Document:

Exhibit 10.4

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

W I T N E S S E T H

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

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

NOW, THEREFORE, in consideration of the premises and
the mutual benefits to be derived herefrom and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:

1.             Termination of Existing Employment Agreements.  As of the Effective Date, all existing
employment agreements between the parties, whether oral or written, including
the Original Agreement, are hereby terminated and superseded.  As part of the termination of the Original
Agreement, amounts paid to Executive during 2006 as housing and transportation
allowances are eliminated as of the Effective Date and shall be deducted from
the lump sum catch-up payment of base salary payable under Section 4 as a
result of the increase in Executive’s base salary rate which will be
implemented as of August 1, 2006.

2.             Employment; Term. The Company hereby agrees to employ
Executive, and Executive hereby accepts employment with the Company, in
accordance with and subject to the terms and conditions set forth herein. The
term of employment of Executive under this Agreement (the “Term”) shall be the
period commencing on the Effective Date and ending on December 31, 2008 as may
be extended in accordance with this Section and subject to earlier termination
in accordance with Section 5. The Term shall be extended automatically
without further action by either party by one additional year (added to the end
of the Term), and then on each succeeding annual anniversary thereafter, unless
either party shall have given written notice to the other party at least ninety
(90) days prior to the date upon which such extension would otherwise have
become effective electing not to further extend the Term, in which case
Executive’s employment shall terminate on the date upon which such extension
would otherwise have become effective, unless earlier terminated in accordance
with Section 5. It is also intended that your previous term of employment
with the Company shall be included when calculating your tenure at the Company
for all purposes.

3.             Offices and Duties. During the Term, the Executive will
serve as Vice President, Chief Compliance Officer and Director of Security for
the Company, and as an officer or director of any subsidiary or affiliate of
the Company if elected to any such position by the shareholders or by the Board
of Directors of the Company or any subsidiary or affiliate, as the case may be.
In such capacities, the Executive shall perform such duties and shall have such
responsibilities as 

 

are normally associated with such positions and as
otherwise may be assigned to the Executive from time to time by the Chief
Executive Officer or upon the authority of the Board of Directors of the Company.
Subject to Section 5(e), Executive’s functions, duties and responsibilities are
subject to reasonable changes as the Company may in good faith determine. The
Executive hereby agrees to accept such employment and to serve the Company to
the best of his ability in such capacities, devoting substantially all of his
business time to such employment.

4.             Compensation; Benefits

(a)           Base Salary. 
During the Term the Company shall pay Executive a base salary (the “Base Salary”)
at the initial rate of four hundred and twenty-two thousand dollars ($422,000)
per annum, payable in accordance with the Company’s regular payroll policies and
subject to all withholdings that are legally required or are agreed to by
Executive. In the event that the Company, in its sole discretion, from time to
time determines to increase the Base Salary, such increased amount shall, from
and after the effective date of the increase, constitute the “Base Salary” for
purposes of this Agreement.

(b)           Incentive Compensation.  Executive shall
have the opportunity annually to earn incentive compensation in amounts
determined by the Compensation Committee of the Board of Directors of SGC (the “Compensation
Committee”) in accordance with the applicable incentive compensation plan of
the Company as in effect from time to time (“Incentive Compensation”). Under
such plan, Executive shall have the opportunity to earn up to 66.7% of Base
Salary as Incentive Compensation at Target Opportunity (“Target Bonus”) and up
to 133% of Base Salary as Incentive Compensation at Maximum Opportunity.

(c)           Eligibility for Annual Equity Awards.  Executive shall be eligible
to receive an annual grant of stock options or other equity awards, in the sole
discretion of the Compensation Committee, in accordance with the applicable
plans and programs for senior executives of the Company and subject to the
Company’s right to at any time amend or terminate any such plan or program, so
long as any such change does not adversely affect any accrued or vested
interest under any such plan or program.

(d)           Expense
Reimbursement.     The Company shall reimburse
Executive for all reasonable and necessary travel, business entertainment and
other business expenses incurred by Executive in connection with the
performance of Executive’s duties under this Agreement, on a timely basis upon
submission by Executive of vouchers therefore in accordance with the Company’s
standard procedures.

(e)           Health
and Welfare Benefits.   Executive shall be entitled to participate,
without discrimination or duplication, in any and all medical insurance, group
health, disability, life, accidental death, dismemberment insurance, 401(k) or
other retirement, deferred compensation, profit sharing, stock ownership and
such other plans and programs which are made generally available by the Company
to its other senior executives in accordance with the terms of such plans and
programs and subject to the Company’s right to at any time amend or terminate
any such plan or program. Executive shall be entitled to paid vacation, holidays,
and any other time off in accordance with the Company’s policies in effect from
time to time.

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(f)            Taxes
and Internal Revenue Code 409A. 
The Company makes no representations regarding the tax implications of
the compensation and benefits to be paid to Executive under this Agreement,
including, without limitation, under Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”), and applicable administrative guidance and
regulations.  Internal Revenue Code
Section 409A governs plans and arrangements that provide “nonqualified deferred
compensation” (as defined under the Code) which may include, among others,
nonqualified retirement plans, bonus plans, stock option plans, employment
agreements and severance agreements.  The
Company reserves the right to provide compensation and benefits under any plan
or arrangement in amounts, at times and in a manner that minimizes taxes,
interest or penalties as a result of Section 409A. In addition, in the event
any benefits or amounts paid hereunder are deemed to be subject to
Section 409A, including payments under Section 5 of this Agreement,
Executive consents to the Company adopting such conforming amendments as the
Company deems necessary, in its reasonable discretion, to comply with Section 409A
(including, but not limited to, delaying payment until six months following
termination of employment).

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

(a)           Termination by Executive for Other than Good Reason. 
Executive may terminate his employment hereunder for any reason or no reason
upon 60 days’ prior written notice to the Company referring to this
Section 5(a); provided, however, that a termination of Executive’s
employment for “Good Reason” (as defined below) shall not constitute a
termination by Executive for other than Good Reason pursuant to this
Section 5(a). In the event the Executive terminates his employment for
other than Good Reason, the Executive shall be entitled only to the following
compensation and benefits (collectively, the “Standard Termination Payments”):

(i)            Any accrued but unpaid
Base Salary (as determined pursuant to Section 4(a)) for services rendered
to the date of termination paid to Executive in accordance with regular payroll
policies;

(ii)           All
vested nonforfeitable amounts owing or accrued at the date of termination under
benefit plans, programs, and arrangements set forth or referred to in
Section 4 hereof in which Executive theretofore participated will be paid
under the terms and conditions of such plans, programs, and arrangements (and
agreements and documents thereunder);

(iii)          Except as provided in Section 6.6, all
stock options and other equity awards will be governed by the terms of the
plans and programs under which the options or other awards were granted; and

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

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

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

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

(c)           Termination By Reason
of Total Disability.  Executive
and the Company agree that Executive may not reasonably be expected to be able
to perform his duties and the essential functions of his office in the event of
the Executive’s “Total Disability.” For
purposes of this Agreement, “Total Disability” shall mean Executive’s (a) becoming
eligible to receive benefits under any long-term disability insurance program
or (b) failure to perform the duties and responsibilities contemplated
under this Agreement for a period of more than 180 days during any consecutive
12-month period due to physical or mental incapacity or impairment. In the
event that Executive’s employment is terminated by reason of Total Disability,
the Company shall pay the following amounts, and make the following other
benefits available, to Executive:

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

(ii)           An amount equal to the
sum of (A) Executive’s annual Base Salary and (B) Executive’s “Severance Bonus
Amount” (as defined below) payable over a period of twelve (12) months after
termination in accordance with Section 5(g) of this Agreement, provided such
amount shall be reduced by any disability payments provided to Executive as a
result of any disability plan sponsored by the Company or its affiliates
providing benefits to Executive. For purposes of this Agreement, “Severance
Bonus Amount” shall mean an amount equal to the highest annual
Incentive Compensation paid to Executive in respect of the two most recent
fiscal years of the Company but not more than the Executive’s Target Bonus for
the-then current fiscal year;

(iii)          In lieu of any Incentive
Compensation for the year in which such termination of employment occurs,
payment of an amount equal to (A) the highest annual Incentive
Compensation paid to Executive in respect of the two most recent fiscal years
of the Company but not more than Executive’s Target Bonus for the year of
termination, multiplied by (B) a fraction the numerator of which is the
number of days Executive was employed in the year of termination and the
denominator of which is the total number of days in the year of termination,
payable as and when such Incentive Compensation would otherwise have been
payable under Section 4(b); and

(iv)          If Executive elects to
continue medical coverage under the Company’s group health plan in accordance
with COBRA, the Company shall pay the monthly premiums for such coverage for a
period of eighteen (18) months.

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(d)           Termination by
the Company for Cause.  The Company may terminate Executive’s
employment hereunder for “Cause” upon written notice to Executive referring to
this Section 5(d). For purposes of this Agreement, the term “Cause” shall
mean (i) gross neglect by the Executive of the Executive’s duties
hereunder; (ii) conviction (including conviction on a nolo contendere plea) of the Executive
of any felony; (iii) conviction (including conviction on a nolo contendere plea) of the
Executive of any non-felony crime or offense involving the property of the
Company or any of its subsidiaries or affiliates or evidencing moral turpitude;
(iv) willful misconduct by the Executive in connection with the
performance of the Executive’s duties hereunder; (v) intentional breach by
the Executive of any material provision of this Agreement; (vi) material
violation of material provision of the Company’s Code of Conduct; or (vii) any
other willful or grossly negligent conduct on the part of the Executive which
would make the Executive’s continued employment by the Company materially
prejudicial to the best interests of the Company; provided, however, that a termination
by the Company under Sections 5(d)(i), 5(d)(v), 5(d)(vi) or 5(d)(vii), if
curable, shall be effective only if, within 21 days following delivery of a
written notice by the Company to Executive that the Company is terminating
Executive’s employment for Cause and setting forth in reasonable detail the
facts and circumstances allegedly constituting Cause, Executive has failed to
cure the circumstances giving rise to Cause.   In the event that Executive’s employment is
terminated by the Company for Cause, the Executive shall be entitled to receive
only the Standard Termination Payments (as defined in Section 5(a)).

