10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED JUNE 30, 2009

OR

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

FOR THE TRANSITION PERIOD FROM              TO             

Commission file number 1-8300

WMS INDUSTRIES INC.

(Exact name of registrant as specified in its charter)

Delaware	36-2814522
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
800 South Northpoint Blvd., Waukegan, Illinois	60085
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (847) 785-3000

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

Title of each class	Name of each Exchange on which registered
Common Stock, $0.50 par value	New York Stock Exchange

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

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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  ¨    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

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

Large accelerated filer  þ            Accelerated filer  ¨            Non-accelerated filer  ¨            Smaller reporting company  ¨

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

The aggregate market value of the shares of common stock held by non-affiliates of the registrant as of the last business day of the second fiscal quarter ended December 31, 2008 was $1,317,349,436 based on the closing price of the common stock as reported on the New York Stock Exchange of $26.90 per share. For the purposes of this calculation, it is assumed that directors and executive officers of the registrant are affiliates.

On August 24, 2009 the number of shares of common stock outstanding was 50,482,317 shares.

Documents Incorporated By Reference: Portions of the Registrant’s definitive proxy statement to be filed on or about October 27, 2009, with the Securities and Exchange Commission are incorporated by reference in Part III of this Report.

TABLE OF CONTENTS

PART I		2
Item 1.	Business	2
Item 1A.	Risk Factors	24
Item 1B.	Unresolved Staff Comments	29
Item 2.	Properties	29
Item 3.	Legal Proceedings	30
Item 4.	Submission of Matters to a Vote of Security Holders	31
PART II		31
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	31
Item 6.	Selected Financial Data	33
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	62
Item 8.	Financial Statements and Supplementary Data	63
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	63
Item 9A.	Controls and Procedures	63
Item 9B.	Other Information	64
PART III		65
Item 10.	Directors, Executive Officers and Corporate Governance	65
Item 11.	Executive Compensation	65
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65
Item 13.	Certain Relationships and Related Transactions, and Director Independence	65
Item 14.	Principal Accountant Fees and Services	65
PART IV		66
Item 15.	Exhibits, Financial Statement Schedules	66

CAUTIONARY NOTE

This report contains statements that do not relate to historical or current facts, but are “forward looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to future events or trends, our future prospects and proposed new products, services, developments, or business strategies, among other things. These statements can generally (although not always) be identified by their use of terms and phrases such as anticipate, appear, believe, continue, could, estimate, expect, indicate, intend, may, plan, possible, predict, project, pursue, will, would, and other similar terms and phrases, as well as the use of the future tense.

Examples of forward looking statements in this report include, but are not limited to, the following categories of expectations about:

Ø our ability to introduce new products and stimulate replacement demand

Ø the timing, features, benefits, and expected success of new product introductions

Ø the timing of the introduction of and revenues from server-based systems and networked gaming

Ø increasing gaming machine sales or placements

Ø increasing growth or contributions from certain non-gaming machine products and services

Ø factors impacting future gross margins and expectations about future tax rates

Ø our ability to acquire, develop, or protect intellectual property

Ø our market share, competitive advantage, and leadership position

Ø the advantages offered to customers by our products and product features

Ø gaming growth, expansion, and new market opportunities

Ø legislative or regulatory developments and related market opportunities

Ø financial results for fiscal 2010 and 2011, stabilization of certain gaming markets, and replacement demand over the next 12 to 24 months

Ø our ability to benefit from and effectively integrate and utilize acquired businesses and assets

Ø investments in other entities, expanding our product lines, and improving our position in related markets

Ø our access to and the availability of capital and credit resources to fund future operating requirements, capital expenditures and payment obligations

Actual results could differ materially from those expressed or implied in our forward looking statements. Our future financial condition and results of operations, as well as any forward looking statements, are subject to change and to inherent known and unknown risks and uncertainties. See Item 1A, Risk Factors, in this report for a discussion of these and other risks and uncertainties. Although we believe that the expectations reflected in our forward-looking statements are reasonable, any or all of our forward-looking statements may prove to be incorrect. Consequently, no forward-looking statements are guaranteed.

