Exhibit 10.1


 




 





PURCHASE AGREEMENT


 


by
and among


 


SCIENTIFIC GAMES CORPORATION


 


SCIENTIFIC GAMES INTERNATIONAL, INC.


 


SCIENTIFIC GAMES RACING, INC.


 


SCIENTIFIC GAMES RACING, LLC


 


SCIENTIFIC GAMES GERMANY GMBH


 


SCIENTIFIC GAMES LUXEMBOURG HOLDINGS SARL


 


SCIENTIFIC GAMES HOLDINGS LIMITED


 


and


 


SPORTECH PLC


 


SPORTECH HOLDCO 1 LIMITED


 


SPORTECH HOLDCO 2 LIMITED


 


Dated
as of January 27, 2010




 





 

















 


PURCHASE AGREEMENT


 


THIS PURCHASE AGREEMENT is made and entered into as of
the 27th day of January, 2010 (this “Agreement”), by and among Scientific Games Corporation, a
Delaware corporation (“SGC”),
Scientific Games International, Inc., a Delaware corporation (“SGI”), Scientific Games Racing, Inc., a Delaware
corporation (“SG Racing”), Scientific Games
Germany GmbH, a German company (“SGG”),
Scientific Games Luxembourg Holdings SARL, a Luxembourg company (“SGL”) and Scientific Games Holdings Limited, an Irish
private company limited by shares (“SGH” and,
together with SGC, SGI, SG Racing, SGG and SGL, “Sellers”
and each, a “Seller”), Scientific Games Racing,
LLC, a Delaware limited liability company (“SGR”),
and Sportech Plc, a public limited company incorporated in Scotland (“Sportech”), Sportech Holdco 1 Limited, an English limited
company (“Newco 1”), and Sportech Holdco 2
Limited, an English limited company (“Newco 2” and
together with Sportech and Newco 1, “Purchasers” and
each, a “Purchaser”).


 


RECITALS


 


WHEREAS, (i)  SGC is the owner of (A) all of
the outstanding common stock (the “AEI Shares”) of
Autotote Enterprises, Inc., a Connecticut corporation (“AEI”), and (B) all of the outstanding common stock (the
“API Shares”) of Autotote Panama, Inc.,
a Panama corporation (“API”), (ii) SGR
is the owner of all but one of the shares (the “SG Turkey
Shares”) in Scientific Games Racing Electronic & Computer
Services Industry and Trade Limited Company, a Turkish company (“SG Turkey”); (iii) SGI is the owner of all of the
outstanding limited liability company interests (the “SGR
Interests”) of SGR; (iv) SG Racing is the owner of all the
outstanding common stock (the “ATC Shares”) of
Autotote Canada, Inc., a Canadian corporation (“ATC”);
(v) SGG is the owner of one share in the nominal amount of DM (Deutsche
mark) 50,000 (the “AE Share”) of
Autotote Europe GmbH, a German company (“AE”); (vi) SGL
is the owner of (A) all of the issued and outstanding shares (the “SGR BV Interests”) in the share capital of Scientific Games
Racing B.V., a Dutch private company with limited liability (“SGR BV”), and (B) all of the outstanding equity
interests (the “SGR SAS Interests”) of SG Racing
S.A.S., a French company (“SGR SAS”); and (vii) SGH
is the legal and beneficial owner of (A) the entire issued share capital
(the “SGRL Interests”) of Scientific Games
Racing Limited, an Irish private company limited by shares (“SGRL”), and (B) all of the issued and outstanding
shares (the “SGWS Interests” and, together with
the AEI Shares, the API Shares, the SG Turkey Shares, the SGR Interests, the
ATC Shares, the AE Share, the SGR BV Interests, the SGR SAS Interests and the
SGRL Interests, the “Interests”) of
Scientific Games Worldwide Sports Limited, a British Virgin Islands company (“SGWS” and, together with AEI, API, SG Turkey, SGR, ATC, AE,
SGR BV, SGR SAS and SGRL, the “Companies” and
each, a “Company”);


 


WHEREAS, Purchasers desire to purchase, and Sellers
desire to sell to Purchasers, the applicable Interests and certain assets owned
by the Companies or their Subsidiaries, upon the terms and subject to the
conditions set forth herein;


 

















 


WHEREAS, concurrently
with the execution of this Agreement, Purchasers have delivered to Sellers
copies of certain agreements, dated as of the date hereof, between Sportech  and certain shareholders of Sportech (the “Sportech Voting Agreements”), pursuant to which such shareholders
have irrevocably agreed to vote their respective shares in favor of the
Sportech Voting Proposal (as hereinafter defined); and


 


WHEREAS, concurrently
with the execution of this Agreement, Purchasers have delivered to Sellers a
copy of the Placing Agreement (as hereinafter defined) concerning the allotment
and issuance of the Placing Shares (as hereinafter defined) as a source of
funds for Purchasers’ payment of a portion of the Purchase Price (as
hereinafter defined) with respect to the transactions contemplated by this
Agreement.


 


NOW, THEREFORE, in
consideration of the foregoing, the representations, warranties, covenants and
agreements set forth in this Agreement, and other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties hereby agree as follows:


 


ARTICLE I.



DEFINITIONS


 


Section 1.1            Definitions.  Capitalized terms used in this Agreement
shall have the meanings set forth in this Agreement.  In addition, for purposes of this Agreement,
the following terms, when used in this Agreement, shall have the meanings
assigned to them in this Section 1.1.


 


“Accelerated Right”
has the meaning set forth in Section 5.12(f).


 


“Acquired Business”
shall have the meaning set forth in Section 2.6(b).


 


“Acquisition Target
Contingent Consideration” means $8,000,000.


 


“Acquisition Target
Contingent Consideration Condition” shall have the meaning set forth
in Section 2.6(c).


 


“Action” means
any action, claim, complaint, suit, arbitration, formal investigation, litigation,
or other proceeding, of any nature (whether civil, criminal, administrative or
formal investigative), at Law or in equity, by or before any Governmental
Entity or arbitrator.


 


“Additional Deferred Amount”
means the sum of $10,000,000 multiplied by the quotient obtained by dividing
the Average Daily Bank Rate plus 1% by 365, for each day from and including the
Closing Date to but excluding the Payment Date. 
For this purpose, Average Daily Bank Rate shall be calculated on the
Payment Date and shall equal the weighted average Bank Rate in effect for such
period, announced by the Bank of England’s Monetary Policy Committee.


 


2

















 


“Admission”
means the admission of the Sportech Shares to be issued pursuant to Section 2.1(b) and
the Placing Shares (i) to the Official List of the FSA and (ii) to
trading on the LSE’s market for listed securities.


 


“Admission Condition”
has the meaning set forth in Section 6.1(b).


 


“AE” shall have
the meaning set forth in the recitals to this Agreement.


 


“AE Share” shall
have the meaning set forth in the recitals to this Agreement.


 


“AE Share Notarial Deed”
means the notarial deed to be notarized by a German notary public with regard
to the transfer of the AE Share in accordance with the terms of this Agreement.


 


“AEI” shall have
the meaning set forth in the recitals to this Agreement.


 


“AEI Shares”
shall have the meaning set forth in the recitals to this Agreement.


 


“Affected Employees”
shall have the meaning set forth in Section 5.12(a).


 


“Affiliate”
means a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, a specified
Person.  A Person shall be deemed to
control another Person if such first Person possesses, directly or indirectly,
the power to direct, or cause the direction of, the management and policies of
such other Person, whether through the ownership of voting securities, by
contract or otherwise.


 


“Agreement”
shall have the meaning set forth in the first paragraph of this Agreement.


 


“Ancillary Agreements”
means, collectively, the Transition Services Agreement, the Right of First
Offer Agreement, the Supply Agreement, the Software License Agreement, the
Patent License Agreement, the SGR Assignment of Interest Agreement, the Irish
Withholding Tax Letter and the Investors’ Agreement.


 


“Ancillary Rights”
means all rights attached to the Interests of any Company or,  the Sportech Shares, as the case may be,
after the Closing Date, including all rights to dividends declared or paid
after the Closing Date.


 


“API” shall have
the meaning set forth in the recitals to this Agreement.


 


“API Shares”
shall have the meaning set forth in the recitals to this Agreement.


 


“Asserted Liability”
shall have the meaning set forth in Section 8.4(a).


 


“Asset Purchase Price”
shall have the meaning set forth in Section 2.2.


 


“Asset Sale Closing”  shall have the meaning set forth in Section 2.2.


 


3

















 


“Asset Sale Closing Bill of
Sale” shall have the meaning set forth in Section 2.2.


 


 “ATC” shall have the meaning set forth in the recitals to
this Agreement.


 


“ATC Shares”
shall have the meaning set forth in the recitals to this Agreement.


 


“Balance Sheet”
means the unaudited combined balance sheet of the Companies and their
Subsidiaries as of the Balance Sheet Date attached as Exhibit A.


 


“Balance Sheet Date”
means September 30, 2009.


 


“Basket” shall
have the meaning set forth in Section 8.2(b).


 


“BM Defect”
means the alleged defect described in Section 1.1(a) of the Seller
Disclosure Schedule.


 


“BM Liability”
means any Liability to the extent resulting from or attributable to any BM
Defect, including all private party litigation, which includes the case
captioned as the “Tri-State Racetrack Matter” in Section 3.8 of the Seller
Disclosure Schedule, and all other regulatory action, proceedings,
inquiries or investigations by any Governmental Entities to the extent
resulting from or attributable to such defect.


 


“Business” means
the business of the Companies and their Subsidiaries, including the business of
(i) supplying, operating, maintaining and developing computerized systems
for pari-mutuel wagering on horse races, greyhound races and jai alai matches
to horse and greyhound racetracks, off-track betting facilities, bookmakers,
casinos, jai alai frontons, telephone and Internet account wagering operators
and other establishments where such pari-mutuel wagering is permitted; and (ii) managing
venues at which such pari-mutuel wagering takes place, in each case as such
business is conducted by the Companies and their Subsidiaries at the date of
this Agreement.


 


“Business Average EBITDA”
shall have the meaning set forth in Section 2.6(a).


 


“Business Day”
means any day other than a Saturday, a Sunday or a day on which banks are
required to be closed in New York, New York.


 


“Cash Closing Consideration”
shall have the meaning set forth in Section 2.1(b).


 


“Ceiling” shall
have the meaning set forth in Section 8.2(b).


 


“Circular” shall
have the meaning set forth in Section 5.11(a).


 


“Circular Liability”
shall have the meaning set forth in Section 5.11(a).


 


“Claim Notice”
shall have the meaning set forth in Section 8.4(a).


 


“Closing” shall
have the meaning set forth in Section 2.3(a).


 


4

















 


“Closing Date”
shall have the meaning set forth in Section 2.3(a).


 


“Closing Share
Consideration” shall have the meaning set forth in Section 2.1(b).


 


“Code” means the
United States Internal Revenue Code of 1986, as amended.


 


“Companies Material Adverse
Effect” means any
change, event, occurrence, effect or circumstance that has a material adverse
effect on the Business, assets, liabilities or results of operations or
condition (financial or otherwise) of the Companies and their Subsidiaries,
taken as a whole; provided, however, that in no event shall any
of the following, alone or in combination, be deemed to constitute in and of
itself a Companies Material Adverse Effect, nor shall any of the following be
taken into account in determining whether a Companies Material Adverse Effect
has occurred or would result: (i) general economic conditions (including
financial, banking, currency, commodity and capital markets) in any of the
countries in which any of the Companies and their Subsidiaries operate, except
to the extent such changes or developments affect the Business or the Companies
and their Subsidiaries taken as a whole in a materially disproportionate manner
compared to other industry participants that supply computerized systems or
manage venues for pari mutuel wagering on horse races; (ii) conditions or
trends generally affecting the industries in which any of the Companies or
their Subsidiaries operate, including changes, developments or trends in the
international, national, regional, state or local gaming or pari-mutuel
wagering industries, except to the extent such changes, developments or trends
affect the Business or the Companies and their Subsidiaries, taken as a whole,
in a materially disproportionate manner compared to other industry participants
that supply computerized systems or manage venues for pari mutuel wagering on
horse races; (iii) changes in Law; (iv) changes in GAAP (or
applicable international accounting principles); (v) any actions taken by
Purchasers, breaches of this Agreement by Purchasers, or actions taken or not
taken at the written request of or with the express written consent of
Purchasers; (vi) the commencement or material worsening of a war or armed
hostilities or other national or international calamity involving the U.S. or
any other country in which the Business operates, whether or not pursuant to
the declaration of a national emergency or war, or the occurrence of any
military or terrorist attack upon the U.S. (or such other country), or any of
its territories, possessions, or diplomatic or consular offices or upon any
military installation, equipment or personnel of the U.S. (or such other
country); (vii) acts of God, natural disasters, hurricanes or other
weather conditions; (viii) any announcement of this Agreement and the
transactions contemplated hereby, including by reason of the identity of
Purchasers or announcement or other communication of plans or intentions of
Purchasers regarding any change in the conduct of the Business; or (ix) any
matter disclosed in the Seller Disclosure Schedule.


 


“Company” or “Companies” shall have the meaning set forth in the recitals
to this Agreement.


 


5

















 


“Company Contracts”
means any Contract to which any of the Companies or their Subsidiaries is a
party or by which any of the assets or properties of any of the Companies or
their Subsidiaries is bound.


 


“Company Guarantees”
means, collectively, the Guarantees to which any of the Companies or their
Subsidiaries is a party or by which any of them are bound in favor of, or for
the benefit of, any of the Sellers or their Affiliates (other than any of the
Companies or their Subsidiaries), including Guarantees of any of the Companies
or their Subsidiaries with respect to the indebtedness of SGC or SGI under the
Credit Agreement or any indenture governing debt securities issued by SGC or
SGI, including those identified at Section 5.8(c) of the Seller
Disclosure Schedule.


 


“Company Leases”
shall have the meaning set forth in Section 3.16(b).


 


“Company Marks”
means (i) all names, Trademarks and service marks as each of the foregoing
may arise anywhere in the world that, as of the Closing, are owned by any of
the Companies and their Subsidiaries; (ii) any names, Trademarks, or
service marks related thereto or containing or comprising the foregoing,
including any names, Trademarks, or service marks legally held to be
confusingly similar thereto or dilutive thereof; and (iii) all goodwill
associated with any of the foregoing.


 


“Company Plans”
shall have the meaning set forth in Section 3.13(a).


 


“Confidentiality Agreement”
shall have the meaning set forth in Section 5.3.


 


“Contingent Consideration”
means either (i) the Organic Target Contingent Consideration; or (ii) the
Acquisition Target Contingent Consideration.


 


“Contingent Consideration
Period” shall have the meaning set forth in Section 2.6(a).


 


“Contract” means
any contract, commitment, indenture, bond, lease, license or other agreement or
instrument, whether written or oral, that purports to be legally binding on any
Person under applicable Law.


 


“Copyrights”
means all copyrights, mask works and moral rights (including copyrighted
computer software, if any), regardless of whether registered and including all
registrations and applications to register copyrights as each of the foregoing
may exist anywhere in the world.


 


“Credit Agreement”
means, collectively, the credit agreement, dated as of June 9, 2008, by
and among SGI, as borrower, SGC, as a guarantor, the financial institutions or
other entities from time to time parties thereto, and JPMorgan Chase Bank,
N.A., as administrative agent, and the related Guarantee and Collateral
Agreement, dated as of June 9, 2008, by and among SGI, SGC and each of the
subsidiaries of SGC party thereto, as subsidiary guarantors, in favor of
JPMorgan Chase Bank, N.A., as administrative agent, each as may be amended from
time to time.


 


6

















 


“Credit Agreement Amendment”
shall have the meaning set forth in Section 5.21.


 


“CS Liability”
means any Liability to the extent resulting from or attributable to the
litigation identified in Section 1.1(d) of the Seller Disclosure
Schedule (the “Specified Litigation”),
and any Liability to the extent resulting from or attributable to any other
litigation to the extent that Relevant Losses to one or more plaintiffs therein
result from Relevant Injuries caused by any CS Defect in any Relevant
Terminal.  For purposes of this
definition, “Relevant Injuries” means any
physical injury that is the same or substantially the same as the physical
injuries alleged in the Specified Litigation; “Relevant
Losses” means any loss that is of the same or substantially the same
type as any loss claimed in the Specified Litigation; “CS Defect”
means any design, manufacturing or installation flaw that is the same or
substantially the same as those flaws alleged in the Specified Litigation (in
each case as such injury, loss or flaw is most particularly articulated by plaintiffs
in the course of the Specified Litigation); and “Relevant
Terminals” means any BetJet terminal which is either the version of
the BetJet terminal at issue in the Specified Litigation or another version of
such BetJet terminal to the extent such terminal has a CS Defect in each case
sold or supplied by (and, in the case of any installation flaw, installed by or
under the control of) SGR or any of its Affiliates prior to Closing.


 


“Current Assets”
with respect to the Companies and their Subsidiaries, means, as of the
applicable date, without duplication, the sum of the items described as “current
assets” in Part B of Section 2.4(a) of the Seller Disclosure
Schedule, in each case calculated in a manner consistent with the
calculation of such items set forth in Part B of Section 2.4(a) of
the Seller Disclosure Schedule (but subject to the explanatory footnotes
thereto).  For the avoidance of doubt, “Current
Assets” shall exclude cash and cash equivalents, any short-term investments,
any intercompany assets between or among the Companies and their Subsidiaries
and any refund, credit or asset in respect of any income Tax.


 


“Current Liabilities”
with respect to the Companies and their Subsidiaries, means, as of the
applicable date, without duplication, the sum of the items described as “current
liabilities” in Part B of Section 2.4(a) of the Seller
Disclosure Schedule, in each case calculated in a manner consistent with
the calculation of such items set forth in Part B of Section 2.4(a) of
the Seller Disclosure Schedule (but subject to the explanatory footnotes
thereto).  For the avoidance of doubt, “Current
Liabilities” shall exclude any intercompany liabilities between or among the
Companies and their Subsidiaries and any Liability in respect of any income
Tax.


 


“Deferred Consideration
Amount” shall have the meaning set forth in Section 2.1(d).


 


“Designated Purchaser”  shall have the meaning set forth in Section 2.5(a).


 


“Designation”  shall have the meaning set forth in Section 2.5(a).


 


7

















 


“Direct Transfer Liability”
means any Liability to the extent resulting from or attributable to (i) the
transfer of the SG Turkey Shares directly to a Purchaser as contemplated by Section 2.1(a)(ii) that
would not have arisen had the SG Turkey Shares been transferred indirectly as a
consequence of the transfer of the SGR Interests hereunder, (ii) the
transfer of the ATC Shares directly to a Purchaser as contemplated by Section 2.1(a)(iv) that
would not have arisen had the ATC Shares been transferred indirectly as a
consequence of the transfer of the SGR Interests hereunder, (iii) the
transfer of any Interest(s) and/or Software Assets to a Designated
Purchaser as contemplated by Section 2.5 that would not have arisen had
such Interest(s) or the Software Assets been transferred to the Purchaser
to which such Interest(s) and/or Software Assets were originally provided
to be transferred hereunder or (iv) the transfer of SG Racing to an
Affiliate of SGC as contemplated by Section 5.19 that would not have
arisen had SGR Racing not been so transferred.


 


“Disclosure Schedules”
means the Purchaser Disclosure Schedule and the Seller Disclosure
Schedule.


 


“Disposed-Of Business”
shall have the meaning set forth in Section 2.6(e).


 


“Dispute Notice”
shall have the meaning set forth in Section 2.4(f).


 


“Domain Names”
means all internet domain name registrations as each may exist anywhere in the
world.


 


“EBITDA” means,
for any period, combined net income for such period determined in accordance with
GAAP, but before provision for interest, tax, depreciation and amortization.


 


“EBITDA Business Statement”
shall have the meaning set forth in Section 2.6(g).


 


“Electronic Data Room”
means the electronic data room established by SGC in connection with the
transactions contemplated hereby.


 


“Encumbrance”
means any lien, charge, easement, lease, sublease, right of way, option, claim,
encumbrance, security interest, pledge, mortgage, hypothecation or other
similar encumbrance or any interest of title of any vendor, lessor, lender or
other secured party under any conditional sale or other title retention
agreement including in the case of stock, stockholder agreements or voting
trusts, except for any restrictions on transfer arising under any applicable
securities Law.


 


“Environmental Claim”
shall have the meaning set forth in Section 3.10(d).


 


“Environmental Law”
shall have the meaning set forth in Section 3.10(f).


 


“Equity Offering Liability”
shall have the meaning set forth in Section 5.11(d).


 


“ERISA” shall
have the meaning set forth in Section 3.13(a).


 


8

















 


“ERISA Affiliate”
shall have the meaning set forth in Section 3.13(a).


 


“Estimated Cash Amount”
shall have the meaning set forth in Section 2.4(a).


 


“Estimated Closing
Adjustment” shall have the meaning set forth in Section 2.4(b).


 


“Estimated Relevant Capital
Expenditure” shall have the meaning set forth in Section 2.4(a).


 


“Estimated Net Working
Capital” shall have the meaning set forth in Section 2.4(a).


 


“Final Cash Amount”
shall have the meaning set forth in Section 2.4(h).


 


“Final Closing Adjustment”
shall have the meaning set forth in Section 2.4(i).


 


“Final Relevant Capital
Expenditure” shall have the meaning set forth in Section 2.4(h).


 


“Final Net Working Capital”
shall have the meaning set forth in Section 2.4(h).


 


“Financial Statements”
means (i) the audited carve out balance sheets of the Companies and their
Subsidiaries as of each of December 31, 2008, 2007 and 2006, and the
Balance Sheet; (ii) the audited carve out statements of operations of the
Companies and their Subsidiaries for the years ended on each of December 31,
2008, 2007 and 2006, and the unaudited combined statement of operations of the
Companies and their Subsidiaries for the nine (9) months ended September 30,
2009; (iii) the audited carve out statements of cash flows of the
Companies and their Subsidiaries for the years ended on each of December 31,
2008, 2007 and 2006; and (iv) the audited carve out statements of invested
equity of the Companies and their Subsidiaries for the years ended on each of December 31,
2008, 2007 and 2006, in each case attached as Exhibit B.


 


“FSA” means the
United Kingdom Financial Services Authority.


 


“GAAP” means
United States generally accepted accounting principles, as in effect from time
to time.


 


“German Pension Cash”
shall have the meaning set forth in Section 5.12(h)(i).


 


“German Pension Liability” shall mean any Liability of the
Companies or their Subsidiaries to the extent resulting from or attributable to
any company pension promise granted by Sellers or any of their Affiliates
(including the Companies or their Subsidiaries) to Mr. Frank Keldenich,
his wife, Doris Keldenich and/or their heirs as of the Closing Date, including
the direct pension commitment from SGR Germany to Frank Keldenich and his wife,
Doris Keldenich, set forth in the letter dated September 9, 1991 as
amended on December 7, 1993.


 


9
















 


“German Pension Liability Insurance Product” shall have the
meaning set forth in Section 5.12(h)(i).


 


“Global Policies”
shall have the meaning set forth in Section 3.15(a).


 


“Governing Documents”
means the charter or other fundamental organizational documents by which any
Person (other than an individual) establishes its legal existence or which by
applicable Law govern its internal affairs, and:  (i) in respect of a corporation or
company, shall mean its certificate or articles of incorporation or association
and/or its memorandum and articles of association or by-laws; (ii) in
respect of a partnership, shall mean its certificate of partnership and its
partnership agreement; (iii) in respect of a limited liability company,
shall mean its certificate of formation and operating or limited liability
company agreement; and (iv) in respect of any other legal entity, shall
mean such entity’s fundamental organizational documents, substantially
equivalent to the foregoing, under applicable Law.


 


“Government-Sponsored
Entity” means (i) any Person (or any Affiliate thereof) that
owns, offers or operates any gaming or wagering business or activity (x) where
such Person (or Affiliate) is owned, controlled, sponsored or operated by a
Governmental Entity or (y) pursuant to an exclusive franchise or similar
authority from a Governmental Entity; (ii) any Person (or any Affiliate
thereof) of the type described in (i) (x) or (y) which is after
the date of this Agreement privatized, sub-divided or spun off in whole or in
part.


 


“Governmental Approvals”
shall mean filings or registrations with, notifications to, or authorizations,
licenses, permits, consents or approvals of, a Governmental Entity.


 


“Governmental Entity”
means any European Union, foreign, federal, national, state, county, local,
municipal or other government, regulatory or administrative authority, or any
agency, board, commission, court, tribunal, arbitral body with competent
jurisdiction, instrumentality, ministry or department thereof, or any national
securities exchange.


 


“Governmental Order”
means any order, writ, judgment, injunction, decree, stipulation, decision,
ruling, verdict or award entered, issued, made or rendered by or with any
Governmental Entity.


 


“Guarantees”
means, collectively, indemnities, performance bonds, surety bonds, performance
guaranties, payment guaranties, other guaranty obligations, keep-wells, net
worth maintenance agreements, reimbursement obligations, letters of comfort and
any other similar arrangements.


 


“Hazardous Substance”
shall have the meaning set forth in Section 3.10(f).


 


“Identified  Employees” means all individuals listed, with their
respective employers, in Section 1.1(b) of the Seller Disclosure
Schedule, together with individuals 


 


10

















 


who are hired by any of
the Companies or their Subsidiaries after the date hereof and prior to the
Closing in accordance with Section 5.1.


 


“Incidents Schedule”
shall have the meaning set forth in Section 5.6(B).


 


“Indebtedness”
means (i) any indebtedness of any of the Companies or their Subsidiaries
for borrowed money, including any such indebtedness evidenced by any note,
bond, letter of credit (to the extent of any amounts drawn thereunder by the
beneficiary thereof as of Closing or any finance or reimbursement charges that
are payable with respect to such drawn amounts), debenture, mortgage or similar
debt instrument; (ii) any bank overdraft, bankers’ acceptance note,
purchase facility or other similar facility, to the extent of any amounts drawn
thereunder; and (iii) all Guarantees of any of the Companies or their
Subsidiaries with respect to any indebtedness for borrowed money; provided
that, for the avoidance of doubt, accounts payable and trade payables (so long
as such payables have not, by reason of default or late payment, ceased to be
treated as Current Liabilities for purposes of Section 2.4), capital
leases, surety or performance bonds, undrawn letters of credit, Letters of
Credit, Company Guarantees (other than Guarantees of any of the Companies or
their Subsidiaries with respect to the indebtedness for borrowed money of any
other Person) and Seller Guarantees shall not be deemed to be “Indebtedness”
hereunder.  The term “Indebtedness” shall
include the amount required to retire such “Indebtedness” on the date in
question and includes all principal, interest or VAT accrued but unpaid, fees,
expenses, prepayment penalties and other similar obligations owed in respect of
any outstanding “Indebtedness”.


 


“Indemnified Party”
shall have the meaning set forth in Section 8.4(a).


 


“Indemnifying Party”
shall have the meaning set forth in Section 8.4(a).


 


“Independent Accounting
Firm” means KPMG, or if such firm is not available or is unwilling
to serve, then a mutually acceptable expert in public accounting upon which
Purchasers and SGC mutually agree.


 


“Initial Cash Purchase
Price” shall have the meaning set forth in Section 2.1(b).


 


“Insurance Policies”
shall have the meaning set forth in Section 3.15(a).


 


“Intellectual Property”
means all (i) Patents; (ii) Trademarks; (iii) Copyrights; (iv) Trade
Secrets; (v) Software; and (vi) Domain Names.


 


“Interests”
shall have the meaning set forth in the recitals to this Agreement.


 


“Investors’ Agreement”
means the investors agreement by and between SGC and Sportech, the agreed form
of which is attached as Exhibit C.


 


“Irish Asset Transfer”
means the transfer of certain assets and liabilities of Scientific Games
Worldwide Limited to SGRL pursuant to the Irish Asset Transfer Agreement.


 


11

















 


“Irish Asset Transfer
Agreement” means the Agreement for the purchase of the racing
business and related assets of Scientific Games Worldwide Limited, dated as of July 10,
2009, between Scientific Games Worldwide Limited and SGRL.


 


“Irish Asset Transfer
Liability” means any Liability to the extent resulting from or
attributable to effecting the Irish Asset Transfer.


 


“Irish Withholding Tax
Letter” means either a certificate of the kind described in Section 980
of the Irish Taxes Consolidation Act 1997 or a letter from the auditors of SGRL
(prior to the resignation referred to in Section 2.3(b)(ix)) confirming
that none is required.


 


“Knowledge of Sellers”
(or similar phrases) means the actual knowledge of Lorne Weil, and the actual
knowledge, following reasonable inquiry of their direct reports (if any) who
would reasonably be expected to have actual knowledge of the relevant matters,
of Brooks Pierce, Andrew Gaughan, David Haslett, Mark Goldberg, James Birney,
Jeffrey Lipkin, Ira Raphaelson, Jack Sarno, Greg Cline and Louis Skelton.


 


“Knowledge of Sportech”
(or similar phrases) means the actual knowledge, following reasonable inquiry
of their direct reports (if any) who would reasonably be expected to have
actual knowledge of the relevant matters, of Ian Penrose, Steve Cunliffe,
Mickey Kalifa and Richard Boardley.


 


“Labor Laws”
shall have the meaning set forth in Section 3.12(a).


 


“Law” means any
European Union, federal, national, state, municipal or local statute, law, code,
rule, regulation, ordinance, constitution, treaty, order (whether executive,
legislative, judicial or otherwise) or other requirement or rule of law
(including common law) or other pronouncement of any Governmental Entity having
the effect of law.


 


“Leased Real Property”
shall have the meaning set forth in Section 3.16(b).


 


“Letters of Credit”
means, collectively, all letters of credit issued in connection with the
Business for which any of Sellers or their Affiliates (other than any of the
Companies or their Subsidiaries) is an applicant and which are indentified at Section 5.8(a) of
the Seller Disclosure Schedule.


 


“Liabilities”
means liabilities or obligations of any kind whatsoever, whether accrued,
contingent, absolute, determinable or otherwise.


 


“Losses” shall
have the meaning set forth in Section 8.2(a).


 


“Lottery”  means any Person (or Affiliate thereof) that owns,
sponsors, licenses or operates a lottery of any nature (including any lottery
owned, sponsored, licensed or operated by a Governmental Entity or by a private
or charitable Person).


 


12

















 


“Lottery /
Government Sponsored Entity” means a Lottery or Government Sponsored
Entity other than a Person that operates any (i) venues primarily for
wagering on horse racing, greyhound racing or jai alai matches, or (ii) off
track betting facilities primarily for horse racing, greyhound racing
or jai alai matches or (iii) dedicated bookmaking shops (but, in the case
of (iii), any such Person that is licensed to operate and operates a lottery
(and not merely lottery games) or which has been granted or has a government
monopoly for sports wagering in any country (other than UK Tote) shall be a “Lottery
/ Government Sponsored Entity” for purposes hereof).


 


“Lottery
System Business” means the business of (A) offering, developing, selling,
providing and/or licensing of physical instant win lottery tickets and/or
systems for validation of physical instant win lottery tickets and/or (B) operating,
offering, developing, selling, providing, licensing, maintaining and/or
supporting networks of computerized systems for venue-based operation of (i) lotteries,
(ii) lotto and other lottery draw games (excluding for the avoidance of
doubt bingo), (iii) instant lottery games (i.e., pre-determined/drawn
winning combinations) and (iv) rapid-draw monitor games including keno
(but in the case of (iv) only to the extent provided to a Lottery /
Government Sponsored Entity), including with respect to the foregoing,
functions of substantially the following type: 
(a) calculation of the pool; (b) registration of tickets and
wagers; (c) identification and validation of winning tickets; (d) calculation
of amounts payable to winning participants; (e) tracking and recordation
of winning tickets and redemptions, (f) accepting and recording of wagers
through point of sale devices; and (g) the posting of the winning
combinations and amounts payable to winning participants to various media such
as television; provided, however, that Lottery System Business shall not
include:  (i) any business for
charity-based or society-based lotteries in the UK or Mauritius; (ii) any
business in any of India, Pakistan, Bangladesh or Sri Lanka; and/or (iii) any
business of the Companies and their Subsidiaries for Loteria Electronica
Internacional Dominica S.A. or any of its controlled Affiliates (subject to the
restrictions in the Software License Agreement) or, for rapid draw monitor
games, Corporacion Interamericana de Entreteminiento Administradora Mexicana de
Hipodromo, SA de CV or any of its controlled Affiliates.


 


“LSE” means the
London Stock Exchange plc.


 


“Maine Approval”
shall have the meaning set forth in Section 5.5(e).


 


“Maine Notice”
shall have the meaning set forth in Section 5.5(e).


 


“Material Company Contracts”
shall have the meaning set forth in Section 3.14(a).


 


“Measurement Period”
shall have the meaning set forth in Section 2.6(c).


 


“Multiemployer Pension Plan”
shall have the meaning set forth in Section 3.13(b).


 


13

















 


“Netherlands License”
means the license dated June 19, 2008 granted by the Ministry of Justice
of the Netherlands to SGR BV to operate as the exclusive licensed operator for
all pari-mutuel wagering in the Netherlands.


 


“Net Working Capital”
means (i) Current Assets minus (ii) Current Liabilities.


 


“New 401(k) Plan”
shall have the meaning set forth in Section 5.12(a).


 


“Newco 1” shall
have the meaning set forth in the first paragraph of this Agreement.


 


“Newco 2” shall
have the meaning set forth in the first paragraph of this Agreement.


 


“NY Liability”
means any Liability to the extent resulting from or attributable to the events
forming the basis of the claims in the litigation identified in Section 1.1(e) of
the Seller Disclosure Schedule.


 


“Organic Target Contingent
Consideration” shall have the meaning set forth in Section 2.6(a).


 


“Organic Target Contingent
Consideration Condition” shall have the meaning set forth in Section 2.6(a).


 


“Outside Date”
shall have the meaning set forth in Section 7.1(b).


 


“Owned Real Property”
shall have the meaning set forth in Section 3.16(a).


 


“Patents” means
all patents and patent applications, including divisions, continuations,
continuations-in-part, reissues, reexaminations, and any extensions thereof as
well as registrations and certificates as each of the foregoing may exist
anywhere in the world.


 


“Patent License Agreement”
means the patent license agreement by and among SGI, SGH and SGR, the agreed
form of which is attached as Exhibit K.


 


“PZ Liability”
means any Liability to the extent resulting from or attributable to the
litigation identified in Section 1.1(f) of the Seller Disclosure
Schedule.


 


“Payment Date”
shall have the meaning set forth in Section 2.1(d).


 


“Permits” shall
have the meaning set forth in Section 3.9(b).


 


“Permitted Encumbrances”
means: (i) mechanics’, carriers’, workers’, repairers’, materialmen’s,
warehousemen’s, construction and similar statutory liens arising or incurred in
the ordinary course of business for amounts not yet due and payable and that
arose in the ordinary course of business; (ii) Encumbrances for Taxes or
other similar governmental charges that either (A) are not yet due and
payable; or (B) are being 


 


14

















 


contested in good faith
by appropriate proceedings; (iii) in the case of Real Property, matters
referenced in abstracts of title or policies of title insurance with respect to
such Real Property made available to Purchasers prior to the date hereof, or
matters of record or registered Encumbrances that would be identified in
customary record searches through and including January 4, 2010; (iv) requirements
and restrictions of zoning, building and land use and similar applicable Laws,
Governmental Orders or restrictions imposed by Governmental Entities having
jurisdiction over the Real Property which are not violated in any material
respect by the current use and operation thereof; (v) statutory
Encumbrances of landlords with respect to Leased Real Property for amounts not
yet due and payable, are being contested in good faith by appropriate
proceedings or may thereafter be paid without penalty; (vi) Encumbrances
arising under conditional sales contracts and equipment leases with third
parties entered into in the ordinary course of business provided that there is
no default under the sale or lease document that would enable the seller or
lessor to retain the property or assets which are the subject of the sale or
lease, and (vii) defects irregularities or imperfections of title and
other Encumbrances, but only to the extent that with respect to each of clauses
(i) through (vii) above, such Encumbrances do not or would not
reasonably be expected to, individually or in aggregate, materially detract
from or impair the continued use and operation of the asset or property to
which they relate in the conduct of the Business in the ordinary course
consistent with past practice or, with respect to (vii), materially impair the
marketability of such asset or property.


 


“Person” means
an association, a corporation, an individual, a partnership, a limited
liability company, an unlimited liability company, a trust or any other entity
or organization of any kind, including a Governmental Entity.


 


“Placing Agreement”
shall have the meaning set forth in Section 4.6.


 


“Placing Shares”
means 58,415,520 ordinary shares, par value £0.50 per share, of Sportech to be
issued pursuant to the Placing Agreement.


 


“Plans” shall
have the meaning set forth in Section 3.13(a).


 


“Pools” means
wagering involving participants making a pari-mutuel wager based on the outcome
of a soccer or cricket event, the outcome of which entitles certain
participants to be paid a proportion of the wagers.


 


“Pools Business”
means the business of (i) operating, offering, selling, providing or
supplying Pools games to consumers and/or (ii) offering, developing,
selling, providing, licensing, maintaining, supporting or supplying pari-mutuel
wagering technology or software for the operation of Pools games.


 


“Post-Closing Tax Period”
means a taxable period beginning after the Closing Date and the portion of a
Straddle Period that begins after the Closing Date.


 


“Pre-Closing Statement”
shall have the meaning set forth in Section 2.4(a).


 


15

















 


“Pre-Closing Tax Period”
means a taxable period ending on or before the Closing Date and the portion of
a Straddle Period that ends on the Closing Date.


 


“Preliminary Cash Amount”
shall have the meaning set forth in Section 2.4(c)(i).


 


“Preliminary
Net Working Capital” shall have the meaning set forth in Section 2.4(c)(ii).


 


“Preliminary Relevant
Capital Expenditure” shall have the meaning set forth in Section 2.4(c)(iii).


 


“Preliminary Statement”
shall have the meaning set forth in Section 2.4(c).


 


“Primary Policies”
shall have the meaning set forth in Section 3.15(a).


 


“Pro Forma Business”
shall have the meaning set forth in Section 2.6(c).


 


“Pro Forma LTM EBITDA”
shall have the meaning set forth in Section 2.6(c).


 


“Publicly Available
Software” means any Software that requires as a condition of use,
modification and/or distribution of such Software that such Software or other
Software incorporated into, derived from or distributed with such Software (a) be
disclosed or distributed in source code form, (b) be licensed for the
purpose of making derivative works, or (c) be redistributable at no
charge.  “Publicly Available Software”
includes software licensed or distributed under GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL).


 


“Purchase Price”
shall have the meaning set forth in Section 2.1(b).


 


“Purchaser” or “Purchasers” shall have the meaning set forth in the first
paragraph of this Agreement.


 


“Purchaser Base Claim”
shall have the meaning set forth in Section 8.2(b).


 


“Purchaser Claim”
shall have the meaning set forth in Section 8.2(b).


 


“Purchaser Contract”
means any Contract to which any Purchaser is a party or by which any of the
assets or properties of any Purchaser is bound.


 


“Purchaser Disclosure
Schedule” shall mean the disclosure schedule of the Purchasers
referred to in, and delivered pursuant to, this Agreement.


 


“Purchaser Employee
Liability” means any Liability solely to the extent
attributable to or resulting from the termination of any employees, including
any Identified Employee’s, employment with the Companies or their Subsidiaries
from and after the Closing.


 


16

















 


“Purchaser Governmental
Approvals” shall mean all Governmental Approvals required to be
obtained or made by any of the Purchasers or their Affiliates (or any of their
Representatives) in connection with the execution, delivery or performance of
this Agreement or the Ancillary Agreements by Purchasers or the consummation by
Purchasers of the transactions contemplated hereby or thereby, other than
Required Governmental Approvals.


 


“Purchaser Indemnified
Party” or “Purchaser Indemnified
Parties” shall have the meaning set forth in Section 8.2(a).


 


“Purchasers Fundamental
Representations” shall have the meaning set forth in Section 8.1(a).


 


“Purchasers Material
Adverse Effect” means any change, event, occurrence, effect or
circumstance that has a material adverse effect on the business, assets,
liabilities, or results of operations or condition (financial or otherwise) of
Sportech and its Subsidiaries, taken as a whole; provided, however,
that in no event shall any of the following, alone or in combination, be deemed
to constitute a Purchasers Material Adverse Effect, nor shall any of the
following be taken into account in determining whether a Purchasers Material
Adverse Effect has occurred or would result: 
(i) general economic conditions (including financial, banking,
currency, commodity and capital markets) in any of the countries in which any
of Sportech and its Subsidiaries operate, except to the extent such changes or
developments affect Sportech and its Subsidiaries taken as a whole in a
materially disproportionate manner compared to other industry participants that
engage in pari-mutuel betting and gaming, football pools, retail football
gaming, online football gaming or outsourcing of online gaming software and
supply; (ii) conditions or trends generally affecting the industries in
which any of Sportech or its Subsidiaries operate, including changes, developments
or trends in the international, national, state or local gaming or pari-mutuel
wagering industries, except to the extent such changes, developments or trends
affect Sportech or its Subsidiaries, taken as a whole, in a materially
disproportionate manner compared to other industry participants that engage in
pari-mutuel betting and gaming, football pools, retail football gaming, online
football gaming or outsourcing of online gaming software and supply; (iii) changes
in Law; (iv) changes in GAAP (or applicable international accounting
principles); (v) any actions taken or not taken by Sellers, breaches of
this Agreement by Sellers, or actions taken or not taken at the written request
of or with the express written consent of SGC; (vi) the commencement or material
worsening of a war or armed hostilities or other national or international
calamity involving the U.K. or any other country in which Sportech or its
Subsidiaries operate, whether or not pursuant to the declaration of a national
emergency or war, or the occurrence of any military or terrorist attack upon
the U.K. (or such other country), or any of its territories, possessions, or
diplomatic or consular offices or upon any military installation, equipment or
personnel of the U.K. (or such other country); (vii) acts of God, natural
disasters, hurricanes or other weather conditions; (viii) any announcement
of this Agreement and the transactions contemplated hereby; or (ix) any
matter disclosed in the Purchaser Disclosure Schedule.


 


“Purchasers Permits”
shall have the meaning set forth in Section 4.12(b).


