Document:

Exhibit 10.32

 

SHAREHOLDERS
AGREEMENT

by and among

AFFILIATES INSURANCE COMPANY,

FIVE STAR QUALITY CARE, INC.,

HOSPITALITY PROPERTIES TRUST,

HRPT PROPERTIES TRUST,

SENIOR HOUSING PROPERTIES TRUST,

TRAVELCENTERS OF AMERICA LLC

and

REIT MANAGEMENT & RESEARCH LLC

February 27, 2009

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  
	
   

  	
   

  	
   

  
	
  INVESTMENT IN THE
  COMPANY; FORMATION AND LICENSING EXPENSES

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Purchase and Sale of Shares

  	
  2

  
	
  1.2

  	
  Future Share Issuances

  	
  2

  
	
  1.3

  	
  Formation and Licensing Expenses

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
   

  	
   

  	
   

  
	
  BOARD COMPOSITION

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Board Composition

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
   

  	
   

  	
   

  
	
  TRANSFER OF SHARES;

  
	
  PREEMPTIVE RIGHTS;
  CALL RIGHTS

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Transfer of Shares; No Pledging of Shares

  	
  3

  
	
  3.2

  	
  Preemptive Rights

  	
  4

  
	
  3.3

  	
  Change of Control Call Option

  	
  6

  
	
  3.4

  	
  Permitted New Issuance of Shares

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  
	
  SPECIAL SHAREHOLDER
  APPROVAL REQUIREMENTS.

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Special Shareholder Approval Requirements

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
   

  
	
  OTHER COVENANTS AND
  AGREEMENTS

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Organizational Documents

  	
  10

  
	
  5.2

  	
  Reports and Information Access

  	
  10

  
	
  5.3

  	
  Compliance with Laws

  	
  10

  
	
  5.4

  	
  Cooperation; Further Assurances

  	
  11

  
	
  5.5

  	
  Confidentiality

  	
  11

  
	
  5.6

  	
  Required Regulatory Approvals

  	
  11

  
	
  5.7

  	
  REIT Matters

  	
  12

  

 

 

	
  ARTICLE VI

  
	
   

  
	
  REPRESENTATIONS AND
  WARRANTIES

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  The Company

  	
  12

  
	
  6.2

  	
  The Shareholders

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
   

  
	
  TERMINATION

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Termination

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  
	
   

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Notices

  	
  15

  
	
  8.2

  	
  Successors and Assigns; Third Party
  Beneficiaries

  	
  17

  
	
  8.3

  	
  Amendment and Waiver

  	
  17

  
	
  8.4

  	
  Counterparts

  	
  18

  
	
  8.5

  	
  Headings

  	
  18

  
	
  8.6

  	
  Governing Law

  	
  18

  
	
  8.7

  	
  Dispute Resolution

  	
  18

  
	
  8.8

  	
  Interpretation and Construction

  	
  19

  
	
  8.9

  	
  Severability

  	
  20

  
	
  8.10

  	
  Entire Agreement

  	
  20

  
	
  8.11

  	
  Non-liability of Trustees and Directors

  	
  20

  

 

 

SHAREHOLDERS AGREEMENT

 

AFFILIATES INSURANCE COMPANY

 

This Shareholders
Agreement (this “Agreement”), dated February 27, 2009, by and among
Affiliates Insurance Company, a company being formed and licensed as an
insurance company in the State of Indiana (the “Company”), Five Star
Quality Care, Inc., a Maryland corporation (“FVE”), Hospitality
Properties Trust, a Maryland real estate investment trust (“HPT”), HRPT
Properties Trust, a Maryland real estate investment trust (“HRP”),
Senior Housing Properties Trust, a Maryland real estate investment trust (“SNH”),
TravelCenters of America LLC, a Delaware limited liability company (“TA”),
and Reit Management & Research LLC, a Delaware limited liability
company (“RMR”, and together with FVE, HPT, HRP, SNH and TA, the “Shareholders”).

 

RECITALS

 

WHEREAS, the
Company has been formed as an insurance company domiciled in the State of
Indiana; and

 

WHEREAS, the
Shareholders have agreed to make capital contributions to the Company as
further detailed in this Agreement and that as of the funding of those capital
contributions as provided in this Agreement the Shareholders will be the sole
shareholders of the Company; and

 

WHEREAS, the
Shareholders and the Company desire to enter into this Agreement in order to
set forth certain agreements and understandings relating to the business and
governance of the Company, the Shares (as defined herein) held by the
Shareholders and certain other matters;

 

NOW,
THEREFORE, in consideration of the premises, representations, warranties,
covenants and agreements contained in this Agreement and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree
as follows:

 

 

ARTICLE I

 

INVESTMENT IN THE COMPANY; FORMATION AND LICENSING EXPENSES

 

1.1           Purchase and Sale
of Shares.

 

(a)        Concurrently with the execution and
delivery of this Agreement by the Company and the Shareholders, the Company
shall issue and sell to each Shareholder, and each Shareholder shall purchase
from the Company, 100 shares of common stock, par value of $10.00 per share, of
the Company (the “Shares”) at a purchase price of $250.00 per Share.

 

(b)        Within five business days after the
Company notifies the Shareholders that the Department of Insurance of the State
of Indiana has notified the Company that it intends to commence its financial
review of the Company, the Company shall issue and sell to each Shareholder,
and each Shareholder shall purchase from the Company, an additional 19,900
Shares at a purchase price of $250.00 per Share.

 

1.2           Future Share
Issuances.  No Shareholder shall be
obligated to purchase additional Shares or any other securities of the Company
and any future proposed issuance and sale of Shares or any other securities of
the Company shall be subject to Section 3.2; provided, however, that the
parties hereto acknowledge that the Company may need to seek additional capital
in the future and that it is the intention of the Shareholders that they each
may, but shall not be obligated to, contribute to the Company up to an
additional $5 million of capital during the period between the second and fifth
anniversaries of the date of this Agreement.

 

1.3           Formation and
Licensing Expenses.  The Company
shall pay for all costs, fees and expenses in connection with the formation and
licensing of the Company as an Indiana insurance company.  The Shareholders shall reimburse the Company
for such amounts paid by the Company in equal proportion.

 

ARTICLE II

 

BOARD COMPOSITION

 

2.1           Board
Composition.

 

(a)        For as long as the Shareholders
collectively own a majority of the issued and outstanding Shares, the board of
directors of the Company (the “Board”) shall consist of not less than
five nor more than fifteen members, with the actual number determined in
accordance with the Bylaws of the Company, as in effect from time to time, and
subject in all instances to this Section 2.1.  As of the date of this Agreement, the Board
shall initially consist of thirteen members. 
For so long as required by applicable Indiana law, at least one member
of the Board shall be an Indiana resident. 
Except as otherwise provided in Section 2.1(c), no Shareholder
having a right to designate any director pursuant to this Article II shall
be required to designate an Indiana resident as a director pursuant to such
right; provided, however, that this sentence shall in no way limit the
application of the immediately preceding sentence.

 

(b)        For so long as a Shareholder (other than
RMR) owns not less than 10%  of the  issued and outstanding Shares, such Shareholder shall have
the right to designate two directors for election to the Board.

 

(c)        For so long as RMR owns not less than
10%  of the  issued
and outstanding Shares, RMR shall have the right to designate three directors
for election to the 

 

2

 

Board. 
For so long as RMR has the right to designate directors pursuant to the
immediately preceding sentence, Indiana law requires the Board to include an
Indiana resident as a director of the Company and no other Shareholder
designates an Indiana resident as a director of the Company, RMR shall
designate at least one Indiana resident to be a director.

 

(d)        Each Shareholder will vote, execute and
deliver written consents and take all other necessary action (including, if necessary,
causing the Company to call a special meeting of shareholders of the Company)
in favor of the election of each director designated by a Shareholder in
accordance with this Article II and otherwise to ensure that the
composition of the Board is at all times as set forth in this Article II.  Each Shareholder agrees that it will not vote
any of its Shares in favor of removal of any director designated by another
Shareholder unless such other Shareholder shall have consented to such removal
in writing.  Each Shareholder agrees to
cause to be called, if necessary, a special meeting of shareholders of the
Company and to vote all the Shares owned by such Shareholder for, or to take
all actions in lieu of any such meeting necessary to cause, the removal of any
director designated by such Shareholder if the Shareholder entitled to
designate such director requests in writing, signed by such Shareholder, such
director’s removal for any reason or no reason.

 

(e)        If, as a result of death, disability,
retirement, resignation, removal or otherwise, there shall exist or occur any
vacancy with respect to any director previously designated by a Shareholder in
accordance with such Shareholder’s right under this Article II to so
designate such director, such Shareholder shall have the right to designate a
replacement director.  Upon such
designation, the Shareholders shall promptly take all action necessary to
ensure the election of such replacement director to fill the unexpired term of
the director whom such new director is replacing, including, if necessary,
calling a special meeting of shareholders of the Company and voting their
Shares, or executing any written consent in lieu thereof, in favor of the
election of such director.

 

ARTICLE III

 

TRANSFER OF
SHARES; 

PREEMPTIVE RIGHTS; CALL RIGHTS

 

 

3.1           Transfer
of Shares; No Pledging of Shares.

 

(a)        The Shareholders may not, directly or
indirectly, transfer any Shares, except that a Shareholder may transfer Shares
owned by it to a wholly owned subsidiary of such Shareholder, to another
Shareholder or to a wholly owned subsidiary of another Shareholder.  Any purported transfer of Shares in
contravention of this Section 3.1 shall be null and void and of no force
or effect.

 

(b)        The Shareholders may not pledge their
Shares (other than pledges arising from the operation of law and not as a
result of the Shareholder’s express granting of a pledge); provided, however,
that any pledge or other lien, charge or encumbrance which may arise by
application of the terms of any agreement, contract, license, permit or
instrument existing on the date hereof (an “Existing Pledge”) on a
Shareholder’s Shares shall not be a 

 

3

 

violation of this Section 3.1(b); and
provided further, however, any transfer which results from exercise of rights
under a permitted lien, charge or encumbrance shall be subject to the call
rights of the Company and the other Shareholders set forth in Section 3.3
to the fullest extent permitted by applicable law and existing contracts as if
such a transfer constitutes a “Change of Control”.  Any Shareholder whose Shares would be subject
to an Existing Pledge shall use best efforts to cause the pledgee under an
Existing Pledge, prior to any exercise by the pledgee of its rights on the
Shareholder’s Shares, to take all actions under applicable law which are
required to be taken prior to any such exercise, including obtaining any
necessary approvals from the Indiana Department of Insurance and Indiana
Insurance Commissioner.

 

3.2           Preemptive
Rights.

 

(a)        If, at any time after the date hereof,
the Company wishes to issue any capital stock of the Company or any other
securities convertible into or exchangeable or exercisable for capital stock of
the Company (collectively, “New Securities”) to any person or entity
(the “Subject Purchaser”), then the Company shall first offer the
Appropriate Percentage (as defined herein) of the New Securities (the “Allocated
Shares”) to each Shareholder (each, a “Preemptive Rightholder” and
collectively, the “Preemptive Rightholders”) by sending written notice
(the “New Issuance Notice”) to each of the Preemptive Rightholders,
which New Issuance Notice shall state the terms of such proposed issuance,
including the number of New Securities proposed to be issued and the proposed
purchase price per security of the New Securities (the “Proposed Price”).  Upon delivery of the New Issuance Notice,
such offer shall be irrevocable unless and until the Company shall have
terminated the contemplated issuance of New Securities in its entirety at which
time the rights set forth herein shall be applicable to any proposed issuance
subsequent to any such termination.  For
purposes of this Section 3.2, “Appropriate Percentage” shall mean
that percentage of the New Securities determined by dividing (i) the total
number of Shares then owned by a Preemptive Rightholder by (ii) the total
number of Shares owned by all the Preemptive Rightholders.

 

(b)        For a period of 20 days after the giving
of the New Issuance Notice pursuant to Section 3.2(a) (the “Initial
Preemptive Subscription Period”), each of the Preemptive Rightholders shall
have the right to purchase, in whole or in part, the Allocated Shares offered
to such Preemptive Rightholder as determined pursuant to Section 3.2(a) at
a purchase price equal to the Proposed Price and upon the terms and conditions
set forth in the New Issuance Notice.