(e)           Termination by the Company Without Cause or by Executive for
Good Reason.  The Company may terminate Executive’s
employment hereunder at any time, without Cause, for any reason or no reason,
and Executive may terminate his
employment hereunder for “Good Reason” (as defined below) if the Company has
failed to cure the event or condition constituting Good Reason within thirty
days after Executive gives written notice to the Company setting forth in
reasonable detail the facts and circumstances allegedly constituting Good
Reason and specifically referencing this Section 5(e). For purposes of
this Agreement, “Good Reason” shall mean that without Executive’s prior written
consent, any of the following shall have occurred within ninety days prior to
the delivery of such notice:  (i) a material change, adverse to
Executive, in Executive’s positions, titles, offices, or duties as provided in
Section 3, except, in such case, in connection with the termination of
Executive’s employment for Cause, Total Disability or death; (ii) an
assignment of any significant duties to Executive which are inconsistent with
Executive’s positions or offices held under Section 3; (iii) a
decrease in Base Salary or material decrease in Executive’s incentive
compensation opportunities provided under this Agreement; and (iv) any
other failure by the Company to perform any material obligation under, or
breach by the Company of any material provision of, this Agreement. In the
event that Executive’s employment is terminated by the Company without Cause or
by Executive for Good Reason, the Company shall pay the following amounts, and
make the following other benefits available, to Executive:

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

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(ii)           An amount equal to the
sum of (A) Executive’s annual Base Salary and (B) Executive’s Severance Bonus
Amount payable over a period of twelve (12) months after termination in
accordance with Section 5(g) of this Agreement;

(iii)          Except to the extent
otherwise provided at the time of grant under the terms of any equity award
made to Executive, all stock options, deferred stock, restricted stock and
other equity-based awards held by Executive at termination will become fully
vested and non-forfeitable, and, in all other respects, all such options and
other awards shall be governed by the plans and programs and the agreements and
other documents pursuant to which the awards were granted;

(iv)          In lieu of any Incentive
Compensation for the year in which such termination of employment occurs,
payment of an amount equal to (A) the highest annual Incentive
Compensation paid to Executive in respect of the two most recent fiscal years
of the Company but not more than the Executive’s Target Bonus for the year of
termination, multiplied by (B) a fraction the numerator of which is the
number of days Executive was employed in the year of termination and the
denominator of which is the total number of days in the year of termination,
payable as and when such Incentive Compensation would otherwise have been
payable under Section 4(b); and

(v)           If Executive elects to
continue medical coverage under the Company’s group health plan in accordance
with COBRA, the Company shall pay the monthly premiums for such coverage for a
period of eighteen (18) months.

(f)            Change in
Control. In the event Executive’s
employment is terminated by the Company without Cause or by Executive for Good
Reason under Section 5(e) and such termination occurs upon or within one year
immediately following a “Change in Control” (as defined below), Executive shall
be entitled to the payments described in Section 5(e) above except that the
aggregate amount payable under 5(e)(ii) shall be multiplied by two (i.e., Base
Salary plus Severance Bonus Amount multiplied by two) and such amount, as well
as the amount payable under 5(e)(iv), shall be paid in a lump sum in accordance
with Section 5(g) of this Agreement. Notwithstanding the foregoing, payments
pursuant to this Section 5(f) shall be reduced by the amount necessary, if any,
to ensure that the aggregate compensation to be received by the Executive in
connection with such “Change in Control” does not constitute a “parachute payment,”
as such term is defined in 26 U.S.C. § 280G.

For purposes of this
Agreement, a “Change in Control” shall be deemed to have occurred if: (i) any “person”
as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and as used in sections 13(d) and 14(d) thereof,
including a “group” as defined in Section 13 (d) of the Exchange Act but
excluding SGC and any subsidiary or affiliate and any employee benefit plan
sponsored or maintained by SGC or any subsidiary or affiliate (including any
trustee of such plan acting as trustee) or any current shareholder of 20% or
more of the outstanding common stock, directly or indirectly, becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of SGC
representing at least 40% of the combined voting power of SGC’s then-outstanding
securities; (ii) the stockholders of SGC approve a merger, consolidation,
recapitalization, or reorganization of 

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SGC, or a reverse stock split of any class of voting
securities of SGC, or the consummation of any such transaction if stockholder
approval is not obtained, other than any such transaction which would result in
at least 60% of the total voting power represented by the voting securities of
SGC or the surviving entity outstanding immediately after such transaction
being beneficially owned by persons who together beneficially owned at least
80% of the combined voting power of the voting securities of SGC outstanding
immediately prior to such transaction; provided that, for purposes of this
Section 5(f), such continuity of ownership (and preservation of relative voting
power) shall be deemed to be satisfied if the failure to meet such 60%
threshold is due solely to the acquisition of voting securities by an employee
benefit plan of SGC or such surviving entity or of any subsidiary of SGC or
such surviving entity; (iii) the stockholders of SGC or the Company, as
applicable, approve a plan of complete liquidation of SGC or the Company, an
agreement for the sale or disposition by SGC or the Company of all or
substantially all of its assets (or any transaction having a similar effect),
or SGC sells all or substantially all of the stock of the Company to any person
or entity other than an affiliate of SGC; or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board, together with any new director (other than a director designated by
a person who has entered into an agreement with the Company to effect a transaction
described in Subsection (i), (ii), or (iii) hereof) whose election by the Board
of Directors of SGC or nomination for election by SGC’s stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (the “Continuing
Directors”), cease for any reason to constitute at least a majority of the
Board of Directors of SGC.

(g)           Timing
of Certain Payments Under Section 5. 
Payments pursuant to Sections 5(c)(ii) or 5(e)(ii) of this
Agreement, if any, shall be payable in equal installments in accordance with
the Company’s standard payroll practices over a period of twelve (12) months
following the date of termination; provided, however, that if necessary to
comply with Section 409A of the Code, and applicable administrative guidance
and regulations, such payments shall be made as follows:  (1) no payments shall be made for a six-month
period following the date of termination, (2) an amount equal to the aggregate
sum that would have been otherwise payable during the initial six-month period
shall be paid in a lump sum six months following the date of termination, and (3)
during the period beginning six months following the date of termination
through the remainder of the twelve-month period, payment of the remaining
amount due shall be payable in equal installments in accordance with the
Company’s standard payroll practices. If the lump sum amounts described in
Section 5(f) of this Agreement become payable, Executive shall receive payment
within thirty (30) days of termination; provided, however, that if necessary to
comply with Section 409A of the Code, and applicable administrative guidance
and regulations, such payment shall instead be made in a lump sum six months
following the date of termination.  In
addition, notwithstanding any other provision with respect to the timing of
payments under this Agreement, including pursuant to Sections 5(c)(iii) or
5(e)(iv) of this Agreement, if necessary to comply with Section 409A of the
Code, and applicable administrative guidance and regulations, such payments
shall instead be made in a lump sum six months following the date of
termination.

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(h)           No Obligation
to Mitigate.  The
Executive shall have no obligation to mitigate damages pursuant to this Section
5, but shall be obligated to promptly advise the Company regarding any
compensation earned or any payments that will become due with respect to
services provided during any period of continued payments pursuant to this
Section 5. The Company’s obligation to make continued payments to the Executive
shall be reduced by any compensation earned by the Executive during the
severance period (without regard to when such compensation is paid).

(i)            Set-Off.  To the fullest extent permitted by law, any
amounts otherwise due the Executive hereunder (including, without limitation,
any payments pursuant to this Section 5) shall be subject to set-off with
respect to any amounts the Executive otherwise owes the Company or any
subsidiary or affiliate thereof.

(j)            No
Other Benefits or Compensation.  Except as may be provided
under this Agreement, under any other written agreement between Executive and
the Company, or under the terms of any plan or policy applicable to Executive,
Executive shall have no right to receive any other compensation from the
Company, or to participate in any other plan, arrangement or benefit provided
by the Company, with respect to any future period after such termination or
resignation.

(k)           Release of Employment Claims; Compliance with Section 6. 
Executive agrees, as a condition to receipt of any termination payments and
benefits provided for in Section 5 (other than the Standard Termination
Payments), that Executive will execute a general release agreement, in a form
reasonably satisfactory to the Company, releasing any and all claims arising
out of Executive’s employment (other than enforcement of this Agreement) and
Executive will not in the future seek employment at the Company.  The
Company’s obligation to make any termination payments and benefits provided for
in Section 5 (other than the Standard Termination Payments) shall
immediately cease if Executive willfully and materially breaches Section 6.1,
6.2 , 6.3, 6.4, or 6.8.

6.             Noncompetition;
Nonsolicitation; Nondisclosure; etc.

6.1           Noncompetition; Nonsolicitation .

(a)
Executive acknowledges the highly competitive nature of the Company’s business
and that access to the Company’s confidential records and proprietary
information renders Executive special and unique within the Company’s industry.
In consideration of the amounts that may hereafter be paid to Executive
pursuant to this Agreement (including, without limitation, Sections 4 and 5), Executive
agrees that during the Term (including any extensions thereof) and during the
Covered Time (as defined in Section 6.1(e)), Executive, alone or with others,
will not, directly or indirectly, engage (as owner, investor, partner,
stockholder, employer, employee, consultant, advisor, director or otherwise) in
any Competing Business. For purposes of this Section 6, “Competing Business”
shall mean any business: (i) involving design and production of instant
lottery tickets and the management of related marketing and distribution
programs; manufacture, sale, operation or management of on-line lottery systems
(Lotto-type games); development and commercialization of licensed and other
proprietary game entertainment for all lottery product channels; provision of
wagering (whether pari-mutuel 

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(pooled) or otherwise) or
venue management services for racetracks and off-track betting facilities;
production of prepaid cellular phone cards; or any other business in which the
Company or its affiliates is then or was within the previous eighteen (18) months
engaged or in which the Company, to Executive’s knowledge, intends to engage
during the Term or the Covered Time (as defined below); (ii) in which the
Executive was engaged or involved (whether in an executive or supervisory
capacity or otherwise) on behalf of the Company or with respect to which the
Executive has obtained proprietary or confidential information; and (iii) which
was conducted anywhere in the United States or in any other geographic area in
which such business was conducted or planned to be conducted by the Company.