 


17

















 


“QP Liability”
means any Liability to the extent resulting from or attributable to any defect
identified in Part A of Section 1.1(c) of the Seller Disclosure
Schedule, including all private party litigation, which includes the case
identified in Part B of Section 1.1(c) of the Seller
Disclosure Schedule, and all regulatory action, proceedings, inquiries or
investigations by any Governmental Entities, to the extent resulting from or
attributable to any such defect.


 


“Quarter” shall
mean the three-month period ending on any Quarter End Date;


 


“Quarter End Date”
means the last day of each fiscal quarter ending on or around March 31, June 30,
September 30 and December 31 in each calendar year.


 


“Real Property”
shall have the meaning set forth in Section 3.16(d).


 


“Reference Net Working
Capital” means $3,775,000.00.


 


“Reference Capital
Expenditure” means an amount in dollars equal to (a) $4,695,000,
multiplied by (b) X/365, where X is the number of calendar days from (but
excluding) the date hereof until (and including) the Closing Date.


 


“Refund” shall
have the meaning set forth in Section 5.10(i).


 


“Regulations”
means the treasury regulations (including temporary regulations) promulgated by
the United States Department of Treasury with respect to the Code or other
federal tax statutes.


 


“Relevant Business”
shall have the meaning set forth in Section 5.17(a).


 


“Relevant US Business
Acquisition” shall have the meaning set forth in Section 2.6(b).


 


“Relevant Capital
Expenditure” means such amounts expended by or on behalf of the
Companies and their Subsidiaries prior to the Closing Date in respect of
capital expenditure for the exclusive benefit of the Companies and their
Subsidiaries which are either (i) contemplated by the most recent annual
capital expenditure budget of the Companies and their Subsidiaries provided to
the Purchasers prior to the date hereof; or (ii) expressly approved in
writing by Sportech.


 


“Relevant Letter of Credit”
means a Letter of Credit which (i) is listed in Section 5.8(a) of
the Seller Disclosure Schedule; (ii) is not material; or (iii) is
in support of any obligation pursuant to any Contract or Permit contained in
the Electronic Data Room.


 


“Relevant Seller Guarantee”
means a Seller Guarantee which (i) is listed in Section 5.8(b) of
the Seller Disclosure Schedule; (ii) is not material; or (iii) is
in support of any obligation pursuant to any Contract or Permit contained in
the Electronic Data Room.


 


18

















 


“Representatives”
means, with respect to a Person, such Person’s Affiliates and any of such
Person’s or such Person’s Affiliates’ respective stockholders, members,
managers, partners, officers, directors, employees, agents, attorneys,
accountants, consultants, financial advisors or other representatives.


 


“Required Governmental
Approvals” shall have the meaning set forth in Section 5.5(a).


 


“Restricted Period”
shall have the meaning set forth in Section 5.12(b).


 


“Right of First Offer
Agreement” means the agreement by and between SGC and Sportech, the
agreed form of which is attached as Exhibit D.


 


“Roberts” means
Roberts Communications Network LLC.


 


“Roberts Agreement”
means the Amended and Restated Limited Liability Company Agreement of Roberts
Communications Network, LLC made, entered into and effective as of February 28,
2007 by and between SGR and Roberts Investment Company, Inc.


 


“Roberts Liability”
means any Liability to the extent resulting from or attributable to (i) the
ownership by SGR of any interest in Roberts; (ii) the transfer by SGR of
any interest in Roberts and any agreement with respect to the same; and (iii) any
Company or any Subsidiary of any Company having been a party to the Roberts
Agreement or any other agreement entered into in connection with the Roberts
Agreement (except, in each case, to the extent that it might agree to acquire
and acquire an interest in Roberts after the Closing).


 


“SEC” shall have
the meaning set forth in Section 5.4(b).


 


“Section 409A”
shall have the meaning set forth in Section 3.13(n).


 


“Seller” or “Sellers” shall have the meaning set forth in the first
paragraph of this Agreement.


 


“Seller Base Claim”
shall have the meaning set forth in Section 8.3(b).


 


“Seller Bonus” or “Seller Bonuses” shall have the meaning set forth in Section 5.12(f).


 


“Seller Claim”
shall have the meaning set forth in Section 8.3(b).


 


“Seller Disclosure Schedule”
shall mean the disclosure schedule of Sellers referred to in, and delivered
pursuant to, this Agreement.


 


“Seller Governmental
Approvals” shall mean all Governmental Approvals required to be
obtained or made by any of Sellers, the Companies or the Subsidiaries of the
Companies (or any of their Affiliates or Representatives) in connection with
the


 


19
















 


execution, delivery or
performance of this Agreement or the Ancillary Agreements by the applicable
Sellers or the consummation by the applicable Sellers of the transactions
contemplated hereby or thereby, other than Required Governmental Approvals or
Purchaser Governmental Approvals.


 


“Seller Guarantee”
means, collectively, the Guarantees to which any of Sellers or their Affiliates
(other than any of the Companies or their Subsidiaries) is a party or by which
any of them are bound in favor of, or for the benefit of, any of the Companies
or any of their Subsidiaries or the Business (other than the Letters of
Credit), including those identified at Section 5.8(b) of the Seller
Disclosure Schedule.


 


“Seller Indemnified Party”
or “Seller Indemnified Parties” shall have
the meaning set forth in Section 8.3(a).


 


“Seller Marks”
shall have the meaning set forth in Section 5.9(b).


 


“Seller
Provided Information” shall have the meaning set forth in Section 3.27.


 


“Sellers Fundamental
Representations” shall have the meaning set forth in Section 8.1(a).


 


“SG Racing”
shall have the meaning set forth in the first paragraph of this Agreement.


 


“SG Racing
Transfer” shall have the meaning set forth in Section 5.19.


 


“SG Turkey”
shall have the meaning set forth in the recitals to this Agreement.


 


“SG Turkey Minority
Interest” shall mean one share in SG Turkey.


 


“SG Turkey Shares”
shall have the meaning set forth in the recitals to this Agreement.


 


“SGC” shall have
the meaning set forth in the first paragraph of this Agreement.


 


“SGC 401(k) Plan”
shall have the meaning set forth in Section 5.12(a).


 


“SGC Financial Disclosure”
shall have the meaning set forth in Section 5.4(b).


 


“SGG” shall have
the meaning set forth in the first paragraph of this Agreement.


 


“SGH” shall have
the meaning set forth in the first paragraph of this Agreement.


 


“SGI” shall have
the meaning set forth in the first paragraph of this Agreement.


 


“SGL” shall have
the meaning set forth in the first paragraph of this Agreement.


 


“SGR” shall have
the meaning set forth in the first paragraph of this Agreement.


 


20

















 


“SGR Assignment of Interest
Agreement” means the agreement by and between SGI and a Purchaser
assigning SGI’s ownership of the SGR Interests to such Purchaser, the
substantially agreed form of which is attached as Exhibit E.


 


“SGR BV” shall
have the meaning set forth in the recitals to this Agreement.


 


“SGR BV Interests”
shall have the meaning set forth in the recitals to this Agreement.


 


“SGR BV Notarial Deed”
means the notarial deed to be notarized by a Dutch notary public with regard to
the transfer of the SGR BV Interests in accordance with the terms of this
Agreement.


 


“SGR Competing Business”
shall have the meaning set forth in Section 5.16(a).


 


“SGR Germany”
means a German Subsidiary of AE of which AE holds 100% of the shares.


 


“SGR Interests”
shall have the meaning set forth in the recitals to this Agreement.


 


“SGR Interests Allocation
Schedule” shall have the meaning set forth in Section 5.10(e).


 


“SGRL” shall
have the meaning set forth in the recitals to this Agreement.


 


“SGRL Interests”
shall have the meaning set forth in the recitals to this Agreement.


 


“SGR SAS” shall
have the meaning set forth in the recitals to this Agreement.


 


“SGR SAS Interests”
shall have the meaning set forth in the recitals to this Agreement.


 


“SGWS” shall
have the meaning set forth in the recitals to this Agreement.


 


“SGWS Interests”
shall have the meaning set forth in the recitals to this Agreement.


 


“Shoreline
Earnout Liability” means any obligation for payment, if, as and when
due, of deferred consideration payments under the Asset Purchase Agreement by
and between AEI and Shoreline Star Greyhound Park and Entertainment Complex,
LLC (dba Shoreline Star) dated April 5, 2006 pursuant to either (i) Section 2.3(b) or
(ii) Section 2.3(c) (but only to the extent such payments are
based on Handle levels (as applied for purposes of such Section 2.3(c))
which are not in excess of Handle levels for 2009, as adjusted in accordance
with such Agreement) of such Agreement, and excluding, for the avoidance of
doubt, payments pursuant to any other section of such Agreement.


 


21

















 


“Software” means
computer code, programs, software, firmware, programming tools, subroutines,
libraries, emulators, objects, databases, modules, algorithms, and utilities,
in each case, in all forms whether in source code, interpreted code or object
code form (including system and terminal software programs), and any
documentation or manuals related to the same as each of the foregoing may exist
anywhere in the world other than “off-the-shelf” computer software programs
that are commercially available.


 


“Software Assets”
shall have the meaning set forth in Section 2.2.


 


“Software License Agreement”
means the software license agreement by and among Sportech, SGC and SGR, the
agreed form of which is attached as Exhibit L.


 


“Special Indemnification
Claim” means any claim by any Purchaser Indemnified Party under
either of Sections 8.2(a)(vii) or (ix).


 


“Sportech” shall
have the meaning set forth in the first paragraph of this Agreement.


 


“Sportech Audited Financial
Statements” shall have the meaning set forth in Section 4.10(b).


 


“Sportech Equity Offering”
shall mean the placing and open offer commenced by Sportech on January 27,
2010.


 


“Sportech Financial
Statements” shall have the meaning set forth in Section 4.10(b).


 


“Sportech Reports” shall have the meaning set forth in Section 4.10(a).


 


“Sportech Shareholders
Meeting” shall have the meaning set forth in Section 5.11(b).


 


“Sportech Shares”
means the ordinary shares, par value £0.50 per share, of Sportech to be issued
to SGC pursuant to Section 2.1.


 


“Sportech Unaudited
Financial Statements” shall have the meaning set forth in Section 4.10(b).


 


“Sportech Voting Agreements”
shall have the meaning set forth in the recitals to this Agreement.


 


“Sportech Voting Proposal”
shall have the meaning set forth in Section 5.11(b).


 


“Straddle Period”
means a taxable period that begins before and ends after the Closing Date.


 


“Subsidiary” of
any Person means, on any date, any Person (i) the accounts of which would
be consolidated with and into those of the applicable Person in such 


 


22

















 


Person’s consolidated
financial statements if such financial statements were prepared in accordance
with GAAP as of such date; or (ii) of which securities or other ownership
interests representing more than fifty (50) percent of the equity or more than
fifty (50) percent of the ordinary voting power or, in the case of a
partnership, more than fifty (50) percent of the general partnership interests
or more than fifty (50) percent of the profits or losses of which are, as of
such date, owned, controlled or held by the applicable Person or one or more
subsidiaries of such Person, provided, however that for the
purposes of this Agreement SG Racing shall not be deemed to be a Subsidiary of
SGR.


 


“Supply Agreement”
means the supply agreement by and between SGC and Sportech, the agreed form of
which is attached as Exhibit F.


 


“Support Services”
shall have the meaning set forth in Section 5.9(a).


 


“Survival Period”
shall have the meaning set forth in Section 8.1(d).


 


“Surviving Policies”
shall have the meaning set forth in Section 5.6.


 


“Tangible Personal Property”
shall have the meaning set forth in Section 3.18(a).


 


“Tax” means any
foreign, federal, provincial, state, county or local income, sales and use,
value added, goods and services, excise, franchise, real and personal property,
gross receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance, wagering or withholding tax or other tax, duty,
fee, assessment or charge, and any statutorily imposed pension plan contributions,
employment insurance and unemployment insurance payments, imposed by any taxing
authority or Governmental Entity, and any interest, penalties or fines related
thereto.


 


“Tax Group”
means any group of companies that files or has filed a combined, consolidated,
joint or similar Tax Return in any relevant jurisdiction.


 


“Tax Return”
means any return, report, declaration, information return or other document
required to be filed with any taxing authority or Governmental Entity with
respect to Taxes, including any amendments thereof.


 


“Terminating Contracts”
shall have the meaning set forth in Section 5.7(b).


 


“Third Contingent
Consideration Year” shall have the meaning set forth in Section 2.6(c).


 


“Third Party Consents”
shall have the meaning set forth in Section 3.3.


 


“Title IV Plan”
shall have the meaning set forth in Section 3.13(a).


 


“Tote System Business”  means the business of operating,
offering, developing, selling, providing, licensing, maintaining and/or
supporting computerized totalisator systems that perform the host function for
pari-mutuel account and cash based wagering 


 


23

















 


on horse racing,
greyhound racing or jai alai matches, including with respect to the foregoing,
functions of substantially the following type: (a) calculation of the
betting pool; (b) calculation of the odds; (c) identification of
winning participants; (d) calculation of the amounts payable to winning
participants; (e) accepting and recording of wagers through point of sale
devices; and (f) the posting of the odds and the amounts payable to
winning participants to various media such as field boards and televisions.


 


“Trade Secrets”
means all confidential or proprietary trade secrets, formulas, methods,
processes, techniques, know-how and compilations of information used in a
business that confer a competitive advantage over those in similar businesses
who or which do not possess such confidential or proprietary trade secrets,
formulas, methods, processes, techniques, know-how and compilations of
information as each of the foregoing may exist anywhere in the world.


 


“Trademarks”
means all trademarks (including service marks), whether or not registered,
trade names, logos, business names and Internet domain names, as each of the foregoing
may exist anywhere in the world, together with the goodwill associated with any
of the foregoing, and all registrations and applications for registration of
the foregoing.


 


“Transfer Document”
means the AE Share Notarial Deed and the SGR BV Notarial Deed and such other
written assignment, agreement, written instrument of transfer, stock transfer
form, stock power, notarial deed or endorsement as required under the Laws of
the relevant jurisdiction in which each Company is incorporated, formed, registered
or otherwise exists to validly transfer the Interests to the Purchasers in
accordance with the terms of this Agreement.


 


“Transfer Taxes”
means any sales, use, goods and services, harmonized sales, stock transfer,
real property transfer, real property gains, transfer, stamp, registration,
documentary, recording or similar duties or taxes together with any interest
thereon, penalties, fines, costs, fees, additions to tax or additional amounts
with respect thereto incurred in connection with the transactions contemplated
hereby.


 


“Transition Services
Agreement” means the transition services agreement by and between
SGC (or an Affiliate thereof, as the case may be) and Sportech, the agreed form
of which is attached as Exhibit G.


 


“UKLA” shall
have the meaning set forth in Section 4.10(a).


 


“VAT” means any
value added tax or any similar sales or turnover tax.


 


“WARN Act” shall
have the meaning set forth in Section 3.12(d).


 


24

















 


ARTICLE
II.


 


PURCHASE AND SALE OF INTERESTS AND SOFTWARE ASSETS


 


Section 2.1            Purchase
and Sale of Interests.


 


(a)           Upon the terms and subject to the satisfaction or
waiver, if permissible, of the conditions set forth in Article VI, at the
Closing and in the sequential order set out below:


 


(i)            Newco 2, or a Purchaser duly designated
in accordance with Section 2.5, shall purchase, acquire and accept from
SGC, and SGC shall sell, transfer, assign and deliver to such Purchaser, the
AEI Shares and the API Shares, free and clear of all Encumbrances and together
with all Ancillary Rights related thereto;


 


(ii)           Newco 1, or a Purchaser duly designated
in accordance with Section 2.5, shall purchase, acquire and accept from
SGR, and SGR shall sell, transfer, assign and deliver to such Purchaser, the SG
Turkey Shares, free and clear of all Encumbrances and together with all
Ancillary Rights related thereto;


 


(iii)          Newco
2, or a Purchaser duly designated in accordance with Section 2.5, shall
purchase, acquire and accept from SGI, and SGI shall sell, transfer, assign and
deliver to such Purchaser, the SGR Interests, free and clear of all
Encumbrances and together with all Ancillary Rights related thereto;


 


(iv)          Newco 2, or a Purchaser duly designated
in accordance with Section 2.5, shall purchase, acquire and accept from SG
Racing, and SG Racing shall sell, transfer, assign and deliver to such
Purchaser, the ATC Shares, free and clear of all Encumbrances and together with
all Ancillary Rights related thereto;


 


(v)           Newco 1, or a Purchaser duly designated
in accordance with Section 2.5, shall acquire and accept from SGG, and SGG
shall transfer and assign to such Purchaser, the AE Share, free and clear of
all Encumbrances and together with all Ancillary Rights related thereto;


 


(vi)          Newco 1, or a Purchaser duly designated
in accordance with Section 2.5, shall purchase, acquire and accept
from SGL, and SGL shall sell, transfer, assign and deliver to such Purchaser,
the SGR SAS Interests, with full title (“en
pleine propriété”), free and clear of all Encumbrances and
together with all Ancillary Rights related thereto;


 


(vii)         Newco
1, or a Purchaser duly designated in accordance with Section 2.5, shall
purchase, acquire and accept from SGL, and 


 


25

















 


SGL
shall sell, transfer, assign and deliver to such Purchaser, the SGR BV
Interests, free and clear of all Encumbrances and together with all Ancillary
Rights related thereto;


 


(viii)        Newco
1, or a Purchaser duly designated in accordance with Section 2.5, shall
purchase, acquire and accept from SGH, and SGH shall sell, transfer, assign and
deliver to such Purchaser, the SGRL Interests, free and clear of all
Encumbrances and together with all Ancillary Rights related thereto; and


 


(ix)           Newco 2, or a Purchaser duly designated
in accordance with Section 2.5, shall purchase, acquire and accept from
SGH, and SGH shall sell, transfer, assign and deliver to such Purchaser the
SGWS Interests, free and clear of all Encumbrances and together with all
Ancillary Rights related thereto.


 


(b)           At the Closing, in consideration for the purchase of
the Interests pursuant to Section 2.1(a), Sportech (on behalf of
Purchasers) shall (i) pay to SGC (on behalf of Sellers) in cash the sum of
(x) $32,888,319; and (y) the Estimated Cash Amount (together, the “Initial Cash Purchase Price”), plus or minus, as the case
may be, the amount of the Estimated Closing Adjustment pursuant to Section 2.4(b) (the
“Cash Closing Consideration”); and (ii) allot
and issue to SGC (on behalf of Sellers) free and clear of all Encumbrances and
together with all Ancillary Rights related thereto 39,742,179 Sportech Shares
(the “Closing Share Consideration”), such
Sportech Shares to be evidenced by one or more certificates registered in the
name of SGC (or, subject to SGC’s compliance with applicable Law in connection
therewith, upon notice from SGC no less than (5) Business Days prior to
Closing, to be credited to a CREST account designated by SGC).  The Cash Closing Consideration is subject to
adjustment following the Closing by the Final Closing Adjustment and, as so
adjusted and together with such Sportech Shares, is referred to herein as the “Purchase Price.”  The
Purchase Price shall be allocated among Sellers as agreed by Sellers and
Purchasers as shown in Section 2.1(b) of the Seller Disclosure
Schedule.  For U.S. federal income
tax purposes, however, the parties agree to treat $697,878.44 of the Cash
Closing Consideration as a loan from Sportech to SGC to be repaid with interest
at a rate of 2.45% (the mid-term applicable federal rate for January 2010,
assuming annual compounding) in five equal installments, as provided under Section 2.7
and to treat the amounts allocated to the AEI Shares in Section 2.1(b) of
the Seller Disclosure Schedule as reduced by the same amount.


 


(c)           In addition to the Purchase Price payable to Sellers
pursuant to Section 2.1(b):


 


(i)            Subject to Section 2.6(b), if and
when the Organic Target Contingent Consideration Condition set forth in Section 2.6(a) is
satisfied, Sportech (on behalf of Purchasers), as additional consideration for
the purchase of the Interests, shall pay to SGC (on behalf of Sellers) in cash
the amount of the Organic Target Contingent Consideration calculated in
accordance 


 


26

















 


with
Section 2.6, such payment to be made within 45 days of such satisfaction;
and


 


(ii)           If and when the Acquisition Target
Contingent Consideration Condition set forth in Section 2.6(c) is
satisfied, Sportech (on behalf of Purchasers), as additional consideration for
the purchase of the Interests, shall pay to SGC (on behalf of Sellers) in cash
the Acquisition Target Contingent Consideration calculated in accordance with Section 2.6,
such payment to be made within 45 days of such satisfaction, except in the
event that a Relevant US Business Acquisition is consummated during the Third
Contingent Consideration Year, in which case such payment to be made within 45
days of the end of the twelve month period beginning on the first Quarter End
Date following the date of the consummation of such Relevant US Business
Acquisition.


 


In no event shall both the Organic Target Contingent
Consideration and the Acquisition Target Contingent Consideration be payable, and either
shall be treated as an adjustment to the Purchase Price for Tax purposes.


 


(d)           In addition to the Purchase
Price payable to Sellers at Closing pursuant to Section 2.1(b) and
thereafter to the extent provided therein pursuant to Section 2.1(c), as
additional consideration for the purchase of the Interests, on September 30,
2013 (the “Payment Date”), Sportech (on
behalf of Purchasers) shall pay to SGC (on behalf of Sellers) an amount in cash
equal to the sum of (i) $10,000,000 plus (ii) the Additional Deferred
Amount ((i) and (ii) together, being the “Deferred
Consideration Amount”). 
Payment of the Deferred Consideration Amount shall be made by wire
transfer in immediately available funds to an account or accounts designated by
SGC.  The Deferred Consideration Amount
shall be treated as an adjustment to the Purchase Price for Tax purposes.  Sportech, each Purchaser and SGR shall be
jointly and severally liable for timely payment in full of the Deferred
Consideration Amount hereunder.


 


Section 2.2            Pre-Closing.


 


On the Closing Date, immediately prior to the
Closing (the “Asset Sale Closing”),
Sportech shall purchase, acquire and accept, and SGR shall sell, transfer and
assign to Sportech, all of SGR’s right, title and interest in, to and under the
Software listed on Annex I to Exhibit H (the “Software Assets”), and all the rights,
remedies and claims of SGR arising after the Asset Sale Closing in respect of
the Software Assets.  At the Asset Sale
Closing (i) in consideration for the Software Assets, Sportech shall pay
to SGR the amount as set out in Section 2.1(b) of the Seller
Disclosure Schedule in respect of the Software Assets (the “Asset Purchase Price”), which shall be left
outstanding as a debt payable on demand by Sportech to SGR; (ii) SGR shall
deliver to Sportech a bill of sale substantially in the form set forth in Exhibit H
in respect of the Software Assets duly executed by SGR (the “Asset Sale Closing Bill of Sale”); and (iii) Sportech
shall deliver to SGR a counterpart of the Asset Sale Closing Bill of Sale.  


 


27

















 


Sportech
and SGR hereby acknowledge and agree that SGR shall not demand payment of such
debt until after Closing.  If the Closing
shall not have occurred on the date of the Asset Sale Closing, Sportech shall
sell, transfer and assign back to SGR the Software Assets, and all the rights,
remedies and claims of Sportech arising after the Asset Sale Closing in respect
of the Software Assets, in full satisfaction of the amount left outstanding
between Sportech and SGR in respect thereof. 
To ensure such timely sale, transfer and assignment back to SGR, at the
Asset Sale Closing Sportech shall no later than three (3) Business Days
prior to Closing deliver to SGR, in escrow, a bill of sale, in substantially
the form of the Asset Sale Closing Bill of Sale, duly executed by Sportech,
evidencing such potential sale back to SGR which shall be released from escrow
if Closing shall not have occurred on the date of the Asset Sale Closing and
which shall be returned to Sportech if Closing shall have so occurred, upon
Closing.  Sportech shall grant to SGR an
irrevocable, worldwide royalty-free license to make full use of the Software
Assets (and Sportech shall not otherwise license or make use of such Software
Assets) from the Asset Sale Closing which shall be perpetual until the Closing
or, if the Closing shall not have occurred, until the Software Assets have been
fully and effectively sold, transferred and assigned back to SGR.  Sportech shall indemnify and hold harmless
Sellers and their Affiliates from and against any Loss suffered or incurred by
Sellers or their Affiliates and resulting from or attributable to this Section 2.2
(including any failure to sell, transfer and assign the Software Assets back to
SGR if the Closing shall not have occurred on the date of the Asset Sale
Closing, or otherwise resulting from or attributable to the transfer of the
Software Assets at the Asset Sale Closing (without regard to any Basket or
Ceiling applicable to indemnification pursuant Article VIII)) but only to
the extent such Loss is greater than any Loss that would have been suffered or
incurred had such Software Assets been acquired by Purchasers indirectly as a
consequence of the transfer of SGR Interests as contemplated hereunder.


 


Section 2.3            Closing.


 


(a)           The closing of the transactions contemplated by this
Agreement (the “Closing”) shall be held at the
offices of Kramer Levin Naftalis & Frankel LLP, located at 1177 Avenue
of the Americas, New York, New York 10036 on the date falling three (3) Business
Days after the satisfaction, or to the extent permitted, waiver of the
conditions set forth in Article VI (other than conditions which by their
nature are to be satisfied at Closing) (the “Closing Date”),
unless another date and time is agreed to in writing by Purchasers and SGC.


 


(b)           At the Closing, SGC shall deliver, or cause to be
delivered, to Purchasers (or, in the case of (vi), shall have had made
available to Purchasers):


 


(i)            all certificates, if any, evidencing the
Interests, duly endorsed for transfer and each Transfer Document sufficient or
necessary to transfer the Interests to Purchasers free and clear of all
Encumbrances with effect from the time of the Closing, the parties to this
Agreement acknowledging and agreeing that this Agreement constitutes an 


 


28

















 


agreement
to sell and purchase the Interests described herein, but that the actual
transfer of the Interests shall be effected by the relevant Transfer Document;


 


(ii)           the certificate referred to in Section 6.2(e);


 


(iii)          evidence,
in form and substance reasonably satisfactory to the Purchasers, of the Third
Party Consents listed in Section 6.2(h) of the Seller Disclosure
Schedule;


 


(iv)          the evidence of payment, discharge and
settlement referred to in Section 6.2(i);


 


(v)           the certificates referred to in Section 6.2(j);


 


(vi)          in respect of the Companies and their
Subsidiaries, all Governing Documents, any corporate seal, share register or
ledger and share certificate book (with any unissued share certificates) and
all minute books and other statutory books or such equivalent items in the
relevant jurisdiction as are kept by the Companies and their Subsidiaries;


 


(vii)         each
of the Ancillary Agreements, duly executed by SGC (or an Affiliate thereof, as
the case may be);


 


(viii)        duly
signed resignations from those members of the board of directors, board of
managers or similar governing bodies of each of the Companies and their
Subsidiaries who have been identified by Purchasers to Sellers in writing as of
the date hereof for such purpose, effective immediately upon the Closing;


 


(ix)           duly signed resignations from such
auditors of each of the Companies and their Subsidiaries who have been
identified by Purchasers to Sellers in writing as of the date hereof for such purpose,
effective immediately upon the Closing, or evidence of notice of termination of
such auditors effective immediately upon the Closing;


 


(x)            a certification, in form and substance
reasonably satisfactory to Purchasers, on behalf of each Seller evidencing (A) the
due authority of each Person who has executed this Agreement on behalf of such
Seller; (B) the resolutions of the applicable governing body of such
Seller authorizing the performance by such Seller of its obligations under this
Agreement; and (C) where the sale and transfer of any Interest in any
Company is required to be authorized by the shareholders, directors, members or
managers of such Company, the resolutions so authorizing such sale and
transfer; and


 


(xi)           the Incidents Schedule.


 


(c)           At the Closing, Sportech shall deliver, or cause to be
delivered, to SGC (on behalf of itself and the other Sellers):


 


29
















 


(i)            the Cash Closing Consideration, by wire
transfer of immediately available funds to an account or accounts designated by
SGC prior to Closing;


 


(ii)           certificates evidencing the Sportech
Shares to be issued pursuant to Section 2.1 (or confirmation of credit
thereof to a CREST account designated by SGC in accordance with such Section 2.1);


 


(iii)          the
certificate referred to in Section 6.3(d);


 


(iv)          each of the Ancillary Agreements (where
relevant) duly executed by Sportech (or an Affiliate thereof, as the case may
be);


 


(v)           where relevant, a counterpart of each
Transfer Document;


 


(vi)          a certification, in form and substance
reasonably satisfactory to SGC, on behalf of each Purchaser evidencing (A) the
due authority of each Person who has executed this Agreement on behalf such
Purchaser; (B) the resolutions of the applicable governing body of such
Purchaser authorizing the performance by such Purchaser of its obligations
under this Agreement; and (C) the resolution of shareholders of Sportech
authorizing the issuance of Sportech Shares to SGC as provided herein; and


 


(vii)         a
valid Internal Revenue Service Form W-8BEN (with Part II completed),
executed by Sportech.


 


(d)           After the Closing and prior to the registration of the
transfer of the SGRL Interests from SGH in the name of a Purchaser, SGH shall
co-operate in any manner reasonably required by Sportech for the convening and
conduct of general meetings of SGRL, shall execute on a timely basis all proxy
forms, appointment of representatives, documents of consent to short notice and
other similar documents that Sportech may reasonably require (including
executing at Closing any power of attorney that may be reasonably required) and
shall act in all respects as the nominee and at the reasonable direction of Sportech
in respect of the entire issued share capital of SGRL and all attached rights
and interests.  Purchasers shall effect
the registration of transfer of the SGRL Interests as promptly as practicable
after the Closing.


 


Section 2.4            Initial
Cash Purchase Price Adjustment.


 


(a)           No later than three (3) Business Days prior to
the Closing Date, SGC shall prepare and deliver, or cause to be prepared and
delivered, to Sportech a certificate of an officer of SGC (the “Pre-Closing Statement”) setting forth its good faith
estimate of (i) the amount of cash and cash equivalents and short-term
investments of the Companies and their Subsidiaries as of the Closing Date
(before giving effect to the Closing, and excluding any cash amounts in the
categories described in Part A of Section 2.4(a) of the Seller
Disclosure Schedule) (the “Estimated Cash 


 


30

















 


Amount”); (ii) the Net Working Capital as of the
Closing Date (before giving effect to the Closing) (the “Estimated
Net Working Capital”); (iii) the combined balance sheet of the
Companies and their Subsidiaries as of the Closing Date; and (iv) the
Relevant Capital Expenditure from the date hereof through the Closing Date (the
“Estimated Relevant Capital Expenditure”).  Such Pre-Closing Statement shall be prepared,
as applicable, in a manner consistent with the calculation of the items set
forth in Part B of Section 2.4(a) of the Seller Disclosure
Schedule (but subject to the explanatory footnotes thereto).


 


(b)           The Initial Cash Purchase Price shall be (i) (A) increased,
if the Estimated Net Working Capital exceeds the Reference Net Working Capital,
by an amount equal to the amount of such excess; or (B) decreased, if the
Reference Net Working Capital exceeds the Estimated Net Working Capital, by an
amount equal to such excess, and (ii) (A) increased, if the Estimated
Relevant Capital Expenditure exceeds the Reference Capital Expenditure; or (B) decreased,
if the Reference Capital Expenditure exceeds the Estimated Relevant Capital
Expenditure, by an amount equal to such excess (such aggregate net increase or
decrease, as the case may be, being the “Estimated Closing
Adjustment”).


 


(c)           Within forty (40) Business Days following the Closing
Date, SGC shall prepare and deliver, or cause to be prepared and delivered, to
Sportech the following (collectively, the “Preliminary Statement”):


 


(i)            a calculation of the amount of cash and
cash equivalents and short-term investments of the Companies and their
Subsidiaries as of the Closing Date (before giving effect to the Closing, and
excluding any cash amounts in the categories described in Part A of Section 2.4(a) of
the Seller Disclosure Schedule) (the “Preliminary
Cash Amount”);


 


(ii)           a calculation of the Net Working Capital
as of the Closing Date (before giving effect to the Closing) (the “Preliminary Net Working Capital”); and


 


(iii)          a
calculation of the Relevant Capital Expenditure from the date hereof through
the Closing Date (the “Preliminary Relevant
Capital Expenditure”).


 


(d)           The Preliminary Statement shall be prepared, as
applicable, in a manner consistent with the calculation of the items set forth
in Part B of Section 2.4(a) of the Seller Disclosure Schedule
(but subject to the explanatory footnotes thereto).


 


(e)           In connection with the preparation of the Preliminary
Statement, SGC and its Representatives shall have reasonable access, during
normal business hours and upon reasonable notice, to the books and records,
finance personnel and any other information of Purchasers, the Companies and
their Subsidiaries that SGC reasonably requests, and Purchasers shall, and
shall cause their Representatives 


 


31

















 


to, cooperate as may be reasonably requested with SGC
and its Representatives in connection therewith.


 


(f)            Sportech shall have forty (40) Business Days following
receipt of the Preliminary Statement to review the calculations of the
Preliminary Cash Amount, the Preliminary Net Working Capital and the
Preliminary Relevant Capital Expenditure, and to notify SGC in writing if it
disputes the amount of the Preliminary Cash Amount, the Preliminary Net Working
Capital or the Preliminary Relevant Capital Expenditure, set forth on the
Preliminary Statement (the “Dispute Notice”),
specifying the reasons therefor in reasonable detail.


 


(g)           In connection with Sportech’s review of the
Preliminary Statement, to the extent reasonably required for the purposes
thereof, Sportech and its Representatives shall have reasonable access, during
normal business hours and upon reasonable notice, to all supporting work papers
and schedules prepared by SGC or its Representatives (subject to customary
indemnification and confidentiality agreements with respect to the supporting
work papers of SGC’s independent accountants that may be requested by such
independent accountants) in connection with its calculation of the Preliminary
Cash Amount, the Preliminary Net Working Capital and the Preliminary Relevant
Capital Expenditure, and to finance personnel of SGC and any other information
which Sportech reasonably requests, and SGC shall cooperate with Sportech and
its Representatives as they may reasonably request in connection therewith.


 


(h)           In the event that Sportech shall timely deliver a
Dispute Notice to SGC, SGC and Sportech shall cooperate in good faith to
resolve such dispute as promptly as practicable and, upon such resolution, if
any, any adjustments to the Preliminary Cash Amount, the Preliminary Net
Working Capital or the Preliminary Relevant Capital Expenditure, shall be made
in accordance with the agreement of Sportech and SGC.  In connection with SGC’s review of the
Dispute Notice, to the extent reasonably required for the purposes thereof, SGC
and its Representatives shall have reasonable access, during normal business
hours and upon reasonable notice, to all supporting work papers and schedules
prepared by Sportech or its Representatives (subject to customary
indemnification and confidentiality agreements with respect to the supporting
work papers of Sportech’s independent accountants that may be requested by such
independent accountants) in connection with Sportech’s preparation of the
Dispute Notice and to finance personnel of Sportech and its Representatives and
any other information which SGC reasonably requests, and Sportech shall
cooperate as they may reasonably request with SGC and its Representatives in
connection therewith.  If Sportech and
SGC are unable to resolve any such dispute within ten (10) Business Days
(or such longer period as Sportech and SGC shall mutually agree in writing) of
Sportech’s delivery of such Dispute Notice, such dispute shall be resolved by
the Independent Accounting Firm, and such determination shall be final and
binding on the parties.  Any additional
terms of reference of the Independent Accounting Firm shall be agreed in good
faith between the parties at the time of appointment by Sportech and SGC.  Any expenses relating to the engagement of
any Independent Accounting Firm in respect of its services pursuant to this Section 2.4(h) shall
be paid (i) by SGC (on behalf of 


 


32

















 


Sellers) if the disputes set forth in the Dispute
Notice are resolved in favor of Sportech; or (ii) by Sportech (on behalf
of Purchasers) if the disputes set forth in the Dispute Notice are resolved in
favor of SGC.  If the disputes set forth
in the Dispute Notice are resolved part in favor of SGC and part in favor of
Sportech, such expenses shall be shared by Sportech and SGC in proportion to
the aggregate amount of disputes resolved in favor of SGC compared to the
aggregate amount of disputes resolved in favor of Sportech, as shall be
determined by the Independent Accounting Firm in good faith.  The Independent Accounting Firm shall be
instructed to use reasonable best efforts to perform its services within thirty
(30) days of submission of the dispute to it and, in any case, as promptly as
practicable after such submission.  In
making its determination, the Independent Accounting Firm shall act as expert and
not arbitrator.  In resolving any
disputed item, the Independent Accounting Firm shall consider only those items
and amounts that are identified in the Dispute Notice that SGC and Sportech
have not theretofore resolved, and may not assign a value to any such item
greater than the highest value, or less than the lowest value, claimed for such
item by either Sportech or SGC.  The
Preliminary Cash Amount, the Preliminary Net Working Capital and the
Preliminary Relevant Capital Expenditure, (i) if no Dispute Notice has
been timely delivered by Sportech, as originally submitted by SGC; or (ii) if
a Dispute Notice has been timely delivered by Sportech, as adjusted pursuant to
the resolution of such dispute in accordance with this Section 2.4(h),
shall be, respectively, the “Final Cash Amount”,
the “Final Net Working Capital” and the “Final Relevant Capital Expenditure”.


 


(i)            The Cash Closing Consideration shall be adjusted as
follows (the aggregate net of such increases or decreases, as the case may be,
pursuant to Sections 2.4(i)(i), (ii) and (iii) below is referred to
as the “Final Closing Adjustment”):


 


(i)            (A) increased, if the Final Cash
Amount exceeds the Estimated Cash Amount, by the amount of such excess; or (B) decreased,
if the Estimated Cash Amount exceeds the Final Cash Amount, by the amount of
such excess;


 


(ii)           (A) increased, if the Final Net
Working Capital exceeds the Estimated Net Working Capital, by the amount of
such excess; or (B) decreased, if the Estimated Net Working Capital
exceeds the Final Net Working Capital, by the amount of such excess; and


 


(iii)          (A) increased,
if the Final Relevant Capital Expenditure exceeds the Estimated Relevant
Capital Expenditure, by the amount of such excess; or (B) decreased, if
the Estimated Relevant Capital Expenditure exceeds the Final Relevant Capital
Expenditure, by the amount of such excess.


 


(j)            Sportech or SGC, as the case may be, shall, within
five (5) Business Days after the determination of the Final Cash Amount,
the Final Net Working Capital and the Final Relevant Capital Expenditure
pursuant to this Section 2.4, make payment to the other by wire transfer
in immediately available funds to an account or accounts designated by Sportech
or SGC, as the case may be, of the amount payable 


 


33

















 


by Sportech or SGC pursuant to Section 2.4(i), as
the case may be, in an amount equal to the Final Closing Adjustment, together
with interest thereon from the Closing Date to the date of payment at a
floating rate equal to the U.S. dollar prime rate per annum, as quoted by
JPMorgan Chase & Co., from time to time during such period (less any
non-resident withholding Tax payable in respect of such interest).  Such interest shall be calculated based on a
year of 365 days and the number of days elapsed from (but excluding) the
Closing Date to (and including) the date of such payment.


 


Section 2.5            Designated Purchaser.


 


(a)           After the date of this Agreement but not less than
five (5) Business Days prior to the Closing Date (or such longer period as
may be required for compliance with applicable Law), Sportech may, upon prior
written notice to SGC (a “Designation”),
designate any Purchaser or one or more directly or indirectly wholly owned
Subsidiaries of Sportech, whether or not existing as of the date hereof, as a “Designated
Purchaser” hereunder (each such Person, a “Designated Purchaser”);
provided, in each case, that Purchasers shall demonstrate to the reasonable
satisfaction of SGC that (A) no such designation would affect or delay by
more than three (3) Business Days any regulatory approval or
third-party consent relating to the transactions contemplated by this
Agreement, and (B) such designation would not adversely affect the
consummation of the transactions contemplated by this Agreement, the
performance of Purchasers’ obligations hereunder, or Sellers’ rights
hereunder.  The Designation shall set
forth as to each Designated Purchaser:  (i) the
name of such Designated Purchaser; (ii) the jurisdiction of organization
of such Designated Purchaser; (iii) the relevant Interest(s) of a
Company (or Subsidiary of a Company) and/or Software Assets that such
Designated Purchaser is intended to acquire at the Closing or Asset Sale
Closing; and (iv) the portion of the Purchase Price allocable to such
Interest(s) and/or Software Assets (which shall not be inconsistent with
the allocation in Section 2.1(b) of the Seller Disclosure Schedule).  Pursuant to the Designation, each Designated
Purchaser shall be considered as a “Purchaser” for purposes of this Agreement
with respect to the acquisition of such Interest(s) and/or Software Assets
(and any reference to “Purchasers” herein in connection therewith, including
all representations and warranties and covenants which by their terms apply to
Purchasers hereunder, shall be deemed to include reference to such Designated
Purchaser), and such Designated Purchaser shall be assigned the rights and
shall assume the obligations under this Agreement necessary for it or them to
acquire the Interest(s) and/or Software Assets identified as to be
acquired by it or them pursuant to such Designation and to perform all the
obligations of the relevant Purchaser in place of which such Designated
Purchaser is to acquire the relevant interests as applicable under the terms of
this Agreement with respect thereto (including, in the case of any acquisition
of Software Assets at the Asset Sale Closing, performing all the obligations of
Sportech set forth in Section 2.2); provided, that following such
Designation: (i) Sportech shall be jointly and severally liable with each
such Designated Purchaser (on the one hand) to Sellers (on the other hand) for
all such rights and obligations so assigned to or assumed by such Designated
Purchaser; and (ii) Sportech shall cause each Designated Purchaser to
appoint either Sportech or another Purchaser (or in the event there is only one
Purchaser, such Purchaser) as its agent in connection with the exercise of its
rights 


 


34

















 


and remedies under this Agreement.  No such Designation shall relieve Sportech of
its obligations hereunder.


 


(b)           Subject to the provisions of Section 2.5(a),
Sellers shall sell or cause to be sold to each Designated Purchaser the
relevant Interest(s) of a Company and/or Software Assets identified in the
Designation to be acquired by that Designated Purchaser, subject, for the
avoidance of doubt, to all the terms and conditions of this Agreement as they
would apply to a sale to Purchaser which was originally a party hereto.


 


Section 2.6            Contingent
Consideration.