 

(c)        The right of each Preemptive Rightholder
to purchase the New Securities so offered under Section 3.2(b) shall
be exercisable by delivering written notice of the exercise thereof, prior to
the expiration of the Initial Preemptive Subscription Period, to the Company,
which notice shall state the amount of New Securities that such Preemptive
Rightholder elects to purchase pursuant to Section 3.2(a).  The failure of a Preemptive Rightholder to
respond prior to the expiration of the Initial Preemptive Subscription Period
shall be deemed to be a waiver of such Preemptive Rightholder’s rights under
this Agreement solely with respect to its right to purchase the New Securities
referenced in the New Issuance Notice; provided that each Preemptive
Rightholder may waive its rights under Section 3.2(b) prior to the
expiration of Initial Preemptive Subscription Period by giving written notice
of such waiver to the Company.

 

4

 

(d)        If as of the expiration of the Initial
Preemptive Subscription Period, some but not all of the Preemptive Rightholders
have exercised their right to purchase the full amount of New Securities to
which they are entitled to purchase pursuant to Sections 3.2(b) and (c) (any
such Preemptive Rightholder which has exercised in full its rights to purchase
such New Securities, a “Fully Exercising Preemptive Rightholder”), the
Fully Exercising Preemptive Rightholders shall have the right to purchase, in
whole or in part, their Oversubscription Appropriate Percentage (as defined
herein) of the New Securities which the Preemptive Rightholders did not
exercise their right to purchase pursuant to Sections 3.2(b) and (c) (the
“Undersubscribed Shares”) at a purchase price equal to the Proposed
Price and upon the terms and conditions set forth in the New Issuance
Notice.  The right of the Fully
Exercising Preemptive Rightholders to purchase the Undersubscribed Shares may
be exercised for a period of ten days following the earlier of the expiration
of the Initial Preemptive Subscription Period or the date on which notice is
given by the Company to such Fully Exercising Preemptive Rightholders that all
the Preemptive Rightholders have either exercised their right to purchase the
New Securities pursuant to Sections 3.2(b) and (c) or waived their
rights to purchase any of such New Securities pursuant to Section 3.2(c) (the
“Oversubscription Period”).  For
purposes of this Section 3.2, “Oversubscription Appropriate Percentage”
shall mean that percentage of the Undersubscribed Shares determined by dividing
(i) the total number of Shares then owned by a Fully Exercising Preemptive
Rightholder by (ii) the total number of Shares owned by all the Fully
Exercising Preemptive Rightholders.

 

(e)        The right of each Fully Exercising
Preemptive Rightholder to purchase Undersubscribed Shares pursuant to Section 3.2(d) shall
be exercisable by delivering written notice of the exercise thereof, prior to
the expiration of the Oversubscription Period, to the Company, which notice
shall state the amount of Undersubscribed Shares that such Fully Exercising
Preemptive Rightholder elects to purchase pursuant to Section 3.2(d).  The failure of a Fully Exercising Preemptive
Rightholder to respond prior to the expiration of the Oversubscription Period
shall be deemed to be a waiver of such Fully Exercising Preemptive Rightholder’s
rights under this Agreement solely with respect to its right to purchase the
Undersubscribed Shares included in the New Securities referenced in the New
Issuance Notice; provided that each Fully Exercising Preemptive Rightholder may
waive its rights under Section 3.2(d) prior to the expiration of Oversubscription
Period by giving written notice of such waiver to the Company.

 

(f)         The closing of the purchase of New
Securities subscribed for by the Preemptive Rightholders, including the Fully
Exercising Preemptive Rightholders, pursuant to this Section 3.2 shall be
held at such time and place as the parties to the transaction may reasonably
agree.  At such closing, the New
Securities subscribed for shall be issued by the Company free and clear of all
liens, charges or encumbrances (other than those arising hereunder and those
attributable to actions by the purchasers thereof).  Each Preemptive Rightholder, including each
Fully Exercising Preemptive Rightholder, purchasing the New Securities shall
deliver at the closing payment in full in immediately available funds for the
New Securities purchased by it.  At such
closing, all of the parties to the transaction shall execute such additional
documents as are otherwise necessary, appropriate or customary for similar
financing transactions.  If any
Preemptive Rightholder, including any Fully Exercising Preemptive Rightholder,
fails to purchase any New Securities for which it exercised its right to
purchase pursuant to Sections 3.2(b) and (c) or 3.2(d) and (e),
such New Securities may be purchased by 

 

5

 

the Fully Exercising Preemptive Rightholders
which did purchase all the New Securities for which they exercised their rights
to purchase pursuant to Sections 3.2(b), (c), (d) and (e) in the same
manner provided in this Section 3.2 with respect to Undersubscribed Shares
and the resulting Oversubscription Period with respect to such right to
purchase shall be an “Oversubscription Period” for all instances such term is
used in this Section 3.2. 
Notwithstanding the preceding sentence, the obligations and liability of
any Preemptive Rightholder, including any Fully Exercising Preemptive
Rightholder, which fails to purchase any New Securities for which it exercised
its right to purchase pursuant to Sections 3.2(b) and (c) or 3.2(d) and
(e) shall not be relieved as a result of any Fully Exercising Preemptive
Rightholder’s right to purchase, or any actual purchase by any Fully Exercising
Preemptive Rightholder of, any such New Securities.

 

(g)        Following the expiration of the later of
the Initial Preemptive Subscription Period and, if applicable, the
Oversubscription Period, if the Preemptive Rightholders, including any Fully
Exercising Preemptive Rightholders, did not exercise their right to purchase
any of the New Securities, including the Undersubscribed Shares, which were
originally the subject of the New Issuance Notice, then the Company may sell
the remaining New Securities to the Subject Purchaser on terms and conditions
that are no more favorable to the Subject Purchaser than those set forth in the
New Issuance Notice; provided, however, that such sale is bona fide and made
pursuant to a contract entered into between the Company and the Subject
Purchaser and that such sale is consummated by not later than 90 days following
the earlier to occur of (i) receipt by the Company of written waivers
pursuant to Section 3.2(c) from all the Preemptive Rightholders of
their rights to purchase the Appropriate Percentage of New Securities and, if
applicable, written waivers pursuant to Section 3.2(e) from all the
Fully Exercising Preemptive Rightholders of their rights to purchase the
Oversubscription Appropriate Percentage of New Securities, and (ii) the
expiration of the Oversubscription Period, if applicable, and if not
applicable, the expiration of the Initial Preemptive Subscription Period.  If the sale of any of the New Securities is
not consummated by the expiration of such 90 day period, then the preemptive
rights afforded to the Shareholders under this Section 3.2 shall again become
effective, and no issuance and sale of New Securities may be made thereafter by
the Company without again offering the same in accordance with this Section 3.2.

 

3.3           Change of Control Call Option.

 

(a)        By not later than five days following a
Change of Control (as defined herein or in Section 3.1(b)) of any
Shareholder, such Shareholder shall give the Company and each other Shareholder
notice of such Change of Control and shall disclose the number of Shares and
any other securities of the Company which were owned by the Shareholder as of
immediately prior to such Change of Control of such Shareholder (the “Change
of Control Securities”).  If the
Shareholder fails to give the notice required by the preceding sentence by the
time required thereby, and another Shareholder or the Company is or becomes
aware that such Shareholder underwent a Change of Control, then (i) if it
is a Shareholder that is or becomes aware of such Change of Control, that
Shareholder shall reasonably promptly inform the Company of such Change of
Control and upon the Company being of the reasonable belief that such a Change
of Control has occurred, the Company shall reasonably promptly provide the
notice to the Shareholders that such Shareholder which underwent the Change of
Control failed to provide, or (ii) if it is the Company that is or becomes

 

6

 

aware of such Change of Control, the Company
shall reasonably promptly provide the notice that such Shareholder which
underwent the Change of Control failed to provide.  Any liability of a Shareholder which
undergoes a Change of Control for failure to give the notice required by the
first sentence of this Section 3.3(a) shall not be relieved as a
result of the Company or any other Shareholder being obligated to give, or
giving, the notice required by the second sentence of this Section 3.3(a).

 

(b)                       For a period of 20 days following
the receipt of a notice given pursuant to Section 3.3(a), the Company
shall have the right to purchase from such Shareholder (or its successor, as
applicable), in whole or in part, the Change of Control Securities.  The purchase price for the Change of Control
Securities shall be the book value, as determined in accordance with the
statutory accounting principles applicable to the Company, of the Change of
Control Securities as of the time such Shareholder underwent the Change of Control
(the “Call Option Purchase Price”). 
To exercise its right to purchase the Change of Control Securities, the
Company shall deliver written notice of such exercise to the Shareholder which
underwent the Change of Control and the other Shareholders prior to the
expiration of such 20 day call exercise period. 
The closing for any such exercised call option shall occur on the fifth
business day (or such longer period as may be required by applicable law or in
order to obtain applicable regulatory approval) following receipt of the
Company’s notice of exercise of its call option by the Shareholder which
underwent the Change of Control, or on such other date as may be agreed by the
Company and such Shareholder.  At its
option, the Company may pay in cash the entire amount of the Call Option
Purchase Price at such closing or it may elect to defer any amount of the Call
Option Purchase Price.  Any amounts so
deferred shall bear interest at the Deferred Interest Rate (as defined
herein).  The Company may pay any such
deferred amounts and accrued interest thereon at any time and from time to
time; provided, however, that all such deferred amounts and accrued but unpaid
interest, shall be due and payable on the fifth anniversary of the closing of
the applicable call option exercise.

 

(c)                        Shareholders other than the
Shareholder which underwent the Change of Control shall have the right to
purchase, in whole or in part, any Change of Control Securities not elected to
be purchased by the Company pursuant to Section 3.3(b) at a price
equal to the Call Option Purchase Price. 
To exercise its right to purchase the Change of Control Securities, the
applicable Shareholder shall deliver written notice of such exercise to the
Shareholder which underwent the Change of Control, the Company and the other
Shareholders by not later than the 20 days following the earlier of (i) the
expiration of the 20 day period during which the Company has the right to
exercise its call option for the Change of Control Securities pursuant to Section 3.3(b) and
(ii) the date the Company waives its right to purchase such Change of Control
Securities and has given notice of the same to all the Shareholders (such
deadline for exercising a right to purchase Change of Control Securities
referred to as the “Call Option Exercise Deadline”).  The notice of exercise shall indicate the
number of Change of Control Securities that the Shareholder seeks to
purchase.  If the aggregate number of
Change of Control Securities sought to be purchased by the exercising
Shareholders (determined by adding all the eligible securities each Shareholder
states it seeks to purchase in its notice of exercise) exceeds the actual
number of Change of Control Securities eligible for purchase, the number of
Change of Control Securities which may be purchased by a particular applicable
Shareholder shall be reduced by an amount equal to the product of the aggregate
number of such excess Change of Control Securities sought to be purchased by
all the exercising Shareholders 

 

7

 

multiplied by the quotient of (x) the number
of Shares owned by all eligible Shareholders which are exercising their call
option rights minus the number of Shares owned by the particular
applicable exercising Shareholder divided by (y) the number of
Shares owned by all eligible Shareholders which are exercising their call
option rights, with any such result rounded up or down to the nearest whole
share as reasonably determined by the Company. 
The closing of any such exercised call option shall occur on the fifth
business day (or such longer period as may be required by applicable law or in
order to obtain applicable regulatory approval) following the Call Option
Exercise Deadline, or on such other date as may be agreed by the exercising
Shareholder, the Company and the Shareholder which underwent the Change of
Control.  At its option, the exercising
Shareholder may pay in cash the entire amount of the Call Option Purchase Price
at such closing or it may elect to defer any amount of the Call Option Purchase
Price.  Any amounts so deferred shall
bear interest at the Deferred Interest Rate. 
The exercising Shareholder may pay any such deferred amounts and accrued
interest thereon at any time and from time to time; provided, however, that all
such deferred amounts and accrued but unpaid interest, shall be due and payable
on the fifth anniversary of the closing of the applicable call option exercise.