(b)           In further consideration of the amounts that may hereafter be paid to
Executive pursuant to this Agreement (including, without limitation, Sections
3, 4 and 5), Executive agrees that during the Term (including any extensions
thereof) and during the Covered Time Executive shall not, directly or
indirectly, (i) solicit or attempt to induce any of the employees, agents,
consultants or representatives of the Company to terminate his, her, or its
relationship with the Company; (ii) solicit or attempt to induce any of the
employees, agents, consultants or representatives of the Company to become
employees, agents, consultants or representatives of any other person or
entity; (iii) solicit or attempt to induce any customer, vendor or distributor
of the Company to curtail or cancel any business with the Company; or (iv) hire
any person who, to Executive’s actual knowledge, is, or was within 180 days
prior to such hiring, an employee of the Company.

(c)           During the Term (including any extensions thereof) and during the
Covered Time, Executive agrees that upon the earlier of Executive’s (i)
negotiating with any Competitor (as defined below) concerning the possible
employment of Executive by the Competitor, (ii) responding to (other than for
the purpose of declining) an offer of employment from a Competitor, or (iii)
becoming employed by a Competitor, (x) Executive will provide copies of
Section 6 of this Agreement to the Competitor, and (y) in the case of any
circumstance described in (iii) above occurring during the Covered Time, and in
the case of any circumstance described in (i) or (ii) above occurring during
the Term or during the Covered Time, Executive will promptly provide notice to
the Company of such circumstances. Executive further agrees that the Company
may provide notice to a Competitor of Executive’s obligations under this
Agreement. For purposes of this Agreement, “Competitor” shall mean any entity
(other than the Company, its subsidiaries or affiliates) that engages, directly
or indirectly, in the United States in any Competing Business.

(d)
          Executive understands that the restrictions
in this Section 6.1 may limit Executive’s ability to earn a livelihood in a
business similar to the business of the Company but nevertheless agrees and
acknowledges that the consideration provided under this Agreement (including,
without limitation, Sections 4 and 5) is sufficient to justify such
restrictions. In consideration thereof and in light of Executive’s education,
skills and abilities, Executive agrees that Executive will not assert in any
forum that such restrictions prevent Executive from earning a living or
otherwise should be held void or unenforceable.

(e)
          For purposes of this Section 6.1, “Covered
Time” shall mean the period beginning on the date of termination of Executive’s
employment (the “Date of Termination”) and ending eighteen (18) months after
the Date of Termination.

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6.2           Proprietary
Information; Inventions.

(a)
          Executive acknowledges that during the course
of Executive’s employment with the Company Executive necessarily will have (and
during any employment by the Company prior to the Term has had) access to and
make use of proprietary information and confidential records of the Company.
Executive covenants that Executive shall not during the Term or at any time
thereafter, directly or indirectly, use for Executive’s own purpose or for the
benefit of any person or entity other than the Company, nor otherwise disclose
to any individual or entity, any such proprietary information, unless such
disclosure has been authorized in writing by the Company or is otherwise
required by law. The term “proprietary information” means: (i) the software
products, programs, applications, and processes utilized by the Company; (ii)
the name and/or address of any customer or vendor of the Company or any
information concerning the transactions or relations of any customer or vendor
of the Company with the Company; (iii) any information concerning any product,
technology, or procedure employed by the Company but not generally known to its
customers or vendors or competitors, or under development by or being tested by
the Company but not at the time offered generally to customers or vendors; (iv)
any information relating to the Company’s computer software, computer systems,
pricing or marketing methods, sales margins, cost of goods, cost of material,
capital structure, operating results, borrowing arrangements or business plans;
(v) any information identified as confidential or proprietary in any line of
business engaged in by the Company; (vi) any information that, to Executive’s
actual knowledge, the Company ordinarily maintains as confidential or
proprietary; (vii) any business plans, budgets, advertising or marketing plans;
(viii) any information contained in any of the Company’s written or oral
policies and procedures or manuals; (ix) any information belonging to
customers, vendors or any other person or entity which the Company, to
Executive’s actual knowledge, has agreed to hold in confidence; and (x) all
written, graphic, electronic data and other material containing any of the
foregoing. Executive acknowledges that information that is not novel or
copyrighted or patented may nonetheless be proprietary information. The term “proprietary
information” shall not include information generally known or available to the
public or generally known or available to the industry or information that
becomes available to Executive on an unrestricted, non-confidential basis from
a source other than the Company or its directors, officers, employees, or
agents (without breach of any obligation of confidentiality of which Executive
has actual knowledge at the time of the relevant disclosure by Executive).

(b)           Executive agrees that all processes, technologies and inventions
(collectively, “Inventions”), including new contributions, improvements, ideas
and discoveries, whether patentable or not, conceived, developed, invented or
made by Executive during the Term (and during any employment by the Company
prior to the Term) shall belong to the Company, provided that such Inventions
grew out of the Executive’s work with the Company or any of its subsidiaries or
affiliates, are related in any manner to the business (commercial or experimental)
of the Company or any of its subsidiaries or affiliates or are conceived or
made on the Company’s time or with the use of the Company’s facilities or
materials. Executive shall further: 
(i) promptly disclose such Inventions to the Company; (ii) assign
to the Company, without additional compensation, all patent and other rights to
such Inventions for the United States and foreign countries; (iii) sign all
papers necessary to carry out the foregoing; and (iv) give testimony in support
of the Executive’s inventorship. If any Invention is described in a patent
application or is disclosed to third parties, directly or indirectly, by the
Executive within 

 10
 

 

two years after the
termination of the Executive’s employment by the Company, it is to be presumed
that the Invention was conceived or made during the Term. Executive agrees that
Executive will not assert any rights to any Invention as having been made or
acquired by Executive prior to the date of this Agreement, except for
Inventions, if any, disclosed in Exhibit A to this Agreement.

6.3
          Confidentiality
and Surrender of Records.  Executive shall not during the Term or at any
time thereafter (irrespective of the circumstances under which Executive’s
employment by the Company terminates), except as required by law, directly or
indirectly publish, make known or in any fashion disclose any confidential
records to, or permit any inspection or copying of confidential records by, any
individual or entity other than in the course of such individual’s or entity’s
employment or retention by the Company, nor shall Executive retain, and will
deliver promptly to the Company, any of the same following termination of
Executive’s employment hereunder for any reason or upon request by the Company.
For purposes hereof, “confidential records” means those portions of
correspondence, memoranda, files, manuals, books, lists, financial, operating
or marketing records, magnetic tape, or electronic or other media or equipment
of any kind in Executive’s possession or under Executive’s control or
accessible to Executive which contain any proprietary information. All
confidential records shall be and remain the sole property of the Company
during the Term and thereafter.

6.4
          Nondisparagement. 
Executive shall not, during the Term and thereafter, disparage in any
material respect the Company, any affiliate of the Company, any of their
respective businesses, any of their respective officers, directors or
employees, or the reputation of any of the foregoing persons or entities. Notwithstanding
the foregoing, nothing in this Agreement shall preclude Executive from making
truthful statements that are required by applicable law, regulation or legal
process.

6.5           No Other
Obligations.  Executive represents that Executive is not
precluded or limited in Executive’s ability to undertake or perform the duties
described herein by any contract, agreement or restrictive covenant. Executive
covenants that Executive shall not employ the trade secrets or proprietary
information of any other person in connection with Executive’s employment by
the Company without such person’s authorization.

6.6           Forfeiture
of Outstanding Options. The provisions of Section 5
notwithstanding, if Executive willfully and materially fails to comply with Section
6.1, 6.2, 6.3, 6.4, or 6.8, all options (whether granted prior to,
contemporaneous with, or subsequent to this Agreement) to purchase common stock
granted by the Company and held by Executive or a transferee of Executive shall
be immediately forfeited and cancelled.

6.7
          Enforcement.
 Executive acknowledges and agrees that, by
virtue of Executive’s position, services and access to and use of confidential
records and proprietary information, any violation by Executive of any of the
undertakings contained in this Section 6 would cause the Company immediate,
substantial and irreparable injury for which it has no adequate remedy at law.
Accordingly, Executive agrees and consents to the entry of an injunction or
other equitable relief by a court of competent jurisdiction restraining any
violation or threatened violation of any undertaking contained in this Section
6. Executive waives posting 

 11
 

 

of any bond otherwise
necessary to secure such injunction or other equitable relief. Rights and
remedies provided for in this Section 6 are cumulative and shall be in addition
to rights and remedies otherwise available to the parties hereunder or under
any other agreement or applicable law.

6.8
          Cooperation
with Regard to Litigation.  Executive agrees to cooperate reasonably with
the Company, during the Term and thereafter (including following Executive’s
termination of employment for any reason), by being available to testify on
behalf of the Company in any action, suit, or proceeding, whether civil,
criminal, administrative, or investigative. In addition, except to the extent
that Executive has or intends to assert in good faith an interest or position
adverse to or inconsistent with the interest or position of the Company,
Executive agrees to cooperate reasonably with the Company, during the Term and
thereafter (including following Executive’s termination of employment for any
reason), to assist the Company in any such action, suit, or proceeding by
providing information and meeting and consulting with the Board or its
representatives or counsel, or representatives or counsel to the Company, in
each case, as reasonably requested by the Company. The Company agrees to pay
(or reimburse, if already paid by Executive) all reasonable expenses actually
incurred in connection with Executive’s cooperation and assistance including,
without limitation, reasonable fees and disbursements of counsel, if any,
chosen by Executive if Executive reasonably determines in good faith, on the
advice of counsel, that the Company’s counsel may not ethically represent
Executive in connection with such action, suit or proceeding due to actual or
potential conflicts of interests.