 


(a)           Subject to
Sections 2.6(b), 2.6(e) and 2.6(f), the Organic Target Contingent
Consideration shall be payable to SGC (on behalf of Sellers) in accordance with
Section 2.1(c) if during the three-year period commencing on the
first Quarter End Date after the Closing Date and ending on the third
anniversary of such first Quarter End Date (the “Contingent
Consideration Period”), the annual average of the EBITDA of the
Business worldwide as conducted by the Companies and their Subsidiaries,
including any and all organic growth in the Business conducted by Sportech or
any controlled Affiliate of Sportech worldwide after the Closing (whether by
internal development, regulatory change or otherwise, including any new
locations at which such Business may be conducted, and including growth
attributable to any initiatives, plans or proposals being developed by
Purchasers prior to Closing) but excluding any growth attributable to any
acquisition of any operating business, for the three twelve-month periods
ending on the first, second and third anniversaries, respectively, of such
first Quarter End Date (the “Business Average EBITDA”)
shall equal or exceed $20,000,000 (the “Organic Target Contingent
Consideration Condition”). 
For the purposes of this Section 2.6, the term “Business” shall
comprise only such business as is described in clauses (i) and (ii) of
the definition of “Business” set out at Section 1.1 and any other type of
business conducted by any of the Companies or their Subsidiaries as of the date
hereof, but disregarding the last 20 words thereof.  The term “Organic
Target Contingent Consideration” means:


 


(i)            $5,000,000, if
the Business Average EBITDA equals or exceeds $20,000,000 but is less than
$21,000,000; and


 


(ii)           $8,000,000, if
the Business Average EBITDA equals or exceeds $21,000,000.


 


The amounts in (i) and
(ii) above are alternative and not cumulative.


 


(b)           The Organic
Target Contingent Consideration shall not be payable if during the Contingent
Consideration Period Sportech or any of its controlled Affiliates consummates a
Relevant US Business Acquisition. A “Relevant US Business
Acquisition” means the acquisition of all or substantially all of an
operating business for consideration in excess of $15 million (whether by the
acquisition of all or substantially all of the interests in any legal entity or
entities, or of all or substantially all 


 


35

















 


of the assets comprising
such business, or a combination thereof, or otherwise) engaged in whole or in
part in the conduct of the Business, at least 50% of the revenue of which in
the twelve month period up to closing of such acquisition derives from
activities conducted in the United States (the part of such business comprising
the Business, being the “Acquired Business”).


 


(c)           Subject to
Sections 2.6(d), 2.6(e) and 2.6(f), the Acquisition Target Contingent
Consideration shall be payable to SGC (on behalf of Sellers) in accordance with
Section 2.1(c) if: (i) during the Contingent Consideration
Period Sportech or any of its controlled Affiliates consummates a Relevant US
Business Acquisition; and (ii) the EBITDA of the Pro Forma Business for
any Measurement Period (the “Pro Forma LTM EBITDA”),
less fifteen percent (15%) of the purchase price paid by Sportech for the
Relevant US Business Acquisition, shall equal or exceed $25,000,000 (the “Acquisition Target Contingent Consideration Condition”).  For purposes hereof, the “Pro Forma Business” means (i) the Business worldwide as
conducted by the Companies and their Subsidiaries, including any and all
organic growth in the Business conducted by Sportech or any controlled
Affiliate of Sportech worldwide after the Closing (whether by internal
development, regulatory change or otherwise, including any new locations at
which such Business may be conducted, and including growth attributable to any
initiatives, plans or proposals being developed by Purchasers prior to Closing)
but excluding any growth attributable to any acquisition of any operating
business, and (ii) the Acquired Business. 
“Measurement Period” means any twelve
month period, ending on a Quarter End Date, the start of which is subsequent to
the consummation of the Relevant US Business Acquisition and the end of which
is prior to or at the end of the Contingent Consideration Period, provided that
if the Relevant US Business Acquisition is consummated during the last twelve
months of the Contingent Consideration Period (the “Third
Contingent Consideration Year”), the Measurement Period shall be the
twelve month period ending on the Quarter End Date immediately prior to the
consummation of the Relevant US Business Acquisition, and the Pro Forma LTM
EBITDA shall be calculated in accordance with Section 2.6(d).


 


(d)           For the
purposes of calculating the Pro Forma LTM EBITDA pursuant to Section 2.6(c),
in the event that the acquisition of an Acquired Business is consummated by
Sportech in the Third Contingent Consideration Year, the Pro Forma LTM EBITDA
for the Measurement Period shall be the pro forma EBITDA of the Pro Forma
Business for such period (that is, in such case, the twelve month period ending
on the Quarter End Date immediately prior to the consummation of the Relevant
US Business Acquisition), as set forth in good faith in the final presentation
to the board of directors of Sportech for approval in connection with such
acquisition.


 


(e)           In the event
that during the Contingent Consideration Period Sportech disposes of any
business falling within the definition of “Business” the EBITDA of which would
otherwise have been relevant for the calculation of the Business Average EBITDA
or the Pro Forma LTM EBITDA (a “Disposed-Of  Business”): (i) for the purposes of determining whether
the Organic Target Contingent Consideration Condition has been satisfied
pursuant to Section 2.6(a) and for the 


 


36

















 


purposes of the calculation
of the Business Average EBITDA such Disposed-Of Business shall be assumed to
have been retained by Sportech and the EBITDA attributable to such Disposed-Of
Business shall for the period prior to such disposal be the actual EBITDA of
such Disposed-Of Business and for the period thereafter shall be deemed to grow
at the same average growth rate achieved by the Business (including such
Disposed-Of Business) for the period from the Closing until the disposal of
such Disposed-Of Business, except that if over the period from the Closing
until the disposal of such Disposed-Of Business the EBITDA of the Disposed-Of
Business has not grown, the growth rate of the EBITDA attributable to the
Disposed-Of Business shall be deemed to be zero; and (ii) for the purposes
of determining whether the Acquisition Target Contingent Consideration
Condition has been satisfied pursuant to Section 2.6(c), the actual EBITDA
of the Disposed-Of Business during the Measurement Period shall be disregarded
for the purposes of calculating the Pro Forma LTM EBITDA, but the EBITDA of the
Disposed-Of Business for the twelve-month period ending on the date of disposal
of the Disposed-Of Business shall be deemed to be the EBITDA of the Disposed-Of
Business for the Measurement Period provided that if the Relevant US Business
Acquisition occurs in the Third Contingent Consideration Year, this clause (ii) shall
not apply.


 


(f)            For the
avoidance of doubt: (i) in the event that the Organic Target Contingent
Consideration is payable, the Acquisition Target Contingent Consideration shall
in no circumstances be payable; and (ii) in the event that the Acquisition
Target Contingent Consideration is payable, in no circumstances shall the
Organic Target Contingent Consideration be payable.


 


(g)           Following the
Closing, Purchasers shall, and shall cause their Affiliates (including the
Companies and their Subsidiaries) to, (i) operate the Business and any
Acquired Business in good faith in a commercially reasonable manner, and (ii) not
take or omit to take any actions to reduce the EBITDA of the Business or any
Acquired Business with a purpose or intention to reduce any of the Contingent
Consideration.  Purchasers shall maintain
adequate financial records for the Business or the Pro Forma Business (as
applicable). Within thirty (30) days after each Quarter End Date during the
Contingent Consideration Period, Sportech shall provide to SGC (x) an
unaudited combined statement of operations of the Business or the Pro Forma
Business (as applicable) worldwide for such quarter in at least the same detail
as the interim financial statements to be delivered by SGC to Purchasers
pursuant to Section 5.13, and (y) a statement setting forth in
reasonable detail the calculation of the EBITDA of the Business or the Pro
Forma Business (as applicable) (together with the statement required by (x) above,
an “EBITDA Business Statement”), determined
in accordance with this Section 2.6 for the twelve-month period ended upon
such Quarter End Date, which statement shall be certified by Sportech’s Finance
Director provided that following a Relevant US Business Acquisition, an EBITDA
Business Statement shall only be delivered with respect to a Quarter End Date
that is the last Quarter End Date of any Measurement Period.


 


37

















 


(h)           In the event that SGC disputes, or wishes to review,
any EBITDA Business Statement delivered pursuant to Section 2.6(g) following
the date on which the Organic Target Contingent Consideration Condition or the
Acquisition Target Contingent Consideration Condition is first capable of being
satisfied, SGC shall deliver a notice to such effect to Sportech within forty
(40) Business Days after receipt thereof. 
Thereafter, SGC and Sportech shall cooperate in good faith to facilitate
such review and to resolve any dispute with respect thereto as promptly as
practicable and, upon such resolution, if any, payment of the Contingent
Consideration, if due, shall be made promptly in accordance with the agreement
of Sportech and SGC.  In connection with
SGC’s review of any such EBITDA Business Statement, to the extent reasonably
required for the purposes thereof, SGC and its Representatives shall have
reasonable access, during normal business hours and upon reasonable notice, to
all supporting work papers and schedules prepared by Sportech or its
Representatives (subject to customary indemnification and confidentiality
agreements with respect to relevant supporting work papers, if any, of Sportech’s
independent accountants that may be requested by such independent accountants)
in connection with Sportech’s preparation of such EBITDA Business Statements
and to finance personnel of Sportech and its Representatives and any other
information which SGC reasonably requests, and Sportech shall cooperate as they
may reasonably request with SGC and its Representatives in connection
therewith.  In connection with Sportech’s
review of any notice delivered by SGC pursuant to the first sentence of this
paragraph, to the extent reasonably required for the purposes thereof, Sportech
and its Representatives shall have reasonable access, during normal business
hours and upon reasonable notice, to all supporting work papers and schedules
prepared by SGC or its Representatives (subject to customary indemnification
and confidentiality agreements with respect to the supporting work papers of
SGC’s independent accountants that may be requested by such independent
accountants) in connection with any notice delivered by SGC pursuant to the
first sentence of this paragraph, and to finance personnel of SGC and its
Representatives and any other information which Sportech reasonably requests,
and SGC shall cooperate as they may reasonably request with Sportech and its
Representatives in connection therewith. 
If Sportech and SGC are unable to resolve any dispute with respect to
such matters within ten (10) Business Days (or such longer period as
Sportech and SGC shall mutually agree in writing) of SGC’s delivery of notice
of such dispute or request to review, such dispute shall be resolved by the
Independent Accounting Firm, and such determination shall be final and binding
on the parties.  Any additional terms of
reference of the Independent Accounting Firm shall be agreed in good faith
between the parties at the time of appointment by Sportech and SGC.  Any expenses relating to the engagement of
any Independent Accounting Firm in respect of its services pursuant to this Section 2.6(h) shall
be paid (i) by SGC (on behalf of Sellers) if the disputes are resolved in
favor of Sportech; or (ii) by Sportech (on behalf of Purchasers) if the
disputes are resolved in favor of SGC.  If
the disputes regarding preparation of and calculation of any items reflected in
any EBITDA Business Statement are resolved part in favor of SGC and part in
favor of Sportech, such expenses shall be shared by Sportech and SGC in
proportion to the aggregate amount of disputes resolved in favor of SGC
compared to the aggregate amount of disputes resolved in favor of Sportech, as
shall be determined by the Independent Accounting Firm in good faith.  The Independent Accounting Firm shall be
instructed to use reasonable best efforts to perform 


 


38

















 


its services within thirty (30) days of submission of
the dispute to it and, in any case, as promptly as practicable after such
submission.  In making its determination,
the Independent Accounting Firm shall act as expert and not arbitrator.  In resolving any disputed item, the
Independent Accounting Firm shall consider only those items and amounts that
are identified in the dispute notice that SGC and Sportech have not theretofore
resolved.


 


(i)            For the avoidance of doubt, any Contingent
Consideration otherwise due pursuant to this Section 2.6 shall be fully
due at the same time, and in the same amount, provided herein, notwithstanding
any business combination or change of control of Sportech.


 


Section 2.7            Trailing Purchase Price
Adjustment.
In consideration of the current underfunded status of the Autotote Systems, Inc.
Pension Plan for Union Employees, SGC shall remit to Sportech the sum of
$750,000, to be paid at the rate of $150,000 per year on each anniversary of
the Closing Date until and including the fifth anniversary of the Closing
Date.   For U.S. federal income tax
purposes, the parties agree to treat the payments made pursuant
to this Section 2.7 as repayments of principal on a loan in the amount of
$697,878.44 made by Sportech to SGC, and payments of interest thereon as shown
at Section 2.7 of the Seller Disclosure Schedule.  The parties agree and acknowledge that the
interest component of each payment shall be subject to withholding tax at a
rate of 30% if Sportech shall have failed to provide to SGC a valid, executed
Internal Revenue Service Form W-8BEN (or successor form) with Part II
completed as required by Section 2.3(c)(vii), which continues to be valid at
the time of payment, and any other documentation that may be required by
applicable Law in effect at the time such payment is made.


 


ARTICLE III.


 


REPRESENTATIONS
AND WARRANTIES OF SELLERS


 


Except as set forth on
the Seller Disclosure Schedule, SGC represents and warrants to
Purchasers as of the date hereof and, except with respect to the Software
Assets, as of the Closing Date, and in respect of the Software Assets, as at
the Asset Closing Date, as follows:


 


Section 3.1            Organization
and Good Standing.  Each
of Sellers and SGR is duly incorporated or organized, validly existing under
the Laws of its governing jurisdiction, is in good standing under the laws of
the jurisdiction of its incorporation or organization, and has all requisite
corporate or company power and authority to enter into this Agreement and those
Ancillary Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby.  Each of the Companies and their Subsidiaries (a) is
duly incorporated or organized and validly existing under the Laws of its
governing jurisdiction; (b) has all requisite corporate, company or
limited liability company power and authority to own, operate and lease its
assets and properties and to


 


39
















 


carry on its business as it is
now being conducted; (c) except as set forth in Section 3.1 of the Seller
Disclosure Schedule, is duly qualified to do business and is in good
standing in each of the jurisdictions in which the ownership, operation or
leasing of its properties and assets and the conduct of its business (including
the Business) requires it to be so qualified and (d) is in substantial
compliance with its charter, bylaws or other Governing Documents, except, in
the case of clauses (c) or (d), where the failure to be so qualified and
in good standing, or to be in such compliance, would not be material in the
context of the Business of the Companies and their Subsidiaries taken as a
whole.


 


Section 3.2            Authorization.  Each Seller and SGR has the requisite
corporate or company power and authority to execute and deliver this Agreement
and those Ancillary Agreements to which it is a party.  The execution and delivery of this Agreement
and the Ancillary Agreements by the applicable Sellers and SGR and the
consummation by the applicable Sellers and SGR of the transactions contemplated
hereby and thereby have been duly and validly authorized by the board of
directors (or equivalent governing body) of such Sellers and SGR and no other
corporate or company proceedings are necessary to authorize this Agreement or
the Ancillary Agreements or to consummate the transactions contemplated hereby
or thereby.  This Agreement has been duly
executed and delivered by Sellers and SGR, and (assuming due authorization, execution
and delivery by Purchasers) this Agreement constitutes, and each of the
Ancillary Agreements, when executed and delivered by the applicable Sellers and
SGR (assuming due authorization, execution and delivery by Purchasers) will
constitute, a valid and binding obligation of such Sellers and SGR, enforceable
against such Sellers and SGR in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar Laws relating to or affecting creditors’ rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).


 


Section 3.3            No
Conflict; No Defaults.  Except
as set forth in Section 3.3 of the Seller Disclosure Schedule and
assuming all Required Governmental Approvals, Seller Governmental Approvals and
Purchaser Governmental Approvals, and all waiting periods described in Section 3.3
of the Seller Disclosure Schedule, have been obtained or made, or have
expired, the execution and delivery of this Agreement and the Ancillary
Agreements by the applicable Sellers and the consummation by such Sellers of
the transactions contemplated hereby and thereby do not and will not (a) result
in a material contravention, violation or breach of Law applicable to any of
such Sellers, the Companies or the Subsidiaries of the Companies or to any of
their respective business assets or properties; (b) conflict with, result
in a violation or breach of, or constitute a default under (including any such
conflict, violation, breach or default resulting from the failure to make or
obtain any required notification, consent, waiver or approval under), or result
in the acceleration of, or create in any party the right to accelerate, terminate
or cancel, or give rise to a right of payment, prepayment or reimbursement, or
termination, cancellation, modification or acceleration under, or to additional
accelerated or guaranteed rights or entitlements of any Person under, or result
in the creation of any Encumbrance (other than a Permitted Encumbrance) upon
any of the properties or assets of the Companies or their Subsidiaries under
any provision of, any Material Company 


 


40

















 


Contract, in each case whether
with or without notice, lapse of time or both (the “Third Party
Consents”); or (c) contravene, conflict with, or result in any
violation or breach of any provision of, the charter, bylaws or other Governing
Documents of any of such Sellers, the Companies or the Subsidiaries of the
Companies, other than (i) in the case of Section 3.3(b), any such
violations, conflicts, breaches, defaults, accelerations or rights that would
not, individually or in the aggregate, reasonably be expected to give rise to a
material liability of the Business or any liability of any Company or any Subsidiary of
any Company that is material in the context of the Companies and their
Subsidiaries taken as a whole, or
materially interfere with the conduct of the Business, and (ii) in any
case, any such violations, conflicts, breaches, defaults, accelerations or
rights, if any, that would reasonably be expected by reason of matters
specifically relating to the nature of the business or the identity of the
Purchasers or their Affiliates.


 


Section 3.4            Capital
Structure.


 


(a)           Section 3.4(b) of the Seller Disclosure
Schedule sets forth a list of each Company, including its name, its
jurisdiction of incorporation or organization, its authorized and outstanding
capital stock or other equity interests, the percentage of its outstanding
capital stock or other equity interests owned by the applicable Seller and the
number and nominal amounts of its outstanding capital stock or other equity
interests held by the applicable Seller. 
Except as set forth in Section 3.4(a) of the Seller
Disclosure Schedule:


 


(i)            the AEI Shares are duly authorized,
validly issued, fully paid and nonassessable, and are held beneficially and of
record by SGC, free and clear of Encumbrances, and constitute all of the
outstanding capital stock or other equity interests of AEI;


 


(ii)           the API Shares are duly authorized,
validly issued, fully paid and nonassessable, and are held beneficially and of
record by SGC, free and clear of Encumbrances, and constitute all of the
outstanding capital stock or other equity interests of API;


 


(iii)          the
SG Turkey Shares and the SG Turkey Minority Interest are duly authorized,
validly issued, fully paid and nonassessable, and are held beneficially and of
record by SGR (in the case of the SG Turkey Shares) and by SGR BV (in the case
of the SG Turkey Minority Interest), free and clear of Encumbrances, and
constitute 99.98% (in the case of the SG Turkey Shares) and 0.02% (in the case
of the SG Turkey Minority Interest) of the outstanding capital stock or other
equity interests of SG Turkey;


 


(iv)          the SGR Interests are duly authorized,
validly issued, fully paid and nonassessable, and are held beneficially and of
record by SGI, free and clear of Encumbrances, and constitute all of the outstanding
limited liability company interests or other equity interests of SGR;


 


41

















 


(v)           the ATC Shares are duly authorized,
validly issued, fully paid and nonassessable, and are held beneficially and of
record by SG Racing, free and clear of all Encumbrances, and constitute all of
the outstanding capital stock or other equity interests of ATC;


 


(vi)          the AE Share is duly authorized, validly
issued and existing in the nominal amount set forth in the recitals to this
Agreement, fully paid and not repaid, nonassessable, unrestrictedly owned by
SGG, freely disposable by SGG, free and clear of Encumbrances, and constitutes
all of the outstanding equity or other interests of AE;


 


(vii)         the
SGR BV Interests are duly authorized, validly issued and fully paid, and are
held beneficially and of record by SGL, free and clear of Encumbrances, and
constitute the entire issued share capital or other equity interests of SGR BV,
and there are no outstanding depositary receipts for shares (certificaten van aandelen) with respect to the SGR BV
Interests;


 


(viii)        the
SGR SAS Interests are duly authorized, validly issued and allotted, fully paid
and nonassessable, and are held beneficially and of record by SGL, free and
clear of Encumbrances, and constitute all of the outstanding equity or other
interests of SGR SAS;


 


(ix)           the SGRL Interests are validly issued and
fully paid, and are held legally and beneficially and of record by SGH, free
and clear of Encumbrances, and constitute the entire issued share capital or
other equity interests of SGRL; and


 


(x)            the SGWS Interests are duly authorized,
validly issued, fully paid and nonassessable, and are held by SGH as the sole
legal and beneficial owner of the SGWS Interests, free and clear of
Encumbrances, and constitute all of the issued and outstanding shares or other
equity interests of SGWS.


 


Except as set forth in Section 3.4(a) of
the Seller Disclosure Schedule, the Interests are not subject to any
purchase option, call option, right of first refusal, preemption right
(statutory or otherwise), subscription right or similar right and were not
issued in violation of any provision of applicable Law (except such violation,
if any, as would not reasonably be expected to materially affect, or impact the
value of, such Interests).  Except as set
forth in Section 3.4(a) of the Seller Disclosure Schedule,
there are no outstanding obligations (contingent or otherwise), options,
warrants, convertible or exchangeable securities, pre-emptive rights, rights of
first refusal, “phantom” stock or stock appreciation rights providing for
settlement in stock, stock-based performance units or other similar rights,
Contracts, arrangements or commitments (contingent or otherwise) (i) relating
to the capital stock or other equity interests of the Companies; (ii) obligating
any Person to issue, deliver or sell, or cause to be issued, delivered or sold,
or otherwise transfer, or cause to be transferred, capital stock or other
equity interests of the Companies; (iii) obligating any Person to
repurchase, redeem or otherwise acquire shares 


 


42

















 


of capital stock or other
equity interests of the Companies, or to pay any dividend or make any
distribution in respect thereof; (iv) obligating any Company to make any
investment in any equity interests in any other Person other than another
Company or a wholly owned Subsidiary of a Company; (v) obligating any
Company to make any investment in debt securities of or extend any loan to any
other Person (which, for the avoidance of doubt, shall not include any
extension of credit in the ordinary course of business); or (vi) obligating
any Company to issue, grant, extend or enter into any option, warrant, call,
right, security, commitment, Contract, arrangement or undertaking with respect
to the capital stock or other equity interests of the Companies.  There are no shareholders’ agreements
governing the affairs of the Companies or the relationship, rights and duties
of its respective shareholders, nor are there any voting trusts, operating
agreements, proxies or other Contracts or understandings (contingent or
otherwise) in effect with respect to the voting or transfer of equity interests
of the Companies.  Upon the delivery and
payment of the Purchase Price at Closing as provided herein, Sellers will
transfer and convey to Purchasers, and Purchasers will receive from Sellers,
good and valid title to the Interests, free and clear of any Encumbrances.


 


(b)           Section 3.4(b) of the Seller Disclosure
Schedule sets forth a list of each Subsidiary of the Companies, including
its name, its jurisdiction of incorporation or organization, its authorized and
outstanding capital stock or other equity interests, the percentage of its
outstanding capital stock or other equity interests owned by the applicable
Company or Subsidiary (as applicable) and the number and nominal amounts of its
outstanding capital stock or other equity interests held by the applicable
Company or Subsidiary (as applicable). 
Except as set forth in Section 3.4(b) of the Seller
Disclosure Schedule, the shares of outstanding capital stock or other
equity interests of the Subsidiaries of the Companies are duly authorized,
validly issued, fully paid and not repaid, nonassessable, and are held of
record or, as applicable, unrestrictedly owned by the applicable Company or
Subsidiary (as applicable), free and clear of Encumbrances, and are not subject
to any purchase option, call option, right of first refusal, preemption right
(statutory or otherwise), subscription right or similar right, and were not
issued in violation of any provision of applicable Law (except such violation,
if any, as would not reasonably be expected to materially affect, or impact the
value of, such Interests).  Except as set
forth in Section 3.4(b) of the Seller Disclosure Schedule,
there are no outstanding obligations (contingent or otherwise), options,
warrants, convertible or exchangeable securities, pre-emptive rights, rights of
first refusal, “phantom” stock or stock appreciation rights providing for
settlement in stock, stock-based performance units or other similar rights,
Contracts, arrangements or commitments (contingent or otherwise) (i) relating
to the capital stock or other equity interests of the Subsidiaries of the
Companies; (ii) obligating any Person to issue, deliver or sell, or cause
to be issued, delivered or sold, or otherwise transfer, or cause to be
transferred, shares of the capital stock or other equity interests of the
Subsidiaries of the Companies; (iii) obligating any Person to repurchase,
redeem or otherwise acquire shares of capital stock or other equity interests
of the Subsidiaries of the Companies, or to pay any dividend or make any
distribution in respect thereof; (iv) obligating any Subsidiary of the
Companies to make any investment in any equity interests in any other Person
other than a Company or a wholly owned Subsidiary of a Company; (v) obligating
any Subsidiary of the Companies 


 


43

















 


to make any investment in debt securities of or extend
any loan to any other Person (which, for the avoidance of doubt, shall not
include any extension of credit in the ordinary course of business); or (vi) obligating
any Subsidiary of the Companies to issue, grant, extend or enter into any
option, warrant, call, right, security commitment, Contract, arrangement or
undertaking with respect to the capital stock or other equity interests of the
Subsidiaries of the Companies.  There are
no shareholders’ agreements governing the affairs of the Subsidiaries of the
Companies or the relationship, right and duties of its respective shareholders,
nor are there any voting trusts, operating agreements, proxies or other
Contracts or understandings (contingent or otherwise) in effect with respect to
the voting or transfer of equity interests of the Subsidiaries of the
Companies.


 


(c)           No change in the capitalization of any of the
Companies or any of the Subsidiaries of the Companies has occurred since the
Balance Sheet Date.


 


(d)           Section 3.4(d) of the Seller Disclosure
Schedule sets out for each Company and each Subsidiary of the Companies all
outstanding Indebtedness of such Company or Subsidiary (secured or unsecured).


 


(e)           Except as set forth in Section 3.4(e) of the
Seller Disclosure Schedule, there are no Persons in which any of the
Companies or their Subsidiaries owns, directly or indirectly, any equity
interest (including any capital stock, or membership interest, or partnership
interest or joint venture interest under a Contract that by its express terms
creates a joint venture or partnership entity in which any of the Companies or
their Subsidiaries shares equity ownership).


 


Section 3.5            Financial
Statements.  Set forth in Section 3.5(a) of
the Seller Disclosure Schedule is a copy of the Financial
Statements.  Except as set forth in Section 3.5(a) of
the Seller Disclosure Schedule, the Financial Statements were prepared
based upon the information contained in the books and records of the Companies
and their Subsidiaries and in accordance with GAAP, consistently applied
throughout the periods included (except as disclosed in the notes thereto, and
except that unaudited statements do not include notes or normal year-end
adjustments), and fairly present, in all material respects, the consolidated
financial position, results of operations, cash flows and invested equity of
the Companies and their Subsidiaries as of the dates thereof and for the
periods covered thereby (as applicable). Section 3.5(b) of the Seller
Disclosure Schedule sets forth the differences, if any, between the
methodologies applied in the preparation of the Financial Statements and the
methodologies applied in calculating the items set forth in Part B of Section 2.4(a) of
the Seller Disclosure Schedule (other than methodologies identified in
the footnotes thereto).  The amounts set
forth in Part B of Section 2.4(a) of the Seller Disclosure
Schedule were prepared based upon the information contained in the books
and records of the Companies and their Subsidiaries.


 


Section 3.6            Undisclosed
Liabilities.  Except for (a) liabilities
which are disclosed, accrued or reserved against in the Financial Statements
(or the related notes) or disclosed in Section 3.6 of the Seller
Disclosure Schedule; (b) liabilities incurred since the Balance Sheet
Date in the ordinary course of business; (c) liabilities 


 


44

















 


disclosed in the Seller
Disclosure Schedule, except as provided therein, pursuant to any of
Sections 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14(b), 3.15, 3.16(b), 3.17(d), and
3.18(b); (d) performance of express obligations under Company Contracts
listed in Section 3.14(a) of the Seller Disclosure Schedule to
the extent the nature of the liability with respect thereto is reasonably
apparent from a reading of such Company Contract (but not, for the avoidance of
doubt, any liability for breach of such Company Contracts by any of the
Companies or their Subsidiaries); (e) liabilities incurred by the
Companies or their Subsidiaries after the date of this Agreement with the
written consent of Sportech in compliance with Section 5.1 or the
incurrence of which would require such consent but for any specific exception
contained in Sections 5.1(a) through (r); and (f) other liabilities,
not covered by Sections 3.6(a) through (e) above, that, individually
and in the aggregate, do not exceed $500,000.00, none of the Companies or any
of their Subsidiaries have any Liabilities in each case required to be
reflected or reserved against on a combined balance sheet of the Companies and
their Subsidiaries prepared in accordance with GAAP.


 


Section 3.7            Absence
of Certain Changes.  Except
as set forth in Section 3.7 of the Seller Disclosure Schedule, from
the Balance Sheet Date through the date of this Agreement, there has not been
any occurrence or event which, individually or in the aggregate, has or would
reasonably be expected to have a Companies Material Adverse Effect.  Except as set forth in Section 3.7 of
the Seller Disclosure Schedule, from the Balance Sheet Date through the
date of this Agreement, the Companies and their Subsidiaries have conducted the
Business in the ordinary course in all material respects, and none of the
Companies or their Subsidiaries, has:


 


(a)           amended or otherwise modified in any respect or
permitted any material waiver of or granted any material consents under its
Governing Documents;


 


(b)           adopted a plan or agreement of liquidation,
dissolution, restructuring, merger, consolidation or recapitalization;


 


(c)           (i) (A) issued, delivered, sold,
transferred, pledged, granted, disposed of, or created, permitted, allowed or
suffered to exist any Encumbrance on, any shares of its capital stock or other
equity interests; or (B) issued, delivered sold, transferred, pledged, granted,
transferred or disposed of or created any Encumbrance on any options, warrants,
securities convertible into or exercisable for (including convertible debt) or
other rights to purchase or obtain any shares of its capital stock or other
equity interests; (ii) effected or approved any split, combination,
subdivision or reclassification of any shares of its capital stock or other
equity interests; (iii) declared, set aside or paid any dividend or other
distribution; or (iv) redeemed, repurchased or otherwise acquired any
shares of its capital stock or other equity interests;


 


(d)           created, incurred, assumed, suffered to exist or
guaranteed or otherwise become liable for any Indebtedness or issued rights to
acquire any debt security;


 


45

















 


(e)           agreed to make any capital expenditures with respect
to which payment is to be made after Closing;


 


(f)            (A) granted or announced any increase in or
accelerated the compensation, bonus or benefits, or otherwise increased the
compensation, bonus or benefits payable or to become payable, except periodic
generally applicable increases in base salaries in accordance with past
practice, to any employee, director, officer, manager, or consultant of, the
Companies and their Subsidiaries; (B) granted any rights to retention,
severance or termination pay to, or entered into any new (or amend any
existing) employment, retention, severance or other Contract with, any such
employee, director, officer, agent or consultant, in each case except as
required by Law or where the effect of any of the foregoing did not lead to an
increase in aggregate of total staff costs of the Companies and their
Subsidiaries by more than five (5) percent per annum; (C) adopted or
established any new employee benefit plans for employees, or taken any action
to accelerate the vesting, payment or funding of compensation or benefits under
any Plan, to the extent not already provided in any such Plan; or (D) entered
into any consulting Contract providing for payments in excess of $50,000 in any
fiscal year;


 


(g)           made any material change in the management structure
of the Companies and their Subsidiaries, including the hiring of senior
managerial personnel or the termination of any personnel other than for cause,
or increased, other than seasonal fluctuations in employment in the ordinary
course, the number of individuals employed by the Companies and their
Subsidiaries;


 


(h)           entered into or consummated any transaction involving
the acquisition of all or substantially all of the business, stock, assets or
other properties of any other Person;


 


(i)            purchased or otherwise acquired any amount of assets
or property for consideration in excess of $125,000 individually or $500,000 in
the aggregate, except in the ordinary course of business;


 


(j)            sold, assigned, transferred, leased, licensed or
otherwise disposed of, or waived or canceled any claims or rights to, any
amount of assets or property for consideration in excess of $125,000
individually or $500,000 in the aggregate, except in the ordinary course of
business;


 


(k)           suffered any damage, destruction or loss, whether or
not covered by insurance, with respect to the property and assets of any of the
Companies or their Subsidiaries having a replacement cost of more than $100,000
for any single loss or $500,000 for all such losses;


 


(l)            made or rescinded any material tax election (including
by adopting or changing any method of accounting or making any entity
classification election) with respect to any of the Companies or their
Subsidiaries;


 


46

















 


(m)          materially amended or modified, had accelerated or
received a written notice of material default or termination under, any
Material Company Contract;


 


(n)           (A) made any payment or transferred any assets
to, or (B) entered into, amended or terminated any Contract with, the
Sellers or any of their Affiliates, except, in the case of payments but not
transfers pursuant to (A) in the usual and ordinary course of business
consistent with past practice;


 


(o)           granted, extended, materially amended (except as
required in the diligent prosecution of the Intellectual Property owned by the
Companies and the Subsidiaries), waived or modified in any material respect any
material rights in or to, or sold, assigned, leased, transferred, licensed
(except in the ordinary course of business), cancelled or otherwise disposed
of, any Intellectual Property owned by the Companies or their Subsidiaries to
the extent such Intellectual Property is or was material to the operation of
the Business or to the extent any such action has had a material impact on the
business of the Companies and their Subsidiaries taken as a whole, or failed to
exercise a right of renewal or extension under any Contract for any such material
Intellectual Property;


 


(p)           except as may be required as a result of a change in
Law or in GAAP (or applicable international accounting principles), adopted or
changed any of its accounting policies, principles, methods, practices, periods
or procedures;


 


(q)           entered into any material new line of business outside
of or not reasonably complimentary to the Business or terminated any line of
business; or


 


(r)            entered into or approved any Contract to do engage in
or cause any of the foregoing


 


Section 3.8            Legal
Proceedings.  Except as set
forth in Section 3.8 of the Seller Disclosure Schedule and except
as to any Actions disclosed in Sections 3.10, 3.11, 3.12, 3.13 or 3.17(d) of
the Seller Disclosure Schedule, there are no Actions pending or, to the
Knowledge of Sellers, threatened against any of the Companies or their
Subsidiaries or any of their respective assets or properties which,
individually or in the aggregate, would reasonably be expected to materially
interfere with the conduct of the Business, or give rise to a material
liability in respect of the Business or any liability of any Company or any Subsidiary of
any Company that is material in the context of the Companies and their
Subsidiaries taken as a whole or, as of
the date hereof, materially interfere with the consummation of the transactions
contemplated hereby.  Except as set forth
in Section 3.8 of the Seller Disclosure Schedule, none of the
Companies, their Subsidiaries or, to the Knowledge of Sellers, their respective
directors, officers, managers or employees (in their capacities as such) is
subject to any Governmental Order relating to the Business which, individually
or in the aggregate, (i) would reasonably be expected to give rise to a
material liability of the Business or any liability of any Company or
any Subsidiary of any Company that is material in the context of the Companies
and their 


 


47

















 


Subsidiaries taken as a whole; (ii) would reasonably be expected to materially interfere with
the conduct of the Business or the ability of any Company or Subsidiary of the
Companies to engage in the Business or compete or do business with any Person
with respect to any aspect of the Business or (iii) as of the date hereof,
would reasonably be expected to materially interfere with the consummation of
the transactions contemplated hereby.  To
the Knowledge of Sellers, no officer or key employee of any of the Companies or
their Subsidiaries (in their capacities as such), is subject to any
Governmental Order that prohibits such officer or other employee from engaging
in or continuing any material conduct, activity or practice relating to the
Business as conducted by such Company or Subsidiary.


 


Section 3.9            Compliance
with Laws; Permits.


 


(a)           Except as set forth in Section 3.9(a) of the
Seller Disclosure Schedule and as specifically disclosed in Sections
3.9(b), 3.10, 3.11, 3.12, 3.13, 3.16 or 3.17 of the Seller Disclosure
Schedule, the Companies and the Subsidiaries of the Companies have at all
times since January 1, 2006 operated and are currently operating the
Business in compliance in all material respects with all material applicable
Laws (including those material Laws relating to employment, employment
practices, wages, bonuses and terms and conditions of employment including
employment compensation).  Except as
would not, individually or in the aggregate, reasonably be expected to give
rise to a material liability of the Business or any liability of any Company or
any Subsidiary of any Company that is material in the context of the Companies
and their Subsidiaries taken as a whole, or materially interfere with the
conduct of the Business, since January 1, 2006, none of the Companies,
their Subsidiaries, their Affiliates or, to the Knowledge of Sellers, their
respective directors, managers, officers, Employees or agents (in each
case,  acting in their capacities as such
and on behalf of any of the foregoing) has (a) directly, or indirectly
through a third-party intermediary, paid, offered, given, promised to pay, or
authorized the payment of any money or anything of value (including any gift,
sample, travel, meal and lodging expense, entertainment, service, equipment,
debt forgiveness, donation, grant or other thing of value, however
characterized) to any official of any Governmental Entity, any Person acting on
behalf of any Governmental Entity, any political party or official thereof or
any candidate for political office at the suggestion, request, direction or for
the benefit of any of the above-described Persons that was illegal under
applicable Law; or (b) violated or is in violation of the Foreign Corrupt
Practices Act of 1977, or any other applicable Law of similar effect, including
laws implementing the OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions.


 


(b)           All material approvals, permits, licenses
and authorizations of Governmental Entities required to be had by any of the
Companies or their Subsidiaries or any of their respective directors, managers,
officers, shareholders or employees to conduct the Business as currently
conducted and to permit each Company and each Subsidiary of the Companies to
own and use its material properties and assets, in all material respects, in
the manner in which it currently owns and uses such properties and assets
(collectively, “Permits”) have been obtained and
all such Permits are in full 


 


48

















 


force and effect and the Business is being operated in
compliance in all material respects therewith (except that this sentence shall
not apply to any Permits that are covered by Section 3.10(a)).  Section 3.9(b) of the Seller
Disclosure Schedule lists all such Permits currently in existence and
maintained by any of the Companies or any of their Subsidiaries. To the
Knowledge of Sellers, no Governmental Entity has threatened in writing to
revoke, materially amend or impose any material condition or sanction in
respect of any such Permit, or commenced formal proceedings to revoke,
materially amend, or impose any material condition or sanction in respect of
any such Permit.  All applications
required to have been filed prior to each date as of which this representation
is made for the renewal of any material Permits after such date have been filed
with the appropriate Persons, except as would not cause such Permits to be
revoked or not renewed.


 


(c)           To the Knowledge of Sellers, since January 1,
2006, the Companies and their Subsidiaries have collected, maintained and
secured all personal information and data provided to it by third Persons in
compliance, in all material respects, with all Laws.  To the knowledge of Sellers, since January 1,
2006, the Companies and their Subsidiaries have not released any such personal
information or data to any Person not authorized to have such information in
material violation of any Law.


 


Section 3.10         Environmental Matters.  Except as set forth in Section 3.10 of
the Seller Disclosure Schedule, or as disclosed in an environmental site
assessment or similar study made available to Purchasers prior to the date
hereof:


 


(a)           one or more of the Companies or their Subsidiaries
have obtained all material Permits that are required under any Environmental
Law for the operation of the Business in all material respects as currently
being conducted, all such Permits are in full force and effect in all material
respects and the Business is being operated in all material respects in
compliance therewith, and such Permits will not be terminated or materially
impaired or become terminable, in whole or in material part, as a result of
this Agreement or the Ancillary Agreements or the consummation of the
transactions contemplated herein or therein;


 


(b)           the Companies and their Subsidiaries are operating the
Business in compliance in all material respects with Environmental Laws;


 


(c)           to the Knowledge of Sellers, none of the Companies or
their Subsidiaries has released or discharged any Hazardous Substances on,
under, in, from, or about the Real Property that is currently subject to any
material investigation, remediation or monitoring, or is reasonably likely to
result in a material liability pursuant to material applicable Environmental
Laws;


 


(d)           to the Knowledge of Sellers, none of the Companies or
their Subsidiaries has received any written notice, demand, letter, information
request or claim alleging a material violation or liability under any
Environmental Law (an “Environmental Claim”)
during the past five (5) years, and no such Environmental Claim regarding
or resulting from the activities or business of any of the Companies or


 


49
















 


their Subsidiaries, or any property or assets
currently or formerly owned, operated or used by any of the Companies or their
Subsidiaries, has been threatened in writing during the past five (5) years;
and


 


(e)           none of the Companies or their Subsidiaries is party
to or has agreed in writing to, or, to the Knowledge of Sellers, is otherwise
subject to, any material Action or Governmental Order under any Environmental
Law regarding any of the Companies or their Subsidiaries or any property or
assets currently or formerly owned, operated or used by any of the Companies or
their Subsidiaries.


 


(f)            As used herein, “Environmental Law”
means any Law applicable to the Business relating to (i) the protection of
the natural environment; (ii) the protection of human health and safety as
it pertains to exposure to Hazardous Substances released or discharged into the
natural environment; or (iii) the handling, use, presence, disposal,
treatment, storage, release, discharge or threatened release or discharge of
any Hazardous Substance.  “Hazardous Substance” means any substance that is (i) listed,
classified, regulated or defined pursuant to any Environmental Law to be a
pollutant, contaminant, waste, hazardous waste, hazardous substance, hazardous
material, toxic substance, deleterious substance or dangerous good; (ii) any
petroleum product or by-product; and (iii) any substance or material
containing polychlorinated biphenyls, asbestos, lead, urea formaldehyde or
radon gas.