 

(d)                       Definitions. 
For purposes of this Section 3.3, the following terms have the
meanings set forth below:

 

(i)             “Change of Control” means (A) the
acquisition by any person or entity, or two or more persons or entities acting
in concert, of beneficial ownership (such term, for purposes of this Section 3.3(d)(i),
having the meaning provided such term in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of 9.8% or more, or rights, options or
warrants to acquire 9.8% or more, or any combination thereof, of the
outstanding shares of voting stock or other voting interests of the
Shareholder, including voting proxies for such shares, or the power to direct
the management and policies of the Shareholder, directly or indirectly,
excluding with respect to RMR, any person or entity, or two or more persons or
entities acting in concert, beneficially owning 9.8% or more of RMR’s
outstanding voting interests as of the date of this Agreement, (B) the
merger or consolidation of the Shareholder with or into any other person or
entity (other than the merger or consolidation of any person or entity into the
Shareholder that does not result in a Change in Control of the Shareholder
under clauses (A), (C), (D) or (E) of this definition), (C) any
one or more sales or conveyances to any person or entity of all or any material
portion of the assets (including capital stock or other equity interests) or
business of the Shareholder, (D) the cessation, for any reason, of the
individuals who at the beginning of any 38 consecutive month period constituted
the board of directors (or analogous governing body) of the Shareholder
(together with any new directors (or analogous position) whose election by such
board or whose nomination for election by the shareholders of the Shareholder
was approved by a vote of a majority of the directors (or analogous position)
then still in office who were either directors (or analogous position) at the
beginning of any such period or whose election or nomination for election was
previously so approved) to constitute a majority of the board of directors (or
analogous governing body) of the Shareholder then in office or (E) in
respect of a Shareholder other than RMR, the termination (including by means of
nonrenewal) of the Shareholder’s management agreement with RMR by such
Shareholder or, in response to a breach of such agreement by such Shareholder,
by RMR; provided, however, a Change of 

 

8

 

Control shall not include:  (1) the acquisition by any person or
entity, or two or more persons or entities acting in concert, of beneficial
ownership of 9.8% or more of the outstanding shares of voting stock or other
voting interests of a Shareholder if such acquisition is approved by the
governing board of such Shareholder in accordance with the organizational
documents of such Shareholder and if such acquisition is otherwise in
compliance with applicable law; (2) the merger or consolidation of a
Shareholder with one or more other Shareholders or wholly owned subsidiaries of
any such Shareholders; or (3) a Change of Control which is approved by
Shareholders owning 75% of the Shares owned by all Shareholders.

 

(ii)          “Deferred Interest Rate” means the London
Interbank Offered Rate (rounded upward, if necessary, to the nearest 1/100th of 1%) appearing on Reuters Screen LIBO Page (or
any successor page) as the London interbank offered rate for three month
deposits in U.S. dollars at approximately 11:00 a.m. (London time) two
days prior to applicable closing date (provided that if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates), plus 100 basis points, and this rate
shall be adjusted in three month intervals thereafter, in accordance with the
foregoing, with such adjustment date being treated as an “applicable closing
date” for purposes of determining the adjusted rate in accordance with the
foregoing, for so long as any deferred amount pursuant to Sections 3.2(b) or
3.2(c) may be unpaid.

 

3.4                                 Permitted New
Issuance of Shares.  The prohibition
on transfer of Shares, the preemptive rights and the change of control call
options created by Sections 3.1, 3.2 and 3.3 of this Article III shall not
apply to any sale of Shares by the Company, or by any Shareholder or
Shareholders, if the Shares are sold to an entity which is managed by RMR that
purchases insurance from the Company, provided that any such sale does not
reduce the ownership of any Shareholder to less than ten percent (10%) of the
Company’s outstanding voting Shares.

 

ARTICLE IV

 

SPECIAL SHAREHOLDER APPROVAL REQUIREMENTS.

 

4.1                                 Special Shareholder
Approval Requirements.  For so long
as the Shareholders beneficially own a majority of the Company’s issued and
outstanding Shares, no action by the Company shall be taken with respect to any
of the following matters without the prior affirmative approval of Shareholders
owning 75% of the Shares owned by all the Shareholders:

 

(a)                        any amendment to the articles of
incorporation or bylaws of the Company;

 

(b)                       any merger of the Company;

 

(c)                        the sale of all or substantially all
of the Company’s assets;

 

(d)                       any reorganization or
recapitalization of the Company; or

 

9

 

(e)                        any liquidation or dissolution of
the Company.

 

If applicable law permits any of the
foregoing actions to be taken by the Company without a shareholders vote, the
vote of all directors of the Company designated by a Shareholder shall be
considered the vote of the Shareholder for purposes of any such action.

 

ARTICLE V

 

OTHER COVENANTS AND AGREEMENTS

 

5.1                                 Organizational
Documents.  Subject to applicable
law, each Shareholder shall vote its Shares or execute any consents necessary,
and shall take all other actions necessary, to ensure that the Company’s
organizational documents facilitate, and do not at any time conflict with any
provision of, this Agreement or any applicable law, and to ensure that the
provisions hereof are implemented notwithstanding any inconsistent provision in
the Company’s organizational documents. 
The parties hereto agree to amend, if necessary, the Company’s
organizational documents to conform to the provisions set forth in this
Agreement, to the extent permitted by applicable law.  In the event of any actual or apparent
inconsistency between this Agreement and the organizational documents, then, as
among the Shareholders, to the extent permitted by applicable law, this
Agreement shall control.

 

5.2                                 Reports and
Information Access.  For so long as a
Shareholder owns not less than 10% of all the issued and outstanding Shares,
the Company shall provide periodically, through the director(s) designated
by such Shareholder under Section 2.1, to the Shareholder financial
information regarding the Company and its operations and the Company shall
permit the Shareholder and its representatives reasonable access to the
financial reports and records of the Company so that the Shareholder may comply
with its financial reporting and tax reporting obligations and procedures, and
disclosure obligations under the federal securities laws and other applicable
laws.

 

5.3                                 Compliance with
Laws.  The Company shall comply in
all material respects with all applicable laws governing its business and
operations.  Except as provided in Section 5.7,
if a Shareholder, by virtue of such Shareholder’s ownership interest in the
Company or actions taken by the Shareholder affecting the Company, triggers the
application of any requirement or regulation of any federal, state, municipal
or other governmental or regulatory body on the Company or any subsidiary of
the Company or any of their respective businesses, assets or operations,
including any obligations to make any filing with or otherwise notifying or
obtaining the consent, approval or other action of any federal, state,
municipal or other governmental or regulatory body, such Shareholder shall
promptly take all actions necessary and fully cooperate with the Company to
ensure that such requirements or regulations are satisfied without restricting,
imposing additional obligations on or in any way limiting the business, assets,
operations or prospects of the Company or any subsidiary of the Company.  Each Shareholder shall use best efforts to
cause its shareholders, directors (or analogous position), nominees for
director (or analogous position), officers, employees and agents to comply with
any applicable laws impacting the Company or any of its subsidiaries or their
respective businesses, assets or operations.

 

10

 

5.4                                 Cooperation;
Further Assurances.

 

(a)                        The Shareholders shall cooperate
with each other and the Company in furtherance of the Company’s underwriting of
insurance policies and coverage with respect to the Shareholders and their
respective businesses, assets and properties as well as in furtherance of the
development and execution of the Company’s business as an insurer.  The Shareholders intend to transition (but
shall not be obligated to do so) their applicable insurance policies and
coverage to the Company so that the Company or its third party agents or contracting
parties shall become the underwriters of such current and future policies and
coverage.

 

(b)                       Each of the parties shall execute
such documents and perform such further acts (including obtaining any consents,
exemptions, authorizations or other actions by, or giving any notices to, or
making any filings with, any governmental authority) as may be reasonably
required or desirable to carry out or to perform the provisions of this
Agreement or the transactions contemplated hereby, including in connection with
any subsequent exercise by a party of a right afforded hereunder to such party.

 

5.5                                 Confidentiality.  Except as may be required by applicable law
or the rules of any national securities exchange upon which a party’s
shares are listed for trading, none of the parties hereto shall make any
disclosure concerning this Agreement, the transactions contemplated hereby or
the business, operations and financial affairs of the Company without prior
approval by the other parties hereto; provided, however, that nothing in this
Agreement shall restrict any of the parties from disclosing information (a) that
is already publicly available, (b) that was known to such party on a
non-confidential basis prior to any relevant disclosure, (c) that may be
required or appropriate in response to any summons or subpoena or in connection
with any litigation, provided that such party will use reasonable efforts to
notify the other party in advance of such disclosure so as to permit the other
party to seek a protective order or otherwise contest such disclosure, and such
party will use reasonable efforts to cooperate, at the expense of the other
party, with the other party in pursuing any such protective order, (d) to
the extent that such party reasonably believes it appropriate in order to
protect its investment in its Shares in order to comply with any applicable
law, (e) to such party’s officers, directors, trustees, advisors,
employees, auditors or counsel or (f) as warranted pursuant to the parties’
disclosure obligations under federal securities laws.

 

5.6                                 Required Regulatory
Approvals.  Certain transactions
required, permitted or otherwise contemplated by this Agreement may under
certain circumstances require prior filings with and approvals, or
non-disapprovals, from the Indiana Department of Insurance or the Indiana
Insurance Commissioner.  Such
transactions include: (a) issuance or purchase of any additional capital
stock of the Company or other securities convertible into or exchangeable or
exercisable for capital stock of the Company pursuant to Sections 1.2 or 3.4; (b) transfer
of Shares to a wholly owned subsidiary of a Shareholder, to another Shareholder
or to a wholly owned subsidiary of another Shareholder pursuant to Sections 3.1(a) or
3.4; (c) exercise of preemptive rights by a Shareholder pursuant to Section 3.2;
and (d) exercise of call rights by the Company or a Shareholder pursuant
to Section 3.3 (including pursuant to the two provisos in Section 3.1(b)).  Notwithstanding anything to the contrary
contained in this Agreement, any such transactions requiring filings with and
approvals, or non-disapprovals, from the Indiana Department of Insurance or the
Indiana Insurance Commissioner shall not, to the extent within 

 

11

 

the control of a party hereto, be entered into or consummated unless
and until the required filings have been made and the required approvals (or
non-disapprovals) have been obtained, and to the extent not within the control
of an applicable party hereto, such party shall use best efforts to cause such
transactions not to be entered into or consummated unless and until the
required filings have been made and the required approvals (or
non-disapprovals) have been obtained.

 

5.7                                 REIT Matters.  At the request of any Shareholder that
intends (for itself or for any of its affiliates) to qualify and be taxed as a
real estate investment trust under the Internal Revenue Code of 1986, as
amended (the “Code”), the Company shall (a) join with such
Shareholder (or, as applicable, such Shareholder’s affiliate) in making a “taxable
REIT subsidiary” election under Section 856(l) of the Code and (b) otherwise
reasonably cooperate with any request of such Shareholder (or its affiliate)
pertaining to such real estate investment trust status or taxation under the
Code.

 

ARTICLE VI

 

REPRESENTATIONS AND WARRANTIES

 

6.1                                 The Company.  The Company represents and warrants to each
Shareholder, as of the date of this Agreement and as of the date of the closing
of the issuance, sale and purchase of Shares (unless any such representation or
warranty speaks as of another date, in which case, as of such date) pursuant to
Section 1.1(b), as follows:

 

(a)                        Organization, Existence, Good
Standing and Power.  The Company is an Indiana insurance company
duly organized, validly existing and in good standing under the laws of the
State of Indiana and has the power and authority to execute, deliver and
perform its obligations under this Agreement.

 

(b)                       Capitalization; Subsidiaries.

 

(i)             As of immediately prior to the execution and delivery
of this Agreement, there are no securities of the Company issued and
outstanding.  Except as provided and
contemplated by this Agreement, as of the date of this Agreement, the Company
has no commitment or arrangement to issue securities of the Company to any
person or entity.

 

(ii)          As of the date of this Agreement, the Company has no
subsidiaries.

 

(c)                        Valid Issuance of Shares. 
The Shares being purchased by the Shareholders hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable law.

 

12

 

(d)                       Binding Effect. 
This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors’ rights generally or by equitable principles relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity).

 

(e)                        No Contravention. 
The execution and delivery of this Agreement by the Company and the
performance of its obligations hereunder and the consummation by the Company of
the transactions contemplated by this Agreement and compliance by the Company
with the provisions of this Agreement (i) have been duly authorized by all
necessary company action, (ii) do not contravene the terms of the Company’s
organizational documents, (iii) do not materially violate, conflict with
or result in any breach or contravention of, or the creation of any material
lien, charge or encumbrance under, any material agreement, contract, license,
permit or instrument to which the Company is a party or by which the Company or
any of its assets or properties are bound and (iv) do not materially
violate any law, statute, regulation, order or decree applicable to, or binding
upon, the Company or any of its assets or properties.