6.9           Survival.  The
provisions of this Section 6 shall survive the termination of the Term and any
termination or expiration of this Agreement.

6.10         Company.  For purposes of this Section 6, references to the “Company” shall
include both the Company and each subsidiary and/or affiliate of the Company.

7.             Code of Conduct.  Executive acknowledges that he has read the
Company’s Code of Conduct and agrees to abide by such Code, as amended or
supplemented from time to time, and other policies applicable to employees and
executives of the Company.

8.             Indemnification.  During the Term of this Agreement and all
periods after the expiration of this Agreement or termination of Executive’s
employment for any reason, the Company shall indemnify Executive to the full
extent permitted under the Company’s Certificate of Incorporation or By-Laws
and pursuant to any other agreements or policies in effect from time to time.
To the extent permitted under the Company’s Certificate of Incorporation and
By-Laws and applicable law, the Company shall advance expenses for which
indemnification may be claimed as such expenses are incurred, subject to any
requirement that Executive provide an undertaking to repay such advances if it
is ultimately determined that Executive is not entitled to indemnification;
provided, however, that any determination required to be made with respect to
whether Executive’s conduct complies with the standards required to be met as a
condition of indemnification or advancement of expenses under applicable law
and the Company’s Certificate of Incorporation, By-Laws, or other agreement,
shall be made by independent counsel mutually acceptable to Executive and the
Company (except to the extent otherwise required by law). Any provision
contained herein notwithstanding, this Agreement shall not limit or reduce, and
the 

 12
 

 

Company hereby agrees to
provide to Executive, any and all rights to indemnification Executive would
otherwise have, to the full extent permitted under applicable law. In addition,
the Company will maintain directors’ and officers’ liability insurance in
effect and covering acts and omissions of Executive. For purposes of this
Section 8, references to the “Company” shall include both the Company and each
of its subsidiaries and/or affiliates for which Executive has acted, acts or
will in the future act in any capacity. The provisions of this Section 8 shall
survive the termination of the Term and any termination or expiration of this
Agreement.

9.             Assignability;
Binding Effect.  Neither this
Agreement nor the rights or obligations hereunder of the parties hereto shall
be transferable or assignable by Executive, except in accordance with the laws
of descent and distribution and as specified below. The Company may assign this
Agreement and the Company’s rights and obligations hereunder, and shall assign
this Agreement and such rights and obligations, to any Successor (as
hereinafter defined) which, by operation of law or otherwise, continues to
carry on substantially the business of the Company (or a business unit of the
Company for which Executive provided services) prior to the event of
succession, and the Company shall, as a condition of the succession, require
such Successor to agree in writing to assume the Company’s obligations and be
bound by this Agreement. For purposes of this Agreement, “Successor” shall mean
any person that succeeds to, or has the practical ability to control, the
Company’s business directly or indirectly, by merger or consolidation, by
purchase or ownership of voting securities of the Company or all or
substantially all of its assets or those relating to a particular business unit
of the Company to which Executive provides services, or otherwise. The Company
may also assign this Agreement and the Company’s rights and obligations
hereunder to any affiliate of the Company, provided that upon any such
assignment the Company shall remain liable for the obligations to Executive
hereunder. This Agreement shall be binding upon and inure to the benefit of
Executive, Executive’s heirs, executors, administrators, and beneficiaries, and
shall be binding upon and inure to the benefit of the Company and its
successors and assigns.

10.           Complete Understanding; Amendment; Waiver.  This
Agreement constitutes the complete understanding between the parties with
respect to the employment of Executive and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof, and no statement, representation,
warranty or covenant has been made by either party with respect thereto except
as expressly set forth herein. This Agreement shall not be modified, amended or
terminated except by a written instrument signed by each of the parties. Any
waiver of any term or provision hereof, or of the application of any such term
or provision to any circumstances, shall be in writing signed by the party
charged with giving such waiver. Waiver by either party of any breach hereunder
by the other party shall not operate as a waiver of any other breach, whether
similar to or different from the breach waived. No delay by either party in the
exercise of any rights or remedies shall operate as a waiver thereof, and no
single or partial exercise by either party of any such right or remedy shall
preclude other or further exercise thereof.

11.           Severability.  If any provision of this Agreement
or the application of any such provision to any person or circumstances shall
be determined by any court of competent jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Agreement, or the
application of such provision to such person or circumstances other than those
to which it is so determined to be invalid or unenforceable, shall not be
affected thereby, and each provision 

 13
 

 

hereof shall be enforced to the fullest extent
permitted by law. If any provision of this Agreement, or any part thereof, is
held to be invalid or unenforceable because of the scope or duration of or the
area covered by such provision, the parties hereto agree that the court making
such determination shall reduce the scope, duration and/or area of such
provision (and shall substitute appropriate provisions for any such invalid or
unenforceable provisions) in order to make such provision enforceable to the
fullest extent permitted by law and/or shall delete specific words and phrases,
and such modified provision shall then be enforceable and shall be enforced.
The parties hereto recognize that if, in any judicial proceeding, a court shall
refuse to enforce any of the separate covenants contained in this Agreement,
then that invalid or unenforceable covenant contained in this Agreement shall
be deemed eliminated from these provisions to the extent necessary to permit
the remaining separate covenants to be enforced. In the event that any court
determines that the time period or the area, or both, are unreasonable and that
any of the covenants is to that extent invalid or unenforceable, the parties
hereto agree that such covenants will remain in full force and effect, first,
for the greatest time period, and second, in the greatest geographical area
that would not render them unenforceable.

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

13.           Governing Law; Arbitration.

(a)           Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be wholly performed
within that State, without regard to its conflict of laws provisions.

(b)           Arbitration.  The
Executive and the Company agree that, except for claims for Workers’
Compensation, Unemployment Compensation, and any other claim that is
non-arbitrable under applicable law, final and binding arbitration shall be the
exclusive forum for any dispute or controversy between them, including, without
limitation, disputes arising under or in connection with this Agreement,
Executive’s employment, and/or termination of employment, with the Company;
provided, however, that the Company shall be entitled to commence an action in
any court of competent jurisdiction for injunctive relief in connection with
any alleged actual or threatened violation of any provision of Section 6.
Judgment may be entered on the arbitrators’ award in any court having
jurisdiction. For purposes of entering such judgment or seeking injunctive
relief with regard to Section 6, the Company and Executive hereby consent to
the jurisdiction of any or all of the following courts: (i) the United States
District Court for the Southern District of New York; (ii) the Supreme Court of
the State of New York, New York County; or (iii) any other court having
jurisdiction; provided, that damages for any alleged violation of Section 6, as
well as any claim, counterclaim or crossclaim brought by the Executive or any
third-party in response to, or in connection with any court action commenced by
the Company seeking said injunctive relief shall remain exclusively subject to
final and binding arbitration as provided for herein. The Company and Executive
hereby waive, to the fullest extent permitted by applicable law, any objection
which either may now or hereafter have to such jurisdiction, venue and any
defense of inconvenient forum.  Thus,
except for the claims carved out above, this Agreement includes all common-law
and statutory claims (whether arising 

 14
 

 

under federal state or local
law), including, but not limited to, any claim for breach of contract, fraud,
fraud in the inducement, unpaid wages, wrongful termination, and gender, age,
national origin, sexual orientation, marital status, disability, or any other protected
status.

(c)           Any arbitration under this Agreement shall be filed exclusively with
the American Arbitration Association in New York, New York before three
arbitrators, in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association in effect at the
time of submission to arbitration.  The
Company and Executive hereby agree that a judgment upon an award rendered by
the arbitrators may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. 
The Company shall pay all costs uniquely attributable to arbitration,
including the administrative fees and costs of the arbitrators.  Each party shall pay that party’s own costs
and attorney fees, if any, unless the arbitrators rule otherwise.  The Executive understands that he is giving
up no substantive rights, and this Agreement simply governs forum.  The arbitrators shall apply the same
standards a court would apply to award any damages, attorney fees or
costs.  The Executive shall not be
required to pay any fee or cost that he would not otherwise be required to pay
in a court action, unless so ordered by the arbitrators.

(d)           BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT
THE RIGHT TO A COURT TRIAL AND TRIAL BY JURY IS OF VALUE, AND KNOWINGLY AND
VOLUNTARILY WAIVE THAT RIGHT FOR ANY DISPUTE SUBJECT TO THE TERMS OF THIS
ARBITRATION PROVISION.

14.           Titles and Captions.  All paragraph titles or captions in this
Agreement are for convenience only and in no way define, limit, extend or
describe the scope or intent of any provision hereof.

15.           Joint Drafting.  In
recognition of the fact that the parties hereto had an equal opportunity to
negotiate the language of, and draft, this Agreement, the parties acknowledge
and agree that there is no single drafter of this Agreement and therefore, the
general rule that ambiguities are to be construed against the drafter is, and
shall be, inapplicable.  If any language
in this Agreement is found or claimed to be ambiguous, each party shall have
the same opportunity to present evidence as to the actual intent of the parties
with respect to any such ambiguous language without any inference or
presumption being drawn against any party.

16.           Notices. 
Whenever under this Agreement it becomes necessary to give notice, such
notice shall be in writing, signed by the party or parties giving or making the
same, and shall be served on the person or persons for whom it is intended or
who should be advised or notified, by Federal Express or other similar
overnight service or by certified or registered mail, return receipt requested,
postage prepaid and addressed to such party at the address set forth below or
at such other address as may be designated by such party by like notice:

To the Company:

Scientific Games Corporation

750 Lexington Avenue

New York, N.Y. 10022

Attention: General
Counsel

 15
 

 

To Executive:

Larry Potts

17670 Braemar Place

Leesburg, VA 20175

[Remainder of Page
Intentionally Left Blank]

 16
 

 

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

	
   

  	
  SCIENTIFIC GAMES
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Ira H.
  Raphaelson

  
	
   

  	
  Title:

  	
  Vice President and General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Larry Potts

  
					

 

 17
 

 

 

EXHIBIT A

LIST OF PRE-EXISTING INVENTIONS OF EXECUTIVE

 

 18Exhibit
10.5

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of August 1,
2006 (the “Effective Date”), by and between SCIENTIFIC GAMES INTERNATIONAL,
INC., a Delaware corporation (the “Company”), which is a subsidiary of
SCIENTIFIC GAMES CORPORATION, a Delaware corporation (“SGC”), and William J.
Huntley (“Executive”).