 


Section 3.11         Taxes.  Except as set forth in Section 3.11 of the Seller
Disclosure Schedule:  (a) (i) the
Companies and their Subsidiaries have timely filed (taking into account
extensions) all material Tax Returns they were required to file, which Tax
Returns are correct in all material respects, and paid all material Taxes,
whether or not shown to be due and payable on such Tax Returns, by the
applicable due dates, and (ii) each Tax Group has timely filed (taking
into account extensions) all material Tax Returns it was required to file for
each taxable period during which any of the Companies and their Subsidiaries
was a member of the Tax Group, which Tax Returns are correct in all material
respects insofar as they relate to the Companies and their Subsidiaries, and
paid all material Taxes for each taxable period during which any of the
Companies and their Subsidiaries was a member of the Tax Group, whether or not
shown to be due and payable on such Tax Returns, by the applicable due dates; (b) there
are no pending or, to the Knowledge of Sellers, threatened Actions for the
assessment or collection of Taxes with respect to any of the Companies or their
Subsidiaries nor is any claim for additional Tax or assessment currently being
asserted by any Government Entity; (c) there are no material liens for
Taxes against any of the Interests or any of the assets of any of the Companies
or their Subsidiaries, other than liens for Taxes not yet due and payable or
contested in good faith; (d) none of the Companies or their Subsidiaries,
and no Tax Group with respect to any taxable period during which any of the
Companies and their Subsidiaries was a member of the Tax Group, has in effect
any waiver of any statute of limitations in respect of Taxes or executed or
filed with any Tax authority any agreement currently in effect extending the
period for any audit or assessment or collection of any Taxes; (e) no
written notice has been received from a Governmental Entity in a jurisdiction
in which a Company or any Subsidiary of a 


 


50

















 


Company does not file a Tax Return stating that such
Company or Subsidiary (i) is or may be subject to a particular type of Tax
in that jurisdiction; or (ii) has been treated as a resident of, or as
having a branch, agency or permanent establishment for Tax purposes, in any
jurisdiction other than its jurisdiction of incorporation; (f) to the
Knowledge of Sellers, there are no pending inquiries from any jurisdiction
questioning why any of the Companies or their Subsidiaries is not filing a Tax Return
or paying Tax to such jurisdiction; (g) within the previous six (6) years
the Companies and their Subsidiaries have complied in all material respects
with all applicable Tax Laws relating to the payment and withholding of Taxes
(including Taxes imposed on any Tax Group for which any of the Companies or
their Subsidiaries may be liable) and have in all material respects duly and
timely withheld and paid over to the appropriate Governmental Entity all
amounts required to be so withheld and paid under all applicable Tax Laws; (h) no
Governmental Entity within the previous three (3) years has audited or
examined any of the Companies or their Subsidiaries, and neither the Companies
nor their Subsidiaries, nor any Tax Group with respect to any taxable period
during which any of the Companies and their Subsidiaries was a member of the
Tax Group, has received notice within the previous three (3) years of an
unresolved Tax deficiency or assessment or an intention to undertake any Tax
audit or examination; (i) neither the Companies nor their Subsidiaries
have within the previous three (3) years been a member of any Tax Group
other than the Tax Group of which SGC is the parent and none of the Companies
or their Subsidiaries is bound by any Tax sharing agreement or similar
Contract, and no such entity will be bound by any such contract after the
Closing; (j) none of the Companies nor any of their Subsidiaries will be
required to recognize income during any Post-Closing Tax Period as a result of
any deferred intercompany transaction or excess loss account (described in the
Regulations under section 1502 of the Code or similar provisions of state,
local or foreign law) existing on or before the Closing Date, any installment
sale or open transaction concluded on or before the Closing Date, any change in
accounting method, practice or period or any amount prepaid on or before the
Closing Date or any settlement or agreement with any Governmental Entity
concluded on or before the Closing Date; (k) none of the Companies nor any
of their Subsidiaries has within the previous three (3) years engaged in
or agreed to engage in a reportable transaction within the meaning of section
6707A of the Code (or similar provisions of state, local or foreign law); (l) the
Companies are not, and have not been within the five (5)-year period ending on
the Closing Date, a United States real property holding corporation within the
meaning of section 897 of the Code (or any similar provision of state, local or
foreign law); (m) none of the Companies nor any of their Subsidiaries have
been a “distributing corporation” or a “controlled corporation” in a
distribution of stock intended to qualify for Tax-free treatment under section
355(a) of the Code: (i) at any time during the two-year period prior
to the date hereof; (ii) at any time during the period commencing on the
date hereof and ending on the Closing Date; or (iii) which could otherwise
reasonably be expected to constitute part of a “plan (or series of related
transactions)” (within the meaning of section 355(e) of the Code in
conjunction with and including the transactions contemplated by this Agreement;
(n) SGR is treated as an entity disregarded as separate from its parent
for U.S. federal income tax purposes; (o) none of the Companies nor any of
their Subsidiaries will be required, as a result of (i) a change in
accounting method for a taxable period beginning on or before the Closing, to
include any adjustment under 


 


51

















 


section 481(a) of the Code (or any similar
provision of state, local or foreign Tax law) in taxable income for any taxable
period beginning on or after the Closing Date; or (ii) any “closing
agreement” as described in section 7121 of the Code (or any similar provision
of state, local or foreign Tax law), to include any item of income in or
exclude any item of deduction from any Post-Closing Tax Period; and (p) all
documents which establish or are necessary to establish the title of any
Company or any of its Subsidiaries to any assets, or by virtue of which such
company has any right, have been duly stamped.


 


Section 3.11 of the Seller Disclosure Schedule
accurately shows for each Company and each Subsidiary of a Company that is organized under
the laws of the United States, (a) the current
status of such Company or such Subsidiary as (i) a corporation or
association taxable as a corporation for U.S. federal income tax purposes; (ii) an
entity “disregarded as an entity separate from its owner” (as such phrase is
used in section 301.7701-2 of the Regulations) for U.S. federal income tax
purposes, or (iii) a partnership for U.S. federal income tax purposes) and
(b) in the case of any entity for which a “check-the-box” election under
section 301.7701-3(c) of the Regulations was required for the entity to
have the status so indicated in Section 3.11 of the Seller Disclosure
Schedule, that a valid and timely election was made.


 


Section 3.12                            Labor
and Employment.


 


(a)           Except as set forth in Section 3.12(a) of
the Seller Disclosure Schedule: (i) none of the Companies or their
Subsidiaries is a party to or bound by (either directly, by operation of law,
or otherwise) any collective bargaining agreement or any other labor-related
agreement (including any letter of understanding, letter of intent, voluntary
recognition agreement, or binding commitment or representation (either directly
or as a member of an employer’s association), in each case, which is binding)
with any labor union, trade union, or employee organization or other group
which may qualify as a trade union which is applicable to or otherwise affects
Identified Employees or independent contractors, nor is any such agreement
currently being negotiated; (ii) none of the Companies or their
Subsidiaries recognizes any labor union, trade union, or employee organization
or other group which may qualify as a trade union as the collective bargaining
agent for any Identified Employees or any group of Identified Employees or
independent contractors; (iii) neither AE nor SGR Germany is a member of
an employer’s association; (iv) neither AE nor SGR Germany applies
collective bargaining agreements by means of reference (Bezugnahme),
including reference in individual employment contracts; (v) neither AE nor
SGR Germany is bound by a collective bargaining agreement that is generally
binding (allgemeinverbindlich) or applies by any
other law or order or other act issued by a public authority; (vi) no
strike, work stoppage or work slow-down involving any of the Companies or
their Subsidiaries is current, pending, has occurred in the last three (3) years,
or, to the Knowledge of Sellers, is threatened; (vii) the Companies and
their Subsidiaries have operated during the last three (3) years and are
operating the Business in compliance in all material respects with all Labor
Laws; (viii) there are no current pending or, to the Knowledge of Sellers,
threatened (A) written unfair labor practice complaints against the
Companies or their Subsidiaries, (B) other labor board proceedings of any
kind against the Companies or 


 


52

















 


their Subsidiaries or (C) written grievances
against the Companies or their Subsidiaries under a collective bargaining
agreement, that, in the case of clauses (A), (B) or (C), would, individually
or in the aggregate, reasonably be expected to give rise to a material
liability of the Business or any liability of any Company or any Subsidiary of
any Company that is material in the context of the Companies and their
Subsidiaries taken as a whole, or materially interfere with the conduct of the
Business; (ix) none of the Companies or their Subsidiaries is party to or,
to the Knowledge of Sellers, threatened with any Action which involves any
current or former employees of the Companies or their Subsidiaries, or which
otherwise relates to any Labor Laws, that would, individually or in the
aggregate, reasonably be expected to give rise to a material liability of the
Business or any liability of any Company or any Subsidiary of any Company that
is material in the context of the Companies and their Subsidiaries taken as a
whole, or materially interfere with the conduct of the Business; (x) there
are no outstanding or pending decisions of a Governmental Entity or any
government safety organization or pensions security trust (including the Pensionsicherungsverein) or settlements involving any
current or former employees of the Companies or their Subsidiaries, or which
otherwise relate to any Labor Laws, which place (or will or would reasonably be
expected to place) any material obligation upon any of the Companies or their
Subsidiaries to do or to refrain from doing any act; (xi) to the Knowledge of
Sellers, as of the date hereof, none of the Companies or their Subsidiaries is
the subject of any threatened or apparent union organizing activities; (xii) no
Identified Employee is on long term disability leave; and (xiii) none of the
Companies or their Subsidiaries is party to or bound by any statutorily
required reemployment of any employee.  “Labor Laws” means any applicable Law relating to collective
bargaining, employment, employment standards, equal employment opportunity,
employment equity, employment non-discrimination, human rights,  employment of individuals pursuant to a visa
or other work authorization which allows such individuals to live and work in
the country to which they have been assigned, workers’ compensation, terms and
conditions of employment, wages and hours, workers’ health and safety, labor
relations, workplace safety, employee insurance and pay equity.


 


(b)           Except as set forth in Section 3.12(b) of
the Seller Disclosure Schedule, as of the date hereof, no works councils
applicable to the Companies or any of their Subsidiaries are currently
established or, to the Knowledge of Sellers, are in the process of being
established, in any establishments and no works council agreements (including
reconcilement of interests and/or social plans) that are currently in effect
have been entered into by the Companies or any of their Subsidiaries. As of the
date hereof, no joint operation exists between either AE and SGR Germany or
between AE and/or SGR Germany and any third party.


 


(c)           Except as set forth in Section 3.12(c) of
the Seller Disclosure Schedule, the consent of any labor union, trade
union, or employee organization or other group which may qualify as a trade
union which is a party to one or more of the collective bargaining or other
labor agreements required to be listed in Section 3.12(a) of the Seller
Disclosure Schedule is not required in connection with the consummation of
the transactions contemplated hereby. 
The Companies or their 


 


53

















 


Subsidiaries respectively have observed all legal
information and codetermination provisions in connection with the consummation
of the transactions contemplated hereby, in particular relating to rights of
German works councils.


 


(d)           Since January 1, 2007, there have not been any
plant closings, mass layoffs or other terminations at any of the Companies or
their Subsidiaries that would create any material obligations upon or material
liabilities for the Companies or their Subsidiaries, or Purchasers, under the
Worker Adjustment and Retraining Notification Act (the “WARN Act”)
or similar Laws (including similar laws applicable in local jurisdictions)
which remain unsatisfied.


 


(e)           Section 3.12(e) of the Seller Disclosure
Schedule contains a list (which list is true and complete with respect to
employees in a managerial capacity, and otherwise true and complete in all
material respects) as of the date hereof of all Identified Employees and as of
the Closing Date all Affected Employees (including the name, country of
employment and applicable employer thereof). Section 3.12(e) of the Seller
Disclosure Schedule will be updated on the Closing Date to reflect the list
(which list shall be true and complete with respect to employees in a
managerial capacity, and otherwise true and complete in all material respects)
of Affected Employees as of such date (and shall indicate if any such Affected
Employees have given written notice of termination of their employment to the
Companies or their Subsidiaries).


 


(f)            The Identified Employees are all the individuals
employed in the operation of the Business as conducted as of the date hereof
(excluding employees of Sellers or their Affiliates (other than the Companies
and their Subsidiaries) who may provide services or support to the Business).


 


(g)           The Companies or their Subsidiaries do not employ any
freelancers except as those named in Section 3.12(g) of the Seller
Disclosure Schedule.  Except to the
extent not material, none of the freelancers is employed in the meaning of
section 7 German Social Security Act IV.


 


(h)           Section 3.12(h) of the Seller Disclosure
Schedule contains a complete and accurate list in all material respects of
all expatriate or seconded Identified Employees. Sellers have made available to
Purchasers all contracts and other agreements with such Identified Employees
relating to the expatriate assignments or secondments of such Identified
Employees. To the Knowledge of Sellers, all such expatriate or seconded
Identified Employees have appropriate visas, work permits and other necessary
legal documents allowing such individuals to live and work in the countries to which
they have been assigned.


 


Section 3.13         Employee Benefit Plans.


 


(a)           Section 3.13(a) of the Seller Disclosure
Schedule contains a true and complete list of each deferred compensation,
incentive compensation, “phantom” stock or stock appreciation right, stock
purchase, stock option, restricted stock unit and other equity compensation
plan, program or agreement; each severance or 


 


54

















 


termination pay, medical, dental, surgical,
hospitalization, disability, life insurance and other “welfare” plan, fund or
program (within the meaning of section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”) or
otherwise); each profit-sharing, stock bonus, retirement savings or other “pension”
plan, fund or program (whether within the meaning of section 3(2) of ERISA
or otherwise); each employment, consulting, termination, severance or change in
control agreement; and each other employee benefit plan, fund, program or
agreement (including any material arrangements providing for fringe benefits,
perquisites, or paid time off), in each case, that is sponsored, maintained or
contributed to by any of the Companies or their Subsidiaries or by any trade or
business, whether or not incorporated, that together with the Companies and/or
any of their Subsidiaries would be deemed a single employer within the meaning
of section 4001(b) of ERISA or section 414 of the Code (an “ERISA Affiliate”), or to which the Companies, any of their
Subsidiaries or an ERISA Affiliate is party, that, in any such case, is for the
benefit of any director, manager, employee or former employee (or any
beneficiary of the foregoing) of any of the Companies or their Subsidiaries or
with respect to which the Companies or any Subsidiary has any liability (the “Plans”).  Section 3.13(a) of
the Seller Disclosure Schedule indicates which of the Plans are
sponsored or maintained solely by a company or companies which are the
Companies or their Subsidiaries or, in the case of Plans that are agreements,
to which any of the Companies or their Subsidiaries is the sole employer party
or the sole employer parties (which, together with the Plans the sponsorship of
which is transferred pursuant to Section 5.12(a), shall be the “Company Plans”). Each of the Plans that is subject to
section 302 or Title IV of ERISA or section 412 of the Code is hereinafter
referred to in this Section 3.13 as a “Title IV
Plan”.  Except as set forth in
Section 3.13(a) of the Seller Disclosure Schedule, no Plan is
intended to be qualified under section 401(a) of the Code.  None of the Plans is, and none of the
Companies or their Subsidiaries has ever sponsored, administered or contributed
to or had any obligation to contribute to a “registered pension plan” within
the meaning of subsection 248(1) of the Income Tax Act (Canada).


 


(b)           No liability under Title IV or section 302 of ERISA
has been incurred by the Companies, their Subsidiaries, or any ERISA Affiliate
that has not been satisfied in full, and no condition exists that presents a
material risk to the Companies or any ERISA Affiliate of incurring any such
liability, other than liability for premiums due to the Pension Benefit
Guaranty Corporation.  No Title IV Plan
or any trust established thereunder has an “accumulated funding deficiency” (as
such term is defined under ERISA and the Code), whether or not waived, as of
the last day of the most recent fiscal year of such Plan and with respect to
plan years beginning after December 31, 2007, no such Title IV Plan has
any unpaid “minimum required contribution” (as such term is defined under ERISA
and the Code) whether or not such unpaid “minimum required contribution” is
waived.  Except as set forth in Section 3.13(b) of
the Seller Disclosure Schedule, no Title IV Plan is a “multiemployer
pension plan,” as defined in section 3(37) of ERISA (a “Multiemployer
Pension Plan”), nor is any Title IV Plan a plan described in section
4063(a) of ERISA.


 


i.                              With respect to each Multiemployer
Pension Plan in which the Companies, their Subsidiaries, or any ERISA Affiliate



 


55

















 


participates
or has participated, (i) none of the Companies, their Subsidiaries nor any
ERISA Affiliate has withdrawn, partially withdrawn, or received any notice of any
claim or demand for withdrawal liability or partial withdrawal liability; (ii) none
of the Companies, their Subsidiaries nor any ERISA Affiliate has received any
notice that any such plan is in critical or endangered status or in
reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of any excise tax, or that any
such plan is or may become insolvent; (iii) none of the Companies, their
Subsidiaries nor any ERISA Affiliate has failed to make any required
contributions or has any liability under section 515 of ERISA; (iv) to the
Knowledge of Sellers, no such plan is a party to any pending merger or asset or
liability transfer; (v) to the Knowledge of Sellers, there are no material
Pension Benefit Guaranty Corporation proceedings against or affecting any such
plan; and (vi) none of the Companies, their Subsidiaries nor any ERISA
Affiliate has any withdrawal liability by reason of a sale of assets pursuant
to section 4204 of ERISA.


 


ii.                           Nothing has occurred that would
reasonably be expected to result in withdrawal liability for the Companies,
their Subsidiaries or any ERISA Affiliate for any such plan.


 


(c)           Sellers have delivered to Purchasers copies, true and
complete, of all material documents and summary plan descriptions of the
Company Plans.  Sellers have delivered to
Purchasers true and complete copies of the most recent determination letters
and opinion letters and the Forms 5500 filed in the most recent three plan
years with respect to any Company Plan, including all schedules thereto and
financial statements with attached opinions of independent accountants.  Sellers have delivered to Purchasers
summaries of material modifications and material communications distributed
within the last year to the participants of each material Company Plan.  Sellers have delivered to Purchasers all
material communications received from or sent to the Internal Revenue Service,
Pension Benefit Guaranty Corporation, the United States Department of Labor or
any other Governmental Entity within the last three years and any Forms 5330
filed by the Companies, their Subsidiaries or any ERISA Affiliate, related to a
Company Plan.  The Companies, their
Subsidiaries and each ERISA Affiliate, as applicable, have in all material
respects maintained all employee data necessary to administer each Company
Plan, including all data required to be maintained under sections 107 and 209
of ERISA, and such data are true and correct in all material respects.  For each Title IV Plan, Sellers have provided
a copy of the most recent annual funding notice.


 


(d)           Except as set forth in Section 3.13(d) of
the Seller Disclosure Schedule, (i) since January 1, 2006,
each Company Plan (and each other Plan 


 


56

















 


solely to the extent it relates to employees or former
employees of the Business) has been operated and administered in all material
respects in accordance with its terms and applicable Law, including, to the
extent such Plan is subject to ERISA or the Code, ERISA and the Code, and (ii) Sellers,
the Companies, their respective Subsidiaries, and each ERISA Affiliate, are in
compliance in all material respects with the applicable provisions of ERISA,
the Code and all Laws applicable thereto. 
Neither Sellers nor, to the Knowledge of Sellers, any fiduciary of a
Plan has violated the requirements of section 404 of ERISA since January 1,
2006.


 


(e)           No Plan provides medical, surgical, hospitalization,
death or similar welfare benefits (whether or not insured) for employees or
former employees of any of the Companies or their Subsidiaries for periods
extending beyond their retirement or other termination of service, other than
coverage mandated by applicable Law, and there has been no communication to any
Person that could reasonably be expected to promise or guarantee any such
benefits.


 


(f)            Except as set forth in Section 3.13(f) of
the Seller Disclosure Schedule, none of the Companies nor any of their
Subsidiaries is a party to an arrangement under which, as a result of the
consummation of the transactions contemplated by this Agreement or otherwise,
it (i) will be required to pay any bonus, exit or deal remuneration,
severance pay, termination pay, unemployment compensation, “excess parachute
payment” or any other amount to any director, manager or employee; (ii) will
be required to pay any amount that will not be fully deductible under sections
162(m) or 280G of the Code; (iii) is required to forgive Indebtedness
of, or make any payment under any Plan, or otherwise, to any director, manager
or employee for which any of the Companies or their Subsidiaries will be
liable; or (iv) is required to accelerate the time of payment or vesting,
or increase the amount of compensation due any employee or former employee,
under any Plan.


 


(g)           Except as set forth in Section 3.13(g) of
the Seller Disclosure Schedule, there are no material Actions pending
or, to the Knowledge of Sellers, threatened, by or on behalf of any Company
Plan (or other Plan solely to the extent it relates to employees or former
employees of the Business) or by any employee, former employee or beneficiary
covered under any such Plan, involving any such Plan (other than routine claims
for benefits).


 


(h)           No Company Plan (nor other Plan solely to the extent
it relates to employees or former employees of the Business) that is subject to
ERISA or the Code, or (to the Knowledge of Sellers) any trustee, administrator
or fiduciary thereof has engaged in any “prohibited transaction” (as such term
is defined in section 406 of ERISA or section 4975 of the Code) with respect to
such Plan to which section 406 of ERISA or section 4975 of the Code applies
which would reasonably be expected to subject any such Plan or trustee or
administrator thereof, or any party dealing with any such Plan, to a tax or
penalty on prohibited transactions imposed by section 4975 of the Code.


 


57

















 


(i)            Each Company Plan (or other Plan solely to the extent
it relates to employees or former employees of the Business) intended to
qualify under section 401(a) of the Code has received a determination
letter from the Internal Revenue Service to the effect that such Plan is a
qualified plan under section 401(a) of the Code and the related trust is
exempt from tax under section 501(a) of the Code.  Each such Plan has been timely amended in
accordance with the good faith amendment requirements of the Economic Growth &
Tax Relief Reconciliation Act of 2001 and any other statutory or regulatory
changes requiring amendments (to the extent amendments are required), and if
not entitled to rely upon an opinion letter has been timely submitted for a
determination letter regarding the provisions of the Economic Growth &
Tax Relief Reconciliation Act of 2001 if the deadline for such submission has
passed.   No event has occurred that
would reasonably be expected to materially adversely affect the qualified or
tax-exempt status of any such Plan or trust under sections 401(a) or 501(a) of
the Code.


 


(j)            No Plan, nor any trust created thereunder, now holds
or has heretofore held as assets any stock or securities issued by the Sellers,
the Companies, their Subsidiaries or any ERISA Affiliate.


 


(k)           (i) All reports, returns and similar documents
with respect to each Company Plan (or any other Plan solely to the extent it
relates to employees or former employees of the Business) required to be filed
with any Governmental Entity or distributed to any participant of any such Plan
have been duly and timely filed or distributed; (ii) all contributions,
taxes, fees, interest, penalties and assessments that are payable by or for the
Companies, their Subsidiaries or any ERISA Affiliate have been timely reported,
fully paid and discharged; and (iii) the Companies and their Subsidiaries
have collected or withheld all material amounts that are required to be
collected or withheld by them to discharge their obligations, and all of those
material amounts have been paid to the appropriate governmental agencies or set
aside in appropriate accounts for future payment when due; except to the
extent, as to any of clauses (i), (ii) or (iii), that any failure to do so
would not, individually or in the aggregate, be material in the context of the
Business of the Companies and their Subsidiaries taken as a whole.


 


(l)            Each Company Plan (or any other Plan solely to the
extent it relates to employees or former employees of the Business) that
constitutes a “welfare benefit plan” within the meaning of section 3(1) of
ERISA, and for which contributions are claimed by the Companies, their
Subsidiaries or any ERISA Affiliate as deductions under any provision of the
Code or other Law, is in compliance in all material respects with all
applicable requirements pertaining to such deduction.  Section 3.13(l) of the Seller
Disclosure Schedule discloses whether each such welfare benefit plan is (i) unfunded;
(ii) with respect to welfare plans subject to the provisions of the Code,
funded through a “welfare benefit fund”, as such term is defined in section 419(e) of
the Code, or other funding mechanism; or (iii) insured.


 


(m)          None of the Companies, the Subsidiaries, the
Purchasers or any of their post-Closing ERISA Affiliates has or shall incur,
and none of them could reasonably be expected to incur, by operation of law or
otherwise, any 


 


58

















 


liability whatsoever with respect to, or in any way
related to, any Plan which is not a Company Plan, as part of the transactions
contemplated by this Agreement or otherwise.


 


(n)           None of the Companies or their Subsidiaries has any
indemnity obligation for any Taxes or interest imposed or accelerated under
section 409A of the Code (“Section 409A”).


 


Section 3.14         Company Contracts.


 


(a)           Section 3.14(a) of the Seller Disclosure
Schedule identifies Company Contracts which are in the categories listed
below (collectively, the “Material  Company Contracts”) as of the date hereof:


 


(i)               any employment, independent contractor,
consulting or other Contract pursuant to which any individual would be
contractually entitled to payment of base compensation, fees, or target bonus
which in aggregate are in excess of $125,000 per annum;


 


(ii)              any Contract under which any of the
Companies or their Subsidiaries has, directly or indirectly, for its own
account made any advance, loan, extension of credit or capital contribution to,
or other investment of debt or equity in, any Person in excess of $200,000 that
has not terminated prior to the date hereof (excluding, for the avoidance of
doubt, extensions of credit in the ordinary course of business);


 


(iii)             any
collective bargaining agreement or any other labor-related agreements with any
labor union applicable to employees;


 


(iv)             any Contract evidencing or guaranteeing
Indebtedness or any Guarantee of any of the Companies or any of their
Subsidiaries, identifying which Guarantees are Company Guarantees and which
Guarantees are Guarantees for borrowed money;


 


(v)              any Contract pursuant to which any of the
Companies or their Subsidiaries currently provides totalisator or race book
services that generated revenues to the Companies and their Subsidiaries in
excess of $375,000 during fiscal year 2008;


 


(vi)             any Contract (not otherwise covered by Section 3.14(a)(v))
that contemplates a sale by any of the Companies or their Subsidiaries of any
Software or terminals (that is not completed as of the date hereof) that is
reasonably expected to generate revenues to the Companies and their
Subsidiaries in excess of $200,000;


 


(vii)            any
Contract pursuant to which the Companies or their Subsidiaries have licensed
any Intellectual Property of a third party that is material to the operation of
the Business;


 


59
















 


(viii)           any
Contract pursuant to which any Seller or any Affiliate of any Seller (including
for this purpose any of the Companies or their Subsidiaries) has licensed or
granted rights (including, without limitation, by covenant-not-to-sue or
non-assert) to a third party in or to material Intellectual Property owned by
it that is material to the operation of the Business, except licenses or grants
that appear (or are substantially similar to those that appear) in the ordinary
course of business in customer contracts;


 


(ix)             any
vendor or supplier Contract pursuant to which any of the Companies or their
Subsidiaries paid amounts to such vendor or supplier in excess of $250,000
during fiscal year 2008;


 


(x)              any
other Contract or group of related Contracts (not otherwise covered by
Sections 3.14(a)(i) through (ix)) that is reasonably expected to
require payments by any of the Companies or their Subsidiaries in excess of
$250,000 in any fiscal year;


 


(xi)             any
Contract relating to any (A) acquisition or disposition of all or
substantially all of the assets or securities constituting a line of business
of any Person; (B) merger, consolidation or other business combination; or
(C) series or group of related transactions or events of the type
specified in Sections 3.14(a)(xi)(A) and (B), in any such case either (x) entered
during the twelve (12) month period preceding the date hereof; or (y) entered
into prior to the date hereof under which any of the Companies or their
Subsidiaries has continuing obligations (contingent or otherwise) that would
reasonably be expected to have a material impact on the Business of the
Companies and their Subsidiaries taken as a whole;


 


(xii)            any
Contract that contains an express non-competition covenant (and not, by way of
example, merely a limitation in a license or confidentiality agreement, or an
exclusivity or similar provision) that materially limits or purports to
materially limit the ability of the Companies and their Subsidiaries to compete
in any line of business with any Person or in any area, or grants to the other
party to such Contract or any third Person “most favored nation” status that
would reasonably be expected to have a material impact on the Business;


 


(xiii)           any
Contract (not otherwise covered by Sections 3.14(a)(i) through (xii)) to
sell or otherwise dispose of any assets of the Companies or their Subsidiaries
other than in the ordinary course of business, with a value, for any such asset
or group of related assets, in excess of $250,000;


 


(xiv)           any
Contract that by its express terms creates a joint venture or partnership in
which any of the Companies or their Subsidiaries shares equity ownership with
any other Person;


 


60

















 


(xv)            any
distributor, dealer, sales agency sales representative, or marketing Contract
that is reasonably expected to require payments by any of the Companies or
their Subsidiaries in excess of $200,000 in any fiscal year;


 


(xvi)           any
Contract (including any keepwell agreement) under which (A) any Person
other than Sellers or their Affiliates has directly or indirectly guaranteed
any liabilities or obligations of any of the Companies or their Subsidiaries,
in case of each such liability or obligation, in an amount in excess of
$200,000; or (B) any of the Companies or their Subsidiaries has, directly
or indirectly, guaranteed any liabilities or obligations of any other Person
other than other Companies or their wholly owned Subsidiaries;


 


(xvii)          any
Contract imposing an Encumbrance (other than a Permitted Encumbrance) on any
assets of any of the Companies or their Subsidiaries that are material to the
Business;


 


(xviii)         any
Contract involving the making of any capital expenditure after the date hereof
in excess of $200,000;


 


(xix)            any
Contract expressly limiting or restricting the ability of any of the Companies
or their Subsidiaries to make distributions or declare or pay dividends in
respect of its capital stock;


 


(xx)             any
Contract containing or incorporating any provision relating to sharing of
liabilities with, or indemnification of, any third party (excluding, for the
avoidance of doubt, any warranty or indemnification relating to the performance
of other obligations contained in such Contract) that would reasonably be
expected to have a material impact on the Business of the Companies and their
Subsidiaries taken as a whole, other than Contracts entered into in the
ordinary course of business consistent with past practice or as disclosed at Section 3.14(a)(xx)
of the Seller Disclosure Schedule;


 


(xxi)            any
Contract relating to interest rate, currency or commodity derivative or hedging
transaction;


 


(xxii)        any
Contract other than as set forth above to which any of the Companies or their
Subsidiaries is a party or by which it or any of its assets or businesses is
bound or subject that if breached by the Companies or their Subsidiaries or
terminated in advance of its scheduled expiration or not renewed would
reasonably be expected to have a Companies Material Adverse Effect;


 


(xxiii)            any
undrawn letter of credit or performance bond in relation to which any of the
Companies or their Subsidiaries has any obligations in an amount in excess of
$50,000; and


 


61

















 


(xxiv)            any
written commitment to enter into any agreement of the type described in
Sections 3.14(a)(i) through (xxiii).


 


(b)           Except as set forth in Section 3.14(b) of
the Seller Disclosure Schedule, (i) each Material Company Contract (A) constitutes
a valid and binding obligation of the applicable Company or Subsidiary of the
Companies party thereto; and (B) is in full force and effect, and
enforceable against the applicable Company or Subsidiary of the Companies party
thereto and, to the Knowledge of Sellers, each other party thereto, except as
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors’ rights in general and subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity); (ii) none of the
Companies or their Subsidiaries and, to the Knowledge of Sellers, no other
party thereto, is in breach or default under any Material Company Contract,
with or without notice or lapse of time or both, and none of the Companies or
the Subsidiaries of the Companies has given or received written notice of any
dispute, breach or default thereunder, except, in each case, where such failure
to be in full force and effect and enforceable, or such breach, default or
dispute, would not, individually or in the aggregate, reasonably be expected to
give rise to a material liability of the Business or any liability of any
Company or any Subsidiary of any Company that is material in the context of the
Companies and their Subsidiaries taken as a whole, or materially interfere with
the conduct of the Business; and (iii) no Seller, Company or Subsidiary of
the Companies, has received notice (whether written or oral) of the pending or
overtly threatened cancellation, revocation or termination, or material
modification or amendment of any Material Company Contract.  No Company or Subsidiary of the Companies has
assigned, delegated or otherwise transferred any of its material rights or
obligations with respect to any such Material Company Contract except to
another Company or Subsidiary of a Company.


 


Section 3.15         Insurance.


 


(a)           Section 3.15(a) of
the Seller Disclosure Schedule sets forth a list of all insurance
policies relating to the Business or otherwise to the Companies, their
Subsidiaries and/or their assets and/or properties the (“Insurance
Policies”), indicating which of such policies are held by and which
are held solely by any of the Companies or their Subsidiaries (the “Primary Policies”). 
All Insurance Policies which are not Primary Policies are referred to
herein as “Global Policies”.  All such Insurance Policies are in full force
and effect (other than any policies that cease to be in full force and effect
as a result of expiring in accordance with their terms).  As of the date hereof, there is no claim by
any of the Companies or their Subsidiaries pending under any Insurance Policies
as to which coverage has been denied or disputed in writing by the applicable
insurers.  All premiums due and payable
under all Insurance Policies have been paid and the Sellers or their
Affiliates, as applicable, are in compliance in all material respects with the
terms and conditions of such policies. 
None of the Sellers, the Companies or the Subsidiaries of the Companies has
within the previous three (3) years received any written notice of
cancellation or termination of, or refusal of coverage or rejection of any
material claim under any Insurance Policy or any material adjustment in 


 


62

















 


the amount of premiums payable
with respect to any Insurance Policy. 
The Companies and their Subsidiaries shall immediately after Closing
continue to have coverage under the Primary Policies to the extent provided
therein.


 


(b)           Section 3.15(b) of the Seller
Disclosure Schedule sets forth existing claims under the Insurance Policies
as of the date of this Agreement.


 


Section 3.16         Real
Property.


 


(a)           Section 3.16(a) of the Seller
Disclosure Schedule sets forth a list of all real property owned by any of
the Companies or their Subsidiaries (the “Owned Real Property”).  Except as set forth in Section 3.16(a) of
the Seller Disclosure Schedule, the Companies and/or their Subsidiaries
has good fee simple title, free and clear of Encumbrances (other than Permitted
Encumbrances), to all of the Owned Real Property.  Except as set forth in Section 3.16(a) of
the Seller Disclosure Schedule, with respect to each such parcel of
Owned Real Property: (i) there are no leases, subleases, licenses,
concessions or other agreements, written or oral, granting any Person the right
of use or occupancy of all or any portion of such parcel; and (ii) there
are no outstanding rights of first refusal, rights of first offer, options or
similar rights of any other Person to purchase such parcel or any portion thereof
or any interest therein.


 


(b)           Section 3.16(b) of the Seller
Disclosure Schedule sets forth a list of all leases, subleases or other
instruments pursuant to which any of the Companies or their Subsidiaries holds
a leasehold or subleasehold estate or other right to use or occupy any interest
in real property that is material to the conduct of the Business as currently
conducted (collectively, with the Company Lease, the “Company
Leases”) and each material leased or subleased parcel of real
property in which any of the Companies or their Subsidiaries is a tenant,
subtenant or occupant thereunder (the “Leased Real Property”).  Except as set forth in Section 3.16(b) of
the Seller Disclosure Schedule, (i) each lease within the
definition of “Leased Real Property” (A) constitutes a valid and binding
obligation of the applicable Company or Subsidiary of the Companies party
thereto; and (B) is in full force and effect, and enforceable against the
applicable Company or Subsidiary of the Companies that is a party thereto and,
to the Knowledge of Sellers, each other party thereto, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting the enforcement of creditors’ rights in general and subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at Law or in equity); and (ii) none of the
Companies or their Subsidiaries and, to the Knowledge of Sellers, no other
party thereto, is in breach or default under any lease within the definition of
“Leased Real Property”, with or without notice or lapse of time or both, and
none of the Sellers, the Companies or the Subsidiaries of the Companies has
given or received written notice of any material dispute, breach or default
thereunder, except, in each case, where such failure to be in full force and
effect and enforceable, or such breach, default or dispute, would not,
individually or in the aggregate, reasonably be expected to give rise to a
material liability of the Business or any liability of any Company or any
Subsidiary of any Company that is material in the context of the Companies and
their Subsidiaries taken as a whole, or materially interfere with the conduct
of the Business.


 


63

















 


(c)           Except as set forth in Section 3.16(c) of
the Seller Disclosure Schedule, none of the Companies or their
Subsidiaries is a party to any lease, sublease, concession agreement, use and
occupancy agreement, assignment or similar arrangement under which such Company
or Subsidiary is a sub-lessor or assignor of the Leased Real Property.


 


(d)           The Owned Real Property and the Leased Real Property (collectively the “Real Property”) comprise all of the material real property used in the Business of the
Companies and their
Subsidiaries and none of the Companies or any of their Subsidiaries is a party
to any option to purchase any such real property or interest therein.


 


(e)           None of the Companies nor any of
their Subsidiaries has received any written notice of any condemnation,
expropriation or other proceeding in eminent domain affecting in any material
respect any parcel of Real Property or any portion or interest therein.


 


(f)            The Real Property currently conforms
in all material respects with all material land use, zoning, health, fire,
water and building codes and any other material applicable Laws and no such
Laws prohibit or limit the use or operation of the Real Property in all
material respects as currently used or operated.  To the Knowledge of Sellers, none of the
Companies or their Subsidiaries has received notice of any pending or
threatened change in the zoning classification of the Real Property or any
portion thereof.


 


Section 3.17         Intellectual
Property.


 


(a)           Section 3.17(a) of the Seller
Disclosure Schedule sets forth a complete and correct list of all (i) applications
for and issued Patents; (ii) registered and applications for registration
with respect to Trademarks; (iii) registered and applications for
registration with respect to Copyrights; (iv) registered Domain Names; and
(v) Software that is material to the operation of the Business, in each
case owned by any of the Companies or their Subsidiaries. To the Knowledge of
Sellers the Intellectual Property listed in Section 3.17(a) of the Seller
Disclosure Schedule is subsisting, and has not been adjudicated invalid or
unenforceable. The Companies’ and their Subsidiaries’ ownership of and rights
to use the Intellectual Property that is material to the operation of the
Business will not be lost, or rendered subject to termination by any third
Person, by virtue of the acquisition of the Interests or the consummation of
the transactions contemplated by this Agreement.


 


(b)           Except as set forth in Section 3.17(b) of
the Seller Disclosure Schedule, (i) the Companies and/or their
Subsidiaries own, free and clear of Encumbrances (other than Permitted
Encumbrances), or have rights to use, all Intellectual Property that is
material to the conduct of the Business as currently conducted, and (ii) none
of such Intellectual Property required to carry on the Business is owned by any
of Sellers or their Affiliates (other than the Companies and their
Subsidiaries).


 


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(c)           Section 3.17(c) of the Seller
Disclosure Schedule sets out a complete and accurate list of all registered
and unregistered Intellectual Property material to the operation of the
Business used by both (i) any of the Companies or their Subsidiaries; and (ii) any
of Sellers or their Affiliates (other than the Companies and their
Subsidiaries).


 


(d)           Except as set forth in Section 3.17(d) of
the Seller Disclosure Schedule, (i) the conduct of the Business as
carried out in the past two (2) years does not infringe or otherwise
violate any Person’s Intellectual Property in any manner and, to the Knowledge
of Sellers, the Purchasers’ operation of the Business immediately after
Closing, in the same manner as conducted by the Companies and the Subsidiaries
at Closing, will not infringe or otherwise violate any Person’s Intellectual
Property in any such manner, except, in each case, where such infringement or
violation would not, individually or in the aggregate, reasonably be expected
to give rise to a material liability of the Business or any liability of the Companies
or any of their Subsidiaries that is material in the context of the Companies
and their Subsidiaries taken as a whole, or materially interfere with the
conduct of the Business, (ii) to the Knowledge of Sellers, there is no
claim pending or threatened in writing against any of the Companies or their
Subsidiaries related to any of their infringement or violation or misuse of any
Person’s Intellectual Property in any such manner, and (iii) to the
Knowledge of Sellers, no Person is infringing or otherwise violating any
Intellectual Property owned by any of the Companies or their Subsidiaries, and
no such infringement claims are pending or threatened against any Person by any
of Sellers, the Companies or the Subsidiaries of the Companies.


 


(e)           Except as set out in Section 3.17(e) of
the Seller Disclosure Schedule, no Publicly Available Software has been
used to develop or create any Software owned by the Companies or their
Subsidiaries that is material to the operation of the Business and no such
Software contains, incorporates or is based on any Publicly Available Software.


 


(f)            Except as set out in Section 3.17(f) of
the Seller Disclosure Schedule, all personnel, including employees,
agents and consultants, who have materially contributed to or materially
participated in the conception, reduction to practice or development of any
Intellectual Property material to the operation of the Business, have so
contributed or participated either: (i) in a “work -for -hire” arrangement
or agreement with any of Sellers or their Affiliates (including the Companies
and their Subsidiaries) in accordance with applicable Law, that by its terms
accords the Companies and their Subsidiaries full and exclusive ownership of
all right, title and interest in and to, all such Intellectual Property; or (ii) under
appropriate instruments of assignment in favor of any of Sellers or their
Affiliates (including the Companies and their Subsidiaries) as assignee that by
their terms convey to the Companies and their Subsidiaries full and exclusive
ownership of all right, title and interest in and to all such Intellectual
Property.


 


(g)           Except as set out in Section 3.17(g) of
the Seller Disclosure Schedule, the Companies and their Subsidiaries
maintain reasonable 


 


65

















 


precautions to protect the confidential information of
the Companies or any of the Subsidiaries that is material to the operation of
the Business.


 


(h)           Except as set out in Section 3.17(h) of
the Seller Disclosure Schedule, each of the Companies and their
Subsidiaries complies with all applicable data protection laws and neither
Sellers nor any of the Companies or their Subsidiaries have received any
written notice or written allegation alleging that any of the Companies or
their Subsidiaries has not complied with any of them, except for any
non-compliance as would not, individually or in the aggregate, reasonably be
expected to give rise to a material liability of the Business or any liability
of the Companies or any of their Subsidiaries that is material in the context
of the Companies and their Subsidiaries taken as a whole, or materially
interfere with the conduct of the Business.


 


Section 3.18         Personal
Property.


 


(a)           Except as set forth in Section 3.18(a) of
the Seller Disclosure Schedule, the Companies and/or their Subsidiaries
have good title to, free and clear of Encumbrances (other than Permitted
Encumbrances), or valid rights to use, all material items of tangible personal
property that are required or necessary to the conduct of the Business as
currently conducted (the “Tangible Personal Property”)
(except as sold or otherwise disposed of subsequent to the date hereof not in
violation of this Agreement).