 

(f)                          Consents. 
No approval, consent, compliance, exemption, authorization or other
action by, or notice to, or filing with, any local, state or federal
governmental authority or any other person or entity (individually and
collectively, a “Consent”), not already obtained or made, and no lapse
of a waiting period under any applicable law, statute, regulation, order or
decree, is necessary or required in connection with the execution, delivery or
performance by the Company of this Agreement or the transactions contemplated
hereby; provided, however, that the foregoing representation and warranty shall
not apply to any Consent which may be required in the future as a result of the
application of the rights and obligations provided for hereunder or the
conducting of the Company’s business.

 

(g)                        Compliance with Laws. 
The Company is in compliance in all material respects with all
applicable laws, statutes, regulations, orders or decrees applicable to, or
binding upon, the Company or any of its assets or properties.

 

(h)                        Offering. 
Subject to the accuracy of the Shareholder’s representations and warranties
set forth in Sections 6.2(f) through 6.2(i), the offer, sale and issuance
of the Shares to be issued in conformity with the terms of this Agreement
constitute transactions which are exempt from the registration requirements of
the Securities Act of 1933, as amended (the “Securities Act”), and from
all applicable state registration or qualification requirements.  Neither the Company nor any person or entity
acting on its behalf will take any action that would cause the loss of such exemption.

 

(i)                            No Integration. 
The Company has not, directly or through any agent, sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be integrated with
the Shares sold pursuant to this Agreement in a manner that would require the
registration of the Shares under the Securities Act.

 

13

 

6.2                                 The Shareholders.  Each Shareholder represents and warrants to
the Company and the other Shareholders, as of the date of this Agreement and as
of the date of the closing of the issuance, sale and purchase of Shares
pursuant to Section 1.1(b), as follows:

 

(a)                        Organization, Existence, Good
Standing and Power.  The Shareholder (i) is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation; (ii) has all requisite power and authority
to conduct the business in which it is currently engaged; and (iii) has
the power and authority to execute, deliver and perform its obligations under
this Agreement.

 

(b)                       Binding Effect. 
This Agreement has been duly executed and delivered by the Shareholder
and constitutes the legal, valid and binding obligations of the Shareholder,
enforceable against it in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors’ rights generally or by equitable principles relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity).

 

(c)                        No Contravention. 
The execution and delivery of this Agreement by the Shareholder and the
performance of its obligations hereunder and the consummation by the
Shareholder of the transactions contemplated by this Agreement and compliance
by the Shareholder with the provisions of this Agreement (i) have been
duly authorized by all necessary company action, (ii) do not contravene
the terms of the Shareholder’s organizational documents, (iii) do not
materially violate, conflict with or result in any breach or contravention of,
or, except with respect to any Existing Pledge which the Shareholder or any of
its assets or properties may be subject, the creation of any material lien,
charge or encumbrance under, any material agreement, contract, license, permit
or instrument to which the Shareholder is a party or by which the Shareholder
or any of its assets or properties are bound and (iv) do not materially
violate any law, statute, regulation, order or decree applicable to, or binding
upon, the Shareholder or any of its assets or properties.

 

(d)                       Consents. 
No Consent, not already obtained or made, and no lapse of a waiting
period under any applicable law, statute, regulation, order or decree, is
necessary or required in connection with the execution, delivery or performance
by the Shareholder of this Agreement or the transactions contemplated hereby;
provided, however, that the foregoing representation and warranty shall not
apply to any Consent which may be required in the future as a result of the
application of the rights and obligations provided for hereunder or the
conducting of the Company’s business.

 

(e)                         Compliance with Laws. 
The Shareholder is in compliance in all material respects with all
applicable laws, statutes, regulations, orders or decrees applicable to, or
binding upon, the Shareholder or any of its assets or properties.

 

(f)                           Purchase Entirely for Own Account. 
The Shares are being acquired for investment for the Shareholder’s own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and the Shareholder has no present intention
of selling, granting any participation with respect to or otherwise
distributing the Shares.  The 

 

14

 

Shareholder does not have any contract,
undertaking, agreement or arrangement with any person or entity to sell or
transfer to any person or entity, or grant participation rights to any person
or entity with respect to, any of the Shares.

 

(g)                        Disclosure of Information. 
The Shareholder has received all the information from the Company and
its management that the Shareholder considers necessary or appropriate for
deciding whether to purchase the Shares hereunder.  The Shareholder further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the Company, its financial condition, results of operations and
prospects and the terms and conditions of the offering of the Shares sufficient
to enable it to evaluate its investment.

 

(h)                        Investment Experience and Accredited
Investor Status.  The Shareholder is an “accredited investor”
(as defined in Regulation D under the Securities Act).  The Shareholder has such knowledge and
experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Shares to be purchased hereunder.

 

(i)                            Restricted Securities.   
The Shareholder understands that the Shares, when issued, shall be “restricted
securities” under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws the Shares may be resold without registration under the
Securities Act only in certain limited circumstances.

 

ARTICLE VII

 

TERMINATION

 

7.1                                 Termination.  This Agreement shall remain in full force and
effect until the sooner of:  (a) its
termination pursuant to the next succeeding sentence of this Section 7.1
or (b) the dissolution of the Company; provided, however, that the
dissolution of the Company, the merger of the Company with, or the transfer of
all or substantially all the assets of the Company to, another entity which
continues substantially all of the Company’s business shall not of itself
terminate this Agreement.  This Agreement
may be terminated at any time by the Shareholders owning at least 75% of the
issued and outstanding Shares owned by all Shareholders.  Section 5.5 and Article VIII shall
survive any termination or expiration of this Agreement.

 

ARTICLE VIII

 

MISCELLANEOUS

 

8.1                                 Notices.  Any notices or other communications required
or permitted under, or otherwise in connection with, this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person,
upon confirmation of receipt when transmitted by facsimile transmission, on the
next business day if transmitted by a nationally recognized overnight courier
or on the third business day following mailing by first class mail, postage 

 

15

 

prepaid, in each case as follows (or at such other United States
address or facsimile number for a party as shall be specified by like notice):

 

Notices to the
Company:

 

Affiliates Insurance Company

101 West Washington Street, Suite 1100

Indianapolis, Indiana 46204

Attention:  President/Vice President

Facsimile No.:   (317) 632-2883

 

with a copy to:

 

Affiliates
Insurance Company

400 Centre Street

Newton, Massachusetts 02458

Attention:  President/Vice President

Facsimile No.:  (617) 928-1305

 

Notices to
FVE:

 

Five Star Quality Care, Inc.

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 796-8385

 

Notices to
HPT:

 

Hospitality Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 969-5730

 

Notices to
HRP:

 

HRPT
Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 332-2261

 

16

 

Notices to SNH:

 

Senior Housing Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 796-8349

 

Notices to TA:

 

TravelCenters of America LLC

24601 Center Ridge Road, Suite 200

Westlake, Ohio 44145

Attention:  President

Facsimile No.:  (440) 808-3301

 

and

 

Notices to RMR:

 

Reit Management & Research LLC

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 928-1305

 

8.2                                 Successors and
Assigns; Third Party Beneficiaries. 
This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of the parties hereto.  Except as permitted by Section 3.1, no
party may assign this Agreement or its rights hereunder or delegate its duties
hereunder without the written consent of the other parties.  No person or entity other than the parties
hereto and their successors and permitted assigns is intended to be a beneficiary
of this Agreement.

 

8.3                                 Amendment and
Waiver.

 

(a)                        No failure or delay on the part of
any party in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.  The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to each party at law, in equity or otherwise.  Any party hereto may waive in whole or in
part any right afforded to such party hereunder.

 

(b)                       Any amendment, supplement or
modification of or to any provision of this Agreement, shall be effective upon
the written agreement of the Company and the Shareholders owning not less than
75% of all Shares owned by the Shareholders; provided, however, that any
amendment, supplement or modification of Article I or Article II
shall require the approval of any Shareholder which may be adversely affected by
any such amendment, supplement or modification.

 

17

 

8.4                                 Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

8.5                                 Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

8.6                                 Governing Law.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Indiana without regard to the conflicts of laws rules thereof,
which would require the application of the laws of another jurisdiction.

 

8.7                                 Dispute Resolution

 

(a)                                  Any disputes, claims or
controversies among any of the parties hereto arising out of or relating to
this Agreement, the Company, its business, assets or operations or any
insurance policies or coverage underwritten by the Company or any of its third
party agents in furtherance of the Company’s insurance business, including any
claims or disputes, whether in contract, tort, equity or otherwise and whether
relating to the meaning, interpretation, effect, validity, performance or
enforcement of this Agreement (all of which are referred to as “Disputes”)
shall be resolved through binding and final arbitration in accordance with the
Expedited Procedures of the Commercial Arbitration Rules (the “Rules”)
of the American Arbitration Association (“AAA”) then in effect, except
as modified herein.

 

(b)                                 There shall be three
arbitrators.  If there are only two
parties to the Dispute, each party shall select one arbitrator within 15 days
after receipt by respondent of a copy of the demand for arbitration.  The two party-nominated arbitrators shall
jointly nominate the third and presiding arbitrator within 15 days of the
nomination of the second arbitrator. If any arbitrator has not been nominated
within the time limit specified herein, then the AAA shall provide a list of
proposed arbitrators in accordance with the Rules and the arbitrator shall
be appointed by the AAA in accordance with a listing, striking and ranking
procedure, with each party having a limited number of strikes, excluding strikes
for cause.  If there are more than two
parties to the Dispute, all claimants on the one hand and all respondents, on
the other hand, shall each select one arbitrator and the two party-nominated
arbitrators shall jointly nominate the third and presiding arbitrator within 15
days of the nomination of the second arbitrator.  If  all
claimants and all respondents are unable to agree on party appointed
arbitrators, within 15 days of receipt by respondent(s) of the demand for
arbitration, the AAA shall provide a list of proposed arbitrators in accordance
with the Rules and all three arbitrators (or a single arbitrator if the
parties so agree) shall be appointed by the AAA in accordance with a listing,
striking and ranking procedure, with each party to the Dispute having a limited
number of strikes, excluding strikes for cause. 
Notwithstanding any provision in the Expedited Procedures to the
contrary, the arbitrator shall be selected from the AAA’s large, complex case
panel and the AAA’s regional office shall have no input into the compensation
of any of the arbitrators.

 

(c)                                  The place of arbitration shall be
Indianapolis, Indiana unless otherwise agreed by the parties to the Dispute.

 

18

 

(d)                                 Consistent with the expedited nature
of the arbitration, there shall be only limited documentary discovery of
documents directly related to the issues in dispute.

 

(e)                                  In rendering an award or decision
(the “Award”), the arbitrators shall be required to follow the laws of the
State of Indiana.  Any arbitration
proceedings or Award rendered hereunder and the validity, effect and
interpretation of this arbitration agreement shall be governed by the Federal
Arbitration Act, 9 U.S.C. §1 et seq.  The
Award shall be in writing and shall briefly state the findings of fact and
conclusions of law on which it is based.

 

(f)                                    Each party shall bear its own costs
in the arbitration, and the arbitrators shall not render an award that would
include shifting of such costs.

 

(g)                                 The Award shall be final and binding
upon the parties to the Dispute and shall be the sole and exclusive remedy
between the parties relating to the Dispute, including any claims,
counterclaims, issues or accounting presented to the arbitrators.  Judgment upon the Award may be entered in any
court having jurisdiction.  The parties
hereby waive any rights of application or appeal to any court of competent
jurisdiction to the fullest extent permitted by law in connection with any question
of law arising in the course of arbitration or with respect to any award made
except for actions relating to enforcement of this agreement to arbitrate or
any arbitral award issued hereunder and except for actions seeking interim or
other provisional relief in aid of arbitration proceedings in any court of
competent jurisdiction.

 

(h)                                 Any monetary award shall be made and
payable in U.S. dollars free of any tax, deduction or offset.  Each party against which the Award assesses a
monetary obligation shall pay that obligation on or before the 30th day following the date of the Award or such
other date as the Award may provide.

 

8.8                                 Interpretation and
Construction.

 

(a)                        The words “hereof”, “herein”,
“hereby”
and “hereunder”
and words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.

 

(b)                       Unless the context otherwise
requires, references to sections, subsections or Articles refer to sections,
subsections or Articles of this Agreement.