W I T N E S S E T H

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

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

NOW, THEREFORE, in consideration of the premises and
the mutual benefits to be derived herefrom and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:

1.             Termination of Existing Employment Agreements.  As of the Effective Date, all existing
employment agreements between the parties, whether oral or written, including
the Original Agreement, are hereby terminated and superseded.

2.             Employment Term. The Company hereby agrees to employ
Executive, and Executive hereby accepts employment with the Company, in
accordance with and subject to the terms and conditions set forth herein. The
term of employment of Executive under this Agreement (the “Term”) shall be the
period commencing on the Effective Date and ending on February 1, 2009, as may
be extended in accordance with this Section and subject to earlier termination
in accordance with Section 5. The Term shall be extended automatically
without further action by either party by one additional year (added to the end
of the Term), and then on each succeeding annual anniversary thereafter, unless
either party shall have given written notice to the other party at least ninety
(90) days prior to the date upon which such extension would otherwise have
become effective electing not to further extend the Term, in which case
Executive’s employment shall terminate on the date upon which such extension
would otherwise have become effective, unless earlier terminated in accordance
with Section 5. It is also intended that your previous term of employment
with the Company shall be included when calculating your tenure at the Company
for all purposes.

3.             Offices and Duties. During the Term, the Executive will
serve as President of Scientific Games Racing, Sports and Gaming Technology, a
division of the Company, as Vice President of SGC, and as an officer or
director of any subsidiary or affiliate of the Company if elected to any such
position by the shareholders or by the Board of Directors of the Company or any
subsidiary or affiliate, as the case may be. In such capacities, the Executive
shall perform such duties and shall have such responsibilities as are normally
associated with such positions and as otherwise may be assigned to the
Executive from time to time by the Chief Executive Officer or President of the
Company or upon the authority of the Board of Directors of the Company. Subject
to Section 5(e), Executive’s functions, duties and responsibilities are subject

 

to reasonable changes as the Company or SGC may in
good faith determine. The Executive hereby agrees to accept such employment and
to serve the Company to the best of his ability in such capacities, devoting
substantially all of his business time to such employment.

4.             Compensation; Benefits

(a)           Base Salary. 
During the Term the Company shall pay Executive a base salary (the “Base Salary”)
at the initial rate of five hundred and fifteen thousand dollars ($515,000) per
annum, payable biweekly (except to the extent deferred under a deferred
compensation plan) and subject to all withholdings that are legally required or
are agreed to by Executive. In the event that the Company, in its sole
discretion, from time to time determines to increase the Base Salary, such
increased amount shall, from and after the effective date of the increase,
constitute the “Base Salary” for purposes of this Agreement.

(b)           Incentive Compensation.  Executive shall
have the opportunity annually to earn incentive compensation in amounts
determined by the Compensation Committee of the Board of Directors of SGC (the “Compensation
Committee”) in accordance with the applicable incentive compensation plan of
the Company as in effect from time to time (“Incentive Compensation”). Under
such plan, Executive shall have the opportunity to earn up to 66.7% of Base
Salary as Incentive Compensation at Target Opportunity (“Target Bonus”) and up
to 133% of Base Salary as Incentive Compensation at Maximum Opportunity.

(c)           Eligibility for Annual Equity Awards.  Executive shall be eligible
to receive an annual grant of stock options or other equity awards, in the sole
discretion of the Compensation Committee, in accordance with the applicable
plans and programs for senior executives of the Company and subject to the
Company’s right to at any time amend or terminate any such plan or program, so
long as any such change does not adversely affect any accrued or vested
interest under any such plan or program.

(d)           Expense
Reimbursement.  The Company shall reimburse Executive for all
reasonable and necessary travel, business entertainment and other business
expenses incurred by Executive in connection with the performance of Executive’s
duties under this Agreement, on a timely basis upon submission by Executive of
vouchers therefore in accordance with the Company’s standard procedures.

(e)           Health
and Welfare Benefits.   Executive shall be entitled to participate, without discrimination or
duplication, in any and all medical insurance, group health, disability, life,
accidental death, dismemberment insurance, 401(k) or other retirement, deferred
compensation, profit sharing, stock ownership and such other plans and programs
which are made generally available by the Company to its other senior
executives in accordance with the terms of such plans and programs and subject
to the Company’s right to at any time amend or terminate any such plan or program.
Executive shall be entitled to paid vacation, holidays, and any other time off
in accordance with the Company’s policies in effect from time to time.

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

 2
 

 

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

(g)           Taxes
and Internal Revenue Code 409A. 
The Company makes no representations regarding the tax implications of
the compensation and benefits to be paid to Executive under this Agreement,
including, without limitation, under Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”), and applicable administrative guidance and
regulations.  Internal Revenue Code
Section 409A governs plans and arrangements that provide “nonqualified deferred
compensation” (as defined under the Code) which may include, among others,
nonqualified retirement plans, bonus plans, stock option plans, employment
agreements and severance agreements.  The
Company reserves the right to provide compensation and benefits under any plan
or arrangement in amounts, at times and in a manner that minimizes taxes,
interest or penalties as a result of Section 409A. In addition, in the event
any benefits or amounts paid hereunder are deemed to be subject to
Section 409A, including payments under Section 5 of this Agreement,
Executive consents to the Company adopting such conforming amendments as the
Company deems necessary, in its reasonable discretion, to comply with
Section 409A (including, but not limited to, delaying payment until six
months following termination of employment).

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

(a)           Termination by Executive for Other than Good Reason. 
Executive may terminate his employment hereunder for any reason or no reason
upon 60 days’ prior written notice to the Company referring to this
Section 5(a); provided, however, that a termination of Executive’s
employment for “Good Reason” (as defined below) shall not constitute a
termination by Executive for other than Good Reason pursuant to this
Section 5(a). In the event the Executive terminates his employment for
other than Good Reason, the Executive shall be entitled only to the following
compensation and benefits (collectively, the “Standard Termination Payments”):

(i)            Any accrued but unpaid
Base Salary (as determined pursuant to Section 4(a)) for services rendered
to the date of termination paid to Executive in accordance with regular payroll
policies;

(ii)           All
vested nonforfeitable amounts owing or accrued at the date of termination under
benefit plans, programs, and arrangements set forth or referred to in
Section 4 hereof in which Executive theretofore participated will be paid
under the terms and conditions of such plans, programs, and arrangements (and
agreements and documents thereunder);

(iii)          Except as provided in Section 6.6, all
stock options and other equity awards will be governed by the terms of the
plans and programs under which the options 

 3
 

 

or other awards
were granted (unless accelerated as part of other termination provisions
herein); and

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

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

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

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

(c)           Termination By Reason of Total Disability.  Executive and the Company agree that
Executive may not reasonably be expected to be able to perform his duties and
the essential functions of his office in the event of the Executive’s “Total
Disability.” For purposes of this
Agreement, “Total Disability” shall mean Executive’s (a) becoming eligible
to receive benefits under any long-term disability insurance program or
(b) failure to perform the duties and responsibilities contemplated under
this Agreement for a period of more than 180 days during any consecutive
12-month period due to physical or mental incapacity or impairment. In the
event that Executive’s employment is terminated by reason of Total Disability,
the Company shall pay the following amounts, and make the following other
benefits available, to Executive:

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

(ii)           An amount equal to the
sum of (A) Executive’s annual Base Salary and (B) Executive’s “Severance Bonus
Amount” (as defined below) payable over a period of twelve (12) months after
termination in accordance with Section 5(h) of this Agreement, provided such
amount shall be reduced by any disability payments provided to Executive as a
result of any disability plan sponsored by the Company or its affiliates
providing benefits to Executive. For purposes of this Agreement, “Severance
Bonus Amount” shall mean an amount equal to the highest annual
Incentive Compensation paid to Executive in respect of the two most recent
fiscal years of the Company but not more than the Executive’s Target Bonus for
the-then current fiscal year;

(iii)          In lieu of any Incentive
Compensation for the year in which such termination of employment occurs,
payment of an amount equal to (A) the highest annual Incentive
Compensation paid to Executive in respect of the two most recent fiscal years
of the Company but not more than Executive’s Target Bonus for the year of
termination, multiplied by (B) a fraction the numerator of which is the
number of days Executive was employed in the year of termination and the
denominator of which is the total number of days in the year of termination,
payable as and when such Incentive Compensation would otherwise have been
payable under Section 4(b); and

 4
 

 

(iv)          If Executive elects to
continue medical coverage under the Company’s group health plan in accordance
with COBRA, the Company shall pay the monthly premiums for such coverage for a
period of eighteen (18) months.

(d)           Termination by
the Company for Cause.  The Company may terminate Executive’s
employment hereunder for “Cause” upon written notice to Executive referring to
this Section 5(d). For purposes of this Agreement, the term “Cause” shall
mean (i) gross neglect by the Executive of the Executive’s duties
hereunder; (ii) conviction (including conviction on a nolo contendere plea) of the
Executive of any felony; (iii) conviction (including conviction on a nolo contendere plea) of the
Executive of any non-felony crime or offense involving the property of the
Company or any of its subsidiaries or affiliates or evidencing moral turpitude;
(iv) willful misconduct by the Executive in connection with the
performance of the Executive’s duties hereunder; (v) intentional breach by
the Executive of any material provision of this Agreement; (vi) material
violation of material provision of the Company’s Code of Conduct; or (vii) any
other willful or grossly negligent conduct on the part of the Executive which
would make the Executive’s continued employment by the Company materially
prejudicial to the best interests of the Company; provided, however, that a
termination by the Company under Sections 5(d)(i), 5(d)(v), 5(d)(vi) or
5(d)(vii), if curable, shall be effective only if, within 21 days following
delivery of a written notice by the Company to Executive that the Company is terminating
Executive’s employment for Cause and setting forth in reasonable detail the
facts and circumstances allegedly constituting Cause, Executive has failed to
cure the circumstances giving rise to Cause.  In the event that
Executive’s employment is terminated by the Company for Cause, the Executive
shall be entitled to receive only the Standard Termination Payments (as defined
in Section 5(a)).