 


(b)           Except as set forth on Schedule 3.18(b) of
the Seller Disclosure Schedule, (i) each lease of such Tangible
Personal Property to which any of the Companies or their Subsidiaries is a
party or by which any of them is otherwise expressly bound (A) constitutes
a valid and binding obligation of the applicable Company or Subsidiary of the
Companies party thereto; and (B) is in full force and effect, and
enforceable against the applicable Company or Subsidiary of the Companies that
is a party thereto and, to the Knowledge of Sellers, each other party thereto,
except as limited by bankruptcy, insolvency, reorganization, moratorium or
other similar Laws affecting the enforcement of creditors’ rights in general
and subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in material equity); and
(ii) none of the Companies or their Subsidiaries and, to the Knowledge of
Sellers, no other party thereto, is in breach or default under any such lease,
with or without notice or lapse of time or both, and none of the Sellers, the
Companies or the Subsidiaries of the Companies has given or received written
notice of any material dispute, breach or default thereunder, except, in each
case, where such failure to be in full force and effect and enforceable, or
such breach, default or dispute, would not, individually or in the aggregate,
reasonably be expected to give rise to a material liability of the Business or
any liability of any Company or any Subsidiary of any Company that is material
in the context of the Companies and their Subsidiaries taken as a whole, or
materially interfere with the conduct of the Business.


 


(c)           The Tangible Personal Property is
generally suitable for the uses for which it is currently used, is in operating
condition and repair in all material respects, subject to ordinary wear and
tear and routine maintenance, and is free 


 


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of material patent and material latent defects and
free of defects that would prevent the continued use thereof by the Companies
and their Subsidiaries following the Closing Date in the conduct of the
Business, except in each case, such defects which would not, individually or in
the aggregate, reasonably be expected to give rise to a material liability of
the Business or any liability of the Companies and their Subsidiaries taken as
a whole.


 


(d)           Except as set forth in Section 3.18(d) of
the Seller Disclosure Schedule, to the actual knowledge of those persons
listed in the definition of “Knowledge of Sellers” as of the date hereof there
are no material programming errors or design defects that exist in a
substantial number of any type or substantially similar type of video lottery terminals or other gaming
machines which are or have been sold, offered for sale, leased or otherwise provided to third parties by or
on behalf of the Companies and their Subsidiaries.


 


Section 3.19         Intercompany
Contracts.  Except as set
forth in Section 3.19 of the Seller Disclosure Schedule, there are
no written Company Contracts between (i) on one hand, any of (x) the
Sellers or their Affiliates (other than any of the Companies or their
Subsidiaries), or (y) to the Knowledge of Sellers, any officer or director
of any Seller or any of their Affiliates, or any member of such Person’s
immediate family or any entity controlled by one or more of the foregoing, and (ii) on
the other hand, any of the Companies or their Subsidiaries.


 


Section 3.20         Brokers’
Fees.  No broker,
investment banker, financial advisor or other Person, other than Broadpoint
Capital, Inc., the fees and expenses for which shall be paid by a Seller
or an Affiliate thereof (other than any of the Companies or their
Subsidiaries), is entitled to any broker’s, finder’s, financial advisor’s or
other similar fee or commission in connection with this Agreement or the
transactions contemplated hereby based upon arrangements made by or on behalf
of any of the Sellers or their Affiliates.


 


Section 3.21         No
Reliance.  SGC (on
behalf of itself and its Affiliates) acknowledges that it has had the
opportunity to conduct an independent investigation of the financial condition,
liabilities, results of operations and projected operations of the business of
Sportech and the nature and condition of its properties and assets and, in
making the determination to proceed with the transactions contemplated by this
Agreement and the Ancillary Agreements, has relied solely on the results of its
own independent investigation and the provisions set forth in Article IV,
the Ancillary Agreements, and the certificates to be delivered pursuant to Section 6.3(d).  SGC acknowledges that none of the Purchasers
nor any other Person has made any representation or warranty, express or
implied, as to the accuracy or completeness of any information, written or oral
and in any form provided, which has been made available (or which is made
available after the date hereof) to SGC, its Affiliates or their
Representatives regarding Sportech or its business or other matters other than
the representations or warranties included in Article IV.  Without limiting the generality of the
foregoing, other than to the extent contained in Article IV, the Ancillary
Agreements or the certificates to be delivered pursuant to Section 6.3(d),
none of the Purchasers nor any other Person has made a representation or
warranty, express or implied, to SGC, its 


 


67

















 


Affiliates or their
Representatives, and SGC (on behalf of its Affiliates and their
Representatives) expressly disclaims reliance, with respect to (a) any
projections, forecasts, estimates or budgets made available (or which are made
available after the date hereof) to SGC, its Affiliates or their
Representatives for Sportech’s business (or any parts thereof), or future
revenues, expenses or expenditures, future results of operations (or any
component thereof, including EBITDA), future cash flows on future financial
condition (or any component thereof) in each case, of Sportech’s business, or
the future business or operations of Sportech; (b) business opportunities,
including the prospects for new (or re-negotiated or revised) Contracts or
arrangements or one-time or other sales, entering into new markets or otherwise
obtaining new business or retaining existing business Contracts or
arrangements; (c) strategies or plans for growing Sportech’s business or
reducing the expenses of Sportech’s business or the probable success or
profitability of the ownership of the Sportech Shares or Sportech’s business; (d) any
material, documents or information, written or oral and in any form provided,
which has been made available (or which is made available after the date
hereof) to SGC or its Representatives; (e) the Circular and any other
documents published by Sportech in connection with the transactions
contemplated hereby; and (f) without limiting the generality of the
foregoing, any communications (written or oral) between Purchasers and their
Representatives, on the one hand, and Sellers or any of their Representatives,
on the other hand, in each case, except as expressly covered by a
representation or warranty set forth in Article IV or the certificates to
be delivered pursuant to Section 6.3(d).


 


Section 3.22         Books
and records.  The books of account, minute books, and stock
record books of each Company and each Subsidiary of the Companies with respect
to the last three (3) years comply in all material respects with the
material requirements of applicable Law.


 


Section 3.23         Bank
Accounts and Powers of Attorney.  Section 3.23 of the Seller
Disclosure Schedule contains a complete and correct list of (a) the
names and locations of all banks, trust companies, securities brokers and other
financial institutions at which each Company or Subsidiary of the Companies has
an account, lockbox or safe deposit box or maintains a banking, custodial,
trading or other similar relationship; (b) the bank, trust company,
securities broker and other financial institution in which each such account,
lockbox or safe deposit box is held; and (c) the name of every Person
authorized to draw thereon or who has access thereto.  Except as set forth in Section 3.23 of
the Seller Disclosure Schedule, no person holds any power of attorney
from any Company or Subsidiary of the Companies, except powers of attorney
granted in the ordinary course of business (including to third-party
professionals in connection with customs, tax, and similar matters).


 


Section 3.24         Restricted
Cash.  As of the
Closing Date, the Companies and their Subsidiaries shall have on hand the
then-current balances of any cash amounts in the categories described in Part A
of Section 2.4(a) of the Seller Disclosure Schedule.


 


Section 3.25         Sufficiency of Assets Except as set forth in Section 3.25
of the Seller Disclosure Schedule, the rights, properties and assets of
the Companies and their Subsidiaries and the facilities and services to which
the Companies and their 


 


68

















 


Subsidiaries have a contractual right and the rights
of the Purchasers and their Affiliates (including Companies and their Subsidiaries)
pursuant to the Ancillary Agreements, but excluding any administrative or
similar group services provided in the ordinary course of business by Sellers
to the Companies and their Subsidiaries as of the date hereof and not provided
pursuant to the Ancillary Agreements, and excluding rights, properties, assets,
facilities and services which are not material to the operation of the
Business, together include all rights, properties, assets, facilities and
services that are necessary for the Purchasers and their Affiliates (including
the Companies and their Subsidiaries) to carry on the Business after Closing
substantially in the manner in which it has been carried on immediately prior
to the Closing.  For the avoidance of
doubt, the Companies and their Subsidiaries do not conduct terminal engineering
or manufacturing functions or own lottery terminals or parts jointly used with
Sellers or other Affiliates of Sellers that are not reflected in the Final Net
Working Capital.


 


Section 3.26         Acquisition
for Investment.  The Sellers
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of Sellers’ acquisition of the
Sportech Shares.  The Sellers are
acquiring the Sportech Shares solely for investment and not with a view toward or for sale in connection
with any distribution thereof, or with any present intention of distributing such Sportech Shares, other
than to any of their respective Affiliates. 
The Sellers acknowledge that the Sportech Shares have not been
registered under applicable securities Laws of the United States.  The Sellers agree that the Sportech Shares
may not be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without qualification under applicable securities Laws,
except pursuant to an exemption from such qualification available under such
securities Laws.


 


Section 3.27         Disclosure. 
The information regarding SGC and its Affiliates (including the
Companies and their Subsidiaries) furnished by SGC to Sportech or its
Affiliates in writing for the purposes of inclusion in the Circular or any
public documentation issued in connection with the Sportech Equity Offering as
extracted and set out at Section 3.27 of the Seller Disclosure Schedule
(such information being the “Seller Provided
Information”) does not contain any untrue statement of a material
fact as of the date of this Agreement.


 


Section 3.28         Disclaimer
of Warranties. 
NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE CONTRARY, SELLERS
MAKE NO REPRESENTATIONS OR WARRANTIES TO PURCHASERS OR ANY OTHER PERSON IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, EXCEPT AS
SPECIFICALLY SET FORTH IN THIS ARTICLE III. 
ALL OTHER REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR IMPLIED,
ARE DISCLAIMED BY SELLERS.


 


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ARTICLE IV.


 


REPRESENTATIONS
AND WARRANTIES OF SPORTECH


 


Except as set forth on
the Purchasers Disclosure Schedule, Sportech represents and warrants to
Purchasers as of the date hereof and as of the Closing Date, as follows:


 


Section 4.1            Organization and Good Standing.  Each of Purchasers (a) is duly
incorporated or organized, validly existing and in good standing under the Laws
of its governing jurisdiction; (b) has all requisite corporate, company or
limited liability company (or other applicable entity) power and authority to
own, operate and lease its assets and properties and to carry on its business
as it is now being conducted; (c) is duly qualified to do business and is
in good standing in each of the jurisdictions in which the ownership, operation
or leasing of its properties and assets and the conduct of its business
requires it to be so qualified and (d) is in substantial compliance with
its charter, by laws or other Governing Documents, except, in the case of
clauses (c) or (d), where the failure to be so qualified and in good
standing, or to be in such compliance, would not be material in the context of
the business of the Purchasers and their Subsidiaries taken as a whole.


 


Section 4.2            Authorization.  Each Purchaser has the requisite corporate or
company power and authority to execute and deliver this Agreement and those
Ancillary Agreements to which it is a party. 
The execution and delivery of this Agreement and each of the Ancillary
Agreements by Purchasers and the consummation by Purchasers of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
board of directors (or equivalent governing body) of each Purchaser and no
other company proceedings are necessary (i) to authorize this Agreement or
the Ancillary Agreements; or (ii) except for the approval of the Sportech
Voting Proposal at the Sportech Shareholders Meeting, to consummate the
transactions contemplated hereby or thereby. 
This Agreement has been duly executed and delivered by each Purchaser
and (assuming due authorization, execution and delivery by Sellers) this
Agreement constitutes, and each of the Ancillary Agreements, when executed and
delivered by Purchasers (assuming due authorization, execution and delivery by
the other parties thereto) will constitute, a valid and binding obligation of
such Purchasers, enforceable against such Purchasers in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar Laws relating to or affecting
creditors’ rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).


 


Section 4.3            No Conflict.  Except as set forth in Section 4.3 of
the Purchaser Disclosure Schedule and assuming all Required Governmental
Approvals, Purchaser Governmental Approvals and Seller Governmental Approvals,
and all waiting periods described in Section 4.3 of the Purchaser
Disclosure Schedule, have been obtained or made, or have expired, the
execution and delivery of this Agreement and the Ancillary Agreements by
Purchasers and the consummation by Purchasers of the transactions contemplated
hereby and thereby will not (a) result in a material contravention,
violation or breach of Law applicable to the Purchasers or their Subsidiaries; (b) conflict
with, result in a violation or breach of, or constitute a default under
(including any such conflict, violation, breach or default resulting from the
failure 


 


70

















 


to make or obtain any required
notification, consent, waiver or approval under), result in the acceleration
of, or create in any party the right to accelerate, terminate or cancel, or
give rise to a right of payment, prepayment or reimbursement, or termination,
cancellation, modification or acceleration under, or to additional accelerated
or guaranteed rights or entitlement of any Person under, or result in the
creation of any Encumbrance (other than a Permitted Encumbrance) upon any of
the properties or assets of the Purchasers or their Subsidiaries under any
provision of any material Purchaser Contract, in each case whether with or
without notice, lapse of time or both; or (c) contravene, conflict with,
or result in any violation or breach of any provision of the memorandum and
articles of association or other Governing Documents of any Purchaser or its
Subsidiaries, other than, in the case of Section 4.3(b), any such
violations, conflicts, breaches, defaults, accelerations or rights that would
not, individually or in the aggregate, reasonably be expected to materially
impair or delay such Purchaser’s ability to perform its obligations under this
Agreement or consummate the transactions contemplated hereby, or give rise to a
material liability of the Purchasers and their Subsidiaries taken as a whole,
or materially interfere with the conduct of the business of the Purchasers or
their Subsidiaries taken as a whole.


 


Section 4.4            Legal Proceedings.  Except as set forth in Section 4.4 of
the Purchaser Disclosure Schedule and except as to any Actions disclosed
in Section 4.12(b) of the Purchaser Disclosure Schedule, there
are no Actions pending or, to the Knowledge of Sportech, threatened against any
Purchaser or its Subsidiaries or any of their respective assets or properties
which, individually or in the aggregate, would reasonably be expected to (a),
as of the date hereof, materially impair or delay any Purchaser’s ability to
perform its obligations under this Agreement or consummate the transactions
contemplated hereby; or (b) give rise to a material liability in respect
of any Purchaser’s business or materially interfere with the conduct of such
Purchaser’s business.  Except as set
forth in Section 4.4 of the Purchaser Disclosure Schedule, none of
the Purchasers, its Subsidiaries or, to the Knowledge of Sportech, their
respective directors, officers, managers or employees (in their capacities as
such) is subject to any Governmental Order which, individually or in the
aggregate, would reasonably be expected to (i) as of the date hereof,
materially impair or delay such Purchasers’ ability to perform its obligations
under this Agreement or consummate the transactions contemplated hereby, or (ii) give
rise to a material liability of such Purchaser’s business or materially
interfere with the conduct of such Purchaser’s business.


 


Section 4.5            Acquisition for Investment.  Sportech has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of Purchasers’ purchase of the Interests. 
Purchasers are acquiring the Interests solely for investment and not with a view toward or for sale in
connection with any distribution thereof, or with any present intention distributing such Interests, other than to any
of their respective Affiliates. 
Purchasers acknowledge that the Interests have not been registered under
applicable securities Laws.  Purchasers
agree that the Interests may not be sold, transferred, offered for sale,
pledged, hypothecated or otherwise disposed of without qualification under
applicable securities Laws, except pursuant to an exemption from such
qualification available under such securities Laws.


 


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Section 4.6            Funding.  Subject to the satisfaction or (where
applicable) waiver of all the conditions set forth in the Placing Agreement (as
defined in this Section 4.6), Purchasers will have on the Closing Date
sufficient funds to enable Purchasers to consummate the transactions
contemplated hereby, including payment of the Cash Closing Consideration and
any other portion of the Purchase Price that becomes payable in cash at Closing
and all fees and expenses of Purchasers relating to the transactions
contemplated hereby.  Purchasers have
delivered to Sellers a copy of a duly executed placing agreement, dated as of
the date of this Agreement, among Sportech and Close Brothers Corporate Finance
Limited and Investec Investment Banking, a division of Investec Bank plc (the “Placing Agreement”) relating to the placing of the Placing
Shares to be allotted and issued pursuant to the terms of the Placing
Agreement, which Placing Agreement shall not be materially amended without the
prior written consent of SGC except if such amendment would not reasonably be
expected to materially affect the ability of Purchasers to consummate, or to
materially delay the consummation of, the transactions contemplated hereby.


 


Section 4.7            Brokers’ Fees.  No broker, investment banker, financial
advisor or other Person other than Close Brothers Corporate Finance and
Investec, the fees and expenses for which shall be paid by Purchasers (or an
Affiliate thereof), is entitled to any broker’s, finder’s, financial advisor’s
or other similar fee or commission in connection with this Agreement or the
transactions contemplated hereby based upon arrangements made by or on behalf
of Purchasers or any of their Affiliates.


 


Section 4.8            No Reliance.  Each Purchaser (on behalf of itself and its
Affiliates) acknowledges that it has had the opportunity to conduct an
independent investigation of the financial condition, liabilities, results of
operations and projected operations of the Business and the Companies and their
Subsidiaries and the nature and condition of their respective properties and
assets and, in making the determination to proceed with the transactions
contemplated by this Agreement and the Ancillary Agreements, has relied solely
on the results of its own independent investigation and the provisions set
forth in this Agreement, the Ancillary Agreements, and the certificates to be
delivered pursuant to Section 6.2(e). 
Each Purchaser acknowledges that none of Sellers, the Companies, the
Subsidiaries of the Companies or any other Person has made any representation or
warranty, express or implied, as to the accuracy or completeness of any
information, written or oral and in any form provided, which has been made
available (or which is made available after the date hereof) to such Purchaser,
its Affiliates or their Representatives regarding the Companies, their
Subsidiaries, the Business or other matters other than the representations or
warranties included in Article III. 
Without limiting the generality of the foregoing, other than to the
extent contained in Article III, the Ancillary Agreements or the
certificates to be delivered pursuant to Section 6.2(e), none of Sellers,
the Companies, the Subsidiaries of the Companies or any other Person has made a
representation or warranty, express or implied, to Purchasers, their Affiliates
or their Representatives, and each Purchaser (on behalf of its Affiliates and
their Representatives) expressly disclaims reliance, with respect to (a) the
Confidential Information Memorandum dated February 2009 with respect to
the Business, any management presentation (or any question and answer session, “break-out”
session or 


 


72

















 


other meeting) or oral or
written responses to questions or requests submitted (in writing or orally) by
or on behalf of Purchasers or their Affiliates or their Representatives; (b) any
projections, forecasts, estimates or budgets made available (or which are made
available after the date hereof) to Purchasers, their Affiliates or their
Representatives for the Business (or any parts thereof) or any of the Companies
or their Subsidiaries, or future revenues, expenses or expenditures, future
results of operations (or any component thereof, including “EBITDA”), future
cash flows or future financial condition (or any component thereof), in each
case, of the Business or the Companies and their Subsidiaries, or the future
business or operations of the Companies and their Subsidiaries; (c) business
opportunities, including the prospects for new (or re-negotiated or revised)
Contracts or arrangements or one-time or other sales, entering into new markets
or otherwise obtaining new business or retaining existing business, Contracts
or arrangements (including the prospects or legality of Internet or other
account wagering business not conducted by any of the Companies or their
Subsidiaries as of the date hereof); (d) strategies or plans for growing
the Business or reducing the expenses of the Business or the probable success
or profitability of the ownership of the Interests or the Business; (e) the
costs or other effects associated with operating the Business as a “stand-alone”
enterprise; (f) any material, documents or information, written or oral
and in any form provided, which has been made available (or which is made
available after the date hereof) to Purchasers or their Representatives in the
Electronic Data Room or otherwise; and (g) without limiting the
generality of the foregoing, any communications (written or oral) between
Purchasers and their Representatives, on the one hand, and Sellers or any of
their Representatives (including members of management or employees of the
Business), on the other hand, in each case, except as expressly covered by a
representation or warranty set forth in Article III or in any Ancillary
Agreement or the certificate to be delivered pursuant to Section 6.2(e).


 


Section 4.9            Capital Structure.


 


(a)           The authorized share capital of
Sportech consists of 140,000,000 ordinary shares, of which, as at the date of
this Agreement, (i) 100,652,603 were issued and outstanding, all of which
are duly authorized, validly issued, fully paid and non-assessable and none of
which were issued in violation of preemptive or similar rights; and (ii) 1,628,967
were subject to outstanding options under Sportech’s stock option plans and
pursuant to the terms of Sportech’s stock option plans, commitments to issue
new shares or re-issue treasury shares shall not exceed 10% of the issued
ordinary share capital of Sportech in any rolling 10 year period.  No change in such capitalization has occurred
since September 30, 2009, except for changes resulting from the exercise
or termination of stock options outstanding as of September 30, 2009.  Except as set forth in this Section 4.9(a) or
in Section 4.9(a) of the Purchaser Disclosure Schedule, there
are no (A) outstanding obligations (contingent or otherwise), options,
warrants, convertible securities or other rights, Contracts or commitments
(contingent or otherwise) relating to the capital stock or other equity
interests of Sportech or obligating Sportech to issue or sell or otherwise
transfer capital stock or other equity interests of Sportech; (B) outstanding
obligations (contingent or otherwise) of Sportech to repurchase, redeem or
otherwise acquire shares of capital stock or other equity interests of
Sportech, to pay any 


 


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dividend or make any distribution in respect thereof,
or to make any investment in any equity interests in any other Person; (C) outstanding
obligations (contingent or otherwise), options, warrants, convertible
securities or other rights, Contracts or commitments (contingent or otherwise)
obligating Sportech to make any investment in debt securities of or extend any
loan to any other Person (which, for the avoidance of doubt, shall not include
any extension of credit in the ordinary course of business); or (D) voting
trusts, operating agreements, proxies or other Contracts or understandings
(contingent or otherwise) in effect with respect to the voting or transfer of
equity interests of Sportech.


 


(b)           The Sportech Shares to be issued
pursuant to Section 2.1 will be duly authorized, validly issued, fully
paid and non-assessable, and will be free and clear of any Encumbrances.


 


(c)           Except as set forth in Section 4.9(c) of
the Purchaser Disclosure Schedule, there are no Persons in which
Sportech owns any equity interest.


 


Section 4.10         United
Kingdom Listing Authority Filings; Financial Statements; Solvency.


 


(a)           Since
January 1, 2007, Sportech has timely filed all forms, reports, statements
and documents required to be filed by it (i) pursuant to the Companies
Acts 1985 and 2006, as applicable; and (ii) pursuant to the rules of
the United Kingdom Listing Authority (“UKLA”)
(collectively together with any such forms, reports, statements and documents
Sportech may file subsequent to the date hereof until the Closing, including
the Circular and any other documents required by applicable Law in connection
with the Sportech Equity Offering or the Sportech Shareholders Meeting, the “Sportech Reports”). 
Each Sportech Report was prepared in all material respects in accordance
with the requirements of applicable Law including the Companies Act 1985 and
2006, as applicable, and the requirements of the UKLA, as the case may be and
including, in the case of the Circular, the requirement set out in section 80
of the Financial Services and Markets Act 2000 that the Circular contains all such information as investors and their
professional advisers would reasonably require, and reasonably expect to find
there, for the purpose of making an informed assessment of the assets and
liabilities, financial position, profits and losses, and prospects of Sportech
and the rights attaching to the shares to be issued pursuant to the Sportech
Equity Offering (but excluding, in each case, any failure to comply with
applicable Law as a result of any inaccuracy in the Seller Provided
Information).


 


(b)           Except
as disclosed in Section 4.10(b) of the Purchaser Disclosure
Schedule, each of (i) the audited consolidated balance sheet of
Sportech as of December 31, 2008 and the related audited consolidated
income statements, statements of cash flow and statements of changes in equity
of Sportech for the year then ended, accompanied by the notes thereto and the auditor’s
report thereon (the “Sportech Audited Financial
Statements”); and (ii) the unaudited consolidated balance sheet
of Sportech as of June 30, 2009 and the related consolidated statements of



 


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income, cash flows and
statements of changes in equity for the six months then ended (the “Sportech Unaudited Financial Statements” and together with
the Sportech Audited Financial Statements, the “Sportech
Financial Statements”), in each case included in the Sportech
Reports, were prepared based upon the information contained in the books and
records of Sportech and in accordance with International Financial Reporting
Standards, consistently applied (except as disclosed in the notes thereto, and
except that unaudited statements do not include notes or normal year-end
adjustments), and fairly present, in all material respects, the consolidated
financial position, results of its operations and cash flows for the periods
covered thereby (as applicable).


 


(c)           At
the date of this Agreement and at the Closing Date (taking into account the
consummation of the transactions contemplated by Article 2 hereof),
neither the Purchaser nor any of its Affiliates is insolvent or bankrupt under
the laws of its jurisdiction of incorporation, unable to pay its debts as they
fall due or is or liable to any arrangement (whether by court process or
otherwise) under which its creditors would receive less than the amounts due to
them.


 


Section 4.11         Undisclosed
Liabilities.  Except
for (a) liabilities which are disclosed, accrued or reserved against in
the Sportech Financial Statements (or the related notes) or disclosed in Section 4.11
of the Purchaser Disclosure Schedule; (b) liabilities incurred
since June 30, 2009 in the ordinary course of business; (c) liabilities
disclosed in the Purchaser Disclosure Schedule pursuant to any of
Sections 4.4 or 4.12; (d) performance of express obligations under
material contracts of Sportech and its Subsidiaries (but not, for the avoidance
of doubt, any liability for breach of such contracts by any of Sportech or its
Subsidiaries); (e) liabilities incurred by the Sportech and its
Subsidiaries after the date of this Agreement with the written consent of SGC;
and (f) other liabilities, not covered by Section 4.11(a) through
(e) above, that, individually and in the aggregate, do not exceed
$2,500,000.00, Sportech and its Subsidiaries do not have any Liabilities
required to be reflected or reserved against on a combined balance sheet of
Sportech and its Subsidiaries prepared in accordance with IFRS.


 


Section 4.12         Compliance
with Laws; Permits.


 


(a)           Except as set forth in Section 4.12(a) of
the Purchaser Disclosure Schedule, Purchasers and their Subsidiaries
have since January 1, 2006 operated and are currently operating their
respective businesses in compliance in all material respects with all material
applicable Laws.  Except as would not,
individually or in the aggregate, reasonably be expected to give rise to a
material liability of Purchasers’ business or materially interfere with the
conduct of Purchasers’ business, since January 1, 2006, none of the
Purchasers, its Subsidiaries, their Affiliates or, to the Knowledge of
Sportech, their respective directors, managers, officers, employees or agents
(in each case, acting in their capacities as such and on behalf of any of the
foregoing) has (a) directly, or indirectly through a third-party
intermediary, paid, offered, given, promised to pay, or authorized the payment
of any money or anything of value (including any gift, sample, travel, meal and
lodging expense, entertainment, service, equipment, debt forgiveness, donation,
grant or other thing of value, however characterized) to any official of any
Governmental Entity, any Person acting on behalf of any Governmental 


 


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Entity, any political party or official thereof or any
candidate for political office at the suggestion, request, direction or for the
benefit of any of the above-described Persons that was illegal under applicable
Law; or (b) violated or is in violation, in any material respect, of any
applicable anti-bribery, anti-corruption or Laws of similar effect, including
laws implementing the OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions.


 


(b)           All material approvals, permits,
licenses and authorizations of Governmental Entities required to be had by any
of Purchasers or its Subsidiaries or any of their respective directors,
managers, officers, shareholders or employees to conduct the business of any of
Purchasers or its Subsidiaries as currently conducted and to permit each
Purchaser and each Subsidiary of the Purchasers to own and use its material
properties and assets, in all material respects, in the manner in which of
currently uses such properties and assets (collectively, “Purchasers
Permits”) have been
obtained and all such Purchasers Permits are in full force and effect and such
businesses are being operated in compliance in all material respects
therewith).  To the Knowledge of
Sportech, no Governmental Entity has threatened in writing to revoke,
materially amend or impose any material condition or sanction in respect of any
such Purchasers Permit, or commenced formal proceedings to revoke, materially
amend, or impose any material condition or sanction in respect of any such
Purchasers Permit.  All applications
required to have been filed for the renewal of any material Permits have been
filed with the appropriate Persons, except as would not cause such Permits to
be revoked or not renewed.


 


Section 4.13         Intellectual
Property.


 


(a)           Except as set forth in Section 4.13(a) of
the Purchaser Disclosure Schedule, to the Knowledge of Sportech,
Sportech owns, free and clear of Encumbrances (other than Permitted
Encumbrances), or has rights to use, all of the Intellectual Property that is
material to the conduct of the business of Sportech and its Subsidiaries as
currently conducted.


 


(b)           Except as set forth in Section 4.13(b) of
the Purchaser Disclosure Schedule, and to the Knowledge of
Sportech,  (i) the conduct of the
business of any of Sportech and its Subsidiaries as currently conducted does
not infringe or otherwise violate any Person’s Intellectual Property in any
manner that would reasonably be expected to materially and adversely affect
their respective businesses, and (ii) to the Knowledge of Sportech, there
is no claim pending or threatened against any of Sportech or its Subsidiaries
related to any of their infringement or violation of any person’s Intellectual
Property in any such manner, and (iii) to the Knowledge of Sportech, no
Person is materially infringing or otherwise materially violating any
Intellectual Property owned by any of Sportech or its Subsidiaries, and no such
infringement claims are pending or threatened against any Person by any of
Sportech or its Subsidiaries.


 


Section 4.14         Disclaimer
of Warranties. 
NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE CONTRARY,
PURCHASERS MAKE 


 


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NO REPRESENTATIONS OR
WARRANTIES TO SELLERS OR ANY OTHER PERSON IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, EXCEPT AS SPECIFICALLY SET FORTH IN THIS
ARTICLE IV.  ALL OTHER REPRESENTATIONS
AND WARRANTIES, WHETHER EXPRESS OR IMPLIED, ARE DISCLAIMED BY PURCHASERS.


 


ARTICLE
V.


 


COVENANTS


 


Section 5.1            Conduct of the Business.   From and after the date hereof until the
earlier of the Closing Date and the date this Agreement is terminated in
accordance with Section 7.1, Sellers shall cause the Companies and their
Subsidiaries to conduct their respective businesses in the ordinary course
(which, for the avoidance of doubt, shall be deemed to include any action
permitted as a result of a dollar threshold or exception contained in any of Sections
5.1(a) through (r) below) and to use their commercially reasonable
efforts to (i) preserve the present Business, operations, assets,
properties, goodwill and relationships with customers, suppliers and others
having business dealings with the Companies and their Subsidiaries; and (ii) maintain
in effect all of the Permits.  Without
limiting the generality of the foregoing, except (1) as otherwise
contemplated by this Agreement or any Ancillary Agreement; (2) for actions
approved by Sportech in writing (which approval shall not be unreasonably
withheld, conditioned or delayed); (3) as required by applicable Law; or (4) as
set forth in Section 5.1 of the Seller Disclosure Schedule, from
and after the date hereof until the earlier of the Closing Date and the date
this Agreement is terminated in accordance with Section 7.1, SGC shall
cause each of the Companies and their Subsidiaries to conduct their Business in
all material respects in the ordinary course of business, and, without limiting
the generality of the foregoing, shall cause each of the Companies and their
Subsidiaries not to take, and, in the case of Section 5.1(l), the Sellers
shall not take with respect to any asset of the Business, any of the following
actions:


 


(a)           amend or otherwise modify in any
respect or permit any material waiver of or grant any material consent under
its Governing Documents;


 


(b)           adopt a plan or agreement of
liquidation, dissolution, merger, consolidation or recapitalization;


 


(c)           (i) (A) issue, deliver,
sell, transfer, pledge, grant, dispose of, or create, permit, allow or suffer
to exist any Encumbrance on, any shares of its capital stock or other equity
interests; or (B) issue, deliver sell, transfer, pledge, grant, transfer
or dispose of or create any Encumbrance on any options, warrants, securities
convertible into or exercisable for (including convertible debt) or other
rights to purchase or obtain any shares of its capital stock or other equity
interests; (ii) effect or approve any split, combine, subdivide or reclassify
any shares of its capital stock or other equity interests; (iii) declare,
set aside or pay any dividend or other distribution, other than (A) any
dividend payable and paid in cash prior to Closing or (B) in settlement of
intercompany items in the manner contemplated by Exhibit I, in each
case not reducing 


 


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any cash amounts in the categories described in Part A
of Section 2.4(a) of the Seller Disclosure Schedule, with
respect to any shares of its capital stock or other equity interests; or (iv) redeem,
repurchase or otherwise acquire any shares of its capital stock or other equity
interests;


 


(d)           create, incur, assume, suffer to
exist or guarantee or otherwise be liable for any Indebtedness or issue rights
to acquire any debt security, other than Indebtedness incurred in the ordinary
course of business consistent with past practice;


 


(e)           make any capital expenditures of any
of the Companies or their Subsidiaries in excess of amounts as contemplated by
the most recent annual capital expenditure budget of the Companies and their
Subsidiaries provided to the Purchasers prior to the date hereof or commit to
make any capital expenditures with respect to which payment is to be made after
Closing, provided that such capital expenditures may be made (but not agreed
and not made) prior to Closing above the amounts contemplated in such annual
capital expenditure budget without the express consent of Sportech provided
that such amounts shall not be deemed to be Relevant Capital Expenditures for
the purposes of this Agreement;


 


(f)            (A) grant or announce any
increase in or accelerate the compensation, bonus or benefits, or otherwise
increase the compensation, bonus or benefits payable or to become payable,
except periodic generally applicable increases in base salaries in accordance
with past practice, to any employee, director, officer, manager, or consultant
of, the Companies and their Subsidiaries except for the payment of any Seller
Bonus or Accelerated Right; (B) grant any rights to retention, severance
or termination pay to, or enter into any new (or amend any existing)
employment, retention, severance or other Contract with, any such employee,
director, officer, agent or consultant, in each case except as may be required
by Law or where the likely effect of any of the foregoing would not reasonably
be expected to lead to an increase in aggregate of total staff costs of the
Companies and their Subsidiaries by more than five (5) percent per annum; (C) adopt
or establish any new employee benefit plans for employees, or take any action
to accelerate the vesting, payment or funding of compensation or benefits under
any Plan, to the extent not already provided in any such Plan; or (D) enter
into any consulting Contract providing for payments in excess of $50,000 in any
fiscal year;


 


(g)           except for amendments as required by
Law to existing agreements, enter into or negotiate any collective bargaining
or similar agreement;


 


(h)           (x) make any material change in
the management structure of the Companies and their Subsidiaries, including the
hiring of senior managerial personnel or the termination of any management
personnel other than for cause; (y) increase the number of individuals
employed by the Companies and their Subsidiaries, except for increases that are
not material in the aggregate in a manner consistent with hiring policies prior
to the date hereof; or (z) hire any personnel from SGC or its Affiliates
(other than the Companies and their Subsidiaries);


 


78

















 


(i)            amend in any material respect or
terminate (not including termination by a counterparty) any Material Company
Contract, or enter into any new Material Company Contract that would have been
required to be disclosed in Section 3.14(a) of the Seller
Disclosure Schedule if such Contract had been in effect as of the date
hereof, except (X) any Contracts amended or entered into in the ordinary
course of business which would reasonably be expected to result in annual average
payments to or from the Companies and their Subsidiaries not in excess of
$200,000 or (Y) other Contracts which would reasonably be expected to
result in annual average payments to or from the Companies and their
Subsidiaries not in excess of $100,000; or enter into any Material Company
Contract of a type that would be required to be disclosed pursuant to Sections
3.14(a)(iv) or (xxiii) had it been in existence at the date hereof, other
than guarantees given by any Company or any Subsidiary of a Company with
respect to the obligations of any Company or any Subsidiary of a Company;


 


(j)            enter into or consummate any
transaction involving the acquisition of all or substantially all of the
business, stock, other equity securities, assets or other properties of any
other Person;


 


(k)           purchase or otherwise acquire any
amount of assets or property for consideration in excess of $125,000
individually or $500,000 in the aggregate, except in the ordinary course of
business and excluding, for the avoidance of doubt, capital expenditures as
contemplated by (e) above;


 


(l)            sell, assign, transfer, lease,
license or otherwise dispose of, or waive or cancel any claims or rights to,
any amount of assets or property for consideration in excess of $125,000
individually or $500,000 in the aggregate, except pursuant to existing Material
Company Contracts and except in the ordinary course of business;


 


(m)          (A) make any payment (excluding
dividends and distributions, which are addressed in Section 5.1(c)) or
transfer any assets to, or (B) enter into, amend or terminate any Contract
with, the Sellers or any of their Affiliates, except, in the case of payments
but not transfers pursuant to (A) in the usual and ordinary course of
business consistent with past practice or as contemplated by this Agreement or
the Ancillary Agreements, or payments or transfers in settlement of
intercompany items in the manner contemplated by Exhibit I hereto
or otherwise in a manner reasonably satisfactory to Purchasers;


 


(n)           enter into any material new line of
business outside of or not reasonably complimentary to the Business;


 


(o)           make or rescind any material Tax
election (including by adopting or changing any method of accounting or making
any entity classification election) with respect to the Business and/or any of
the Companies or their Subsidiaries, grant or request a waiver or extension of
any limitation on the period for audit and examination or assessment and
collection of any material Tax, file any amended Tax Return or settle or
compromise any contested Tax liability, except to the


 


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extent that any such waiver, extension, amended Tax
Return, settlement or compromise, if granted, requested, filed, settled or
compromised, as the case may be, would not reasonably be expected to (i) have
a material adverse effect on Purchasers or (ii) cause the Tax liability of the Companies and their
Subsidiaries to be materially lower for a Pre-Closing Tax Period
and, as a result,
correspondingly higher for a Post-Closing Tax Period, provided that, in any
event, Sellers must provide written notice to Purchasers of their intent to
settle or compromise any Tax liability of the Companies or their Subsidiaries of more
than $250,000 or to amend any Tax Return of the Companies or their Subsidiaries if
such amendment would change the Tax shown on such Tax Return of the Companies or their Subsidiaries by
more than $250,000;


 


(p)           grant, extend, materially amend
(except as required in the diligent prosecution of the Intellectual Property
owned by the Companies and their Subsidiaries), waive or modify in any respect
any material rights in or to, or sell, assign, lease, transfer, license (except
licenses or grants that appear (or are substantially similar to those that
appear) in the ordinary course of business in customer contracts), let lapse or
abandon (except in the ordinary course of business), cancel or otherwise
dispose of, any Intellectual Property owned by the Companies or their
Subsidiaries to the extent such Intellectual Property is material to the
operation of the Business or to the extent any such action would have a
material impact on the business of the Companies and their Subsidiaries taken
as a whole, or fail to exercise a right of renewal or extension under any
Contract affording the Companies or their Subsidiaries rights to any such
material Intellectual Property;


 


(q)           except as may be required as a result
of a change in Law or in GAAP (or applicable international accounting
principles), adopt or change any of its accounting policies, principles,
methods, practices, periods or procedures; or


 


(r)            enter into or approve any Contract
or other binding commitment to do, engage in or cause any of the foregoing.


 


Section 5.2            Publicity.  Sportech and SGC shall communicate with each
other and cooperate with each other prior to any public disclosure of the
transactions contemplated by this Agreement. 
Purchasers and Sellers agree that no public release, statement, issuance
or announcement concerning the terms of the transactions contemplated hereby
shall be issued by any party without the prior written consent of Sportech (in the case of any such release,
statement, issuance or announcement by Sellers) or SGC (in the case of any such release, statement, issuance or
announcement by Purchasers), except as
may be required by Law, in which case the party required to make the release,
statement, issuance or announcement shall, to the extent practicable, allow
Sportech or SGC, as the case may be, reasonable time to comment on such
release, statement, issuance or announcement in advance of such issuance.


 


Section 5.3            Confidentiality.


 


(a)           Each
of Purchasers and Sellers shall, and shall cause its Representatives to, treat
all materials and information obtained from the other in 


 


80

















 


connection with this Agreement
and the transactions contemplated hereby as confidential in accordance with the
terms of the Mutual Nondisclosure Agreement, dated September 24, 2008 (the
“Confidentiality Agreement”).  The terms of the Confidentiality Agreement
are hereby incorporated herein by reference. 
If this Agreement is, for any reason, terminated prior to the Closing,
the Confidentiality Agreement shall continue in full force and effect as
provided in Section 7.2. For purposes of this Section 5.3(a), a Person’s “Representatives”
shall not include such Person’s stockholders or members.


 


(b)           Purchasers
shall not, and shall cause their Subsidiaries not to use material confidential
and/or proprietary information of Sellers and their Subsidiaries to conduct any
Lottery Systems Business except as would not allow SGC to terminate the
Investors’ Agreement in accordance with Section 2(f) thereof.  Each of Purchasers acknowledges and agrees
that the remedy at law for any breach, or threatened breach, of any of the
provisions of this Section 5.3(b) will be inadequate and,
accordingly, covenants and agrees that each of Sellers and their Subsidiaries
shall, in addition to any other rights and remedies which such party may have
at law, be entitled to equitable relief, including injunctive relief, and to the
remedy of specific performance with respect to any breach or threatened breach
of this Section 5.3(b), as may be available from any court of competent
jurisdiction.  In the event that any of
the covenants contained in this Section 5.3(b) shall be determined by
any court of competent jurisdiction to be unenforceable for any reason
whatsoever, then any such provision or provisions shall not be deemed void, and
the parties agree that said limits may be modified by such court and that the
covenants contained in this Section 5.3(b) shall be amended in
accordance with said modification, it being specifically agreed by the parties
that it is their continuing desire that the covenants contained in this Section 5.3(b) be
enforced to the full extent of its terms and conditions, or if a court finds
the scope of any of such covenants unenforceable, the court should redefine
such covenant so as to comply with applicable Law.  This Section 5.3(b) shall not apply
after the third anniversary of the Closing Date.


 


Section 5.4            Access to Information.