 

(c)                        Terms defined in the singular shall
have a comparable meaning when used in the plural, and vice versa.

 

(d)                       The words “include” and “including”
and words of similar import shall be deemed to be followed by the words “without
limitation”.

 

(e)                        Words importing gender include both
genders.

 

(f)                          Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession
of 

 

19

 

comparable successor statutes and references
to all attachments thereto and instruments incorporated therein.  In addition, references to any statute are to
that statute and to the rules and regulations promulgated thereunder.

 

(g)                       The parties hereto have participated
jointly in the negotiation and drafting of this Agreement and, in the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as jointly drafted by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement.

 

8.9                              Severability.  If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions hereof.

 

8.10                           Entire Agreement.  This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement.

 

8.11                           Non-liability of Trustees
and Directors.

 

(a)                        COPIES OF THE DECLARATIONS OF TRUST,
AS IN EFFECT ON THE DATE HEREOF, OF HPT, HRP AND SNH, TOGETHER WITH ALL
AMENDMENTS AND SUPPLEMENTS THERETO, ARE DULY FILED IN THE OFFICE OF THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND.  THE DECLARATIONS OF TRUST, AS AMENDED AND
SUPPLEMENTED, OF HPT, HRP AND SNH, PROVIDE THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF HPT, HRP OR SNH, AS APPLICABLE, SHALL BE HELD
TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR
CLAIM AGAINST, HPT, HRP OR SNH.  ALL
PERSONS DEALING WITH HPT, HRP OR SNH IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS
OF HPT, HRP OR SNH, AS APPLICABLE, FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE
OF ANY OBLIGATION.

 

(b)                       A COPY OF THE ARTICLES OF
INCORPORATION, AS IN EFFECT ON THE DATE HEREOF, OF FVE, TOGETHER WITH ALL
AMENDMENTS AND SUPPLEMENTS THERETO, IS DULY FILED IN THE OFFICE OF THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND.  NO DIRECTOR, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF FVE SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY,
FOR ANY OBLIGATION OF, OR CLAIM AGAINST, FVE. 
ALL PERSONS DEALING WITH FVE, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS
OF FVE FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

 

20

 

(c)                        A COPY OF THE LIMITED LIABILITY
COMPANY AGREEMENT, AS IN EFFECT ON THE DATE HEREOF, OF TA, TOGETHER WITH ALL
AMENDMENTS THERETO, IS AVAILABLE TO A SHAREHOLDER PARTY HERETO UPON WRITTEN
REQUEST MADE TO TA.  NO DIRECTOR,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF TA SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TA.  ALL PERSONS DEALING WITH TA, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF TA FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.

 

[The
Remainder of This Page Intentionally Left Blank]

 

21

 

IN WITNESS WHEREOF, the undersigned have
executed, or have caused to be executed, this Shareholders Agreement on the
date first written above.

 

 

	
   

  	
  AFFILIATES INSURANCE COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jennifer B. Clark

  
	
   

  	
  Name: Jennifer B. Clark

  
	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
  FIVE STAR QUALITY CARE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J. Mackey Jr.

  
	
   

  	
  Name: Bruce J. Mackey Jr.

  
	
   

  	
  Title: President and Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  HOSPITALITY PROPERTIES TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John G. Murray

  
	
   

  	
  Name: John G. Murray

  
	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
  HRPT PROPERTIES TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John A. Mannix

  
	
   

  	
  Name: John A. Mannix

  
	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
  SENIOR HOUSING PROPERTIES TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
  Name: David J. Hegarty

  
	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
  TRAVELCENTERS OF AMERICA LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark R. Young

  
	
   

  	
  Name: Mark R. Young

  
	
   

  	
  Title: Executive Vice President and General
  Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  REIT MANAGEMENT & RESEARCH LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark L. Kleifges

  
	
   

  	
  Name: Mark L. Kleifges

  
	
   

  	
  Title: Executive Vice PresidentExhibit 10.14

 

SCIENTIFIC
GAMES CORPORATION

 

ELECTIVE DEFERRED COMPENSATION PLAN

 

Executive Deferred
Compensation Plan

and

Non-Employee
Directors Deferred Compensation Plan

 

(effective January 1, 2005, as amended and restated effective January 1,
2009)

 

 

 

Table of Contents

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  I

  	
  INTRODUCTION

  	
  1

  
	
  1.1

  	
  Purpose; Prior Plan

  	
  1

  
	
  1.2

  	
  New Plan Effective January 1, 2005

  	
  1

  
	
  1.3

  	
  Construction

  	
  1

  
	
  1.4

  	
  Separate Plans for Executives and Non-Employee
  Directors

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  	
  DEFINITIONS

  	
  2

  
	
  2.1

  	
  Account

  	
  2

  
	
  2.2

  	
  Change in Control Event

  	
  2

  
	
  2.3

  	
  Code

  	
  3

  
	
  2.4

  	
  Company

  	
  3

  
	
  2.5

  	
  Compensation

  	
  3

  
	
  2.6

  	
  Disability

  	
  3

  
	
  2.7

  	
  Election Form

  	
  4

  
	
  2.8

  	
  Elective Deferral

  	
  4

  
	
  2.9

  	
  Eligible Individual

  	
  4

  
	
  2.10

  	
  Employer

  	
  4

  
	
  2.11

  	
  Employment

  	
  4

  
	
  2.12

  	
  ERISA

  	
  4

  
	
  2.13

  	
  Investment Vehicle

  	
  4

  
	
  2.14

  	
  Participant

  	
  4

  
	
  2.15

  	
  Performance Bonus

  	
  4

  
	
  2.16

  	
  Plan

  	
  4

  
	
  2.17

  	
  Plan Administrator

  	
  4

  
	
  2.18

  	
  Regulations

  	
  4

  
	
  2.19

  	
  Separation from Service

  	
  5

  
	
  2.20

  	
  Specified Distribution Date

  	
  5

  
	
  2.21

  	
  Specified Employee

  	
  6

  
	
  2.22

  	
  Subsidiary

  	
  6

  
	
  2.23

  	
  Subsidiary Change in Control Event

  	
  6

  
	
  2.24

  	
  Trust

  	
  6

  
	
  2.25

  	
  Trustee

  	
  6

  
	
  2.26

  	
  Unforeseeable Emergency

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
  PARTICIPATION

  	
  6

  
	
  3.1

  	
  Eligible Individuals

  	
  6

  
	
  3.2

  	
  Commencement of Participation

  	
  7

  
	
  3.3

  	
  Continued Participation

  	
  7

  

 

 

Table of Contents

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
  DEFERRAL ELECTIONS

  	
  8

  
	
  4.1

  	
  Deferrals of Salary

  	
  8

  
	
  4.2

  	
  Deferrals of Cash Bonuses

  	
  8

  
	
  4.3

  	
  Deferrals of Director’s Compensation

  	
  8

  
	
  4.4

  	
  New Mid-Year Eligibles

  	
  8

  
	
  4.5

  	
  New Outside Directors

  	
  9

  
	
  4.6

  	
  Mechanics of Deferral

  	
  9

  
	
  4.7

  	
  Irrevocability

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V

  	
  ACCOUNTS

  	
  9

  
	
  5.1

  	
  Accounts

  	
  9

  
	
  5.2

  	
  Deemed Investment of Accounts

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  	
  VESTING

  	
  10

  
	
  6.1

  	
  General

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
  DISTRIBUTION EVENTS

  	
  10

  
	
  7.1

  	
  Specified Distribution Date

  	
  10

  
	
  7.2

  	
  Separation from Service

  	
  11

  
	
  7.3

  	
  Change in Control Event

  	
  11

  
	
  7.4

  	
  Disability

  	
  11

  
	
  7.5

  	
  Death

  	
  11

  
	
  7.6

  	
  Beneficiaries

  	
  11

  
	
  7.7

  	
  Unforeseeable Emergency

  	
  12

  
	
  7.8

  	
  Medium of Distribution

  	
  13

  
	
  7.9

  	
  Actual Payment Date

  	
  13

  
	
  7.10

  	
  Taxes

  	
  13

  
	
  7.11

  	
  Acceleration generally prohibited

  	
  13

  
	
  7.12

  	
  Delay under Section 162(m)

  	
  13

  
	
  7.13

  	
  Delays to comply with Securities and other Laws

  	
  14

  
	
  7.14

  	
  Transition Rule Elections

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
  PLAN ADMINISTRATOR

  	
  14

  
	
  8.1

  	
  Plan Administration and Interpretation

  	
  14

  
	
  8.2

  	
  Powers, Duties, Procedures, Etc.

  	
  15

  
	
  8.3

  	
  Information

  	
  15

  
	
  8.4

  	
  Indemnification of Plan Administrator

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IX

  	
  AMENDMENT AND TERMINATION

  	
  15

  
	
  9.1

  	
  Amendments

  	
  15

  
	
  9.2

  	
  Termination of Plan

  	
  15

  

 

ii

 

Table of Contents

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Existing Rights

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  X

  	
  MISCELLANEOUS

  	
  16

  
	
  10.1

  	
  No Funding

  	
  16

  
	
  10.2

  	
  Non-Assignability

  	
  16

  
	
  10.3

  	
  Limitation of Participants’ Rights

  	
  16

  
	
  10.4

  	
  Participants Bound

  	
  17

  
	
  10.5

  	
  Release

  	
  17

  
	
  10.6

  	
  Administrative Processing Considerations

  	
  17

  
	
  10.7

  	
  Correction of Error

  	
  17

  
	
  10.8

  	
  Governing Law

  	
  18

  
	
  10.9

  	
  Headings and Subheadings

  	
  18

  

 

iii

 

SCIENTIFIC GAMES CORPORATION

ELECTIVE DEFERRED COMPENSATION PLAN

Executive Deferred
Compensation Plan

and

Non-Employee
Directors Deferred Compensation Plan

(effective January 1, 2005, as amended and restated effective January 1,
2009)

 

The
Scientific Games Corporation Elective Deferred Compensation Plan established as
of January 1, 2005 (the “Plan”) is hereby amended and restated in its
entirety to read as follows, effective as of January 1, 2009, except as
otherwise provided.

 

ARTICLE
I

INTRODUCTION

 

1.1          Purpose; Prior
Plan

 

Effective October 8,
1998, Scientific Games Corporation (prior to April 27, 2001, Autotote
Corporation) adopted the Scientific Games Corporation Key Executive Deferred
Compensation Plan (the “Prior Plan”) to provide a means by which eligible
individuals may elect to defer receipt of designated percentages or amounts of
their bonuses, and later, pursuant to amendment effective as of December 11,
2001, to make salary deferrals.  The
Prior Plan as so amended shall continue to be administered in accordance with
the terms in effect on October 3, 2004, but shall be limited in its
application to benefits attributable to deferrals of salary for 2004 or prior
years and bonuses payable for 2004 or prior years (all of which were earned and
vested on December 31, 2004) under the terms of the Company’s Management
Incentive Compensation Program and Compensation Committee action taken
thereunder.

 

1.2          New Plan
Effective January 1, 2005

 

Effective January 1,
2005, this Plan, which shall be known as the Scientific Games Corporation
Elective Deferred Compensation Plan, was adopted to provide benefits
substantially similar to those provided under the Prior Plan on terms modified
to comply with Section 409A
of the Internal Revenue Code of 1986, as amended (“Section 409A”) and regulations
and other guidance thereunder. 
Effective January 1, 2009, this amendment and restatement of the
Plan was adopted in order to comply with the final regulations under Section 409A
(the “Regulations”).

 

1.3          Construction

 

This
Plan shall be administered and interpreted in accordance with Section 409A
and the Regulations.  Accordingly, no
provision hereof shall be construed in any manner that would violate Section 409A
or the Regulations.  In addition, to the
maximum extent permitted by applicable law, no provision of the Plan
inconsistent with Section 409A or the Regulations shall be valid or given
any effect whatever.

 

1

 

1.4          Separate Plans for
Executives and Non-Employee Directors

 

For purposes of ERISA and Section 409A, the Plan
as set forth in this instrument consists of two separate plans, one for
eligible key employees (the “Executive Deferred Compensation Plan”), and one
for non-employee directors (the “Non-Employee Directors Deferred Compensation
Plan”), each governed by those Plan terms which either apply without
distinction to both eligible employees and non-employee directors or apply
specifically to that particular plan.  The Plan with respect to eligible employees
is intended to be a plan that is “unfunded and is maintained by an employer
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees” within the meaning of sections
201(2) and 301(a)(3) of ERISA, and shall be interpreted and
administered to the extent possible in a manner consistent with that intent.