(e)           Termination by the Company Without Cause or by Executive for
Good Reason.  The Company may terminate Executive’s
employment hereunder at any time, without Cause, for any reason or no reason,
and Executive may terminate his
employment hereunder for “Good Reason” (as defined below) if the Company has
failed to cure the event or condition constituting Good Reason within thirty
days after Executive gives written notice to the Company setting forth in
reasonable detail the facts and circumstances allegedly constituting Good
Reason and specifically referencing this Section 5(e). For purposes of
this Agreement, “Good Reason” shall mean that without Executive’s prior written
consent, any of the following shall have occurred within ninety days prior to
the delivery of such notice:  (i) a material change, adverse to
Executive, in Executive’s positions, titles, offices, or duties as provided in
Section 3, except, in such case, in connection with the termination of
Executive’s employment for Cause, Total Disability or death; (ii) an
assignment of any significant duties to Executive which are inconsistent with
Executive’s positions or offices held under Section 3; (iii) a
decrease in Base Salary or material decrease in Executive’s incentive
compensation opportunities provided under this Agreement; and (iv) any
other failure by the Company to perform any material obligation under, or
breach by the Company of any material provision of, this Agreement.  In the event that Executive’s employment is
terminated by the Company without Cause or by Executive for Good Reason, the
Company shall pay the following amounts, and make the following other benefits
available, to Executive:

 5
 

 

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

(ii)           An amount equal to the
sum of (A) Executive’s annual Base Salary and (B) Executive’s Severance Bonus
Amount payable over a period of twelve (12) months after termination in
accordance with Section 5(h) of this Agreement;

(iii)          Except to the extent
otherwise provided at the time of grant under the terms of any equity award
made to Executive, all stock options, deferred stock, restricted stock and
other equity-based awards held by Executive at termination will become fully
vested and non-forfeitable, and, in all other respects, all such options and
other awards shall be governed by the plans and programs and the agreements and
other documents pursuant to which the awards were granted;

(iv)          In lieu of any Incentive
Compensation for the year in which such termination of employment occurs,
payment of an amount equal to (A) the highest annual Incentive
Compensation paid to Executive in respect of the two most recent fiscal years
of the Company but not more than the Executive’s Target Bonus for the year of
termination, multiplied by (B) a fraction the numerator of which is the
number of days Executive was employed in the year of termination and the
denominator of which is the total number of days in the year of termination,
payable as and when such Incentive Compensation would otherwise have been
payable under Section 4(b); and

(v)           If Executive elects to
continue medical coverage under the Company’s group health plan in accordance
with COBRA, the Company shall pay the monthly premiums for such coverage for a
period of eighteen (18) months.

(f)            Change in
Control. In the event Executive’s
employment is terminated by the Company without Cause or by Executive for Good
Reason under Section 5(e) and such termination occurs upon or within one year
immediately following a “Change in Control” (as defined below), Executive shall
be entitled to the payments described in Section 5(e) above except that the
aggregate amount payable under 5(e)(ii) shall be multiplied by two (i.e., Base
Salary plus Severance Bonus Amount multiplied by two) and such amount, as well
as the amount payable under 5(e)(iv), shall be paid in a lump sum in accordance
with Section 5(h) of this Agreement. Notwithstanding the
foregoing, payments pursuant to this Section 5(f) shall be reduced by the
amount necessary, if any, to ensure that the aggregate compensation to be
received by the Executive in connection with such “Change in Control” does not
constitute a “parachute payment,” as such term is defined in 26 U.S.C.
§ 280G.

For purposes of this
Agreement, a “Change in Control” shall be deemed to have occurred if: (i) any “person”
as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and as used in sections 13(d) and 14(d) thereof,
including a “group” as defined in Section 13 (d) of the Exchange Act but
excluding SGC and any subsidiary or affiliate and any employee benefit plan
sponsored or maintained by SGC or any subsidiary or affiliate (including any
trustee of such plan acting as trustee) or any current shareholder of 20% or
more of the outstanding common stock, directly or indirectly, becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of SGC 

 6
 

 

representing at least 40% of the combined voting power
of SGC’s then-outstanding securities; (ii) the stockholders of SGC approve a
merger, consolidation, recapitalization, or reorganization of SGC, or a reverse
stock split of any class of voting securities of SGC, or the consummation of
any such transaction if stockholder approval is not obtained, other than any
such transaction which would result in at least 60% of the total voting power
represented by the voting securities of SGC or the surviving entity outstanding
immediately after such transaction being beneficially owned by persons who
together beneficially owned at least 80% of the combined voting power of the
voting securities of SGC outstanding immediately prior to such transaction;
provided that, for purposes of this Section 5(f), such continuity of ownership
(and preservation of relative voting power) shall be deemed to be satisfied if
the failure to meet such 60% threshold is due solely to the acquisition of
voting securities by an employee benefit plan of SGC or such surviving entity
or of any subsidiary of SGC or such surviving entity; (iii) the stockholders of
SGC or the Company, as applicable, approve a plan of complete liquidation of
SGC or the Company, an agreement for the sale or disposition by SGC or the
Company of all or substantially all of its assets (or any transaction having a
similar effect), or SGC sells all or substantially all of the stock of the
Company to any person or entity other than an affiliate of SGC; or (iv) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board, together with any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in Subsection (i), (ii), or (iii)
hereof) whose election by the Board of Directors of SGC or nomination for
election by SGC’s stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved (the “Continuing Directors”), cease for any reason to
constitute at least a majority of the Board of Directors of SGC.

(g)           Retirement.  In the event Executive
retires on or after February 1, 2009 from full-time employment with the Company
and in the industry by giving notice no later than ninety days prior to such
event, he shall receive the same benefits as though he had terminated his
employment for “Good Reason” above.

(h)           Timing of Certain Payments Under
Section 5.  Payments
pursuant to Sections 5(c)(ii) or 5(e)(ii) of this Agreement, if any, shall be
payable in equal installments in accordance with the Company’s standard payroll
practices over a period of twelve (12) months following the date of termination;
provided, however, that if necessary to comply with Section 409A of the Code,
and applicable administrative guidance and regulations, such payments shall be
made as follows:  (1) no payments shall
be made for a six-month period following the date of termination, (2) an amount
equal to the aggregate sum that would have been otherwise payable during the
initial six-month period shall be paid in a lump sum six months following the date
of termination, and (3) during the period beginning six months following the
date of termination through the remainder of the twelve-month period, payment
of the remaining amount due shall be payable in equal installments in
accordance with the Company’s standard payroll practices. If the lump sum
amounts described in Section 5(f) of this Agreement become payable, Executive
shall receive payment within thirty (30) days of termination; provided,
however, that if necessary to comply with Section 409A of the Code, and
applicable administrative guidance and regulations, such payment shall instead
be made in a lump sum six months following the date of 

 7
 

 

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

(i)            No Obligation to Mitigate.  The Executive shall have no
obligation to mitigate damages pursuant to this Section 5, but shall be
obligated to promptly advise the Company regarding any compensation earned or
any payments that will become due with respect to services provided during any
period of continued payments pursuant to this Section 5. The Company’s
obligation to make continued payments to the Executive shall be reduced by any
compensation earned by the Executive during the severance period (without
regard to when such compensation is paid).

(j)            Set-Off.  To the fullest extent permitted by law, any
amounts otherwise due the Executive hereunder (including, without limitation,
any payments pursuant to this Section 5) shall be subject to set-off with
respect to any amounts the Executive otherwise owes the Company or any
subsidiary or affiliate thereof.

(k)           No Other Benefits or Compensation. 
Except as may be provided under this Agreement, under any other written
agreement between Executive and the Company, or under the terms of any plan or
policy applicable to Executive, Executive shall have no right to receive any
other compensation from the Company, or to participate in any other plan,
arrangement or benefit provided by the Company, with respect to any future
period after such termination or resignation.

(l)            Release of
Employment Claims; Compliance with Section 6.  Executive
agrees, as a condition to receipt of any termination payments and benefits
provided for in Section 5 (other than the Standard Termination Payments),
that Executive will execute a general release agreement, in a form reasonably
satisfactory to the Company, releasing any and all claims arising out of Executive’s
employment (other than enforcement of this Agreement) and Executive will not in
the future seek employment at the Company.  The Company’s obligation to
make any termination payments and benefits provided for in Section 5
(other than the Standard Termination Payments) shall immediately cease if
Executive willfully and materially breaches Section 6.1, 6.2 , 6.3, 6.4,
or 6.8.

6.             Noncompetition; Nonsolicitation;
Nondisclosure; etc.

6.1           Noncompetition;
Nonsolicitation .

(a)
Executive acknowledges the highly competitive nature of the Company’s business
and that access to the Company’s confidential records and proprietary
information renders Executive special and unique within the Company’s industry.
In consideration of the amounts that may hereafter be paid to Executive
pursuant to this Agreement (including, without limitation, Sections 4 and 5),
Executive agrees that during the Term (including any extensions thereof) and
during the Covered Time (as defined in Section 6.1(e)), Executive, alone or
with others, will not, directly or indirectly, engage (as owner, investor,
partner, stockholder, employer, 

 8
 

 

employee, consultant,
advisor, director or otherwise) in any Competing Business. For purposes of this
Section 6, “Competing Business” shall mean any business: (i) involving
design and production of instant lottery tickets and the management of related
marketing and distribution programs; manufacture, sale, operation or management
of on-line lottery systems (Lotto-type games); development and commercialization
of licensed and other proprietary game entertainment for all lottery product
channels; provision of wagering (whether pari-mutuel (pooled) or otherwise) or
venue management services for racetracks and off-track betting facilities;
production of prepaid cellular phone cards; or any other business in which the
Company or its affiliates is then or was within the previous eighteen (18) months
engaged or in which the Company, to Executive’s knowledge, intends to engage
during the Term or the Covered Time (as defined below); (ii) in which the
Executive was engaged or involved (whether in an executive or supervisory
capacity or otherwise) on behalf of the Company or with respect to which the
Executive has obtained proprietary or confidential information; and (iii) which
was conducted anywhere in the United States or in any other geographic area in
which such business was conducted or planned to be conducted by the Company.