 


(a)           Subject to Section 5.3, from and
after the date hereof until the earlier of the Closing Date and the date this
Agreement is terminated in accordance with Section 7.1, SGC shall cause
the Companies and their Subsidiaries to afford Sportech and its Representatives
reasonable access, during normal business hours and upon reasonable notice, to
the officers, agents, properties, offices and other facilities of the Companies
and their Subsidiaries and to their books and records, and shall furnish
Sportech with available financial, operating and other data and information
with respect to the business and properties of the Companies and their
Subsidiaries as Sportech may reasonably request.  In exercising its rights hereunder, Sportech
shall (and shall cause each of its Representatives to) conduct itself so as not
to unreasonably interfere in the conduct of the business of the Companies and
their Subsidiaries prior to Closing. 
Sportech acknowledges and agrees that any contact by Sportech and its
Representatives with officers, customers or agents of the Companies and their
Subsidiaries hereunder shall be arranged and supervised by Representatives of
SGC, unless SGC otherwise 


 


81

















 


expressly consents in writing with respect to any
specific unsupervised contact. 
Notwithstanding anything to the contrary set forth in this Agreement,
none of Sellers or any of their Affiliates (including the Companies and their
Subsidiaries) shall be required to disclose to Sportech or any agent or
Representative thereof any information (x) relating to any sale or
divestiture process conducted by any of the Sellers or their Affiliates with
respect to the Companies, their Subsidiaries or the Business or any evaluation
by any of Sellers or their Affiliates (or their Representatives) of the
Companies, their Subsidiaries or the Business in connection therewith,
including projections, financial information or other information relating
thereto or the subscription for the Sportech Shares; or (y) if doing so
could violate any Contract or Law to which any of Sellers or their Affiliates
(including the Companies and their Subsidiaries) is a party or to which it is
subject or which it believes in good faith would result in a loss of the
ability to successfully assert a claim of privilege (including attorney-client
and work product privileges); provided, however, that in the case
of potential loss of privilege under Section 5.4(a)(y) above, the
parties shall cooperate in seeking to find a way to allow disclosure of such
information to the extent doing so would not (in the good faith belief of SGC
(after consultation with counsel, which may be in-house counsel)) reasonably be
likely to cause such privilege to be undermined with respect to such
information.  In addition,
notwithstanding anything contained in this Agreement to the contrary, none of
Sportech or its Representatives shall have any right to perform or conduct, or
cause to be performed or conducted, any environmental sampling or testing at,
in, on, above or underneath the Real Property.


 


(b)           To the extent that SGC’s investment
in the Sportech Shares is required under GAAP and applicable rules and
regulations promulgated by the Securities and Exchange Commission (the “SEC”) to be reflected as an equity method investment in the
financial statements of SGC, and SGC is as a result required by applicable Law,
or SGC is otherwise required by applicable Law, including the disclosure
principles of Rule 10b-5 under the Securities Exchange Act of 1934, or in
connection with ordinary course financing matters, to disclose, with respect to
any quarter or fiscal year, financial information (including appropriate
treatment for tax matters) in relation to or derived from financial information
of Sportech (but only to the extent such information of Sportech does not
comprise any forecast or other forward looking information and only to the
extent, unless the SEC requires an alternative presentation, that such
disclosure is aggregated on a combined basis with financial information with
other equity method investees of SGC, if any, and as such does not separately
identify Sportech financial information) (such disclosure, to such extent, a “SGC Financial Disclosure”), Sportech shall,
subject to GAAP and applicable Law, provide the aforementioned Sportech
information at such times and in such detail as may be reasonably requested by
SGC for the purposes of the SGC Financial Disclosure (including affording
access to SGC’s independent auditors to review, and if necessary audit, the
financial information of Sportech from which the SGC Financial Disclosure is
derived, which may include affording access to Sportech’s independent auditors
(subject to customary indemnification and confidentiality agreements that may
be requested by such auditors, and to the consent of such auditors for any
reliance on or reference thereto), to the extent reasonably required for such
purpose).  SGC and Sportech 


 


82

















 


acknowledge and agree that (i) any information or
access to auditors provided by Sportech pursuant to this Section 5.4(b) shall
be provided at SGC’s sole cost and expense and shall remain subject to a duty
of confidentiality until such time as such information is made public pursuant
to the SGC Financial Disclosure with the approval of Sportech (not to be
unreasonably withheld or delayed); (ii) SGC shall afford Sportech a
reasonable opportunity to approve any sections of the SGC Financial Disclosure
to the extent that they expressly include or are derived from any information
provided by Sportech pursuant to this Section 5.4(b) (such approval
not to be unreasonably withheld or delayed) provided that such SGC Financial
Disclosure that relates to SGC shall be subject to a duty of confidentiality on
the part of Sportech until such time as such information is made public by SGC;
(iii) any information provided by Sportech pursuant to this Section 5.4(b) shall
not be required to be prepared in accordance with GAAP but may instead be
prepared in accordance with IFRS; (iv) SGC will, to the maximum extent
permitted by applicable Law (without, however, for the avoidance of doubt,
requiring SGC to seek to extend any applicable filing date, fail to timely
update any filing in accordance with applicable Law, or materially delay any
proposed public offering of securities or financing transaction), ensure (A) that
the timing of any SGC Financial Disclosure is consistent with the timing of
disclosure of financial information by Sportech in the usual and ordinary
course of business, and delay any SGC Financial Disclosure until such time as
the information provided by Sportech pursuant to this Section 5.4(b) would
be disclosed by Sportech pursuant to its usual and ordinary course disclosure of
financial information, and (B) that the SGC Financial Disclosure contains
the minimum information with respect to Sportech or its Affiliates as
reasonably necessary for the SGC Financial Disclosure to comply with GAAP or
applicable Law; (v) Sportech shall have no Liability to SGC with respect
to any information provided by Sportech pursuant to this Section 5.4(b); (vi) SGC
shall indemnify and hold harmless Sportech and its Affiliates from and against
any Loss suffered or incurred by Sportech or its Affiliates in respect of any
Action by any Person against any of them to the extent resulting from or
attributable to any inaccuracy in any information contained in the SGC
Financial Disclosure (except in each case to the extent resulting from or
attributable to any inaccuracy in any information provided by Sportech pursuant
to this Section 5.4(b)).  For
purposes of this Section 5.4(b) only, the term GAAP shall also refer
to any applicable successor accounting principles which may in the future apply
to the preparation of SGC’s financial statements.


 


(c)           For a period of six (6) years
following the Closing Date, SGC and its authorized Representatives and
regulators shall have reasonable access, at its expense, during normal business
hours and upon reasonable written notice, to the books, records and other
documents of the Companies and their Subsidiaries or the Business in existence
on the Closing Date as are transferred with the Companies and their
Subsidiaries in connection with the transactions under this Agreement and the
personnel of the Companies, their Subsidiaries and their respective Affiliates,
in each case, as may be required by applicable Law or as may reasonably
requested by SGC in connection with any insurance claims by, legal proceedings
(other than proceedings among parties to this Agreement asserting claims
pursuant to this Agreement or other claims in respect of which indemnification
may be sought pursuant to this Agreement) against, governmental 


 


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investigations of, or tax filings pursuant to
applicable Law as may be required to be filed by, Sellers or their Affiliates
or reasonably required to allow the performance by Sellers of their obligations
hereunder or any substantially similar purpose. 
SGC may, at its own expense, make such copies of such books, records and
documents as it deems necessary or advisable in connection therewith. Sportech
shall cause all such books, records and documents to be maintained by Sportech
and its Affiliates for the period required by applicable Laws.  Notwithstanding anything to the contrary set
forth in this Agreement, none of Purchasers or any of their Affiliates shall be
required to disclose to SGC or any agent or Representative thereof any
information if doing so could violate any Contract or Law to which any of
Purchasers or their Affiliates is a party or to which it is subject or which it
believes in good faith would result in a loss of the ability to successfully
assert a claim of privilege (including attorney-client and work product
privileges); provided, however, that in the case of potential
loss of privilege, the parties shall cooperate in seeking to find a way to
allow disclosure of such information to the extent doing so would not (in the
good faith belief of Sportech (after consultation with counsel, which may be
in-house counsel)) reasonably be likely to cause such privilege to be
undermined with respect to such information. 
In exercising its rights hereunder, SGC shall (and shall cause its
Representatives to) conduct itself so as not to unreasonably interfere with the
conduct of the business of Sportech or any of its Affiliates (including the
Companies and their Subsidiaries after the Closing).


 


(d)           For a period of six (6) years
following the Closing Date, Sportech and its authorized Representatives and
regulators shall have reasonable access, at its expense, during normal business
hours and upon reasonable written notice, to the books, records and other
documents of Sellers and their Subsidiaries to the extent, if any, that they
directly relate to the Business in existence on the Closing Date and are not
substantially similar to books, records and other documents maintained by the
Companies and their Subsidiaries or otherwise available to Sportech, as may be
required by applicable Law or as may be reasonably requested by Sportech in
connection with any insurance claims by, legal proceedings (other than
proceedings among parties to this Agreement asserting claims pursuant to this
Agreement or other claims in respect of which indemnification may be sought
pursuant to this Agreement) against, or governmental investigations of,
Purchasers or their Affiliates or reasonably required to allow the performance
by Purchasers of their obligations hereunder or any substantially similar
purpose.  Sportech may, at its own
expense, make such copies of such books, records and documents as it deems
necessary or advisable in connection therewith. 
SGC shall cause all such books, records and documents to be maintained
by SGC (or its Affiliates) for the period required by applicable Laws.  Notwithstanding anything to the contrary set
forth in this Agreement, none of SGC or any of its Affiliates shall be required
to disclose to Sportech or any agent or Representative thereof any information
if doing so could violate any Contract or Law to which any of SGC or its
Affiliates is a party or to which it is subject or which it believes in good
faith would result in a loss of the ability to successfully assert a claim of
privilege (including attorney-client and work product privileges); provided,
however, that in the case of potential loss of privilege, the parties
shall cooperate in seeking to find a way to allow disclosure of such
information to the extent doing so would not (in the good faith belief of SGC
(after consultation with 


 


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counsel, which may be in-house counsel)) reasonably be
likely to cause such privilege to be undermined with respect to such
information.  In exercising its rights
hereunder, Sportech shall (and shall cause its Representatives to) conduct
itself so as not to unreasonably interfere with the conduct of the business of
SGC or any of its Affiliates.


 


Section 5.5            Filings, Authorizations and Consents.


 


(a)           As soon as reasonably practicable
after the date of this Agreement, but in any event, in the case of (i) or (ii) below,
within ten (10) Business Days after the date of this Agreement: (i) each
of the applicable Sellers and Purchasers shall cause to be filed with the
applicable Governmental Entity (A) any antitrust or competition Law
filings required in any jurisdictions, if and to the extent required for the
transactions contemplated by this Agreement; and (B) any filings,
registrations, notifications or other documents necessary or advisable to be
submitted by such party or its Affiliates or Representatives in order to obtain
the Governmental Approvals required for the transactions contemplated by this
Agreement from each of the following Governmental Entities: (1) the
Division of Special Revenue of the State of Connecticut; (2) the Casino
Control Commission of the State of New Jersey; (3) the Racing Commission
of the State of New Jersey; (4) Maine State Harness Racing Commission and (5) the
Ministry of Justice of the Netherlands (including with respect to the transfer
of SGR BV pursuant to this Agreement as required under the Netherlands License)
(such Governmental Approvals, including if available, any Governmental Approval
from such Governmental Entity in the form of a temporary Governmental Approval,
transactional or other waiver, provisional or similar Governmental Approval
which is sufficient to allow the consummation of the transactions contemplated
by this Agreement, the “Required Governmental
Approvals”); (ii) each of the applicable Sellers shall cause to
be filed with the applicable Governmental Entity any other filings,
registrations, notifications or other documents necessary or advisable to be
submitted by such Seller or its Affiliates or Representatives in order to
obtain any other Seller Governmental Approvals (the reasonably incurred cost
and expense of which, in the case of all such filings, registrations,
notifications or other documents to the extent necessary or advisable to be
submitted by any of the Companies or their Subsidiaries, shall, subject to the
prior approval of Purchasers, not to be unreasonably withheld or delayed, be
paid by Purchasers, and shall otherwise be paid by the applicable Sellers; and (iii) each
of the applicable Purchasers, at its sole cost and expense, shall cause to be
filed with the applicable Governmental Entity any other filings, registrations,
notifications or other documents necessary or advisable to be submitted by such
Purchaser or its Affiliates or Representatives in order to obtain any other
Purchaser Governmental Approvals.


 


(b)           Sellers and Purchasers shall, and
shall cause their respective Affiliates and Representatives to, as promptly as
reasonably practicable, comply with any request for additional information or documents
pursuant to any applicable antitrust or competition Law or in connection with
the Required Governmental Approvals or any other Seller Governmental Approvals
(in the case of Sellers) or Purchaser Governmental Approvals (in the case of
Purchasers).  SGC shall inform Sportech,
and Sportech shall inform SGC, promptly of any information or documents 


 


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submitted or communication made by or on behalf of
such party to (including, to the extent practicable or permitted under Law,
permitting such other party to review such information, documents or
communication in advance), or received from, the applicable Governmental Entity
in connection with obtaining such Governmental Approvals (including under any antitrust
or competition Law outside of the U.S.), and each party shall furnish to the
other party such information and assistance as such other party may reasonably
request in connection with its preparation of any filing, submission or other
act that is necessary or advisable to obtain such Governmental Approvals
(including under any antitrust or competition Law outside of the U.S.).  None of Sellers or Purchasers shall, to the
extent practicable, agree to participate in any meeting, whether in person or
telephonically, with any Governmental Entity in respect of any such filings,
investigation or other inquiries unless it consults with the other party (SGC,
in the case of Sellers, and Sportech, in the case of the Purchasers) in advance
and, to the extent practicable and as permitted by such Governmental Entity,
gives the other party (SGC, in the case of Sellers, and Sportech, in the case
of the Purchasers) the opportunity to attend and participate thereat.


 


(c)           Without limiting the foregoing,
Sportech shall use, and shall cause each of its Affiliates (and its and their
Representatives) to use, as promptly as reasonably practicable, its
commercially reasonable best efforts to obtain all necessary approvals,
clearances, authorizations, consents and waivers under any applicable antitrust
or competition Law.  For the avoidance of
doubt, such commercially reasonable best efforts shall include (i) defending
any Action (including seeking to prevent or rescind any Governmental Order)
challenging, or seeking to prevent, delay or restrict, this Agreement or the
consummation of the transactions contemplated hereby with respect to any
antitrust or competition Law and (ii) committing to and effecting, by
consent decree, hold separate orders or otherwise, with respect thereto the
sale or divestiture of assets or businesses (including assets or businesses to
be acquired pursuant to this Agreement) or the termination of relationships or
Contracts (including relationships or Contracts of the Business) so long as
such actions do not materially reduce the economic benefit to Purchasers of the
transactions contemplated by this Agreement. 
Purchasers shall, and shall cause their Affiliates and their respective
Representatives to, not take or cause to be taken any action that would reasonably
be expected to increase the likelihood that the transactions contemplated by
this Agreement will not be consummated or will be delayed, impaired or impeded
under antitrust or competition Law within or outside the U.S. or that would
increase the likelihood that any approvals, clearances, authorizations,
consents and waivers under any antitrust or competition Law within or outside
of the U.S. would be delayed or not obtained, including as a result of entering
into any agreement with respect to, or effecting or consummating any
acquisition of, or joint venture, alliance or similar arrangement or other
transaction involving, another company that is engaged in a business similar to
any of the Companies or their Subsidiaries. 
The approval, clearance, authorization, consent or waiver of any
Governmental Entity permitting the transactions contemplated by this Agreement
under any antitrust or competition Law but subject to reasonable conditions,
requirements or limitations (such as divestitures, hold separate arrangements
and 


 


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limitations with respect to future actions by
Purchasers or their post-closing Affiliates) shall not be deemed a failure to
satisfy any of the conditions set forth in Article VI.


 


(d)           Without limiting the foregoing, and
excepting any approvals, clearances, authorizations, consents and waivers under
any applicable antitrust or competition Law, Sportech shall use, and shall
cause each of its Affiliates (and its and their Representatives) to use, as
promptly as reasonably practicable, its commercially reasonable best efforts to
obtain the Required Governmental Approvals and any other Purchaser Governmental
Approvals, including taking all reasonable action necessary to comply promptly
with requirements of Law that may be imposed on it or any of its Affiliates
with respect to the Closing.  For the
avoidance of doubt, such commercially reasonable best efforts with respect to
obtaining the Required Governmental Approvals shall include (i) demonstrating
financial capability and responsibility, including (x) the provision of
commercially reasonable indemnities, performance or other guaranties,
keepwells, and other similar arrangements and (y) the provision of
commercially reasonable performance or surety bonds, letters of credit or
similar assurance, security or credit support from third parties (it being
agreed and understood that provision of those that do not exceed in order of
magnitude those previously or currently provided by or on behalf of any of the
Companies or their Subsidiaries (or any of Sellers or their other Affiliates in
connection with the Business) and disclosed to the Purchasers in Section 5.8
of the Seller Disclosure Schedule, taken together with those that do not
exceed a combined additional face value of $2,250,000.00 (with respect to which
no more than $337,500.00 shall be required to be provided as cash collateral)
shall be considered commercially reasonable for these purposes); (ii) entering
into commercially reasonable agreements or acknowledgements with respect to
suitability requirements, performance and operational requirements or
standards, compliance with Laws, or similar matters, (it being agreed and
understood that any such agreements or acknowledgments that are not materially
more onerous than those provided by or on behalf of any of the Companies or
their Subsidiaries (or any of Sellers or their Affiliates in connection with
the Business) and either disclosed to Purchasers in Section 5.8 of the Seller
Disclosure Schedule or not material in impact or cost shall be considered
commercially reasonable for this purpose and (iii) using reasonable best
efforts to defend any Action (including seeking to prevent or rescind any
Governmental Order) challenging or seeking to prevent, delay or restrict, this
Agreement or the consummation of the transactions contemplated hereby.  The approval, clearance, authorization,
consent or waiver of any Governmental Entity in respect of any Required Governmental
Approval or other Governmental Approval permitting the transactions
contemplated by this Agreement but subject to reasonable conditions,
requirements or limitations (such as those referred to in clauses (i), (ii) and
(iii) above) shall not be deemed a failure to satisfy any of the conditions
set forth in Article VI.


 


(e)           If the Required Governmental Approval
listed at Section 5.5(a)(B)(4) above (the “Maine
Approval”) remains outstanding for a period of ten (10) calendar
days after the date upon which all other Required Governmental Approvals have
been obtained, Sportech may send to SGC a notice (the “Maine Notice”),
upon receipt of which SGC and Sportech shall negotiate in good faith, and 


 


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implement, arrangements to exclude the part of the
Business that is conducted in Maine (and for which the Maine Approval is
required to be received) from the transactions contemplated by this Agreement,
such arrangements to be implemented by a date no later than ten (10) calendar
days from the date of receipt of the Maine Notice, and as a result of the
exclusion of such business the Purchase Price shall be reduced by a percentage
of the Purchase Price equal to the percentage of the total EBITDA for the
Companies and the Subsidiaries for the year ended December 31, 2008
attributable to such excluded business. 
At any time after the date falling thirty (30) calendar days after the
date upon which all other Required Governmental Approvals other than the Maine
Approval have been obtained, SGC may send to Sportech a Maine Notice, upon
receipt of which Sportech and SGC shall negotiate in good faith, and implement,
arrangements to exclude the part of the Business that is conducted in Maine
(and for which the Maine Approval is required to be received) from the transactions
contemplated by this Agreement, such arrangements to be implemented by a date
no later than ten (10) calendar days from the date of receipt of the Maine
Notice, and as a result of the exclusion of such business the Purchase Price
shall be reduced by a percentage of the Purchase Price equal to the percentage
of the total EBITDA for the Companies and the Subsidiaries for the year ended December 31,
2008 attributable to such excluded business. 
To the extent (if any) such exclusion may be prohibited by applicable
Law, the parties shall instead use their commercially reasonable best efforts
in good faith to implement such alternative arrangements as may, with
substantially the same economic effect, permit the Closing to proceed as
promptly as possible in compliance with Law.


 


(f)            Sportech, on the one hand, and SGC,
on the other hand, shall cooperate (or cause their Affiliates to cooperate)
with one another in determining whether any action by or in respect of, or
filing with, any Governmental Entity is required or reasonably appropriate in
connection with the consummation of the transactions contemplated by this
Agreement.  Subject to the terms and
conditions of this Agreement and the Confidentiality Agreement, in taking such
actions or making any such filings, the parties shall furnish (or cause their
Affiliates to furnish) such information as may be required in connection
therewith and timely seek to obtain any such actions, consents, approvals or
waivers, subject in each case to the other provisions of this Section 5.5.


 


(g)           Prior to the Closing, SGC shall, and
shall cause its Affiliates (including the Companies or their Subsidiaries) to,
as promptly as reasonably practicable, provide any Governmental Entity with
such information, cooperation and/or attendance and shall participate in such
meetings, as any Governmental Entity may reasonably require, to facilitate the
obtaining of any Required Governmental Approval or any other Governmental
Approval in connection with the transactions contemplated by this Agreement.  Before participation in such meeting, SGC
shall, to the extent practicable and as permitted by such Government Entity,
consult with Sportech in advance, and to the extent practicable and as
permitted by such Government Entity shall give Sportech the opportunity to
attend and participate thereat.


 


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Section 5.6            Insurance.  Sellers shall (i) use
reasonable best efforts to keep, or cause to be kept, all insurance coverage
for the Companies, their Subsidiaries and the Business (or replacement coverage
on substantially comparable terms) in full force and effect through to the
Closing Date; (ii) where prior to the Closing Date any claim or notice of
claim which is attributable to or resulting from the operation of the Business
or attributable to the Companies and their Subsidiaries has been made under any
Global Policy, including the claims set forth in Section 3.15(b) of
the Seller Disclosure Schedule, (any such claim or notice of claim being
a “Pre-Closing Claim”) and the cessation
at Closing of insurance coverage relating to the operation of the Business or
the Companies and their Subsidiaries under any Global Policy would result in
any such Pre-Closing Claim being unable to be effectively prosecuted pursuant
to the terms of such insurance coverage, use reasonable best efforts to keep,
or cause to be kept, such insurance coverage for the Companies, their
Subsidiaries and the Business in full force and effect until all such
Pre-Closing Claims have been finally determined and, in connection therewith,
shall be responsible for any amounts payable to the insurer under such policies
with respect to such insurance coverage; and (iii) keep, or cause to be
kept, in full force and effect indefinitely such insurance coverage under any
Global Policy to the extent it relates to the operation of the Business or the
Companies and their Subsidiaries before Closing and under which claims are made
on a “losses occurring” basis (any claims thereunder with respect to the operation
of the Business or the Companies and their Subsidiaries before Closing, whether
such claims are made before or after Closing, being “Losses
Occurring Claims”) (the policies described at Sections 5.6(ii) and
(iii) above shall be the “Surviving Policies”).  Purchasers acknowledge and agree, on behalf
of themselves and their Subsidiaries (including after the Closing the Companies
and their Subsidiaries), that other than pursuant to Primary Policies and
Surviving Policies no claims may be brought under the Insurance Policies by any
of the Companies or their Subsidiaries from and after the Closing.  The Companies and their Subsidiaries
shall from and after Closing continue to have coverage under the
Primary Policies in accordance with their terms.  Sellers shall use commercially reasonable
best efforts to procure that the Companies and their Subsidiaries are able to
continue to exercise their rights as insureds under the Surviving Policies
following Closing with respect to any Pre-Closing Claim or Losses Occurring
Claim.  SGC shall remit to Sportech or to
such Person as Sportech may reasonably direct (A) any proceeds received by
Sellers or their Affiliates (other than the Companies and their Subsidiaries)
from the applicable insurer under such Surviving Policies with respect to any
Pre-Closing Claims or any Losses Occurring Claims; and (B) to the extent
not covered or only partially covered by the receipt of proceeds pursuant to Section 5.6(A) above
or otherwise from any such proceeds received directly by the Companies or their
Subsidiaries, the amount of any deductible, co-payment or insurance cost
incurred or applicable with respect to such claim, but only, in the case of a
Losses Occurring Claim, to the extent such claim relates to circumstances or
incidents described on the Incidents Schedule. 
SGC’s payment obligation pursuant to Section 5.6(A) and 5.6(B) above
is required only to the extent that Purchasers and their Subsidiaries
(including after the Closing the Companies and their Subsidiaries) have made
payment with respect to any Pre-Closing Claim or Losses Occurring Claim, or,
without expanding SGC’s liability under Sections 5.6(A) and 5.6(B), the
subject matter thereof.  To the extent
that Sellers or their Affiliates have


 


89
















 


paid any deductible,
co-payment or insurance cost incurred or applicable with respect to a Losses
Occurring Claim which is neither a Pre-Closing Claim nor is a claim which
relates to circumstances or incidents described on the Incidents Schedule,
Sportech shall remit such amount to Sellers.   Prior to
Closing Sellers shall, in good faith, make reasonable enquiries of its
employees, officers and directors and the employees, officers and directors of
the Companies and their Subsidiaries in order to indentify any circumstances or
incidents which would reasonably be expected to give rise to a Losses Occurring
Claim and shall provide, at Closing, a schedule describing such circumstances
or incidents, as of Closing, to Purchasers (such schedule, the “Incidents Schedule”).


 


Section 5.7                                   Indebtedness;
Termination of Agreements.


 


(a)                                  At or prior to the Closing, Sellers shall
repay in full (or cause to be extinguished or no longer outstanding) (or to the
extent such Indebtedness consists of a Guarantee (to the extent, for the
avoidance of doubt, such Guarantees constitute Indebtedness as defined herein),
release or otherwise terminate or cause to be released or otherwise terminated
such Guarantee), the principal of, interest on and all other amounts owed with
respect to any Indebtedness incurred prior to the Closing such that no such
Indebtedness remains outstanding immediately prior to the Closing. SGC shall
deliver to Sportech, at or prior to the Closing, evidence of the payment in
full and discharge of all such Indebtedness (or, to the extent such
Indebtedness consists of a Guarantee (to the extent, for the avoidance of
doubt, such Guarantees constitute Indebtedness as defined herein), evidence of
the release or termination of such Guarantee) and release of any Encumbrances
on the Interests, assets or property of the Companies and their Subsidiaries
arising under such Indebtedness or in respect of any indebtedness of any other
Person secured by the Interests, assets or property of any Company or
Subsidiary, in form and substance reasonably satisfactory to Sportech.  In connection with any such repayment and
discharge, Sellers shall, for the benefit of Purchasers, irrevocably and
permanently waive any right of reimbursement, contribution, subrogation whether
arising under contract, statute or applicable law in respect of any such
repayment, in each case in a writing in form and substance reasonably
satisfactory to Sportech.


 


(b)                                 As of the Closing, except for (i) the
Ancillary Agreements; and (ii) the Contracts set forth in Section 5.7(b) of
the Seller Disclosure Schedule, all Contracts between any of the
Companies or their Subsidiaries, on the one hand, and any of Sellers or their
Affiliates (other than any of the Companies or their Subsidiaries), on the
other hand (the “Terminating Contracts”), shall be
terminated as between them and shall be without any further force and effect,
and there shall be no further obligations or liabilities of any of the relevant
parties thereunder.  Purchasers and
Sellers agree to take and to cause their respective Affiliates to take any
action following the Closing that would be required to give effect to the
termination of the Terminating Contracts.


 


(c)                                  Except as set forth in Section 5.7(c) of
the Seller Disclosure Schedule, all inter-company accounts, whether
payables or receivables, between any of Sellers and their Affiliates (other
than any of the Companies and their 


 


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Subsidiaries), on the one hand, and any of the
Companies and their Subsidiaries, on the other hand, as of the Closing shall be
settled in full in the manner contemplated by Exhibit I or
otherwise in a manner reasonably satisfactory to Purchasers at or prior to the
Closing.  SGC shall deliver to Sportech,
at or prior to Closing, evidence of settlement in full of the inter-company
accounts in accordance with this Section 5.7(c).


 


Section 5.8                                   Release
of Letters of Credit and Guarantees.


 


(a)                                  Prior to the Closing, Purchasers shall
obtain a substitute letter of credit to replace in all respects each Relevant
Letter of Credit and Purchasers, subject to such cooperation from Sellers as
the Purchasers may reasonably require, shall use their reasonable best efforts
to obtain from the beneficiary of such Relevant Letter of Credit and deliver to
Sellers a full and unconditional release of all of the obligations of Sellers
and their applicable Affiliates with respect to such Relevant Letter of Credit
(which release shall be reasonably acceptable to SGC).  Neither Sellers nor Purchasers shall be
required to pay any consideration or offer or grant any financial accommodation
to obtain any such release.  In the event
Purchasers have not, as of the Closing, obtained substitute letters of credit
to replace in all respects the Relevant Letters of Credit and obtained and
delivered releases with respect thereto in accordance with the preceding
sentence, Purchasers shall use reasonable best efforts to do so following the
Closing and shall (i) obtain and deliver to the applicable Seller at the
Closing one or more letters of credit in favor of such Sellers with an
aggregate initial face amount equal to the aggregate amount as may be necessary
to secure the undrawn face amount of such continuing Relevant Letter(s) of
Credit, and otherwise on terms and conditions and from financial institutions,
which in each case are reasonably satisfactory to such Sellers (Sellers and
Purchasers acknowledging and agreeing that Lloyds Banking Group plc is a
financial institution acceptable to Sellers in this regard); and (ii) following
the Closing not permit any of the Companies or their Subsidiaries or their
Affiliates to (A) renew or extend the term of; (B) increase the
obligations under; or (C) transfer to another third party, any loan,
lease, Contract or other obligation for which any of Sellers or their
Affiliates is or would reasonably be expected to be liable under any Letter(s) of
Credit.


 


(b)                                 Prior to the Closing, Purchasers shall,
subject to such cooperation from Sellers as the Purchasers may reasonably
require, use their reasonable best efforts to (i) either (A) obtain a
substitute guaranty or similar instrument to replace in all respects each
Relevant Seller Guarantee or (B) fully assume all obligations under each
such Relevant Seller Guarantee and (ii) subject to such cooperation,
Purchasers shall use reasonable best efforts to obtain from the creditor or
beneficiary of each such Relevant Seller Guarantee and deliver to the
applicable Seller a full and unconditional release of all of the obligations of
such Seller and its applicable Affiliates under each such Relevant Seller
Guarantee (which release shall be reasonably acceptable to such Seller).  In the event Purchasers have not, as of the
Closing, obtained substitute guarantees or similar instruments to replace in
all respects any Relevant Seller Guarantee, or assumed all obligations
thereunder, and obtained and delivered releases with respect thereto in
accordance with the preceding sentence, Purchasers shall use their reasonable
best efforts to do so following the Closing and shall (1) indemnify and
hold 


 


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harmless Sellers and their Affiliates from and against
any and all Losses incurred by any of them arising out of or relating to any
such Relevant Seller Guarantees; and (2) not permit any of the Companies
or their Subsidiaries or their Affiliates to (x) renew or extend the term
of; (y) increase the obligations under; or (z) transfer to another
third party, any loan, lease, Contract or other obligation for which any of
Sellers or their Affiliates is or would reasonably be expected to be liable
under any Seller Guarantee(s).  To the
extent that any of Sellers or their Affiliates has performance obligations
under any such Relevant Seller Guarantee, Purchasers shall use their reasonable
commercial efforts to (I) perform such obligations on behalf of such
Seller or Affiliate; or (II) otherwise take such action as reasonably
requested by such Seller so as to put such Seller or such Affiliate in the same
position as if Purchasers, and not such Seller or Affiliate, had performed or
was performing such obligations.


 


(c)                                  Prior to the Closing, SGC shall, subject
to such cooperation from Purchasers as SGC may reasonably require,  use its reasonable best efforts to (i) either
(A) obtain a substitute guaranty or similar instrument to replace in all
respects any Company Guarantee listed in Section 5.8(c) of the Seller
Disclosure Schedule; or (B) fully assume all obligations under any
such Company Guarantee; and (ii) subject to such cooperation, SGC shall
use reasonable best efforts to obtain from the creditor or beneficiary of any
such Company Guarantee and deliver to Purchasers or the applicable Company or
Subsidiary thereof a full and unconditional release of all of the obligations
of such Company or Subsidiary and its applicable Affiliates under any such
Company Guarantee (which release shall be reasonably acceptable to
Purchasers).  In the event SGC has not,
as of the Closing, obtained substitute guarantees or similar instruments to
replace in all respects any Company Guarantees listed in Section 5.8(c) of
the Seller Disclosure Schedule (or any other Company Guarantee
identified to SGC in writing following the date hereof whether before or after
Closing), or assumed all obligations thereunder, and obtained and delivered
releases with respect thereto in accordance with the preceding sentence, SGC
shall use its reasonable best efforts to do so following the Closing and shall (1) indemnify
and hold harmless each of Purchasers and their Affiliates (including the
Companies and their Subsidiaries) from and against any and all Losses incurred
by any of Purchasers or such Affiliates arising out of or relating to any such
Company Guarantee(s); and (2) not permit any of Sellers or their Affiliates
to (x) renew or extend the term of; (y) increase the obligations
under; or (z) transfer to another third party, any loan, lease, Contract
or other obligation for which any of the Companies and their Subsidiaries is or
would reasonably be expected to be liable under such Company Guarantee(s).  To the extent that any of the Companies or
their Subsidiaries has performance obligations under any such Company
Guarantee, SGC shall use its reasonable best efforts to (I) perform such
obligations on behalf of such Company or Subsidiary; or (II) otherwise
take such action as reasonably requested by Purchasers so as to put such
Company or such Subsidiary in the same position as if SGC, and not such Company
or Subsidiary, had performed or was performing such obligations.


 


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Section 5.9                                   Support
Services; Names.


 


(a)                                  Sportech acknowledges that the Companies
or their Subsidiaries currently receive (or have received in the past) from
Sellers or their Affiliates certain corporate and other services and support,
including manufacturing, purchasing, repair and engineering, warehousing and
depot services, paper supply, general and administrative services, audit and
accounting services, legal and compliance services (including with respect to
licensing), security services (including screening, suitability reviews and
background checks), government and public relations services, human resources
services, travel-related services, tax services, marketing services, finance and
audit services, cash management and treasury services, insurance administration
and related services, payroll services, employee benefits (including 401(k) plan)
and related services, recruiting, information technology and related services
and support (including MIS infrastructure, financial systems, phone and
communications systems) and facilities-related support (collectively, the “Support Services”). 
Sportech acknowledges that, except as expressly provided in the
Ancillary Agreements, the Support Services shall cease as of the Closing, and
all agreements and arrangements in respect thereof shall terminate as of the
Closing, with no further obligation of any party thereto, except to the extent
as may be specifically provided under the Transition Services Agreement.


 


(b)                                 No later than ten (10) days
following the Closing Date, Sportech shall cause each of the Companies and
their Subsidiaries to change their names and cause the certificate of
incorporation (or other Governing Documents), as applicable, to be amended to
remove any reference to “Scientific Games”, “SG” or any confusingly similar
mark.  Following the Closing Date,
Purchasers shall cause the Companies and their Subsidiaries (i) to, as
soon as practicable following the Closing, but in no event later than six (6) months
following the Closing Date, cease to make any use of (A) any Trademarks
that include the terms “Scientific Games” or any other registered Trademark
(other than “Autotote” and any other Company Marks) used exclusively by any of
Sellers or their Affiliates at the Closing Date; or (B) any Trademarks
(other than “Autotote” and any other Company Marks) confusingly similar thereto
(such Trademarks referred to in Section 5.9(b)(A) and (B) above,
and all goodwill associated with any of the foregoing, collectively, the “Seller Marks”) except in each case with respect to Paper
Supplies (as defined in the Supply Agreement); (ii) not to initiate any
new advertising, promotions or campaigns incorporating the Seller Marks; (iii) to,
as soon as reasonably practicable following the Closing, but in no event later
than twenty (20) days following the Closing Date, cease to use any existing
stationary containing any Seller Mark; and (iv) except: (A) to the
extent (if any) suggested merely through the use of the Seller Marks as
contemplated by Section 5.9(b)(i) or (iii); or (B) as part of a
preexisting and ongoing advertising, promotion or campaign (which activities
shall be terminated or changed to avoid such use as soon as reasonably
practicable), to cease to hold themselves out as having any affiliation with
any of Sellers or their Affiliates. Any use by any Purchaser or its Affiliates
(including the Companies and their Subsidiaries) of any of the Seller Marks as
permitted in this Section 5.9(b) is subject to compliance with any
reasonable quality control requirements and guidelines that may be provided by
SGC to Purchasers on or prior to the Closing Date.  Sportech shall not, and shall cause its
Affiliates (including the Companies and their Subsidiaries) not to, use the
Seller Marks in 


 


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a manner that could reasonably be taken to reflect
negatively on such name and marks or on any of Sellers or their
Affiliates.  Sportech shall indemnify and
hold harmless each of Sellers and their Affiliates from and against any Losses
arising from, relating to or otherwise in respect of any use by the Companies
and their Subsidiaries of the Seller Marks after Closing outside the provisions
of this Section 5.9(b).


 


(c)                                  Following the Closing Date, Sellers
shall, and shall cause their Affiliates (i) to, as soon as practicable
following the Closing, but in no event later than six (6) months following
the Closing Date, cease to make any use of any Company Marks or any confusingly
similar mark; and (ii) immediately after the Closing, except to the extent
(if any) suggested merely through use of the Company Marks as contemplated by
this Section 5.9(c), cease to hold themselves out as having any
affiliation with any of the Companies and their Subsidiaries.  Any use by Sellers or their Affiliates of any
of the Company Marks as permitted in this Section 5.9(c) is subject
to compliance with any quality control requirements and guidelines that may be
provided to SGC by Purchasers on or prior to the Closing Date.  Sellers shall not, and shall cause their
Affiliates not to, use the Company Marks in a manner that reflects negatively
on such name and marks or on any of the Companies or their Subsidiaries.  Sellers shall indemnify and hold harmless
each of Sportech and its Affiliates (including the Companies and their
Subsidiaries) from and against any Losses arising from, relating to or
otherwise in respect of any use following the Closing by Sellers or any of
their Affiliates (other than the Companies and their Subsidiaries) of the
Company Marks outside the provisions of Section 5.9(c).  Sportech hereby acknowledges that all right,
title and interest in and to the Seller Marks and any and all goodwill
associated therewith, including registrations and applications for registration
thereof, are owned exclusively by Sellers or their Affiliates (other than the
Companies and their Subsidiaries), and that, except as provided in this Section 5.9
or in any license terms agreed between Sportech (or any Person which is an
Affiliate of Sportech after Closing) and SGC (or any Person which is an
Affiliates of SGC after Closing), all right, title and interest of the
Companies and their Subsidiaries, if any, in or to the Seller Marks shall
terminate as of the Closing Date, and shall immediately revert back to Sellers
and their Affiliates.  Sellers hereby
acknowledge that from and after the Closing, all right, title and interest in
and to the Company Marks and any and all goodwill associated therewith,
including registrations and applications for registration thereof, shall be
owned exclusively by Sportech, the Companies or their Subsidiaries, and that
except as provided in this Section 5.9 or in any license terms agreed as
provided in the preceding sentence, all right, title and interest of Sellers
and their Affiliates (other than the Companies and their Subsidiaries), if any,
in or to the Company Marks shall terminate as of the Closing Date, and shall
immediately revert to the Companies and their Subsidiaries.


 


Section 5.10                            Tax
Matters.


 


(a)                                  SGC shall prepare and file or cause to be
prepared and filed all Tax Returns required to be filed by any of the Companies
or their Subsidiaries with respect to any Pre-Closing Tax Period and any
Straddle Period Tax Returns for which a consolidated, unitary or combined Tax
Return is required to be filed 


 


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on a basis consistent with the Companies’ and their
Subsidiaries’ past methods and practices. 
SGC agrees to pay and shall pay or cause to be paid all Taxes of the
Companies and their Subsidiaries with respect to Pre-Closing Tax Periods,
except to the extent such Taxes are specifically taken into account as an
accrued tax liability in the Final Net Working Capital.


 


(b)                                 Purchasers shall prepare and file or
cause to be prepared and filed all other Tax Returns required to be filed by
any of the Companies or their Subsidiaries. 
Purchasers agree to pay and shall pay or cause to be paid all Taxes of
the Companies and their Subsidiaries with respect to all Post-Closing Tax
Periods, as well as all Taxes specifically taken into account as an accrued tax
liability in the Final Net Working Capital.


 


(c)                                  SGC shall provide or cause to be provided
to Purchasers a complete copy of each such Tax Return described in Section 5.10(a) at
least 30 days before the date when the return is due, and SGC shall modify or
cause to be modified such returns to reasonably take into account Purchasers’
reasonable comments provided no later than ten days before their due
dates.  None of SGC, the Companies or any
of their Subsidiaries shall file any such Tax Return without reasonably taking
into account such comments.  All Straddle
Period Tax Returns prepared by Purchasers pursuant to Section 5.10(b) shall
be subject to the review of SGC, pursuant to the same procedures applicable to
the Tax Returns prepared by SGC as provided above.


 


(d)                                 In the case of any Taxes of any of the
Companies or their Subsidiaries that are payable with respect to Straddle
Periods, the portion of any such Taxes that are attributable to the portion of
the Straddle Period that ends on the Closing Date shall (i) in the case of
Taxes that are based upon or related to income or receipts or imposed on a
transactional basis, be deemed equal to the amount that would be payable if the
Tax year or period ended on the Closing Date; and (ii) in the case of
other Taxes, be allocated pro rata per
day between the portion of such Straddle Period included in the Pre-Closing Tax
Period and remainder of such Straddle Period.


 


(e)                                  SGC and Purchasers agree that the
purchase of SGR Interests shall be treated as a purchase of the assets of SGR
for United States federal, state and local income tax purposes.  Purchasers shall prepare and deliver to SGC
the allocation of the Purchase Price allocable to such assets (as set forth in Section 2.1(b) of
the Seller Disclosure Schedule) (the “SGR
Interests Allocation Schedule”), but in no event later than 90 days
after the Closing Date.  SGC shall review
the SGR Interests Allocation Schedule and notify Purchasers of any disagreement
with the allocation within 30 days of receipt of the SGR Interests Allocation
Schedule from Purchasers.  SGC and
Purchasers agree to file IRS Form 8594 and all U.S. federal, state and
local Tax Returns in accordance with the SGR Interests Allocation Schedule. SGC
and Purchasers agree to provide the other promptly with any other information
required to complete the SGR Interests Allocation Schedule.  If, however, SGC and Purchasers are unable to
complete such schedule within 180 days following the Closing Date, or by such
other date as agreed by the parties, SGC and Purchasers may file IRS Form 8594
with respect to the purchase of the SGR Interests in the manner each believes
appropriate, provided such 


 


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allocation is reasonable and in accordance with Section 1060
of the Code and the Regulations thereunder.