 

1.5          Coordination with CEO
Employment Agreement.

 

Notwithstanding
any other provision of the Plan, the entire benefit accrued and vested under
the Prior Plan as of December 31, 2004 by the Participant serving as Chief
Executive Officer of the Company as of January 1, 2006, pursuant to an
employment agreement with the Company effective as of such date, shall be
payable solely under this Plan (and no portion thereof shall be payable under
the Prior Plan), and the date(s) of payment thereof, other than by reason
of Disability or death, shall be the specified dates of payment (within the
meaning of Section 409A) set forth in the amendment to such employment
agreement executed on May 12, 2008.

 

ARTICLE
II

DEFINITIONS

 

Wherever used herein, the following terms have the meanings set forth
below, unless a different meaning is clearly required by the context:

 

2.1          Account means, for
each Participant, an account maintained on the books and records of the Company
(including participating Subsidiary Employers) and the Trust (if applicable)
that is established for his or her benefit under Section 5.1.

 

2.2          Change in Control Event means
the occurrence of any of the following:

 

(a) any “person”
as defined in section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and as used in sections 13(d) and 14(d) thereof,
including a “group” as defined in section 13(d) of the Exchange Act but
excluding the Company and any subsidiary and any employee benefit plan
sponsored or maintained by the Company or any subsidiary (including any trustee
of such plan acting as trustee), directly or indirectly, becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of
the Company representing at least 40% of the combined voting power of the
Company’s then outstanding securities;

 

(b) the
stockholders of the Company approve a merger, consolidation, recapitalization
or reorganization of the Company, or the consummation of any such transactions
if stockholder 

 

2

 

approval is not obtained,
other than any such transaction which would result in at least 60% of the total
voting power represented by the voting securities of the Company or the
surviving entity outstanding immediately prior to such transaction being
beneficially owned by persons who together beneficially owned at least 80% of
the combined voting power of the securities of the Company outstanding
immediately prior to such transaction; provided that,
for purposes of this paragraph (b), such continuity of ownership (and
preservation of relative voting power) shall be deemed to be satisfied if the
failure to meet such 60% threshold is due solely to the acquisition of voting
securities by an employee benefit plan of the Company or such surviving entity;

 

(c) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the its assets (or any transaction having a similar
effect); or

 

(d) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company (the “Board”), together
with any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described in
paragraph (a), (b), or (c) of this Section) whose election by the Board or
nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election of nomination for
election was previously so approved (the “Continuing Directors”), cease for any
reason to constitute a majority of the Board;

 

provided that in any such
case, such occurrence constitutes a change in control event as defined in the
Regulations.

 

2.3          Code means the
Internal Revenue Code of 1986, as amended from time to time.   Reference to any section or subsection of
the Code includes reference to any comparable or succeeding provisions of any
legislation that amends, supplements or replaces such section or subsection.

 

2.4          Company means
Scientific Games Corporation, a Delaware corporation, and any successor to all
or a major portion of the Company’s assets or business that assumes the
obligations of the Company.

 

2.5          Compensation means (a) for
an employee, salary and bonuses eligible for deferral under Article IV,
and (b) for a non-employee director, fees, retainers, and other cash
compensation for services as such a director. 
The Plan Administrator may limit the Compensation an Eligible Individual
may defer for any calendar year by action taken no later than the December 31
immediately preceding such calendar year, and shall advise the affected
Eligible Individual of any such limitation.

 

2.6          Disability means any
medically determinable physical or mental impairment which can be expected to
result in death or to last for a continuous period of not less than twelve (12)
months, which renders the Participant unable to engage in any substantial
gainful activity or by reason of which the Participant receives income
replacement benefits for a period of not less than

 

3

 

three months under
an accident and health plan of the Employer. 
Notwithstanding the foregoing, a determination of total disability by
the Social Security Administration shall be conclusive proof of Disability.

 

2.7          Election Form means
a deferral election form prescribed by the Plan Administrator.

 

2.8          Elective
Deferral means the portion of Compensation that is deferred by a
Participant under Article IV.

 

2.9          Eligible
Individual means an employee of an Employer, or non-employee
director of the Company, who satisfies the criteria established in Article III.

 

2.10        Employer shall mean the Company and any
Subsidiary which has adopted the Plan with the
approval of the Company, subject to such terms and conditions as may be imposed
by the Company upon the participation in the Plan of such adopting Subsidiary.

 

2.11        “Employment”
and similar terms (without regard to capitalization) shall, in the case of an
eligible employee, mean service for the Company or a Subsidiary prior to
Separation from Service, and in the case of a non-employee director, mean
service for the Company as such director prior to Separation from Service.

 

2.12        ERISA
means the Employee Retirement Income Security Act of 1974, as amended from time
to time.  Reference to any section or
subsection of ERISA includes reference to any comparable or succeeding
provisions of any legislation that amends, supplements or replaces such section
or subsection.

 

2.13        Investment
Vehicle means a theoretical investment made available under the Plan
by the Plan Administrator from time to time in which a Participant’s Account
may be deemed to be invested in accordance with Section 5.2 hereof in
order to measure the value of the Account.

 

2.14        Participant
means any Eligible Individual who participates in the Plan in accordance with Article III.

 

2.15        Performance
Bonus means a bonus for a calendar year that the Plan Administrator
determines qualifies as performance-based compensation under the Regulations,
so that the deadline for making an election to defer the bonus may be up to June 30
of such calendar year, rather than December 31 of the prior year.

 

2.16        Plan
means this Scientific Games Corporation Elective Deferred Compensation Plan,
effective as of January 1, 2005 and restated effective January 1,
2009, as it may be from time to time amended, and comprising the Executive
Deferred Compensation Plan and the Non-Employee Directors Deferred Compensation
Plan (as set forth in Section 1.4).

 

2.17        Plan
Administrator means the person, persons or entity designated by the
Company to administer the Plan and to serve as the agent for the Company with
respect to the Trust as contemplated by the agreement establishing the Trust.

 

2.18        Regulations
mean regulations and other guidance issued by the Treasury or Internal

 

4

 

Revenue Service
under Section 409A. References to a specific section of the Regulations
shall refer to such provision as from time to time in effect or any applicable
successor section.

 

2.19        Separation from Service
means (a) with respect to a Participant other than a non-employee
director, separation from service within the meaning of the Regulations, other than
by reason of death, determined by reference to the presumptive rule of
Treasury Reg. § 1.409A-1(h)(l) (under which a reasonable expectation
of a permanent reduction in the level of services to no more than 20% of the
average level during the prior 36-month or other applicable period is presumed
to result in a separation from service), and (b) with respect to a
non-employee director, separation from service as such a director if the
Participant thereafter neither performs or is expected to perform services for
the Company or any Subsidiary as an independent contractor (or, if the
Participant continues or is expected to perform services as such an independent
contractor, separation from service within the meaning of the applicable
provisions of Treasury Reg. § 1.409A-1(h)).  For purposes of the foregoing,

 

(a)           Controlled
Group.  Whether a separation of
service occurs shall be determined in each case by treating the Company and all
Subsidiaries as single Employer.

 

(b)           Sale
of Subsidiary.  In the event of a
Subsidiary Change in Control Event, distribution shall be made to each
Participant who continues to be employed by the affected Subsidiary immediately
following such event (and who had not previously incurred a Separation from
Service) as if the Participant had thereupon incurred Separation from Service,
except that no six-month delay shall be required pursuant to Section 7.2(a).

 

(c)           Leaves,
etc.  A Participant’s employment
relationship shall be treated as continuing while he or she is on military
leave, sick leave, or other bona fide leave of absence (such as temporary
employment by the government) if the period of such leave does not exceed six
months, or if longer, so long as the Participant’s right to reemployment with
the Employer is provided either by statute or by contract.  If the period of leave exceeds six months and
the Participant’s right to reemployment is not provided either by statute or by
contract, the employment relationship is deemed to terminate immediately
following such six-month period.

 

(d)           Sale
of a division or other substantial assets. 
Notwithstanding the first paragraph of this Section 2.19, a
separation from service shall not occur for purposes of this Plan to the extent
that the Committee determines otherwise in accordance with Treasury Reg.
§ 1.409A-1(h)(4).

 

2.20        Specified Distribution
Date means, with respect to each Elective Deferral (as adjusted for
earnings and losses), the later of:

 

(a)           the
date selected by the Participant prior to the last day prescribed for an
initial deferral election with regard thereto under Section 4.1 – 4.5, as
applicable, which shall (i) be at least three years after the close of the
calendar year in which the amount so deferred was earned or, in the case of
salary deferrals, was otherwise payable (or, if applicable, complies with such
other minimum period of deferral as the Plan Administrator may prescribe), and (ii) be
January 2, in the case of salary deferrals for the calendar years 2005
through 2008, and February 28 for salary deferrals for all subsequent
years and for all bonus deferrals;

 

5

 

(b)           any
later date elected by the Participant under Section 7.1(b).

 

2.21        Specified Employee
means “specified employee” as determined pursuant to procedures adopted by the
Company in accordance with the Regulations for purposes of its nonqualified
deferred compensation plans subject to Section 409A.

 

2.22        Subsidiary means a
subsidiary or affiliate that is a member of the same controlled group as the
Company within the meaning of section 414(b) or (c) of the Code.

 

2.23        Subsidiary Change in
Control Event means a change in control event with respect to a Subsidiary
within the meaning of the Regulations, pursuant to which the Company ceases to
have direct or indirect ownership of at least fifty-one percent (51%) of the
value of the total equity or total combined voting power in respect of the
Subsidiary.

 

2.24        Trust means a domestic
grantor trust within the meaning of section 671 of the Code that is established
by the Company to assist the Employers in meeting their obligations under the
Plan and that identifies the Plan as a plan with respect to which assets are to
be held by the Trustee.   At no time
shall any assets of the Trust be held or located outside of the United States,
and such Trust shall at all times comply with the requirements of Section 409A(b) of
the Code.

 

2.25        Trustee means the
trustee or trustees of the Trust.

 

2.26        Unforeseeable Emergency
shall mean a severe financial hardship of the Participant resulting from an
illness or accident of the Participant or the Participant’s spouse or dependent
(as defined in section 152 of the Code without regard to section 152(b)(1), (b)(2) and
(d)(1)(B)); loss of the Participant’s property due to casualty (including the
need to rebuild a home following damage to a home not otherwise covered by
insurance, for example, as a result of a natural disaster); or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant or his spouse or dependent as determined
in accordance with Treasury Regulation § 1.409A-3(i)(3) (and which
shall not include purchase of a home or the payment of tuition).  Whether a Participant is faced with an
unforeseeable emergency permitting a distribution under this paragraph is to be
determined by the Committee based on the relevant facts and circumstance, but,
in any case, a distribution on account of unforeseeable emergency may not be
made to the extent that such emergency is or may be relieved through
reimbursement or compensation from insurance or otherwise, by liquidation of
the Participant’s assets, to the extent the liquidation of such assets would
not cause severe financial hardship, or by cessation of deferrals under the
Plan.

 

ARTICLE
III

PARTICIPATION

 

3.1          Eligible Individuals

 

The following categories of
individuals are eligible to participate in the Plan for a particular calendar
year:

 

(a)           Each
employee who has been designated as a participant under Tiers I through V 

 

6

 

of the Company’s
Management Incentive Compensation Plan, and any other employee whom the Company
may designate from within
a select group of management or highly compensated employees described in Section 1.4,
and

 

(b)           Each
non-employee member of the Board of Directors of the Company.

 

3.2          Commencement of
Participation

 

Any Eligible Individual who
elects to defer part of his or her Compensation in accordance with Article IV
shall become a Participant in the Plan as of the date such election becomes
irrevocable in accordance with Article IV.

 

3.3          Continued Participation

 

A
Participant in the Plan shall continue to be a Participant so long as any
amount remains credited to his or her Account.

 

7

 

ARTICLE
IV

DEFERRAL ELECTIONS

 

4.1          Deferrals of
Salary

 

An employee who is an
Eligible Individual may elect to defer a specified percentage, not to exceed
50%, of his or her base salary payable for a calendar year by completing an
Election Form and filing it with the Plan Administrator not later than the
last day of preceding calendar year or such earlier deadline as the Plan
Administrator may prescribe.