(b)           In further consideration of the amounts that may hereafter be paid to
Executive pursuant to this Agreement (including, without limitation, Sections
3, 4 and 5), Executive agrees that during the Term (including any extensions
thereof) and during the Covered Time Executive shall not, directly or
indirectly, (i) solicit or attempt to induce any of the employees, agents,
consultants or representatives of the Company to terminate his, her, or its
relationship with the Company; (ii) solicit or attempt to induce any of the
employees, agents, consultants or representatives of the Company to become
employees, agents, consultants or representatives of any other person or
entity; (iii) solicit or attempt to induce any customer, vendor or distributor
of the Company to curtail or cancel any business with the Company; or (iv) hire
any person who, to Executive’s actual knowledge, is, or was within 180 days
prior to such hiring, an employee of the Company.

(c)  During the Term (including any extensions
thereof) and during the Covered Time, Executive agrees that upon the earlier of
Executive’s (i) negotiating with any Competitor (as defined below) concerning
the possible employment of Executive by the Competitor, (ii) responding to
(other than for the purpose of declining) an offer of employment from a
Competitor, or (iii) becoming employed by a Competitor, (x) Executive will
provide copies of Section 6 of this Agreement to the Competitor, and
(y) in the case of any circumstance described in (iii) above occurring
during the Covered Time, and in the case of any circumstance described in (i)
or (ii) above occurring during the Term or during the Covered Time, Executive
will promptly provide notice to the Company of such circumstances. Executive
further agrees that the Company may provide notice to a Competitor of Executive’s
obligations under this Agreement. For purposes of this Agreement, “Competitor”
shall mean any entity (other than the Company, its subsidiaries or affiliates)
that engages, directly or indirectly, in the United States in any Competing
Business.

(d)
          Executive understands that the restrictions
in this Section 6.1 may limit Executive’s ability to earn a livelihood in a
business similar to the business of the Company but nevertheless agrees and
acknowledges that the consideration provided under this Agreement (including,
without limitation, Sections 4 and 5) is sufficient to justify such
restrictions. In consideration thereof and in light of Executive’s education,
skills and abilities, Executive agrees 

 9
 

 

that Executive will not
assert in any forum that such restrictions prevent Executive from earning a
living or otherwise should be held void or unenforceable.

(e)
          For purposes of this Section 6.1, “Covered
Time” shall mean the period beginning on the date of termination of Executive’s
employment (the “Date of Termination”) and ending eighteen (18) months after the
Date of Termination.

6.2           Proprietary
Information; Inventions.

(a)
          Executive acknowledges that during the course
of Executive’s employment with the Company Executive necessarily will have (and
during any employment by the Company prior to the Term has had) access to and
make use of proprietary information and confidential records of the Company.
Executive covenants that Executive shall not during the Term or at any time
thereafter, directly or indirectly, use for Executive’s own purpose or for the
benefit of any person or entity other than the Company, nor otherwise disclose
to any individual or entity, any such proprietary information, unless such
disclosure has been authorized in writing by the Company or is otherwise
required by law. The term “proprietary information” means: (i) the software
products, programs, applications, and processes utilized by the Company; (ii)
the name and/or address of any customer or vendor of the Company or any
information concerning the transactions or relations of any customer or vendor
of the Company with the Company; (iii) any information concerning any product,
technology, or procedure employed by the Company but not generally known to its
customers or vendors or competitors, or under development by or being tested by
the Company but not at the time offered generally to customers or vendors; (iv)
any information relating to the Company’s computer software, computer systems,
pricing or marketing methods, sales margins, cost of goods, cost of material,
capital structure, operating results, borrowing arrangements or business plans;
(v) any information identified as confidential or proprietary in any line of
business engaged in by the Company; (vi) any information that, to Executive’s
actual knowledge, the Company ordinarily maintains as confidential or
proprietary; (vii) any business plans, budgets, advertising or marketing plans;
(viii) any information contained in any of the Company’s written or oral
policies and procedures or manuals; (ix) any information belonging to customers,
vendors or any other person or entity which the Company, to Executive’s actual
knowledge, has agreed to hold in confidence; and (x) all written, graphic,
electronic data and other material containing any of the foregoing. Executive
acknowledges that information that is not novel or copyrighted or patented may
nonetheless be proprietary information. The term “proprietary information”
shall not include information generally known or available to the public or
generally known or available to the industry or information that becomes
available to Executive on an unrestricted, non-confidential basis from a source
other than the Company or its directors, officers, employees, or agents
(without breach of any obligation of confidentiality of which Executive has
actual knowledge at the time of the relevant disclosure by Executive).

(b)           Executive agrees that all processes, technologies and inventions
(collectively, “Inventions”), including new contributions, improvements, ideas
and discoveries, whether patentable or not, conceived, developed, invented or
made by Executive during the Term (and during any employment by the Company
prior to the Term) shall belong to the Company, provided that such Inventions
grew out of the Executive’s work with the Company or any of its subsidiaries or
affiliates, are related in any manner to the business (commercial or 

 10
 

 

experimental) of the Company
or any of its subsidiaries or affiliates or are conceived or made on the
Company’s time or with the use of the Company’s facilities or materials.
Executive shall further: 
(i) promptly disclose such Inventions to the Company; (ii) assign
to the Company, without additional compensation, all patent and other rights to
such Inventions for the United States and foreign countries; (iii) sign all
papers necessary to carry out the foregoing; and (iv) give testimony in support
of the Executive’s inventorship. If any Invention is described in a patent
application or is disclosed to third parties, directly or indirectly, by the
Executive within two years after the termination of the Executive’s employment
by the Company, it is to be presumed that the Invention was conceived or made
during the Term. Executive agrees that Executive will not assert any rights to
any Invention as having been made or acquired by Executive prior to the date of
this Agreement, except for Inventions, if any, disclosed in Exhibit A to
this Agreement.

6.3
          Confidentiality
and Surrender of Records.  Executive shall not during the Term or at any
time thereafter (irrespective of the circumstances under which Executive’s
employment by the Company terminates), except as required by law, directly or
indirectly publish, make known or in any fashion disclose any confidential
records to, or permit any inspection or copying of confidential records by, any
individual or entity other than in the course of such individual’s or entity’s
employment or retention by the Company, nor shall Executive retain, and will
deliver promptly to the Company, any of the same following termination of
Executive’s employment hereunder for any reason or upon request by the Company.
For purposes hereof, “confidential records” means those portions of
correspondence, memoranda, files, manuals, books, lists, financial, operating
or marketing records, magnetic tape, or electronic or other media or equipment
of any kind in Executive’s possession or under Executive’s control or
accessible to Executive which contain any proprietary information. All
confidential records shall be and remain the sole property of the Company during
the Term and thereafter.

6.4
          Nondisparagement. 
Executive shall not, during the Term and thereafter, disparage in any
material respect the Company, any affiliate of the Company, any of their
respective businesses, any of their respective officers, directors or
employees, or the reputation of any of the foregoing persons or entities.
Notwithstanding the foregoing, nothing in this Agreement shall preclude
Executive from making truthful statements that are required by applicable law,
regulation or legal process.

6.5           No Other
Obligations.  Executive represents that Executive is not
precluded or limited in Executive’s ability to undertake or perform the duties
described herein by any contract, agreement or restrictive covenant. Executive
covenants that Executive shall not employ the trade secrets or proprietary
information of any other person in connection with Executive’s employment by
the Company without such person’s authorization.

6.6           Forfeiture of
Outstanding Options. The provisions of Section 5 notwithstanding, if
Executive willfully and materially fails to comply with Section 6.1, 6.2, 6.3,
6.4, or 6.8, all options (whether granted prior to, contemporaneous with, or
subsequent to this Agreement) to purchase common stock granted by the Company
and held by Executive or a transferee of Executive shall be immediately
forfeited and cancelled.

 11
 

 

6.7
          Enforcement. 
Executive acknowledges and agrees that, by virtue of Executive’s
position, services and access to and use of confidential records and
proprietary information, any violation by Executive of any of the undertakings
contained in this Section 6 would cause the Company immediate, substantial and
irreparable injury for which it has no adequate remedy at law. Accordingly,
Executive agrees and consents to the entry of an injunction or other equitable
relief by a court of competent jurisdiction restraining any violation or
threatened violation of any undertaking contained in this Section 6. Executive
waives posting of any bond otherwise necessary to secure such injunction or
other equitable relief. Rights and remedies provided for in this Section 6 are
cumulative and shall be in addition to rights and remedies otherwise available
to the parties hereunder or under any other agreement or applicable law.

6.8
          Cooperation
with Regard to Litigation.  Executive agrees to cooperate reasonably with
the Company, during the Term and thereafter (including following Executive’s
termination of employment for any reason), by being available to testify on
behalf of the Company in any action, suit, or proceeding, whether civil,
criminal, administrative, or investigative. In addition, except to the extent
that Executive has or intends to assert in good faith an interest or position
adverse to or inconsistent with the interest or position of the Company,
Executive agrees to cooperate reasonably with the Company, during the Term and
thereafter (including following Executive’s termination of employment for any
reason), to assist the Company in any such action, suit, or proceeding by
providing information and meeting and consulting with the Board or its
representatives or counsel, or representatives or counsel to the Company, in
each case, as reasonably requested by the Company. The Company agrees to pay
(or reimburse, if already paid by Executive) all reasonable expenses actually
incurred in connection with Executive’s cooperation and assistance including,
without limitation, reasonable fees and disbursements of counsel, if any,
chosen by Executive if Executive reasonably determines in good faith, on the
advice of counsel, that the Company’s counsel may not ethically represent
Executive in connection with such action, suit or proceeding due to actual or
potential conflicts of interests.