 


(f)                                    Notwithstanding any other provision of
this Agreement, Sellers shall have the right to control the conduct of any
audit or administrative or judicial proceeding for which Sellers acknowledge
responsibility for any resulting liability with respect to all Pre-Closing Tax
Periods (other than a Straddle Period for which the Sellers would bear no
liability for matters under such audit or proceeding, and without limiting
Purchasers’ obligations under Section 5.10(b)); provided, however,
that Sellers shall not compromise or settle any such audit or proceeding
relating to a Pre-Closing Tax Period or a Straddle Period without obtaining
Purchasers’ prior written consent (which consent may not be unreasonably
withheld, conditioned or delayed) if it would reasonably be expected to have a
material adverse effect on Purchasers. 
Following the Closing, if a lien or levy is imposed on any of the
Companies or their Subsidiaries, any of their assets or any of their receipts
as a result of a disputed Tax for which SGC would be liable under this Section 5.10,
SGC will pay (or cause to be paid) the disputed Tax and seek a refund, or take
such other action as may be reasonably acceptable to Purchasers to prevent such
levy or lien from having a Companies Material Adverse Effect.  Following the Closing, if a lien or levy is
imposed on any of Sellers or their Affiliates (other than the Companies and
their Subsidiaries), any of their assets or any of their receipts as a result
of a disputed Tax for which Purchasers would be liable under this Section 5.10,
Purchasers will pay the disputed Tax and seek a refund, or take such other
action as may be reasonably acceptable to SGC to prevent such levy or lien from
having a material adverse effect on Sellers and their Affiliates (other than
the Companies and their Subsidiaries).


 


(g)                                 Purchasers and Sellers shall cooperate
fully, and shall cause their respective Representatives to cooperate, as and to
the extent reasonably requested by the other party, in connection with the
preparation and filing of Tax Returns and any audit, litigation or other
proceeding with respect to Taxes of any of the Companies or their
Subsidiaries.  Such cooperation shall
include the retention and (upon the other party’s request) the provision of
records and information reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder.  Purchasers and Sellers shall (i) retain
all books and records with respect to Tax matters pertinent to the Companies or
their Subsidiaries relating to any taxable period beginning before the Closing
Date until expiration of the period for assessment and collection of tax of the
respective taxable periods; (ii) allow access to such books and records at
mutually convenient times and dates and, at each party’s own expense, to review
and to copy such returns, records and information; and (iii) give the
other party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so requests,
shall allow the requesting party to take possession of such books and records.


 


(h)                                 Neither Purchasers nor any of their
Affiliates (including, after the Closing, the Companies and their Subsidiaries)
shall, without the 


 


96

















 


prior written consent of SGC or except as required by
Law, (i) make or change any Tax election affecting a Pre-Closing Tax
Period of any of Sellers or their Affiliates (including, before the Closing,
the Companies and their Subsidiaries); (ii) amend, refile or otherwise
modify (or grant an extension of any applicable statute of limitations with
respect to) any Tax Return prepared by any of Sellers or their Affiliates
(including, before the Closing, the Companies and their Subsidiaries) relating
to a Pre-Closing Tax Period; or (iii) take any action that results in any
increased Tax liability (including a reduction in a refund) or reduction of any
Tax asset of any of the Companies or their Subsidiaries (or any of Sellers or
their Affiliates) in respect of a Pre-Closing Tax Period or of SGC or its
Affiliates with respect to any taxable period.


 


(i)                                     If a refund of Taxes (to the extent not
taken into account in the Final Net Working Capital) (the “Refund”)
is received by or credited to the account of any of Purchasers, the Companies
or their Subsidiaries in respect of any Pre-Closing Tax Period (including the
allocable portion for any Straddle Period), Purchasers shall cause such
recipient to promptly pay the amount of the Refund to the applicable Seller
except to the extent that such refund or credit is attributable (determined on
a marginal basis) to the effect of any loss, deduction, credit or other item
from a Post-Closing Tax Period (or the allocable portion of any such item from
a Straddle Period).  Any other refund of
or credit for Taxes shall be for the account of Purchasers.  If any party or its Affiliates receives a Tax
refund or credit to which another party is entitled, such party shall or shall
cause its Affiliates to pay an amount equal to the refund or credit to the
party entitled to it within 30 Business Days after receiving the refund or
applying the credit against a Tax amount then due.  Any such payment with respect to a Tax refund
or credit shall be treated as an adjustment to the Purchase Price for Tax
purposes.


 


(j)                                     Purchasers shall indemnify Sellers
against and hold them harmless from: (i) Taxes imposed on the Companies or
their Subsidiaries with respect to a Post-Closing Tax Period; (ii) Taxes
allocated as provided in Section 5.10(d) to the portion of a Straddle
Period beginning after the Closing Date; and (iii) Taxes attributable to
any breach by Purchasers of their obligations under this Agreement.


 


(k)                                  Sellers shall indemnify Purchasers
against and hold them harmless from: (i) Taxes imposed on the Companies or
their Subsidiaries with respect to a Pre-Closing Tax Period; (ii) Taxes
allocated as provided in Section 5.10(d) to the portion of a Straddle
Period ending on the Closing Date; (iii) Taxes imposed on any members of
Sellers’ Tax Group (including under section 1.1502-6 of the Regulations); and (iv) Taxes
attributable to SGC’s breach of its obligations under this Agreement.


 


(l)                                     Any disputes regarding any matter covered
by this Section 5.10 that the parties cannot resolve shall be determined
by the Independent Accounting Firm.


 


(m)                               Sellers, Purchasers and their respective
Affiliates shall elect to treat the purchase and sale of AEI Shares as provided
in section 338(h)(10) of the Code (and shall elect to apply any similar
provision of state, local or foreign Tax Law). 
Purchasers shall prepare and file all forms and documents required to
effectuate 


 


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the section 338(h)(10) election.  At the
request of Purchasers, Sellers shall timely and properly prepare, execute, and
deliver to Purchasers, in complete and correct form, all such documents, forms
and other information as Purchasers may reasonably request to make the section
338(h)(10) election effective or to facilitate the allocation of the
purchase price by the Purchasers.  No later than ninety (90) days before
the section 338(h)(10) election is required to be filed, Purchasers shall
deliver (or shall cause to be delivered) to SGC IRS Form 8023 (or
successor form).  Sellers shall execute (or cause to be executed) and
deliver (or cause to be delivered) to Purchasers such form (including
additional documents or forms as are reasonably requested to properly complete
the section 338(h)(10) election) at least 30 days prior to the date such
election is required to be filed. 
Purchasers shall prepare and deliver to SGC the allocation of the
purchase price no later than ninety (90) days before such election is required
to be made.  SGC shall review the
purchase price allocation and notify Purchasers of any disagreement with the
allocation within thirty (30) days of receipt. 
All Tax Returns and reports (including IRS Form 8883), filed by
Purchasers, Sellers, and their respective Affiliates shall be prepared
consistently with the allocation schedule, unless otherwise required by Law.


 


(n)                                 Sellers and Purchasers shall share
equally all transfer, conveyance or similar Taxes applicable to the transfer of
the Interests.  Each party shall use
reasonable best efforts to claim any available exemption from such Taxes and to
cooperate with the other parties to obtain such exemption.


 


(o)                                 Sellers shall ensure that any Tax sharing
agreement, indemnity obligation or similar contract or arrangement between any
Company and their Subsidiaries and the Sellers or any Affiliate of the Sellers
terminates on or before the Closing Date.


 


(p)                                 All payments made under this Agreement
shall be made without deduction or withholding unless such deduction or
withholding is required by Law.  If such
deduction or withholding is required by Law, the amount of any payment due
(other than payment due pursuant to Section 2.7) shall be increased to an
amount which (after making such deduction or withholding) leaves an amount
equal to the payment which would have been due if no deduction or withholding
had been required.


 


Section 5.11                            Shareholder
Approval; Sportech Equity Offering; Disposal of Sportech Shares.


 


(a)                                  Sportech shall
as promptly as practicable prepare and file with the UKLA a circular to be sent
to Sportech’s shareholders in connection with the Sportech Shareholders Meeting
(as defined below) (the “Circular”)
containing (i) a notice convening the Sportech Shareholders Meeting; (ii) such
other information (if any) as may be required by the UKLA; and (iii) such
other information as Sportech shall reasonably determine to be necessary and
appropriate to include therein.  Sportech
shall indemnify and hold harmless each of the Sellers and their Affiliates from
and against any Loss suffered or incurred by the Sellers and their Affiliates
in respect of any Action by any Person against any of them to the extent
resulting from or attributable to any 


 


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inaccuracy in any
information contained in the Circular or Sportech’s failure to comply with
applicable Law in connection with the Sportech Shareholders Meeting (except in
each case to the extent resulting from or attributable to any inaccuracy in any
Seller Provided Information) (“Circular Liability”).


 


(b)                                 Sportech will
take all necessary action to convene a general meeting of holders of Sportech
ordinary shares (the “Sportech Shareholders
Meeting”) at which resolutions will be proposed to approve this
Agreement and the transactions contemplated hereby including the Sportech
Equity Offering and such other matters as may be necessary in relation thereto
(the “Sportech Voting Proposal”) as promptly
as practicable after the Circular is approved by the UKLA.  Subject to the requirements of Law, the
specific terms of this Agreement and to their general fiduciary duties, the
board of directors of Sportech shall recommend to its shareholders the approval
of this Agreement and the transactions contemplated hereby.  Sportech, in all events, shall take all
action necessary to ensure that the Sportech Voting Proposal is submitted to
shareholders at the Sportech Shareholders Meeting, that such Sportech
Shareholders Meeting is duly adjourned and reconvened if the requisite vote of
the shareholders of Sportech is not originally obtained.  Sportech shall use its commercially
reasonable best efforts to cause the Admission of the Sportech Shares upon or
as soon as practicable after the expected date therefor in the Circular.


 


(c)                                  The Circular
or other materials prepared by or on behalf of Purchaser or its Affiliates in
connection with the Sportech Shareholders Meeting and the Sportech Voting
Proposal which include any information provided by or on behalf of any of
Sellers or their Affiliates (including the Companies and their Subsidiaries)
shall, to the extent permitted by the UKLA, include a conspicuous disclaimer to
the effect that none of Sellers or their Affiliates (including the Companies
and their Subsidiaries) accepts any responsibility whatsoever for the content
of such Circular and disclaims any and all responsibility or liability which
they might otherwise have in respect of the Circular and shall further include
a disclaimer of the same nature with respect to Sellers or their Affiliates
(including the Companies and their Subsidiaries) in any oral disclosure with
respect to the Sportech Shareholders Meeting and the Sportech Voting
Proposal.  SGC shall be afforded a
reasonable opportunity to review and comment on any reference therein to SGC or
its Affiliates prior to their use.


 


(d)                                 Sportech shall
use its commercially reasonable best efforts to complete, on or before the
Closing Date, the Sportech Equity Offering, the net proceeds of which shall be
at least sufficient to fund the Cash Closing Consideration.  Sportech shall indemnify and hold harmless
each of the Sellers and their Affiliates from and against any Loss suffered or
incurred by the Sellers and their Affiliates in respect of any Action by any
Person against any of them to the extent resulting from or attributable to any inaccuracy
in any information contained in any disclosure by Sportech to investors in
connection with, or Sportech’s failure to comply with applicable Law in
connection with, the Sportech Equity Offering (except in each case to the
extent resulting from or attributable to any inaccuracy in any Seller Provided
Information) (“Equity Offering Liability”).


 


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(e)                                  All materials prepared by or on behalf of
Sportech or its Affiliates in connection with the Sportech Equity Offering
which include any information provided by or on behalf of any of Sellers or
their Affiliates (including the Companies and their Subsidiaries) shall, to the extent
permitted by the UKLA,  include a conspicuous disclaimer to the effect
that none of Sellers, their Affiliates (including the Companies and their
Subsidiaries) or their respective Representatives has any responsibility for
the content of such materials and disclaims all responsibility therefor.  SGC shall be afforded a reasonable
opportunity to review and comment on any reference therein to SGC or its
Affiliates prior to their use.


 


(f)                                    SGC and its Affiliates shall consult with
Sportech to the extent reasonable in the circumstances prior to disposing of
any Sportech Shares.  Except where such proposed disposal has resulted
from a breach by SGC or its Affiliates of Section 5.17(a) of this
Agreement, and except with respect to any proposed disposal to the extent it
constitutes an offer to the public, the board of directors and senior
management of Sportech shall reasonably cooperate with SGC, at SGC’s sole
expense, with a view to achieving an orderly and effective marketing of
such Sportech Shares, including providing reasonable assistance with marketing
efforts.


 


Section 5.12                            Employee
Matters.


 


(a)                                  After the date hereof and prior to
Closing, on terms reasonably satisfactory to Purchasers to the extent
materially different from those in effect on the date hereof, SGC shall cause
the Companies and their Subsidiaries to seek to continue to employ all
individuals who are Identified Employees on and with effect from no later than
the Closing (such individuals, to the extent employed by the Companies and
their Subsidiaries as of the Closing, collectively, the “Affected
Employees”).  Nothing in this Section 5.12(a) shall
constitute a guarantee of employment following the Closing.  If Purchasers terminate (or cause to be
terminated) any of the employees indentified as “finance employees” on Schedule
1.1(b) of the Seller Disclosure Schedule, Purchasers shall bear
responsibility for any associated termination Liabilities, except to the extent
that any Seller
(or an Affiliate of any Seller) hires any such individual within six (6) months
of such individual’s termination and within such six (6) month period
Purchasers have not relocated,
or announced plans to relocate, all or substantially all of the finance
function of the Companies and their Subsidiaries away from (or otherwise
discontinue such operations in) the Atlanta, Georgia metropolitan area,
in which case Sellers shall reimburse Purchasers for any such termination
Liabilities already paid or which Purchasers are required to pay in the future
(excluding any Liability for any “stay bonus” to which such individual may be
entitled to the extent agreed by Purchasers before or after Closing).  SGC shall transfer sponsorship of the
Autotote Systems, Inc. Pension Plan for Union Employees and the Scientific
Games Racing Union Plan to SGR as of Closing. 
For avoidance of doubt, the Autotote Systems, Inc. Pension Plan for
Union Employees and the Scientific Games Racing Union Plan shall each be a
Company Plan.  Purchasers shall, or shall
cause the Companies to, establish a comparable plan to the Scientific Games 401(k) Plan
(the “SGC 401(k) Plan”), effective on or
as soon as practicable after the Closing Date, for Affected Employees whose
active participation in 


 


100

















 


the SGC 401(k) Plan will end on the Closing Date
(the “New 401(k) Plan”).  There shall be no transfer of any portion of
the SGC 401(k) Plan to the New 401(k) Plan.  Furthermore, SGC shall ensure that the
Companies and their Subsidiaries cease as of the Closing to be participating
sponsors of the SGC 401(k) Plan and any other Plans sponsored by Sellers
or their Affiliates (other than the Companies and their Subsidiaries), and that
Sellers and their Affiliates (other than the Companies and their Subsidiaries)
cease to be participating sponsors of any Company Plans.


 


(b)                                 For a 12-month period following the
Closing (the “Restricted Period”), for so long
as any Affected Employee remains employed by a Purchaser or its Affiliates,
Purchasers shall not reduce, or permit to be reduced, any Affected Employee’s
base salary as in effect immediately prior to the Closing, and shall provide
incentive compensation (other than equity compensation) opportunities and
employee benefits to Affected Employees that are no less favorable in the
aggregate than those provided to such Affected Employees immediately prior to
the Closing; provided, however, that if Purchaser causes the
Affected Employees to incur any increased costs associated with insured welfare
arrangements, such increased costs shall not cause the arrangements to fail to
be comparable in the aggregate to the benefits provided immediately prior to
Closing. Furthermore, nothing in this Section 5.12 shall act as an
amendment to any employee benefit plan, program, or arrangement, affect a
Purchaser’s right to amend or terminate any employee benefit plan, program or
arrangement in accordance with the terms of such plan, program or arrangement
and applicable Law, require the Purchasers to maintain any particular plan,
program or arrangement or any type of plan, program or arrangement, or give any
third party the right to enforce the provisions of this Agreement.


 


(c)                                  Periods of employment with any of the
Companies or their Subsidiaries (including any current or former Affiliate or
predecessor thereof) shall be recognized for purposes of determining, as
applicable, the eligibility for participation and vesting of any employee,
under all employee benefit plans offered by any Purchaser or an Affiliate of
any Purchaser to the Affected Employees, including vacation plans or
arrangements, welfare plans, retirement savings plans and any entitlements upon
termination of employment pursuant to any employment Contract, severance plan
or as required by Law, as applicable.  Such
service shall not be taken into account for purposes of determining the level
of benefits to which a Person is entitled thereunder, except to the extent
required by Law.


 


(d)                                 Immediately after Closing a fully insured
medical plan sponsored by the Companies, their Subsidiaries, Purchasers or an
Affiliate of any Purchaser shall offer medical coverage to the Affected
Employees, and such medical plan shall grant credit for amounts paid by
participants under the Plans during the portion of the applicable plan year
preceding the Closing Date, and, with respect to any Affected Employee, shall
not exclude coverage for such Affected Employee’s pre-existing conditions to
the extent coverage was provided with respect to such Affected Employee’s
pre-existing conditions under the existing Plans.  SGC shall cooperate with Purchasers and use
reasonable best efforts to cause one or more of the Companies, as determined by



 


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Purchasers, to adopt a fully insured medical plan and
such other welfare benefit plans (including but not limited to workers’
compensation, short and long term disability, and life insurance) as determined
by Purchasers to be necessary and appropriate to satisfy the comparable benefit
requirement of Section 5.12(b), effective as of the Closing; provided,
however, that if Purchaser is unable to establish an insured medical plan for
employees of the Companies and their Subsidiaries (and their eligible
dependents) as of Closing, Sellers will permit the Affected Employees to
continue to participate in Sellers’ medical plan at the same cost (without
reduction for any government subsidy), and subject to the same election
restrictions, as if they had been entitled to elect COBRA continuation
coverage, until either the new insured coverage is in place or, if earlier, the
first anniversary of the Closing Date. 
Purchasers acknowledge and agree that, notwithstanding any provision of
this Section 5.12, Affected Employees (and their eligible dependents) are
not eligible for COBRA continuation coverage as a consequence of the
transactions contemplated by this Agreement.


 


(e)                                  Purchasers acknowledge and agree that the
Companies and their Subsidiaries (or, as applicable, Company Plans) shall be
solely responsible for all obligations and liabilities arising out of or
related to payment of benefits due under any Company Plan to Affected Employees
(including benefit payment liabilities attributable to periods prior to
Closing) or benefits due under any Company Plan.  The foregoing, however, shall not limit
Purchasers’ rights under Article VIII for breaches of representations,
warranties, covenants and agreements. 
Notwithstanding anything in this Agreement to the contrary, SGC shall
pay and be responsible for all workers’ compensation and disability benefit
claims of Affected Employees with dates of loss or occurrence on or prior to
Closing (including all costs and collateral and the payment and administration
of such claims), and shall reimburse Purchasers, the Companies and their
Subsidiaries and Affiliates for all Losses relating to or arising from SGC’s
failure to make such payments.


 


(f)                                    Sellers acknowledge and agree that
Sellers shall be responsible for and shall pay or cause to be paid to the
Affected Employees eligible under any Bonus Plan bonuses in respect of the 2009
calendar year in good faith in accordance with substantially the same
procedures and guidelines, and on the same basis, (subject to applicable
business unit targets and individual performance) and in substantially the same
manner in each case as is applied to employees of the Sellers and their
Affiliates other than the Companies and their Subsidiaries (each a “Seller Bonus” and collectively the “Seller
Bonuses”) and in accordance with their entitlements, if any; (B) Sellers
and their Affiliates (other than the Companies and their Subsidiaries) shall
pay and be solely responsible for all obligations and liabilities arising out
of or related to any compensation, bonus or benefit to Affected Employees due
under any Plan that is not a Company Plan, and further for all bonuses, if any,
due for the 2009 year (whether or not under a Company Plan) as provided in (A);
and (C) Sellers and their Affiliates (other than the Companies and their
Subsidiaries) shall be solely responsible for the acceleration, if any, of any
compensation, bonus or benefit provided to any Affected Employee pursuant to
any Plan that is not a Company Plan or which is accelerated or becomes due in
connection with the consummation of the transaction contemplated by this
Agreement, 


 


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whether or not under a Company Plan (an “Accelerated Right”). 
In the event that after the Closing Date the Companies or their
Subsidiaries are required to pay any Seller Bonus to any Affected Employee, or
pay any amount to any Affected Employee pursuant to an Accelerated Right,
Sellers shall reimburse the Companies or the Subsidiaries for the amount of any
payment made by Purchasers in respect of any such Seller Bonus or Accelerated
Right (and all costs, fees and expenses in respect thereto) by wire transfer of
immediately available funds to an account or accounts designated by the
relevant Company or Subsidiary.


 


(g)                                 All material data, plan documentation and
other relevant information in the possession of SGC and its Subsidiaries (other
than the Companies and their Subsidiaries) necessary for Purchasers and the
Companies and their Subsidiaries to discharge the obligations set forth in this
Section 5.12 and otherwise under the Company Plans shall be delivered to
Purchasers at least thirty (30) days prior to Closing, and supplemented as
reasonably appropriate thereafter.


 


(h)                                 On or
before November 30, 2010, SGC shall take action with respect to the German
Pension Liability as described in (i) or (ii) below:


 


(i)                                     SGC may, at its option, purchase or cause
to be purchased an annuity or other reasonably suitable insurance product
covering in full the German Pension Liability from a provider and in an amount
reasonably satisfactory to Sportech (the “German Pension Liability
Insurance Product”).  SGC
will, at its own expense, be responsible for obtaining any necessary approvals
for such purchase, subject to reasonable cooperation from Purchasers and their
Affiliates, including but not limited to the consent of Mr. Keldenich.  In the event that the German Pension
Liability Insurance Product is purchased by SGR Germany prior to Closing, SGR
Germany shall use its restricted cash balance held in respect of the German
Pension Liability (the “German Pension Cash”)
remaining at the time of the purchase of the German Pension Liability Insurance
Product to purchase the German Pension Liability Insurance Product, and to the
extent SGR Germany’s then remaining German Pension Cash is insufficient to
cover the cost of the German Pension Liability Insurance Product, SGR Germany
shall pay in cash the remaining amount of such cost prior to Closing.  In the event that the German Pension
Liability Insurance Product is purchased by a legal entity other than SGR
Germany prior to Closing, SGC shall transfer or cause to be transferred the
German Pension Liability Insurance Product to SGR Germany by Closing, at which
time SGR Germany shall transfer the then remaining German Pension Cash to SGC.  In the event that the German Pension
Liability Insurance Product is purchased following Closing, SGC shall either (A) purchase
or cause to be purchased, at SGC’s expense (including any reasonable third
party costs incurred by Purchasers and/or their Affiliates), the German Pension
Liability Insurance Product directly and transfer the German Pension Liability
Insurance Product to SGR Germany so that the German Pension Liability is
covered in full, at which time SGR Germany shall transfer the then remaining
German Pension Cash to SGC; or (B) cooperate, at SGC’s expense 


 


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(including any
reasonable third party costs incurred by Purchasers and/or their Affiliates),
with SGR Germany in order for SGR Germany to purchase the German Pension
Liability Insurance Product directly, and to the extent SGR Germany’s German
Pension Cash remaining at that time is insufficient to cover the cost of the
German Pension Liability Insurance Product, shall pay in cash the remaining
amount of such cost to SGR Germany.


 


(ii)                                  SGC may, in lieu of obtaining the German Pension Liability Insurance
Product as provided in (i) above, subject to reasonable cooperation from
Purchasers and their Affiliates, at SGC’s own expense (including
any reasonable third
party costs incurred by Purchasers and/or their Affiliates), take or cause to be taken any and
all necessary actions to procure that as of November 30, 2010 either (x) the
German Pension Liability has been transferred to SGG or another German Affiliate
of SGC by individual agreement in a way that ensures a full discharge of SGR
Germany and is accepted by the German statutory insolvency protection fund or (y) the
German Pension Liability has been transferred to SGG or another German
Affiliate of SGC by way of a spin-off
under the German Transformation Act in a way that ensures a full discharge of SGR Germany after the compulsory statutory period of
joint and severable debtorship has lapsed, and in the case of either (x) or
(y), SGR Germany’s existing German Pension Cash shall be transferred to SGG or
such other German Affiliate of SGC.  At
the expense of Sellers (including any reasonable third party costs incurred by
Purchasers and/or their Affiliates),
Purchasers shall ensure that after Closing any actions or steps required to be
taken by AE and/or SGR Germany in order to effect such transfer shall be taken
by AE and/or SGR Germany.


 


Purchasers shall not permit the German
Pension Cash to be distributed or applied for any purpose except in
satisfaction of the German Pension Liability or as otherwise provided in this Section 5.12(h),
including any reasonable
third party costs in connection with
the transfer of the German Pension Cash to SGC. 
Irrespective of Sellers’ compliance with their obligation to transfer
the German Pension Liability as provided in Section 5.12(h)(ii) above,
in the event that a German Pension Liability Insurance Product has not been
acquired in accordance with Section 5.12(h)(i) above, Sellers shall
indemnify and hold harmless Purchasers and SGR Germany from any Liability or reasonable third party costs to the extent resulting from or attributable
to the German Pension Liability and/or the actions provided in this Section 5.12(h).


 


Section 5.13                            Interim
Financial Statements.  From
the date hereof until the Closing (or earlier termination of this Agreement),
SGC shall deliver to Purchasers an unaudited consolidated balance sheet of the
Companies and their Subsidiaries as of the end of each calendar month, and the
related unaudited consolidated statement of operations of the Companies and
their Subsidiaries for the month then ended (in each case, in the form prepared
in the ordinary course), within thirty (30) days after the end of such month.


 


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Section 5.14                            Exclusivity.  From the date hereof until the Closing (or
earlier termination of this Agreement), Sellers shall not, and shall cause
their Affiliates not to, directly or indirectly, knowingly solicit, encourage,
negotiate, discuss (other than to state that they are not permitted to discuss)
or provide any assistance with any offers, inquiries or proposals from any
Person (other than Purchasers) relating to, or that could reasonably be
expected to lead to, any proposal or transaction involving, directly or
indirectly, the acquisition of all or any of the Companies and their
Subsidiaries, or the sale of any securities of, or acquisition of any record
ownership interest in, any of the Companies and their Subsidiaries, the sale of
all or substantially all of the assets of the Business of the Companies and
their Subsidiaries (including any transaction structured as a merger,
consolidation, business combination, share exchange, stock sale or other
similar transaction) (other than the transactions contemplated hereby).  From the date hereof until the Closing (or
earlier termination of this Agreement), except to the extent legally
prohibited, SGC will promptly notify Purchasers of all material terms of any
such inquiries or proposals received by Sellers or any of their Affiliates.


 


Section 5.15                            Non-Solicitation.  For a period of one (1) year from and
after the Closing Date, except as otherwise contemplated by this Agreement with
respect to Employees, neither Sellers or their Affiliates, on the one hand, or
Purchasers, the Companies and their Subsidiaries, on the other hand, will,
whether alone, jointly with another or directly or indirectly, seek to entice
away, solicit for employment, offer to employ or hire any person who is an
employee of the other as of the Closing Date; provided, however,
that the foregoing provision shall not preclude any such Person from (a) making
good faith generalized solicitations for employees (not targeted at employees
of the other party) through advertisements or search firms and hiring any
persons through such solicitations, provided, that such Person does not
encourage or advise or cause such firm to approach any such employee; or (b) responding
to or hiring any employee of the other who contacts such Person at his or her
own initiative without any prior direct or indirect encouragement or
solicitation (other than as permitted by Section 5.15(a)), (c) soliciting,
offering to employ or hiring any former employee of the other whose employment
has been terminated by the other prior to such solicitation, offer or hiring, or (d) in the case of
Sellers and their Affiliates, soliciting, offering to employ or hiring any
employee identified as a “finance employee” in Schedule 1.1(b) of the Seller Disclosure
Schedule in the event that, prior to such
solicitation, offer or hiring, Purchasers had determined to relocate the
finance function for SGR away from the Atlanta, Georgia metropolitan area.


 


Section 5.16                            Non-Competition.


 


(a)                                  From the Closing Date through the third
anniversary of the Closing Date, SGC shall not, and shall cause its
Subsidiaries (other than the Companies and their Subsidiaries) not to, directly
or indirectly, own, manage, operate or engage in any Tote Systems Business (an “SGR Competing Business”).


 


(b)                                 Notwithstanding
anything contained in this Agreement or the Ancillary Agreements to the
contrary, the restrictions set forth in 


 


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Section 5.16(a) shall
not in any way prohibit or restrict SGC or any of its Subsidiaries from,
directly or indirectly:


 


(i)                                     acquiring any
interest in any Person or business (however such acquisition is structured)
that, directly or indirectly (including without limitation, through any
Affiliate of such Person or business) owns, manages, operates, or engages in an
SGR Competing Business provided that (A) such business does not constitute
the principal business of such Person or business and its Affiliates, taken as
a whole (based on revenues during the preceding four (4) full calendar
quarters) and (B) if such SGR Competing Business constitutes in excess of
ten percent (10%) of such revenues of such Person or business and its
Affiliates, taken as a whole, SGC shall cause the divestiture of that portion
of such Person or business that engages in such SGR Competing Business within
12 months after such acquisition; or


 


(ii)                                  acquiring or
holding securities or other equity interests (A) representing not more
than five percent (5%) of the outstanding voting power of any Person which has
voting securities traded on a national securities exchange, the Nasdaq Stock
Market or the over-the-counter market, (B) in any Person through any
employee benefit plan or (C) in Sportech or any successor Person.


 


Notwithstanding anything to
the contrary in this Agreement or the Ancillary Agreements, the restrictions
set forth in this Section 5.16 shall not in any way prohibit or restrict
or otherwise apply to (i) any businesses or operations of SGC or any of
its Affiliates which are sold, transferred or otherwise disposed of after the
Closing to any Person that is not then an Affiliate of SGC from and after such
sale, transfer or disposal, or (ii) any Affiliates of SGC the capital
stock or equity interests representing a majority of the voting power of which
are sold, transferred or otherwise disposed of after the Closing to any Person
that is not then an Affiliate of SGC from and after such sale, transfer or
disposal.


 


(c)                                  Each of Sellers
acknowledges and agrees that the remedy at law for any breach, or threatened
breach, of any of the provisions of this Section 5.16 will be inadequate
and, accordingly, covenants and agrees that each other party shall, in addition
to any other rights and remedies which such party may have at law, be entitled
to equitable relief, including injunctive relief, and to the remedy of specific
performance with respect to any breach or threatened breach of this Section 5.16,
as may be available from any court of competent jurisdiction.  In the event that any of the covenants
contained in this Section 5.16 shall be determined by any court of
competent jurisdiction to be unenforceable for any reason whatsoever, then any
such provision or provisions shall not be deemed void, and the parties agree
that said limits may be modified by such court and that the covenants contained
in this Section 5.16 shall be amended in accordance with said
modification, it being specifically agreed by the parties that it is their
continuing desire that the covenants contained in this Section 5.16 be
enforced to the full extent of its terms and conditions, or if a court finds
the scope of any 


 


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of such covenants
unenforceable, the court should redefine such covenant so as to comply with
applicable Law.


 


Section 5.17                            Relevant
Business.


 


(a)                                  If, from the
Closing Date through the third anniversary of the Closing Date, SGC or any of
its Subsidiaries directly or indirectly owns, manages, operates or engages in
any Pools Business (other than, in the case of paragraph (ii) of the
definition of “Pools Business” to, for or on behalf of (x) any Person that
is a Lottery / Government Sponsored Entity or (y) any other Person
but only to the extent such other Person operates Pools games
for consumers in Germany, Israel, Norway, Hungary, Iceland,
Switzerland or Argentina following any liberalization of such market, and
only in respect of the operations of such Person therein) (a “Relevant Business”), Sportech may, by notice to SGC,
require SGC to (and to cause its Subsidiaries to) sell any Sportech Shares that
it holds, directly or indirectly, unless SGC shows to the reasonable
satisfaction of Sportech that within 30 days of notice thereof such ownership,
management, operation or engagement by SGC or any of its Subsidiaries in any
Pools Business has ceased (which sale shall be effected as promptly as
reasonably practicable consistent with an orderly and effective marketing of
such Sportech Shares).


 


(b)                                 Notwithstanding
anything contained in this Agreement or the Ancillary Agreements to the contrary,
the restrictions set forth in Section 5.17(a) shall not in any way
prohibit or restrict SGC or any of its Subsidiaries from, directly or
indirectly:


 


(i)                                     acquiring any
interest in any Person or business (however such acquisition is structured) that,
directly or indirectly owns, manages, operates, or engages in a Relevant
Business provided that (A) such business does not constitute the principal
business of such Person or business and its Affiliates, taken as a whole (based
on revenues during the preceding four (4) full calendar quarters) and (B) if
such Relevant Business constitutes in excess of ten percent (10%) of such
revenues of such Person or business and its Affiliates, taken as a whole, SGC
shall cause the divestiture of that portion of such Person or business that
engages in such Relevant Business within 12 months after such acquisition; or


 


(ii)                                  acquiring or
holding securities or other equity interests (A) representing not more
than five percent (5%) of the outstanding voting power of any Person which has
voting securities traded on a national securities exchange, the Nasdaq Stock
Market or the over-the-counter market, (B) in any Person through any
employee benefit plan or (C) in Sportech or any successor Person.


 


Notwithstanding anything to the
contrary in this Agreement or the Ancillary Agreements, the restrictions set
forth in this Section 5.17 shall not in any way prohibit or restrict or
otherwise apply to (i) any businesses or operations of SGC or any of its
Affiliates which are sold, transferred or otherwise disposed of after the
Closing to any Person that is not 


 


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then an Affiliate of SGC from
and after such sale, transfer or disposal, or (ii) any Affiliates of SGC
the capital stock or equity interests representing a majority of the voting
power of which are sold, transferred or otherwise disposed of after the Closing
to any Person that is not then an Affiliate of SGC from and after such sale,
transfer or disposal.


 


(c)                                  Each of Sellers acknowledges
and agrees that the remedy at law for any breach, or threatened breach, of any
of the provisions of this Section 5.17 will be inadequate and,
accordingly, covenants and agrees that each other party shall, in addition to
any other rights and remedies which such party may have at law, be entitled to
equitable relief, including injunctive relief, and to the remedy of specific
performance with respect to any breach or threatened breach of this Section 5.17,
as may be available from any court of competent jurisdiction.  In the event that any of the covenants
contained in this Section 5.17 shall be determined by any court of
competent jurisdiction to be unenforceable for any reason whatsoever, then any
such provision or provisions shall not be deemed void, and the parties agree
that said limits may be modified by such court and that the covenants contained
in this Section 5.17 shall be amended in accordance with said
modification, it being specifically agreed by the parties that it is their
continuing desire that the covenants contained in this Section 5.17 be
enforced to the full extent of its terms and conditions, or if a court finds
the scope of any of such covenants unenforceable, the court should redefine
such covenant so as to comply with applicable Law.


 


Section 5.18                            BM
Defect and CS Defect. Purchasers shall upon the reasonable request
of the Sellers reasonably cooperate with Sellers in the development and implementation of programs reasonably designed to mitigate the BM
Defect and CS Defect and/or alleged effects thereof including communications
with customers of SGR regarding such matters as the installation or operation
of terminals; provided, however that (i) such cooperation
shall not unreasonably interfere with the conduct of the business of Sportech
and its Affiliates (including the Companies and the Subsidiaries) including the
relationship between any of them and their customers; and (ii) with the
exception of a combined total of $25,000 of cost and expense for such programs,
which shall be for the account of Purchasers, the development and
implementation of any such program shall
be conducted at the sole cost and expense of the Sellers.


 


Section 5.19                            Transfer
of SG Racing.  Prior to
Closing, SGR shall, and SGC shall procure that SGR shall, transfer SGR’s
ownership of SG Racing from SGR to an Affiliate of SGC (excluding the Companies
and their Subsidiaries) so that at Closing SG Racing will not transfer to
Purchasers as a Subsidiary of SGR (the “SG Racing Transfer”).  Sellers shall afford Sportech a reasonable
opportunity to approve the documentation implementing the SG Racing Transfer (such approval not to be unreasonably
withheld).


 


Section 5.20                            Release of Employees.  Sellers acknowledge and agree that for so long as any
Affected Employee remains an employee of Sportech or any of its Subsidiaries
(including the Companies and their Subsidiaries) and whether or not such
Affected Employee has provided any release to Sellers, Sellers shall not, and
shall 


 


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procure that none of their Affiliates shall, enforce
any restrictive covenants or agreements relating to non-competition,
non-solicitation, use of Intellectual Property or use of confidential
information or any restrictions of similar effect in effect between such
Affected Employee and Sellers and any of their Affiliates, to the extent such
covenants or agreements would otherwise limit such Affected Employee’s
performance of his services as an employee of Sportech or any of its
Subsidiaries and to such extent such covenants or agreements shall not apply; provided
in each case that Sportech and its Affiliates (i) are in compliance with
the provisions of Section 5.3(b) of this Agreement, (ii) are in
compliance with Section 2 of the Supply Agreement, Section 2 of the
Software License Agreement, and any other provisions of the Ancillary
Agreements which by their terms limit the conduct of business by Sportech or
any of its Affiliates, whether by reference to the fields of use of licenses
granted to or by such persons, restrictive covenants, or otherwise, and (iii) have
not taken any action that would entitle SGC pursuant to Section 2(e) or
2(f) of the Investors’ Agreement to terminate its obligations under Section 1
of the Investors’ Agreement; provided further that in the event of such
non-compliance by Sportech or its Affiliates, without limiting the remedies
against Sportech or any of its Affiliates, SGC shall only enforce any such
covenant or agreement between such Affected Employee and Sellers or any of
their Affiliates, and any such covenant or agreement shall only apply, to the
extent of such non-compliance. Each Affected Employee shall be an express third
party beneficiary of this Section 5.20. 
To the extent that any Affected Employee provides a general release to
Sellers prior to Closing, SGC shall use its commercially reasonably efforts to
procure that such release shall include SGR and its Affiliates as express third
party beneficiaries.


 


Section 5.21    Credit Agreement. 
SGC shall use its best efforts to obtain any amendment of, or consent
under, the Credit Agreement as may be reasonably deemed necessary or
appropriate to unambiguously confirm that SGC (on behalf of Sellers) may
receive the consideration due to it pursuant to Article II hereof in
consideration for the purchase of the Interests and the Software Assets by
Purchasers without being in breach of the Credit Agreement (the “Credit Agreement Amendment”).  SGC shall keep Sportech reasonably
informed of the nature and content of any material discussions with its
banks with respect to the Credit Agreement Amendment, and shall afford Sportech
a reasonable opportunity to participate in discussions, from time to time, with
SGC personnel in attendance, with the Administrative Agent under the Credit
Agreement with respect to the status of the Credit Agreement Amendment,
provided that Sportech shall not in any way impair or impede the process for
obtaining such amendment (it being understood that the fact that such
discussions shall be held shall not of itself be considered as impairing or
impeding such process).  Notwithstanding
the foregoing, SGC’s obligations under this Section 5.21 shall cease from
and after such time, if any, as SGC irrevocably waives the condition set forth
in Section 6.3(g).


 


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ARTICLE VI.


 


CONDITIONS
OF CLOSING


 


Section 6.1                                   Conditions
to Obligations of Purchasers and Sellers.  The respective obligations of Sellers and
Purchasers to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of each of the following conditions:


 


(a)                                  there shall not be any Law in effect
making illegal the consummation of the transactions contemplated hereby, and
there shall not be any Governmental Order in effect prohibiting the
consummation of the transactions contemplated hereby;


 


(b)                                 Admission shall have become effective,
and the Placing Agreement shall not have been terminated before Admission (the “Admission Condition”);


 


(c)                                  the Required Governmental Approvals shall
have been obtained;


 


(d)                                 the Sportech Voting Proposal shall have
been duly adopted and approved by resolution of the shareholders of Sportech to
the extent such approval is required by law, regulation or applicable UKLA
rule; and


 


(e)                                  the Placing Agreement shall have become
unconditional in all respects (except for any conditions relating to Admission)
and shall not have expired.


 


Section 6.2                                   Additional
Conditions to Obligations of Purchasers.  The obligation of Purchasers to consummate
the transactions contemplated by this Agreement is subject to the satisfaction
of each of the following conditions (any or all of which may be waived in
writing by Purchasers in whole or in part in their sole discretion):


 


(a)                                  the representations and warranties of
Sellers set forth in Sections 3.4(a) (except the first sentence, and
clauses (iii) and (v) of the fourth sentence, thereof), 3.4(b) (except
the first sentence, and clauses (iii) and (v) of the third sentence,
thereof) and 3.4(c) and 3.4(e) shall be true and correct, without
giving effect to qualifications as to materiality within any such
representations and warranties, on and as of the Closing Date in all material
respects;


 


(b)                                 the representations and warranties of
Sellers set forth in Article III, other than the representations and
warranties set forth in Section 3.4 to the extent described in Section 6.2(a) above,
shall be true and correct, without giving effect to qualifications as to
materiality or Companies Material Adverse Effect within any such representation
or warranty (but taking into account any dollar limitation therein), on 


 


110

















 


and as of the Closing Date (except to the extent such
representations and warranties shall have been expressly made only as of an
earlier date, in which case such representations and warranties shall have been
true and correct as of such earlier date) except where any failure of such
representations and warranties to be so true and correct, individually or in
the aggregate, would not have a Companies Material Adverse Effect;


 


(c)                                  all required waiting periods (including
any extension thereof) applicable to the consummation of the transactions
contemplated by this Agreement identified on Exhibit J hereto shall
have terminated or expired;


 


(d)                                 Sellers shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by Sellers at or prior to Closing;


 


(e)                                  Sportech shall have received a
certificate of an executive officer of SGC that the conditions set forth in Section 6.2(a),
(b), (d) and (f) have been satisfied;


 


(f)                                    since the date of this Agreement, there
shall not have been a Companies Material Adverse Effect;


 


(g)                                 SGC (or an Affiliate thereof, as the case
may be) shall have executed and delivered each of the Ancillary Agreements;


 


(h)                                 the Third Party Consents identified in Section 6.2(h) of
the Seller Disclosure Schedule shall have been obtained, in form and
substance reasonably satisfactory to Purchasers;


 


(i)                                     SGC shall have delivered to Sportech
evidence of (A) the payment in full and discharge of all Indebtedness (or,
if such Indebtedness consists of a guarantee, evidence of the release or
termination of such guarantee) and release of any Encumbrances on assets or
property of the Companies and their Subsidiaries arising under such
Indebtedness in form and substance reasonably satisfactory to Purchasers and (B) the
settlement in full of all inter-company accounts between any of the Sellers and
their Affiliates (other than the Companies and their Subsidiaries) on the one
hand, and any of the Companies and their Subsidiaries on the other hand, in the
manner contemplated by Exhibit I or otherwise in a manner
reasonably satisfactory to Purchasers; and


 


(j)                                     SGC shall have delivered to Sportech either
(x) a duly executed certificate from the appropriate Seller that such
Seller is not a foreign person within the meaning set forth in section
1.1445-2(b)(2)(iii)(A) of the Regulations or (y) a certificate that
the respective Seller is not a U.S. real property holding company within the
meaning of section 897 of the Code, in each case consistent with sample
certificate in the Regulations promulgated under section 1445 of the Code.