 

4.2          Deferrals of
Cash Bonuses

 

An employee who is an
Eligible Individual may elect to defer up to 100% of his cash bonus under the
Company’s Management Incentive Compensation Program (and/or any other bonus
program designated by the Company for inclusion in the Plan) calculated with reference to a particular
calendar year (or identifiable portion thereof) by completing an Election Form and
filing it with the Plan Administrator (a) not later than the last day of
the preceding calendar year or such earlier deadline as the Plan Administrator
may prescribe, or (b) if such annual bonus constitutes a Performance Bonus
and the Plan Administrator so permits, not later than June 30 of the
calendar year in respect of which such bonus is payable.

 

4.3          Deferrals of
Director’s Compensation

 

A non-employee
director may elect to defer up to 100% of his or her annual retainer, fees for
attendance at Board or committee meetings, and other cash compensation with
respect to services performed as such a director in any calendar year, by
completing an Election Form and filing it with the Plan Administrator not
later than the last day of the preceding calendar year or such earlier deadline
as the Plan Administrator may prescribe.

 

4.4          New Mid-Year
Eligibles

 

An employee who first
becomes an Eligible Individual as of a date other than the first day of
calendar year, and who was not previously eligible to participate in the Plan
(or Prior Plan) or any other elective account balance nonqualified deferred
compensation plan (a “Similar Plan”) in his or her capacity as an employee of
the Company or any Subsidiary, may elect, by completing an Election Form and
filing it with the Plan Administrator within thirty (30) days after such date,
to defer up to 50% of his or her salary for pay periods in such calendar year
beginning after the date of such election, and up to 100% of his or her cash
bonus for such year under the Company’s Management Incentive Compensation
Program (and/or any other bonus program designated by the Company for
inclusion in the Plan) and
allocable on a prorata basis to the portion of such year following the date of
his or her deferral.  The Plan
Administrator may, in its discretion, extend the application of this Section 4.4
to one or more employees who were formerly eligible to participate in the Plan
or a Similar Plan as an eligible employee but who ceased to be so eligible and
who may be treated as newly eligible employees under Treasury Reg.
§ 1.409A-2(a)(7).

 

8

 

4.5          New Outside Directors

 

A newly elected non-employee director who was not previously eligible
to participate in the Plan by reason of any prior service as a non-employee
director, or in any other elective account balance nonqualified deferred
compensation plan of the Company or any Subsidiary in the capacity of either a
non-employee director or independent contractor (a “Comparable Plan”), may
elect, by completing an Election Form and filing it with the Plan
Administrator within thirty (30) days after becoming such a director, to defer
up to 100% of the retainer, fees and other cash compensation payable in respect
of services performed as a director during the year of such election and
following the date of his or her deferral election.  The Plan Administrator may, in its
discretion, extend the application of this Section 4.5 to an individual
who was formerly eligible to participate in the Plan as a non-employee director
or a Comparable Plan but who ceased to be so eligible and who may be treated as
newly eligible individual under Treasury Reg. § 1.409A-2(a)(7).

 

4.6          Mechanics of Deferral

 

A Participant’s Compensation shall be reduced
in accordance with the Participant’s election hereunder, and amounts deferred
hereunder shall be paid by the Employer to the Trust as soon as
administratively feasible after such reduction and credited to the
Participant’s Account as of the date of payment thereof.

 

4.7          Irrevocability

 

A Participant’s deferral election under this
Article IV shall be irrevocable after the last date prescribed hereunder
for the making of such election; provided, however, that such election may be
revoked if necessary in order to permit a hardship withdrawal of section
401(k) contributions under the Scientific Games 401(k) Plan (or any
similar plan of the Company or any Subsidiary) prior to age 59-1/2, or in the
event of an Unforeseeable Emergency permitting distribution under
Section 7.7 hereof.  Prior to such
date, revocation shall be permitted to the extent (if any) that the Plan
Administrator may prescribe.

 

ARTICLE
V

ACCOUNTS

 

5.1          Accounts

 

The Plan Administrator shall establish an
Account for each Participant reflecting the Participant’s Elective Deferrals,
together with any adjustments for income, gain or loss (determined in
accordance with Section 5.2(a)) and any payments from the Account.  The Plan Administrator shall establish
sub-accounts for each Participant as may be necessary or desirable for the
proper administration of the Plan.  The
Plan Administrator shall provide each Participant with a periodic statement of
his or her Account reflecting the income, gains and losses (realized and
unrealized), amounts of deferrals, and distributions of such Account since the
prior statement.

 

9

 

5.2          Deemed Investment of Accounts

 

(a)           Adjustment of Accounts.  The amount of each Participant’s Elective
Deferral for a calendar year shall be credited to the Participant’s Account as
provided in Section 4.6.  The
Account shall be adjusted from time to time to reflect (i) subsequent
years’ deferrals, if any, and (ii) gains (or losses) determined as if the
Account were invested in one or more Investment Vehicles selected by the
Participant.  The Plan Administrator may
adopt such rules and administrative practices as it shall deem necessary
or appropriate in connection with a Participant’s right to select Investment
Vehicles hereunder including restrictions on the timing or frequency of such
elections, and all such Investment Vehicle selections shall be made in such
form as may be required by the Plan Administrator from time to time.

 

(b)           Investment of Trust Assets.  The assets of the Trust shall be invested in
such investments (which may, but are not required to be, the Investment
Vehicles) as the Trustee shall be directed by the Plan Administrator.  Without limiting the generality of the
foregoing, the Plan Administrator may, in its discretion, determine to invest
Trust assets in such manner as shall minimize the risk that assets of the Trust
shall be insufficient to meet the Employers’ obligations with respect to the
Plan and in furtherance thereof may (but shall be under no obligation to)
direct the Trustee to invest Trust assets to the maximum extent possible in
investments that reflect the Participant selections of the Investment Vehicles
to be the basis for the adjustment of their Accounts under Section 5.2(a).

 

ARTICLE
VI

VESTING

 

6.1          General

 

Without
limitation on Section 10.1, each Participant shall be immediately vested
in, i.e., shall have a nonforfeitable right
to, the balance in the Participant’s Account, to be payable at the time and in
the manner provided hereunder.

 

ARTICLE
VII

DISTRIBUTION
EVENTS

 

7.1          Specified Distribution Date

 

(a)           Time of Distribution.  Unless sooner distributed by reason of an intervening
distribution event under the Plan, a Participant shall receive a distribution
of the portion of his or her Account attributable to each Elective Deferral on
the Specified Distribution Date for such Elective Deferral.

 

(b)           Extension of Distribution Date.  To the extent permitted by the Plan
Administrator, each Participant who is employed by the Employer shall be
entitled to elect a new, later Specified Distribution Date with respect to the
amounts credited to the Participant’s Account with respect to an Elective
Deferral.  Any such election shall be
made on the Election Form prescribed by the Plan Administrator and shall
be delivered to the Plan Administrator no 

 

10

 

later than one year prior to the Participant’s
previous Specified Distribution Date in respect of such Elective Deferral.  In addition, the new Specified Distribution
Date must be no earlier than five years after the Specified Distribution Date
previously in effect and shall be February 28 of the calendar year to
which payment is further deferred.

 

7.2          Separation from Service

 

In the event of a Participant’s Separation
from Service, the Participant shall receive a distribution of his or her entire
Account balance in a single lump sum –

 

(a)           If the Participant is a Specified Employee, on the first
day following the expiration of six months from the date of such Separation
from Service, and

 

(b)           If the Participant is not a Specified Employee, on the
thirtieth (30th)
day following the date of such Separation from Service

 

7.3          Change in Control Event

 

Upon a Change in Control Event with respect
to the Company, each Participant shall be paid his or her entire Account
balance in a single lump sum on the thirtieth (30th day) following the date of .such Change in
Control Event.

 

7.4          Disability

 

In
the event of a Participant’s Disability, the Participant shall receive a
distribution of his or her entire Account Balance in a single lump sum on the
thirtieth (30th) day following the occurrence of such Disability.

 

7.5          Death

 

If
a Participant dies prior to the complete distribution of his or her Account,
the balance of the Account shall be paid in a single lump sum on the fortieth
(40th)
day following the date of death to the Participant’s designated beneficiary or
beneficiaries in effect on the date of the Participant’s death.

 

7.6          Beneficiaries

 

(a)           Beneficiary Designation Form.  Any designation of a beneficiary shall be
made by the Participant on (and only on) a form prescribed by the Plan
Administrator (“Beneficiary Designation Form”) and filed with the Plan
Administrator, and may be changed by the Participant at any time by filing
another Beneficiary Designation Form containing the revised
instructions.  Without limiting the
generality of the foregoing, the Plan Administrator may, in its discretion,
prescribe a single Beneficiary Designation Form for both the Prior Plan
and this Plan and require that the same beneficiary designation govern at all
times under both Plans.

 

(b)           Failure to Designate.  If no beneficiary is designated or no
designated beneficiary 

 

11

 

survives the Participant, payment shall be
made to the Participant’s surviving spouse, or, if none, to his or her issue per stirpes, in a single payment.  If no spouse or issue survives the
Participant, payment shall be made in a single lump sum to the representative
of the Participant’s estate.  No payment
shall be made to the representative of a Participant’s estate until the Plan
Administrator has been furnished with such evidence as it shall deem necessary
or appropriate to establish the validity of the payment.

 

(c)           Proper Beneficiary. 
If the Plan Administrator has any doubt as to the proper Beneficiary to
receive payments hereunder, the Plan Administrator shall have the right to
withhold such payments until the matter is finally adjudicated.  However, any payment made by the Plan
Administrator, in good faith and in accordance with this Plan, shall fully discharge
the Company and any other applicable Employer from all further obligations with
respect to that payment.

 

(d)           Prior Plan Designations.  Notwithstanding anything in
Section 7.6(a) or (b) to the contrary, in the event that a
Member was a member of the Prior Plan on or before December 31, 2004
(whether or not he is entitled to benefits under the Prior Plan as a result of
the amendment and freeze thereof effective December 31, 2004) and had a
beneficiary designation in effect under Section 7.4 of such Plan in effect
on December 31, 2004, the beneficiary or beneficiaries so designated shall
be the Member’s Beneficiary under this Plan unless and until the Member shall
designate another Beneficiary in accordance with Section 7.6(a).

 

(e)           Minor or Incompetent Beneficiary.  In making any payments to or for the benefit
of any minor or an incompetent Beneficiary, the Plan Administrator, in its sole
and absolute discretion, may, but need not, make a payment to a legal or
natural guardian or other relative of a minor or court appointed committee of
such incompetent.  Alternatively, it may
make a payment to any adult with whom the minor or incompetent temporarily or
permanently resides.  The receipt by a
guardian, committee, relative or other person shall be a complete discharge to
the Company and each other Employer. 
Neither the Company or any Employer, nor the Plan Administrator, shall
have any responsibility to see to the proper application of any payments so
made.

 

7.7          Unforeseeable Emergency

 

If
a Participant suffers an Unforeseeable Emergency, the Plan Administrator, in
its sole discretion, may pay to the Participant only that portion, if any, of
the Participant’s Account that the Plan Administrator determines in accordance
with the Regulations is necessary to satisfy the emergency need, including any
amounts necessary to pay any Federal, State or local income taxes reasonably
anticipated to result from the distribution, after taking into account the
extent to which such hardship is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the Participant’s
assets (to the extent the liquidation of such assets would not itself cause
severe financial hardship) or by cessation of deferrals under the Plan or any
similar plan. A Participant requesting an emergency payment shall apply for the
payment in writing in a form approved by the Plan Administrator and shall
provide such additional information as the Plan Administrator may require.

 

12

 

7.8          Medium of Distribution

 

Each
distribution hereunder shall be made in cash and/or in kind as determined by
the Plan Administrator.

 

7.9          Actual Payment Date

 

The
provisions hereof for payment on a particular date shall be construed and may
be applied as the Plan Administrator (including the Plan recordkeeper) deems
necessary or advisable (taking into account the purpose of the Plan) and in
accordance with the Regulations, including without limitation Treasury Reg.
§ 1.409A-3(d), without liability to any Participant or Beneficiary by
reason thereof.