6.9           Survival.  The
provisions of this Section 6 shall survive the termination of the Term and any
termination or expiration of this Agreement.

6.10         Company.  For
purposes of this Section 6, references to the “Company” shall include both the
Company and each subsidiary and/or affiliate of the Company.

7.             Code of Conduct.  Executive acknowledges that he has read the
Company’s Code of Conduct and agrees to abide by such Code, as amended or
supplemented from time to time, and other policies applicable to employees and
executives of the Company.

8.             Indemnification.  During the Term of this Agreement and all
periods after the expiration of this Agreement or termination of Executive’s
employment for any reason, the Company shall indemnify Executive to the full
extent permitted under the Company’s Certificate of Incorporation or By-Laws
and pursuant to any other agreements or policies in effect from time to time.
To the extent permitted under the Company’s Certificate of Incorporation and
By-Laws and applicable law, the Company shall advance expenses for which indemnification
may be claimed as such expenses are incurred, subject to any requirement that
Executive provide an 

 12
 

 

undertaking to repay such
advances if it is ultimately determined that Executive is not entitled to
indemnification; provided, however, that any determination required to be made
with respect to whether Executive’s conduct complies with the standards
required to be met as a condition of indemnification or advancement of expenses
under applicable law and the Company’s Certificate of Incorporation, By-Laws,
or other agreement, shall be made by independent counsel mutually acceptable to
Executive and the Company (except to the extent otherwise required by law). Any
provision contained herein notwithstanding, this Agreement shall not limit or
reduce, and the Company hereby agrees to provide to Executive, any and all
rights to indemnification Executive would otherwise have, to the full extent
permitted under applicable law. In addition, the Company will maintain
directors’ and officers’ liability insurance in effect and covering acts and
omissions of Executive. For purposes of this Section 8, references to the “Company”
shall include both the Company and each of its subsidiaries and/or affiliates
for which Executive has acted, acts or will in the future act in any capacity.
The provisions of this Section 8 shall survive the termination of the Term and
any termination or expiration of this Agreement.

9.             Assignability;
Binding Effect.  Neither this
Agreement nor the rights or obligations hereunder of the parties hereto shall
be transferable or assignable by Executive, except in accordance with the laws
of descent and distribution and as specified below. The Company may assign this
Agreement and the Company’s rights and obligations hereunder, and shall assign
this Agreement and such rights and obligations, to any Successor (as
hereinafter defined) which, by operation of law or otherwise, continues to
carry on substantially the business of the Company (or a business unit of the
Company for which Executive provided services) prior to the event of
succession, and the Company shall, as a condition of the succession, require
such Successor to agree in writing to assume the Company’s obligations and be
bound by this Agreement. For purposes of this Agreement, “Successor” shall mean
any person that succeeds to, or has the practical ability to control, the
Company’s business directly or indirectly, by merger or consolidation, by
purchase or ownership of voting securities of the Company or all or
substantially all of its assets or those relating to a particular business unit
of the Company to which Executive provides services, or otherwise. The Company
may also assign this Agreement and the Company’s rights and obligations
hereunder to any affiliate of the Company, provided that upon any such
assignment the Company shall remain liable for the obligations to Executive
hereunder. This Agreement shall be binding upon and inure to the benefit of
Executive, Executive’s heirs, executors, administrators, and beneficiaries, and
shall be binding upon and inure to the benefit of the Company and its
successors and assigns.

10.           Complete Understanding; Amendment; Waiver.  This
Agreement constitutes the complete understanding between the parties with
respect to the employment of Executive and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof, and no statement, representation,
warranty or covenant has been made by either party with respect thereto except
as expressly set forth herein. This Agreement shall not be modified, amended or
terminated except by a written instrument signed by each of the parties. Any
waiver of any term or provision hereof, or of the application of any such term
or provision to any circumstances, shall be in writing signed by the party
charged with giving such waiver. Waiver by either party of any breach hereunder
by the other party shall not operate as a waiver of any other breach, whether
similar to or different from the breach waived. No delay by either party in the
exercise of any rights or remedies shall operate as 

 13
 

 

a waiver thereof, and no
single or partial exercise by either party of any such right or remedy shall
preclude other or further exercise thereof.

11.           Severability.  If any provision of this Agreement
or the application of any such provision to any person or circumstances shall
be determined by any court of competent jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Agreement, or the
application of such provision to such person or circumstances other than those
to which it is so determined to be invalid or unenforceable, shall not be
affected thereby, and each provision hereof shall be enforced to the fullest
extent permitted by law. If any provision of this Agreement, or any part
thereof, is held to be invalid or unenforceable because of the scope or
duration of or the area covered by such provision, the parties hereto agree
that the court making such determination shall reduce the scope, duration
and/or area of such provision (and shall substitute appropriate provisions for
any such invalid or unenforceable provisions) in order to make such provision
enforceable to the fullest extent permitted by law and/or shall delete specific
words and phrases, and such modified provision shall then be enforceable and
shall be enforced. The parties hereto recognize that if, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants
contained in this Agreement, then that invalid or unenforceable covenant
contained in this Agreement shall be deemed eliminated from these provisions to
the extent necessary to permit the remaining separate covenants to be enforced.
In the event that any court determines that the time period or the area, or
both, are unreasonable and that any of the covenants is to that extent invalid
or unenforceable, the parties hereto agree that such covenants will remain in
full force and effect, first, for the greatest time period, and second, in the greatest
geographical area that would not render them unenforceable.

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

13.           Governing Law; Arbitration.

(a)           Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be wholly performed
within that State, without regard to its conflict of laws provisions.

(b)           Arbitration.  The
Executive and the Company agree that, except for claims for Workers’
Compensation, Unemployment Compensation, and any other claim that is
non-arbitrable under applicable law, final and binding arbitration shall be the
exclusive forum for any dispute or controversy between them, including, without
limitation, disputes arising under or in connection with this Agreement,
Executive’s employment, and/or termination of employment, with the Company;
provided, however, that the Company shall be entitled to commence an action in
any court of competent jurisdiction for injunctive relief in connection with
any alleged actual or threatened violation of any provision of Section 6.
Judgment may be entered on the arbitrators’ award in any court having
jurisdiction. For purposes of entering such judgment or seeking injunctive
relief with regard to Section 6, the Company and Executive hereby consent to
the jurisdiction of any or all of the following courts: (i) the United States
District Court for the Southern District of New York; (ii) the Supreme Court of
the State of New York, New York 

 14
 

 

County; or (iii) any other
court having jurisdiction; provided, that damages for any alleged violation of
Section 6, as well as any claim, counterclaim or crossclaim brought by the
Executive or any third-party in response to, or in connection with any court
action commenced by the Company seeking said injunctive relief shall remain
exclusively subject to final and binding arbitration as provided for herein.
The Company and Executive hereby waive, to the fullest extent permitted by
applicable law, any objection which either may now or hereafter have to such
jurisdiction, venue and any defense of inconvenient forum.  Thus, except for the claims carved out above,
this Agreement includes all common-law and statutory claims (whether arising
under federal state or local law), including, but not limited to, any claim for
breach of contract, fraud, fraud in the inducement, unpaid wages, wrongful
termination, and gender, age, national origin, sexual orientation, marital status,
disability, or any other protected status.

(c)           Any arbitration under this Agreement shall be filed exclusively with
the American Arbitration Association in New York, New York before three
arbitrators, in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association in effect at the
time of submission to arbitration.  The
Company and Executive hereby agree that a judgment upon an award rendered by
the arbitrators may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. 
The Company shall pay all costs uniquely attributable to arbitration,
including the administrative fees and costs of the arbitrators.  Each party shall pay that party’s own costs
and attorney fees, if any, unless the arbitrators rule otherwise.  The Executive understands that he is giving
up no substantive rights, and this Agreement simply governs forum.  The arbitrators shall apply the same
standards a court would apply to award any damages, attorney fees or costs.  The Executive shall not be required to pay
any fee or cost that he would not otherwise be required to pay in a court
action, unless so ordered by the arbitrators.

(d)           BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT
THE RIGHT TO A COURT TRIAL AND TRIAL BY JURY IS OF VALUE, AND KNOWINGLY AND
VOLUNTARILY WAIVE THAT RIGHT FOR ANY DISPUTE SUBJECT TO THE TERMS OF THIS
ARBITRATION PROVISION.

14.           Titles and Captions.  All paragraph titles or captions in this
Agreement are for convenience only and in no way define, limit, extend or
describe the scope or intent of any provision hereof.

15.           Joint Drafting.  In
recognition of the fact that the parties hereto had an equal opportunity to
negotiate the language of, and draft, this Agreement, the parties acknowledge
and agree that there is no single drafter of this Agreement and therefore, the
general rule that ambiguities are to be construed against the drafter is, and
shall be, inapplicable.  If any language
in this Agreement is found or claimed to be ambiguous, each party shall have
the same opportunity to present evidence as to the actual intent of the parties
with respect to any such ambiguous language without any inference or
presumption being drawn against any party.

16.           Notices. 
Whenever under this Agreement it becomes necessary to give notice, such
notice shall be in writing, signed by the party or parties giving or making the
same, and shall be served on the person or persons for whom it is intended or
who should be advised or notified, by Federal Express or other similar
overnight service or by certified or registered mail, 

 15
 

 

return receipt requested,
postage prepaid and addressed to such party at the address set forth below or
at such other address as may be designated by such party by like notice:

To the Company:

Scientific Games Corporation

750 Lexington Avenue

New York, N.Y. 10022

Attention: General
Counsel

To Executive:

William J. Huntley

6305 Holland Drive

Cumming, GA 30041

[Remainder of Page
Intentionally Left Blank]

 16
 

 

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

	
  

  	
  SCIENTIFIC GAMES INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  William J. Huntley

  

 

 17
 

 

EXHIBIT A

LIST OF PRE-EXISTING INVENTIONS OF EXECUTIVE

 18

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