 


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Section 6.3                                   Additional
Conditions to Obligations of Sellers.  The obligation of Sellers to consummate the
transactions contemplated by this Agreement is subject to the satisfaction of
each of the following conditions (any or all of which may be waived in writing
by Sellers in whole or in part in their sole discretion):


 


(a)                                  the representations and warranties of
Purchasers set forth in Sections 4.9(a) (except clause (C) of the
second sentence thereof) and 4.9(b) shall be true and correct, without
giving effect to qualifications as to materiality within any such
representations and warranties, on and as of the Closing Date in all material
respects;


 


(b)                                 the representations and warranties of
Purchasers set forth in Article IV, other than the representations and
warranties set forth in Section 4.9 to the extent described in Section 6.3(a) above,
shall be true and correct, without giving effect to qualifications as to
materiality or Purchasers Material Adverse Effect within any such
representation or warranty, on and as of the Closing Date (except to the extent
such representations and warranties shall have been expressly made only as of
an earlier date, in which case such representations and warranties shall have
been true and correct as of such earlier date) except where any failure of such
representations and warranties to be so true and correct, individually or in
the aggregate, would not have a material adverse effect on the Purchaser’s
ability to perform its obligations under this Agreement or consummate the
transactions contemplated hereby or have a Purchasers Material Adverse Effect;


 


(c)                                  Purchasers shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by Purchasers at or prior to Closing;


 


(d)                                 SGC shall have received a certificate of
an executive officer of Sportech that the conditions set forth in subsections
(a), (b), (c) and (e) of this Section 6.3 have been satisfied;


 


(e)                                  since the date of this Agreement, there
shall not have been a Purchasers Material Adverse Effect;


 


(f)                                    Sportech (or an Affiliate thereof, as the
case may be) shall have executed and delivered each of the Ancillary
Agreements; and


 


(g)                                 the Credit Agreement Amendment shall have
been obtained.


 


Section 6.4                                   Satisfaction of
Conditions.  Sportech shall use its commercially
reasonable best efforts to cause the conditions to the obligations of SGC in Section 6.1(a) to
be satisfied as promptly as reasonably practicable.  SGC shall use its commercially reasonable
best efforts to cause the conditions to the obligations of Sportech in Section 6.1(a) to
be satisfied as promptly as reasonably practicable and to 


 


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obtain each Third Party Consent as promptly as
reasonably practicable, subject to such cooperation from Purchasers as SGC may
reasonably request.


 


ARTICLE VII.


 


TERMINATION


 


Section 7.1                                   Termination
of Agreement.  This
Agreement may be terminated at any time prior to the Closing Date as follows:


 


(a)                                  by mutual written consent of Sportech and
SGC;


 


(b)                                 by the written notice of SGC to Sportech
if the Closing shall not have occurred on or before the date 240 days following
the date hereof (the “Outside Date”);
provided, however, that the right of SGC to terminate this Agreement
under this Section 7.1(b) shall not be available to SGC if the
failure of any Seller to fulfill any obligation under this Agreement shall have
been the cause of, or shall have resulted in, the failure of the Closing to
occur on or prior to such date;


 


(c)                                  by the written notice of Sportech to SGC
if the Closing shall not have occurred on or before the Outside Date; provided,
however, that the right of Sportech to terminate this Agreement under
this Section 7.1(c) shall not be available to Sportech if the failure
of any Purchaser to fulfill any obligation under this Agreement shall have been
the cause of, or shall have resulted in, the failure of the Closing to occur on
or prior to such date;


 


(d)                                 by SGC or Sportech, by written notice to
the other, if there shall be a Law in effect making illegal the consummation of
the transactions contemplated hereby, or there shall be in effect a final and
non-appealable Governmental Order prohibiting the consummation of the
transactions contemplated hereby; provided, however, that the
right to terminate this Agreement under this Section 7.1(d) shall not
be available to such party if the failure of such party to fulfill any
obligation under this Agreement shall have been the cause of, or shall have
resulted in, such Law or Governmental Order;


 


(e)                                  by Sportech if there shall have been (i) a
breach of any of the representations and warranties of Sellers set forth in
this Agreement, which breach would cause the condition set forth in Section 6.2(a) or
(b) not to be satisfied; or (ii) a breach of any of the covenants or
agreements on the part of Sellers set forth in this Agreement, which breach
would cause the condition set forth in Section 6.2(c) not to be
satisfied (and, in the case of either (i) or (ii) above, such breach is
not cured within fifteen (15) Business Days after SGC’s receipt of written
notice thereof from Sportech or is incapable of being cured by Sellers by the
Outside Date);


 


(f)                                    by SGC if there shall have been (i) a
breach of any of the representations and warranties of Purchasers set forth in
this Agreement, which breach would cause the condition set forth in Section 6.3(a) or
(b) not to be satisfied, or 


 


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(ii) a breach of any of the covenants or
agreements on the part of Purchasers set forth in this Agreement, which breach
would cause the condition set forth in Section 6.3(c) not to be
satisfied (and, in the case of either (i) or (ii) above, such breach
is not cured within fifteen (15) Business Days after Sportech’s receipt of
written notice thereof from SGC or is incapable of being cured by Purchasers by
the Outside Date);


 


(g)                                 by SGC if Purchasers breach their
obligations under Section 2.3(c)(i) or (ii) in any respect and
such breach is not cured within five (5) Business Days after Sportech’s
receipt of written notice thereof from SGC; or


 


(h)                                 by SGC or Sportech, by written notice to
the other, if at the Sportech Shareholder Meeting (including any adjournment or
postponement thereof), at which a vote on the Sportech Voting Proposal is
taken, the requisite vote of the shareholders of Sportech in favor of the
Sportech Voting Proposal shall not have been obtained (provided that the right
to terminate this Agreement under this Section 7.1(h) shall not be
available to any party seeking termination if at such time such party is in
breach of or has failed to fulfill its obligations under this Agreement as are
due at that time, and shall not be available to Sportech if the ordinary shares
subject to the Sportech Voting Agreements have not been voted in favor of the
Sportech Voting Proposal for any reason unless Sportech shall have satisfied
its obligations under Section 5.11(b)).


 


Section 7.2                                   Effect
of Termination.  In the event
of termination of this Agreement by a party pursuant to Section 7.1,
written notice thereof shall forthwith be given by the terminating party to the
other party, and this Agreement shall thereupon terminate and become void and
have no effect, and the transactions contemplated hereby shall be abandoned
without further action by the parties with no liability or obligation on the
part of any party hereto (or any of its Affiliates or Representatives), except
that the following provisions of this Agreement shall survive the termination:


 


(a)                                  Section 5.2;


 


(b)                                 Section 5.3;


 


(c)                                  this Section 7.2;


 


(d)                                 Article I
(to the extent terms defined in such Article are required for the
application of the other provisions which survive termination pursuant to this Section 7.2);
and


 


(e)                                  Article IX.


 


Nothing in this Section 7.2 shall be deemed to
release any party to this Agreement from any liability for any breach by any
party to this Agreement of the terms and provisions of this Agreement,
including Purchasers’ failure to perform their obligations to sell back the
Software Assets pursuant to Section 2.2 or to deliver the Purchase Price
upon satisfaction or waiver of the conditions to Purchasers’ obligations to
effect the Closing set forth in Article VI, or to impair the right of any
party to compel specific performance by any 


 


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other party of that party’s obligations under this
Agreement in accordance with the terms of Section 9.14.


 


ARTICLE
VIII.


 


INDEMNIFICATION


 


Section 8.1                                   Survival.


 


(a)                                  Subject to Section 8.1(d), the
representations and warranties contained in Article III and Article IV
shall survive the Closing until June 30, 2011, after which time such
representations and warranties shall terminate and have no further force or
effect (and no claim arising from, relating to or otherwise in respect of a
breach thereof may be made); provided, however, that (i) Sellers’
representations and warranties (and any claim arising from, relating to or
otherwise in respect of a breach thereof) set forth in Sections 3.1 (Organization
and Good Standing) (other than clauses (c) and (d) thereof), 3.2
(Authorization), 3.4(a) (except the first sentence, and clauses (iii) and
(v) of the fourth sentence, thereof), 3.4(b) (except the first
sentence, and clauses (iii) and (v) of the third sentence,
thereof), and 3.4(c) and 3.4(e) (Capital Structure), the first two
sentences of 3.13(a) (but only to the extent that such sentences are in
respect of material Company Plans) (Employee Benefit Plans), and 3.21 (No
Reliance) (“Sellers Fundamental Representations”),
and Purchasers’ representations and warranties (and any claim arising from,
relating to or otherwise in respect of a breach thereof) set forth in Sections
4.1 (Organization and Good Standing (other than clauses (c) and (d) thereof),
4.2 (Authorization), 4.8 (No Reliance) and 4.9(a) (except clause (C) of
the second sentence thereof) and 4.9(b) (Capital Structure) (“Purchasers Fundamental Representations”), shall survive
indefinitely and (ii) Sellers’ representations and warranties (and any
claim arising from, relating to or otherwise in respect of a breach thereof)
set forth in Sections 3.11 (Taxes) and 3.13 (other than the first two sentences
thereof to the extent that they are in respect of material Company Plans)
(Employee Benefit Plans), shall survive until the date that is ninety (90) days
following the expiration of the applicable statute of limitations (including
any extension thereof), after which time such representations and warranties
shall terminate and have no further force or effect (and no claim arising from,
relating to or otherwise in respect of a breach thereof may be made).


 


(b)                                 Subject to Section 8.1(d), unless a
specified period is set forth in this Agreement limiting the time in which
claims may be made in respect of a breach of such covenant (in which event such
specified period shall control and any claim arising from, relating to or
otherwise in respect of a breach of such covenant shall survive only for such
period), and except for the covenants set forth in Section 5.4(a) (which
shall not survive the Closing), all covenants and agreements contained herein
shall survive the Closing indefinitely.


 


(c)                                  The obligation of SGC to indemnify any
Purchaser Indemnified Party pursuant to Section 8.2(a)(ix) shall
survive until the date that is ten (10) years from the date of this
Agreement, after which time such obligation to indemnify 


 


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shall terminate and have no further force or
effect.  For the avoidance of doubt, the
obligation of SGC to indemnify any Purchaser Indemnified Party pursuant to
Sections 8.2(a)(ii) to 8.2(a)(xii) (other than Section 8.2(a)(ix))
shall survive indefinitely.


 


(d)                                 The period of time a representation or
warranty or covenant or agreement survives the Closing pursuant to this Section 8.1
shall be the “Survival Period” with respect to
such representation or warranty or covenant or agreement.  In the event notice of any claim for
indemnification under this Article VIII shall have been given within the
applicable Survival Period (and with reasonable specificity) and such claim has
not been finally resolved by the expiration of such Survival Period, the
representations or warranties or covenants or agreements that are the subject
of such claim shall survive until such claim is finally resolved.


 


Section 8.2                                   Obligations
of SGC.


 


(a)                                  Subject to the terms of this Article VIII,
SGC shall be liable for and indemnify and hold harmless each Purchaser, its
Affiliates (including the Companies and their Subsidiaries) and their
respective Representatives (each a “Purchaser Indemnified
Party” and collectively, the “Purchaser Indemnified
Parties”) from and against any liabilities, losses, judgments,
claims, settlements, damages, costs, fees and expenses (including any expense
of enforcement of obligations under this Agreement, reasonable attorneys’ fees
and any reasonable expenses incurred in connection with the investigation,
defense and settlement thereof or in connection with the enforcement of its
obligations with respect thereto) (collectively, “Losses”)
suffered or incurred by any Purchaser Indemnified Party to the extent arising
from, relating to or otherwise in respect of (i) any breach or inaccuracy
of any of the representations or warranties of Sellers contained in Article III
(disregarding all qualifications and exceptions contained therein relating to
materiality, Companies Material Adverse Effect or words of similar import or
effect, including disregarding for the purposes of Section 3.6 any dollar
threshold, for purposes of determining the amount of applicable Losses, but
not, for the avoidance of doubt, disregarding such matters for purposes of
determining whether a representation or warranty has been breached or is
inaccurate) other than the Sellers Fundamental Representations; (ii) any
breach or inaccuracy of any of the Sellers Fundamental Representations
(disregarding all qualifications and exceptions contained therein relating to
materiality, Companies Material Adverse Effect or words of similar import or
effect for purposes of determining the amount of applicable Losses, but not,
for the avoidance of doubt, disregarding such matters for purposes of
determining whether a representation or warranty has been breached or is
inaccurate); (iii) any breach of any of the covenants or agreements of
Sellers contained in this Agreement; (iv) the specific liabilities
identified and up to the amount specified in Section 8.2 of the Seller
Disclosure Schedule; (v) any QP Liability; (vi) any NY Liability;
(vii) any Shoreline Earnout Liability; (viii) any Irish Asset
Transfer Liability; (ix) any BM Liability; (x) 50% of any PZ
Liability (provided, however that each party shall bear its
own legal fees and expenses, incurred in connection with any PZ Liability); (xi) any CS Liability provided that SGC
shall not be responsible for the first $100,000 of such Losses; and (xii) any
Roberts Liability (provided, however that any Roberts 


 


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Liability shall not include any Liability to the
extent resulting from or attributable to the breach after Closing of the non-competition,
non-solicitation and confidentiality and proprietary information provisions set
out in Article XI of the Roberts Agreement or in the Data Communications
Joint Venture Agreement made, entered into and effective as of February 28,
2007, by and between, inter alia, Roberts and SGR to the extent applicable to
SGR, any of the other Companies or their Subsidiaries, or any of their
respective controlled Affiliates, with respect to which SGR or such Persons shall
remain liable in accordance with the terms thereof).  Nothing contained in the Seller Disclosure
Schedule shall qualify, limit or exclude the obligations pursuant to
Sections 5.10(k), 8.2(a)(iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi)
and (xii) except, with respect to Section 8.2(a)(iii), to the extent it is
reasonably apparent from a reading of such disclosure that such disclosure is
relevant to the covenant or agreement in question.


 


(b)                                 Other than arising out of or in
connection with fraud, for which the limitations under this Section 8.2(b) shall
not apply but which shall, in any case, be subject to the provisions of
Sections 3.28 and 4.8, the obligation of SGC to indemnify any Purchaser
Indemnified Party for Losses shall be subject to the following limitations: (i) no
Purchaser Indemnified Party shall be entitled to make a claim against SGC for
indemnification under Section 8.2(a)(i) (a “Purchaser
Claim”) unless and until the aggregate amount of Losses suffered or
incurred by all Purchaser Indemnified Parties with respect to an event or
occurrence and all other events or occurrences arising from, relating to or
otherwise in respect of the same circumstances exceeds $25,000 (a “Purchaser Base Claim”); (ii) SGC shall not be required
to provide indemnification to any Purchaser Indemnified Party pursuant to Section 8.2(a)(i) unless
the aggregate amount of Losses incurred by all the Purchaser Indemnified
Parties in respect of all Purchaser Claims constituting Purchaser Base Claims
exceeds $950,000 (the “Basket”), and
then the Purchaser Indemnified Parties shall be entitled to indemnification for
only the amount of Losses in excess of the Basket; and (iii) in no event
shall the aggregate amount of Losses for which SGC is obligated to indemnify
the Purchaser Indemnified Parties pursuant to Section 8.2(a)(i) exceed
$19 million (the “Ceiling”).


 


Section 8.3                                   Obligations
of Sportech.


 


(a)                                  Subject to the terms of this Article VIII,
Sportech shall be liable for and indemnify and hold harmless Sellers, their
Affiliates and their respective Representatives (each a “Seller
Indemnified Party” and collectively, the “Seller
Indemnified Parties”) from and against Losses suffered or incurred
by any Seller Indemnified Party to the extent arising from, relating to or
otherwise in respect of (i) any breach or inaccuracy of any of the
representations or warranties of Purchasers contained in Article IV
(disregarding all qualifications and exceptions contained therein relating to materiality,
Purchasers Material Adverse Effect or words of similar import or effect for
purposes of determining the amount of applicable Losses, but not, for the avoidance
of doubt, disregarding such matters for purposes of determining whether a
representation or warranty has been breached or is inaccurate) other than
Purchasers Fundamental Representations; (ii) any breach of any of the
Purchasers Fundamental Representations (disregarding all qualifications and
exceptions contained therein relating 


 


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to materiality, Purchasers Material Adverse Effect or
words of similar import or effect for purposes of determining the amount of
applicable Losses, but not, for the avoidance of doubt, disregarding such matters
for purposes of determining whether a representation or warranty has been
breached or is inaccurate); (iii) any breach of any of the covenants or
agreements of Purchasers contained in this Agreement; (iv) any Purchaser
Employee Liability; (v) any Equity Offering Liability; (vi) any
Circular Liability; and (vii) any Direct Transfer Liability.


 


(b)                                 Other than arising out of or in
connection with fraud, for which the limitations under this Section 8.3(b) shall
not apply but which shall, in any case, be subject to the provisions of
Sections 3.21 and 4.14, the obligation of Sportech to indemnify any Seller
Indemnified Party for Losses shall be subject to the following limitations: (i) no
Seller Indemnified Party shall be entitled to make a claim against Sportech for
indemnification under Section 8.3(a)(i) (a “Seller Claim”)
unless and until the aggregate amount of Losses incurred by all Seller
Indemnified Parties with respect to an event or occurrence and all other events
or occurrences arising from, relating to or otherwise in respect of the same
circumstances exceeds $25,000 (a “Seller  Base Claim”); (ii) Sportech shall not be required to
provide indemnification to any Seller Indemnified Party pursuant to Section 8.3(a)(i) unless
the aggregate amount of Losses incurred by all the Seller Indemnified Parties
in respect of all claims under this Article VIII constituting Seller Base
Claims exceeds the Basket, and then the Seller Indemnified Parties shall be
entitled to indemnification for only the amount in excess of the Basket; and (iii) in
no event shall the aggregate amount of Losses for which Sportech is obligated
to indemnify the Seller Indemnified Parties pursuant to Section 8.3(a)(i) of
this Agreement exceed 50% of the Ceiling.


 


(c)                                  In consideration for the indemnification
rights provided in this Section 8.3, each Seller hereby waives, to the
fullest extent permitted by Law, any claim under applicable Law that such
Seller might otherwise have in connection with SGC’s acquisition of the
Sportech Shares to the extent arising from, relating to or otherwise in respect
of any information contained in or omitted from or otherwise in respect of the
Circular or any other documents published by Sportech in connection with the
transactions contemplated hereby.


 


Section 8.4                                   Indemnification
Procedures and Limitations.


 


(a)                                  In the event that any Action is commenced
by a third party involving a claim for which a party required to provide
indemnification hereunder (an “Indemnifying Party”)
may be liable to a party entitled to indemnification (an “Indemnified
Party”) hereunder (an “Asserted Liability”),
the Indemnified Party shall promptly notify the Indemnifying Party in writing
of such Asserted Liability (the “Claim Notice”);
provided, that no delay on the part of the Indemnified Party in giving
any such Claim Notice shall relieve the Indemnifying Party of any
indemnification obligation hereunder except to the extent that the Indemnifying
Party is prejudiced by such delay and no Claim Notice need be filed with
respect to the specific matters identified in Section 8.4(a) of the Seller
Disclosure Schedule.  Any Claim
Notice shall set forth, with reasonable specificity the basis of the claim for
the Losses, the section(s) of 


 


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this Agreement which form the basis for such claim,
and, to the extent reasonably practicable, an estimate of the amount of the
Losses that have been or may be incurred by the Indemnified Party (which
estimate shall not limit the rights of the Indemnified Party hereunder).  The Indemnifying Party, upon giving notice to
such Indemnified Party, shall be entitled to assume the defense of such
Asserted Liability with counsel of its own choosing (reasonably satisfactory to
the Indemnified Party) and, in such an event (i) the Indemnifying Party
will be entitled to prosecute, appeal, negotiate, resolve, settle, compromise,
arbitrate or otherwise pursue such Asserted Liability, in whole or in part; and
(ii) the Indemnifying Party shall have no obligation to indemnify or pay
for or reimburse any Indemnified Party for any attorneys’ fees, investigation
costs or litigation or other defense expenses incurred by the Indemnified Party
after the assumption of the defense of such Asserted Liability; provided,
however, that the Indemnifying Party shall not, without the prior
written consent of the Indemnified Party, settle, compromise or consent to the
entry of any judgment in respect of any Asserted Liability if (A) any
Indemnified Party is a party to the applicable claim or has been actually
threatened to be made a party thereto, unless such settlement, compromise or
consent includes a complete and unconditional release of each Indemnified Party
from all liability arising out of such claim; or (B) such settlement,
compromise or consent would lead to any material liability or create any
material financial or other obligation on the part of the Indemnified Party for
which the Indemnified Party is not entitled to indemnification hereunder and, provided
further, that the Indemnifying Party shall not be entitled to assume the
defense or settle, compromise or consent to the entry of any judgment in
respect of any Asserted Liability if the relevant third party Action would (i) impose
material injunctive or other equitable relief against the Indemnified Party or (ii) require
the admission of criminal or civil wrongdoing by any Indemnified Party or (iii) constitute
a Special Indemnification Claim.  If the
Indemnifying Party undertakes to defend against such Asserted Liability, the
Indemnified Party shall fully cooperate with the Indemnifying Party and its
counsel in the investigation, defense and settlement thereof, including providing reasonable
access to the Indemnified Party’s personnel, books and records for the purposes
thereof, making such personnel available to testify, and making such books and
records available for use in such litigation. 
Notwithstanding the foregoing, the Indemnified Party shall have the
right to control, pay or settle any Asserted Liability which the Indemnifying
Party shall have undertaken to defend so long as the Indemnified Party shall
also waive any right to indemnification therefor by the Indemnifying Party.
Save in respect of a Special Indemnification Claim, the Indemnifying Party
shall not be liable for any settlement of any Asserted Liability by an
Indemnified Party without the Indemnifying Party’s written consent (not to be
unreasonably withheld or delayed).  The
Indemnified Party at its own expense shall be entitled to participate in (but
not control) the defense of any Asserted Liability and to employ counsel of its
choice for such purpose; provided, however, that the reasonable
fees and expenses of such separate counsel shall be borne by the Indemnifying
Party (i) to the extent, if any, legal representation is reasonably
required by the Indemnified Party between the time the Asserted Liability is
first asserted and the date upon which the Indemnifying Party notifies the
Indemnified Party that the Indemnifying Party has assumed the defense of such
Asserted Liability; (ii) where there are or are reasonably likely to be
legal defenses available to the Indemnified Party that are materially different
from or additional to those available to the indemnifying Party or


 


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there exists any other conflict between the interests
of the Indemnifying Party and the Indemnified Party that, in either such case,
would make it inappropriate in the reasonable judgment of the Indemnified Party
(upon and in conformity with the opinion of counsel) for the same counsel to
represent both the Indemnified Party and the Indemnifying Party; or (iii) the
employment of such counsel at the expense of the Indemnifying Party has been
specifically authorized by the Indemnifying Party in writing.  In no event shall the Indemnifying Party be
required to pay the fees and expenses of more than one separate counsel for all
Indemnified Parties. In respect of Special Indemnification Claims, the
Indemnifying Party shall pay the amount of any Asserted Liability upon
confirmation that the relevant amount has been paid or is within five (5) Business
Days to be paid by the Purchaser Indemnified Party.


 


(b)           In calculating amounts payable to an
Indemnified Party, the amount of any indemnified Losses shall be (i) determined
without duplication of any other Loss which has been paid under any other
representation, warranty, covenant, or agreement; and (ii) computed net of
(A) payments already recovered or recoverable without unreasonable effort
and expense by any Indemnified Party under any insurance policy with respect to
such Losses (net of all collection expenses); (B) any prior recovery by
any Indemnified Party from any Person with respect to such Losses (net of all
collection expenses); and (C) any Tax benefit received, or receivable
without undue effort or expense, by any Indemnified Party with respect to such
Losses.  If any Indemnified Party
realizes a Tax benefit or receives an amount under insurance coverage with
respect to Losses sustained and for which indemnification has been provided at
any time subsequent to the time such indemnification is provided pursuant to
this Article VIII, then such Indemnified Party shall promptly reimburse
the applicable Indemnifying Party for any payment made by such Indemnifying Party
in connection with providing such indemnification up to such amount realized or
received by such Indemnified Party with respect to such Losses (net of all
collection expenses).


 


(c)           Notwithstanding any other provision
of this Agreement, in no event shall any Indemnified Party be entitled to
indemnification pursuant to this Article VIII, or to make a claim for
breach of any other provision of this Agreement or to any other remedy at Law
or in equity, (i) with respect to any liability to the extent expressly
set forth in the Final Net Working Capital or any amount that was correctly the
subject of a dispute submitted to, and resolved by, the Independent Accounting
Firm pursuant to Section 2.4(h) or that was resolved by written
agreement of the parties pursuant to Section 2.4(h) or (ii) as to any
matter to the extent specifically reflected on or reasonably apparent from the
face of the Financial Statements or the Sportech Financial Statements, as the
case may be.  Each Indemnified Party
shall take commercially reasonable steps to mitigate any Losses upon and after
becoming aware of any facts, matters, failures or circumstances that would
reasonably be expected to result in any Losses that are indemnifiable
hereunder.  For the avoidance of doubt,
the reasonable cost of an Indemnified Party’s mitigation of a Loss subject to
indemnification hereunder shall be included in calculating the amount of the
indemnified Loss.


 


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(d)           Notwithstanding any other provision
of this Agreement, in no event shall Sellers or Purchasers be liable under this
Article VIII for any (i) punitive or treble damages; or (ii) special,
indirect, incidental or consequential damages in each case that are not a
reasonably foreseeable consequence of the relevant breach.


 


(e)           Except with respect to actual fraud
(which shall, in any case, be subject to Sections 3.21, 3.28, 4.8 and 4.14),
and except as to any remedies set forth under any Ancillary Agreements, the
remedies provided in this Article VIII and the payment mechanics and
indemnities set forth in Sections 2.5, 5.4, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11,
5.12 and 5.17 shall be deemed the sole and exclusive remedies of the parties,
from and after the Closing Date, with respect to this Agreement other than
Sections 2.4 and 2.6 and the transactions contemplated hereby.  Nothing herein shall prevent a party from
seeking injunctive relief as provided in Section 9.14.


 


(f)            To the extent that the Indemnifying
Party makes any payment pursuant to this Article VIII in respect of Losses for
which the Indemnified Party or any of its Affiliates has a right to recover
against a third party (including an insurance company), the Indemnifying Party
shall be subrogated to the rights of the Indemnified Party or any of its
Affiliates to seek and obtain recovery from such third party.  Except with respect to any right of
subrogation to seek and obtain recovery against the manufacturer of any
mechanism that is subject to the BM Defect, the Indemnifying Party shall only
seek and obtain recovery from any third party pursuant to this Section 8.4(f) to
the extent that pursuing such recovery would not reasonably be expected to
materially adversely affect any material on-going business relationship between
such third party and the Indemnified Party or its Affiliates.


 


(g)           Any indemnification payment made
under this Agreement shall be treated as an adjustment to the Purchase Price
for Tax purposes.


 


(h)           For purposes of the indemnification
provisions of this Article VIII, a Person’s “Representatives” shall not
include such Person’s stockholders or members.


 


ARTICLE IX.


 


MISCELLANEOUS


 


Section 9.1                                   Assignment;
Binding Effect.  This Agreement and the rights and obligations
hereunder are not assignable or otherwise transferable unless such assignment
or transfer is consented to in writing by both Purchasers and SGC; provided,
however, that Purchasers may assign any rights (but not obligations)
under this Agreement to any Affiliate (including, subject to the provisions of Section 2.5,
any Designated Purchaser) of any Purchaser and for collateral security purposes
to any Person providing financing for the transactions contemplated by this
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preceding sentence, this
Agreement and all the provisions hereof shall be binding upon and shall inure
to the benefit of the parties and their respective successors and permitted
assigns. Any attempted assignment in violation of
this Section 9.1 shall be null and void and of no effect.


 


Section 9.2            Choice of Law.  This Agreement and all
disputes arising hereunder or relating to the transactions contemplated hereby
and all matters arising out of or relating in any way whatsoever (whether in
contract, tort or otherwise) to the subject matter of this Agreement shall be
governed by and interpreted and enforced in accordance with, the law of the
State of New York.


 


Section 9.3            Waiver
of Jury Trial.  EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING
ARISING OUT OF OR RELATED IN ANY WAY WHATSOEVER (WHETHER IN CONTRACT, TORT OR
OTHERWISE) TO THIS AGREEMENT OR THE OTHER TRANSACTIONS CONTEMPLATED HEREBY.


 


Section 9.4            Consent to Jurisdiction and
Service of Process.  All
judicial Actions brought against the parties arising out of or relating to this
Agreement, or any obligations hereunder, shall be brought in any state or
federal court of competent jurisdiction in the State of New York, County of New
York.  By executing and delivering this
Agreement, the parties irrevocably: (a) accept generally and unconditionally
the exclusive jurisdiction and venue of these courts; (b) waive any
objections which such party may now or hereafter have to the laying of venue of
any of the aforesaid Actions arising out of or in connection with this
Agreement brought in the courts referred to in the first sentence of this Section 9.4
and hereby further irrevocably waive and agree not to plead or claim in any
such court that such Action brought in any such court has been brought in an
inconvenient forum; (c) agree that service of all process in any such Action in
any such court may be made by registered or certified mail, return receipt
requested, to such party at their respective addresses provided in accordance
with Section 9.5; and (d) agree that service as provided in Section 9.4(c) above
is sufficient to confer personal jurisdiction over such party in any such
Action in any such court, and otherwise constitutes effective and binding
service in every respect.


 


Section 9.5            Notices.  All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (a) when received if delivered personally, (b) when
sent by cable, telecopy, telegram or facsimile (which is confirmed by the
intended recipient), and (c) when sent by overnight courier service or
when mailed by certified or registered mail, return receipt requested, with
postage prepaid to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):


 


122

















 


if to Purchasers or any
Designated Purchaser, to:


 


Sportech
Plc


101
Wigmore Street


London


W1U
1QU


United
Kingdom


Fax:
+44 20 7493 8445


 


with copies, in the case of notice to Purchasers, to:


 


Freshfields Bruckhaus Deringer US LLP

520 Madison Avenue

34th Floor

New York, NY 10022

United States


Attention: Julian M.
Pritchard, Esq.


Facsimile: +1 212 277
4001


e-mail address:
julian.pritchard@freshfields.com


 


Freshfields Bruckhaus Deringer LLP


65 Fleet Street


London


EC4Y 1HS


United Kingdom


Attention: Martin Taylor


Facsimile: +44 20 7832 7001


e-mail address:martin.taylor@freshfields.com


 


if to
any of Sellers, to:


 


Scientific Games Corporation


750 Lexington Avenue, 25th Floor


New
York, New York 10022


Attn:                    General Counsel


Fax:                           +1 212 754 2372


 


with copies, in the case
of notice to any of Sellers, to:


 


Kramer
Levin Naftalis & Frankel LLP


1177
Avenue of the Americas


New
York, New York 10036


Attn:                    Peter G. Smith, Esq.


Fax:         +1 212 715 8000


 


123

















 


Section 9.6                                   Headings.  The headings contained in
this Agreement are inserted for convenience only and shall not be considered in
interpreting or construing any of the provisions contained in this Agreement.


 


Section 9.7                                   Fees
and Expenses.  Except as
otherwise specified in this Agreement, each party shall bear its own costs and
expenses (including investment advisory and legal fees and expenses) incurred
in connection with this Agreement and the transactions contemplated hereby;
provided that (a) (i) all Transfer Taxes (as well as the obligation
for filing of all Tax Returns with respect thereto); and (ii) the filing fees
in connection with any filing in respect of any antitrust or competition Law
outside of the U.S., in each case, shall be shared equally among SGC and
Sportech, and (b) any fees and expenses incurred in connection with the
Required Governmental Approvals shall be paid by Sportech, except that SGC
shall pay (i) 50% of any filing fees relating thereto; (ii) such portion
of such expenses as may be directly attributable to bona fide regulatory
investigation of individuals who are currently officers, directors or employees
of SGC and its Affiliates (including the Companies and their Subsidiaries); and
(iii) 50% of other fees and expenses relating thereto, up to a maximum of
$25,000.


 


Section 9.8                                   Entire
Agreement.  This Agreement
(including the Exhibits and Schedules) constitute the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between the parties with respect to such subject
matter; provided, however, this Agreement shall not supersede the
terms and provisions of the Confidentiality Agreement, which shall survive and
remain in effect until expiration or termination thereof in accordance with its
terms and this Agreement.


 


Section 9.9                                   Interpretation.


 


(a)           Any definition of or reference in
this Agreement to any agreement, contract, document, instrument or other record
herein shall be construed as referring to such agreement, contract, document,
instrument or other record as from time to time amended, supplemented, restated
or otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth herein).


 


(b)           When a reference is made in this
Agreement to any Person such reference shall be construed to include such
Person’s successors and permitted assigns.


 


(c)           The word “will” in this Agreement shall
be construed to have the same meaning and effect as the word “shall”.


 


(d)           When a reference is made in this
Agreement to an Article, Section, Exhibit or Schedule, such reference
shall be to an Article, Section, Exhibit or Schedule of or to this Agreement
unless otherwise indicated.


 


124

















 


(e)           Whenever the words “include,” “includes”
or “including” are used in this Agreement, they shall be deemed to be followed
by the words “without limitation”.


 


(f)            When a reference in this Agreement
is made to a “party” or “parties,” such reference shall be to a party or
parties to this Agreement unless otherwise indicated.


 


(g)           Unless the context requires
otherwise, the terms “hereof,” “herein,” “hereby,” “hereto”, “hereunder” and
derivative or similar words in this Agreement refer to this entire Agreement.


 


(h)           Unless the context requires
otherwise, words in this Agreement using the singular or plural number also
include the plural or singular number, respectively, and the use of any gender
herein shall be deemed to include the other genders.


 


(i)            References in this Agreement to “dollars”
or “$” are to U.S. dollars.


 


(j)            This Agreement was prepared jointly
by the parties and no rule that it be construed against the drafter will
have any application in its construction or interpretation.


 


(k)           Any reference in this Agreement to
shares of capital stock and/or stock shall for the purposes of any Seller,
Company or Subsidiary which is a private limited company incorporated in Ireland
be deemed to be a reference to the issued and/or to be issued share capital of
the relevant company.


 


Section 9.10                            Disclosure
Schedules.  Notwithstanding
anything to the contrary in this Agreement, a fact, matter or circumstance
shall only be deemed to be disclosed against, and shall only be deemed to
qualify, any Section of this Agreement (a) if it is clearly identified in
the corresponding section of the Seller Disclosure Schedule or Purchaser
Disclosure Schedule, as the case may be, or (b) to the extent that
such fact, matter or circumstance is clearly identified and it is reasonably
apparent from a reading of the disclosure in any other section of the Seller
Disclosure Schedule or Purchaser Disclosure Schedule, as the case
may be, that such disclosure is relevant to such Section of this
Agreement.  The inclusion of any
information in any Section of either Disclosure Schedule shall not be
deemed to be an admission or acknowledgment to any Person or otherwise imply
that such information is required to be included in any Section of such
Disclosure Schedule or that any such matter rises to either a Companies
Material Adverse Effect or Purchasers Material Adverse Effect, as the case may
be, or is material to or outside the ordinary course of business of any of the
Persons to which such Disclosure Schedule relates (or that any such matter is
above any specified threshold).  Matters
reflected in either Disclosure Schedule are not necessarily limited to matters
required by this Agreement to be reflected in such Disclosure Schedule.  Such additional matters are set forth for
informational purposes and do not necessarily include other matters of a 


 


125

















 


similar nature.  All references in either Disclosure Schedule
to the enforceability of agreements with third parties, the existence or
non-existence of third-party rights, the absence of breaches or defaults by
third parties, or similar matters or statements, are intended only to allocate
rights and risks between Purchasers and Sellers and are not intended to be
admissions against interests, give rise to any inference or proof of accuracy,
be admissible against any party to this Agreement (or any other Person) by any
Person who is not a party to this Agreement, or give rise to any claim or
benefit to any Person who is not a party to this Agreement (other than
Affiliates and Representatives of Sellers and Purchasers to the extent entitled
to indemnification pursuant to Article VIII).  In addition, the disclosure of any matter in
either Disclosure Schedule is not to be deemed an admission to any Person that
such matter actually constitutes noncompliance with, or a violation of Law, any
Permit or Contract or other topic to which such disclosure is applicable.  In no event shall the disclosure of matters
in the Disclosure Schedules or the Electronic Data Room be deemed or
interpreted to broaden Sellers’ representations and warranties, obligations,
covenants, conditions or agreements contained in this Agreement.  The headings contained in the Disclosure
Schedules are for convenience of reference only and shall not be deemed to
modify or influence the interpretation of the information contained in the
Disclosure Schedules or this Agreement.


 


Section 9.11         Waiver and Amendment.  This Agreement may be
amended, modified or supplemented only by a written mutual agreement executed
and delivered by Sellers and Purchasers. 
Except as otherwise provided in this Agreement, any failure of any party
to comply with any obligation, covenant, agreement or condition herein may be
waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver, or delay
in or failure to insist upon strict compliance with such obligations, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure to so comply.


 


Section 9.12         Counterparts; Facsimile Signatures.  This Agreement may be
executed in any number of counterparts, each of which when executed, shall be
deemed to be an original and all of which together shall be deemed to be one
and the same instrument binding upon all of the parties notwithstanding the
fact that all of the parties are not signatory to the original or the same
counterpart.  For purposes of this
Agreement, facsimile signatures shall be deemed originals.


 


Section 9.13         Third-Party Beneficiaries.  Expect for the Seller
Indemnified Parties and the Purchaser Indemnified Parties, who shall be
intended third party beneficiaries with respect to Article VIII with the
right to directly enforce the same against the parties as if signatories
hereto, and as expressly provided in Section 5.20, this Agreement is for
the sole benefit of the parties and their successors and permitted assigns and
nothing herein express or implied shall give or be construed to give to any
Person, other than the parties and such successors and permitted assigns, any
legal or equitable rights hereunder.


 


Section 9.14         Specific Performance.  The parties agree that if any of the
provisions of this Agreement were not performed in accordance with their
specific terms 


 


126

















 


or were otherwise breached,
irreparable damage would occur, no adequate remedy at Law would exist and
damages would be difficult to determine, and that the parties shall be entitled
to specific performance of the terms hereof, in addition to any other remedy at
Law or in equity.


 


Section 9.15         Severability.  Without prejudice to the provisions of
Sections 5.3(b), 5.16(c) and 5.17(c), if any provision of this Agreement
or the application of any such provision to any Person or circumstance shall be
held invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.


 


127
















 


IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed the day and year first above written.


 


	
   

  	
  SCIENTIFIC GAMES
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey S. Lipkin

  
	
   

  	
   

  	
  Name:

  	
  Jeffrey S. Lipkin

  
	
   

  	
   

  	
  Title:

  	
  Vice President and
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  SCIENTIFIC GAMES
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey S. Lipkin

  
	
   

  	
   

  	
  Name:

  	
  Jeffrey S. Lipkin

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  SCIENTIFIC GAMES
  RACING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey S. Lipkin

  
	
   

  	
   

  	
  Name:

  	
  Jeffrey S. Lipkin

  
	
   

  	
   

  	
  Title:

  	
  Vice President and
  Treasurer

  
	
   

  	
   

  
	
   

  	
  SCIENTIFIC GAMES
  GERMANY GMBH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Donahue

  
	
   

  	
   

  	
  Name:

  	
  John Donahue

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
  SCIENTIFIC GAMES
  LUXEMBOURG HOLDINGS SARL

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ira H. Raphaelson

  
	
   

  	
   

  	
  Name:

  	
  Ira H. Raphaelson

  
	
   

  	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
  SCIENTIFIC GAMES
  HOLDINGS LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ira H. Raphaelson

  
	
   

  	
   

  	
  Name:

  	
  Ira H. Raphaelson

  
	
   

  	
   

  	
  Title:

  	
  Director and Secretary

  



 

















 


	
   

  	
  SCIENTIFIC GAMES
  RACING, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey S. Lipkin

  
	
   

  	
   

  	
  Name:

  	
  Jeffrey S. Lipkin

  
	
   

  	
   

  	
  Title:

  	
  Manager

  



 

















 


	
   

  	
  SPORTECH PLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ian Penrose

  
	
   

  	
   

  	
  Name:

  	
  Ian Penrose

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  SPORTECH HOLDCO 1
  LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steve Cunliffe

  
	
   

  	
   

  	
  Name:

  	
  Steve Cunliffe

  
	
   

  	
   

  	
  Title:

  	
  Finance Director

  
	
   

  	
   

  
	
   

  	
  SPORTECH HOLDCO 2
  LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steve Cunliffe

  
	
   

  	
   

  	
  Name: 

  	
  Steve Cunliffe

  
	
   

  	
   

  	
  Title:

  	
  Finance Director