 

7.10        Taxes

 

All
federal, state or local taxes that the Plan Administrator determines are
required to be withheld in respect of any Elective Deferrals hereunder or from
any payments made pursuant to this Article VII shall be withheld from
amounts payable hereunder or from any other amounts payable to a Participant.

 

7.11      Acceleration generally prohibited

 

No
acceleration of payments under the Plan shall be permitted except as authorized
by the Regulations and approved by the Plan Administrator in its discretion
consistent with such Regulations. Without limiting the generality of the
foregoing:

 

(a)           Ethics or Conflict of Interest Requirements.  Distribution may be accelerated as may be
necessary to comply with ethics or conflict of interest requirements in
accordance with Treasury Reg. § 1.409A-3(j)(4)(iii).

 

(b)           Payment of employment taxes.  Distribution may be accelerated in order to
pay (i) the Federal Insurance Contributions Act (FICA) tax imposed under
section 3101, section 3121(a) and section 3121(v)(2) of the
Code on deferrals under the Plan (the “FICA Amount”), (ii) Federal, state,
local or foreign wage withholding taxes on the FICA Amount, and
(iii) additional wage withholding taxes attributable to the pyramiding of
wages subject to withholding and taxes. Acceleration shall be permitted under
this paragraph (b) only to the extent that the Plan Administrator
determines that such tax obligations cannot be readily met from other sources,
and the total payment under this paragraph (b) shall not exceed the
aggregate of the FICA Amount and related income tax withholding.

 

7.12      Delay under Section 162(m)

 

A payment under the Plan may
be delayed to the extent that the Company reasonably anticipates that if the
payment were made as scheduled, the Employer’s deduction with respect to such 

 

13

 

payment would not be
permitted by reason of section 162(m) of the Code, provided that the
payment is made either (a) during the Employer’s first taxable year in
which it is reasonably anticipated that the deduction of such payment will not
be barred by section 162(m) or (b) during the period beginning with
the date of the Participant’s Separation from Service and ending on the later
of the last day of the taxable year of the Employer in which the Participant
separates from service or the 15th day of the third month following such
Separation from Service, and all similarly situated Participants are treated on
a reasonably consistent basis, and provided further that where any scheduled
payment to a specific Participant in a taxable year is delayed in accordance
with this Section 7.12, the delay in payment will be treated as a
subsequent deferral election unless all scheduled payments to that Participant that
could be delayed under this Section 7.12 are also delayed.  Where the payment is delayed to a date on or
after Separation from Service, the payment will be considered a payment upon a
Separation from Service for purposes of the Plan, including for purposes of
Section 7.2(b).  No election may be
provided to the Participant with respect to the timing of the payment under
this Section 7.12.  The balance
credited to each of the Participant’s Accounts shall continue to be adjusted
pursuant to Section 5.2 during the period of any delay in payment under
this Section 7.12, including any delay during the period where the Company
or the Plan Administrator is determining whether such a delay is necessary or
appropriate, up to the last day of the month immediately preceding the date of
payment.

 

7.13        Delays to comply with Securities and other Laws

 

Payment may be delayed as the Company or the
Plan Administrator may determine to be necessary or advisable in order to
comply with Federal securities or other applicable laws or as otherwise
authorized by applicable with the Regulations, including Treas.
Reg.§ 1.409A-2(b)(7).  The balance
credited to each of the Participant’s Accounts shall continue to be adjusted
pursuant to Section 5.2 during the period of any delay in payment under
this Section 7.12, including any delay during the period where the Company
or the Plan Administrator is determining whether such a delay is necessary or
appropriate.

 

7.14        Transition Rule Elections

 

Participants may elect at any time during the
period through December 31, 2006 to change the time of payment of any
Elective Deferral to any other time of payment permitted at the time of the
initial deferral election with respect thereto, provided that no such election
made after December 31, 2005 may apply to amounts otherwise payable the
year of such election or accelerate into the year of election amounts otherwise
payable in a future year.

 

ARTICLE
VIII

PLAN
ADMINISTRATOR

 

8.1          Plan Administration and Interpretation

 

The Plan Administrator shall oversee the
administration of the Plan.  The Plan
Administrator shall have complete control and authority to determine the rights
and benefits and all claims, demands and actions arising out of the provisions
of the Plan of any Participant, beneficiary, deceased Participant, or other
person having or claiming to have any interest under the Plan.  The 

 

14

 

Plan Administrator shall have complete
discretion to interpret the Plan and to decide all matters under the Plan.  Such interpretation and decision shall be
final, conclusive and binding on all Participants and any person claiming under
or through any Participant (in the absence of clear and convincing evidence
that the Plan Administrator acted arbitrarily and capriciously).  Any individual(s) serving as Plan
Administrator who is a Participant will not vote or act on any matter relating
solely to himself or herself.  When
making a determination or calculation, the Plan Administrator shall be entitled
to rely on information furnished by a Participant, a beneficiary, an Employer
or the Trustee.  The Plan Administrator
shall have the responsibility for complying with any reporting and disclosure
requirements of ERISA.

 

8.2          Powers, Duties, Procedures, Etc.

 

The Plan Administrator shall have such powers
and duties, may adopt such rules and tables, may act in accordance with
such procedures, may appoint such officers or agents, may delegate such powers
and duties, may receive such reimbursements and compensation, and shall follow
such claims and appeal procedures with respect to the Plan as it may establish.

 

8.3          Information

 

To enable the Plan Administrator to perform
its functions, the Employers shall supply full and timely information to the
Plan Administrator on all matters relating to the compensation of Participants,
their employment, retirement, death, termination of employment, and such other
pertinent facts as the Plan Administrator may require.

 

8.4          Indemnification of Plan Administrator

 

The
Company agrees to indemnify and to defend to the fullest extent permitted by
law any officer(s) or employee(s) who serve as Plan Administrator
(including any such individual who formerly served as Plan Administrator)
against all liabilities, damages, costs and expenses (including attorneys’ fees
and amounts paid in settlement of any claims approved by the Company)
occasioned by any act or omission to act in connection with the Plan, if such
act or omission is in good faith.

 

ARTICLE
IX

AMENDMENT
AND TERMINATION

 

9.1          Amendments

 

The Company shall have the right to amend the
Plan from time to time on behalf of all Employers, subject to Section 9.3,
by an instrument in writing that has been executed on the Company’s behalf by
its duly authorized officer.

 

9.2          Termination of Plan

 

This Plan is strictly a voluntary undertaking
on the part of the Employers and shall not be deemed to constitute a contract
between any Employer and any Eligible Individual (or any other person) or a
consideration for, or an inducement or condition of employment for, the
performance of the 

 

15

 

services by any Eligible Individual (or other
person).  The Company reserves the right
to terminate the Plan at any time with respect to any or all Participants,
subject to Section 9.3, by an instrument in writing that has been executed
on the Company’s behalf by its duly authorized officer.  Upon termination, the Company and other
Employers shall continue to maintain the Account of each Participant affected
by such termination and pay benefits hereunder as they become due to such
Participant as if the Plan had not terminated, but no further deferral shall be
available to such Participant for any period after the date of such
termination. Alternatively, the Company may determine in its discretion to
distribute the remaining balance in the Accounts of all Participants and
beneficiaries to the extent authorized by Treasury Reg. § 1.409A-3(j)(ix).

 

9.3          Existing Rights

 

No
amendment or modification to, or termination of, the Plan shall be effective to
the extent that it would reduce the value of a Participant’s Account
immediately prior to the amendment, modification or termination, without the
Participant’s prior written consent, nor (to the extent permitted by law) shall
any such amendment or other action be valid or given any effect whatever if and
to the extent it is inconsistent with Section 409A or the Regulations.

 

ARTICLE
X

MISCELLANEOUS

 

10.1        No Funding

 

The Plan constitutes a mere promise by the
Employers to make payments in accordance with the terms of the Plan, and
Participants and beneficiaries shall have the status of general unsecured
creditors of the Employer.  If a
Participant has deferred Compensation for service with a Subsidiary, such
Subsidiary shall be primarily liable for all obligations under the Plan with
respect thereto and the Company shall be secondarily liable thereafter.  Nothing in the Plan will be construed to give
any employee or any other person rights to any specific assets of the Employer
or of any other person.  In all events,
it is the intent of the Company that the Plan be treated as unfunded for tax
purposes and for purposes of Title I of ERISA.

 

10.2        Non-Assignability

 

None
of the benefits, payments, proceeds or claims of any Participant or beneficiary
shall be subject to any claim of any creditor of any Participant or beneficiary
and, in particular, the same shall not be subject to attachment or garnishment
or other legal process by any creditor of such Participant or beneficiary, nor
shall any Participant or beneficiary have any right to alienate, participate,
commute, pledge, encumber or assign any of the benefits or payments or proceeds
that he or she may expect to receive, contingently or otherwise, under the
Plan.

 

10.3        Limitation of Participants’ Rights

 

Nothing contained in the Plan shall confer
upon any person a right to be employed or to continue in the employ of the
Company or any Subsidiary, or interfere in any way with the right of the
Company or any Subsidiary to terminate the employment of a Participant at any
time, with or 

 

16

 

without cause.  In addition, nothing shall confer on any
individual a right to participate in the Plan in any calendar year.  The fact that an individual is an Eligible
Individual in one year shall not give the individual a right to participate in
the Plan in any other year.

 

10.4        Participants Bound

 

Any action with respect to the Plan taken by
the Plan Administrator, the Company or any Subsidiary, or the Trustee or any
action authorized by or taken at the direction of the Plan Administrator, the
Company or any Subsidiary, or the Trustee shall be conclusive upon all
Participants and beneficiaries entitled to benefits under the Plan.

 

10.5        Release

 

Any payment to any Participant or beneficiary
in accordance with the provisions of the Plan shall, to the extent thereof, be
in full satisfaction of all claims against the Company or any Subsidiary, the
Plan Administrator and the Trustee under the Plan, and the Plan Administrator
may, to the extent consistent with the Plan and the Regulations, require such
Participant or beneficiary, as a condition precedent to such payment, to
execute a receipt and release to such effect. 
If any Participant or beneficiary is determined by the Plan
Administrator to be incompetent by reason of physical or mental disability
(including minority) to give a valid receipt and release, the Plan
Administrator may cause the payment or payments becoming due to such person to
be made to another person for his or her benefit without responsibility on the
part of the Plan Administrator, the Company or any Subsidiary, or the Trustee
to follow the application or use of such funds.

 

10.6        Administrative Processing Considerations

 

Notwithstanding any other provision of the
Plan, it shall be recognized that implementation of the accounting, valuation
and distribution procedures required under the Plan is dependent upon the Plan
recordkeeper receiving complete and accurate information from a variety of
different sources on a timely basis. 
Since events may occur that interrupt or otherwise interfere that in
this process, there shall be no guarantee by the Plan that any given
information or transaction will be received or processed at the anticipated
time and day.  In any such events shall
occur, any affected transaction will be processed as soon as administratively
feasible consistently with the Regulations, without liability to any
Participant of Beneficiary by reason thereof.

 

10.7        Correction of Error

 

The Plan Administrator may adjust the
Accounts of any or all Participants in order to correct errors and rectify
omissions in such manner as the Plan Administrator believes will best result in
the equitable and nondiscriminatory administration of the Plan and ensure
compliance with Section 409A and the Regulations and/or to make use of
such correction procedures as may be established to mitigate or avoid penalties
for violation thereof, without liability to any Participant or Beneficiary by
reason thereof.

 

17

 

10.8        Governing Law

 

The Plan shall be construed, administered,
and governed in all respects under and by the laws of the State of New York
without reference to the principles of conflicts of law, unless preempted by
applicable federal law.  If any provision
of the Plan shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.

 

10.9        Headings and Subheadings

 

Headings
and subheadings in this Plan are inserted for convenience only and are not to
be considered in the construction of the provisions hereof.

 

18

 

IN WITNESS WHEREOF, the
Board of Directors of the Company has duly adopted this amended and restated
Plan on behalf of the Company and other Employers and caused it to be executed
by the undersigned officers of the Company this 31st day of December, 2008.

 

 

	
  Attest:

  	
   

  	
  Scientific
  Games Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  Jack B. Sarno

  	
   

  	
  By:

  	
   

  	
  /s/
  DeWayne E. Laird

  
	
  Jack
  B. Sarno

  	
   

  	
  Name:

  	
   DeWayne
  E. Laird

  
	
   

  	
   

  	
  Title:

  	
   Vice
  President

  

 

19

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