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PART I

ITEM 1. BUSINESS

General

WMS Industries Inc. (“WMS” or the “Company”) is engaged in serving the legalized gaming industry worldwide by designing, manufacturing and distributing video and reel-spinning gaming machines, video lottery terminals (“VLTs”) and in gaming operations, which consists of the placement of leased participation gaming machines in legal gaming venues. We either sell our products outright or place and lease our products to approved customers. Our products are installed in all of the major regulated gaming jurisdictions in the United States, as well as in over 100 international gaming jurisdictions. We also derive revenue from the sale of parts, conversion kits, amusement-with-prize (“AWP”) gaming machines, equipment manufactured under original equipment manufacturing agreements (“OEM”), gaming related systems for smaller international casinos and from licensing our gaming themes (“games”) and other intellectual property to third parties.

We seek to develop games and gaming machines that offer high entertainment value to casino patrons and generate greater revenues for casinos and other gaming machine operators than the games and gaming machines offered by our competitors. Our gaming products feature advanced graphics, digital sound and engaging games, and most games incorporate secondary bonus rounds. Certain games are based on licensed, well-recognized brands such as MONOPOLY^TM, POWERBALL^® and THE WIZARD OF OZ^TM and substantially all of our gaming machines utilize technologies and intellectual property licensed from third parties. In designing our games and gaming machines, our designers, engineers, artists and development personnel build upon our over 60 years of experience in designing and developing novel and entertaining products from jukeboxes and pinball games to video and arcade games and, now, gaming machines for the gaming industry. We utilize our unique Player Driven Innovation^TMapproach in the development of new games and technologies to create innovative products.

Our primary manufacturing facility is located in the United States, with development or distribution offices in the United States, Argentina, Australia, Canada, China, Italy, South Africa, Spain, and the United Kingdom and, through our subsidiary, Orion Financement Company (“Orion Gaming”), we have a development and distribution office in the Netherlands. During the June 2009 quarter we ceased manufacturing in the Netherlands and integrated the manufacturing of Orion Gaming products into our facilities in Spain and the United States. In fiscal 2008, we added a development and distribution office in Austria with our acquisition of Systems in Progress GmbH (“SiP”). We conduct our business through our subsidiaries, including WMS Gaming Inc. (“WMS Gaming”), Orion Gaming and SiP, which market our products under the WMS, WMS Gaming, Orion Gaming and SiP trademarks. Our fiscal year begins on July 1 and ends on June 30.

We have only one business segment. Data for product sales and gaming operations is only maintained on a consolidated basis as presented in our Consolidated Financial Statements, with no additional separate data maintained for product sales and gaming operations (other than the revenue and cost of revenues information included in our Consolidated Statements of Income and cost of gaming operations equipment and related accumulated depreciation included in our Consolidated Balance Sheets). For information about our revenues, net income, assets, liabilities, stockholders equity and cash flows, see our Consolidated Financial Statements included in this Report and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

WMS was incorporated in Delaware on November 20, 1974 under the name Williams Electronics, Inc. WMS succeeded to the amusement game business that had been conducted for almost 30 years prior to 1974 by our predecessors and entered the gaming machine market beginning in the 1990’s. Our principal executive offices are located at 800 South Northpoint Blvd., Waukegan, Illinois 60085, and our telephone number is (847) 785-3000. Our Internet website address is www.wms.com. Information contained on our website is not part of this Report. Through our Internet website, we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as soon as

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reasonably practical after the information has been filed with or furnished to the SEC. We will also provide electronic or paper copies of these reports free of charge upon request to our principal executive office, Attention: Investor Relations. We filed our annual Chief Executive Officer certification dated January 7, 2009, with the New York Stock Exchange. Copies of any materials we file with the SEC are also available at the SEC’s Public Reference Room at 100 F Street, N.E. Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.

Company and Product Overview

We design, manufacture and distribute gaming machines and VLTs for customers in legalized gaming jurisdictions worldwide. Our products consist of innovative and differentiated video gaming machines, mechanical reel gaming machines and VLTs. We were one of the original developers and pioneers of video gaming machines in the U.S. market. We strive to develop highly entertaining games that incorporate engaging game play, themes, intellectual properties and advanced technologies, exciting winning combinations, advanced graphics, and digital music and sound effects. Each gaming machine contains an operating system referred to as a game platform. The game platform manages software needed to run the gaming machine. Game platforms and the related computer systems are constantly updated and revised to keep pace with the ever-increasing complexity of modern game play requirements. The change in game play requirements are driven by, among other things, changes in consumer demand, capacity, security and regulation. CPU-NXT^® and CPU-NXT2 are the primary platforms for most of our video and mechanical reel gaming machine and VLT product offerings.

Our games typically integrate secondary bonus rounds as additions to the primary game to create a game-within-a-game for more exciting and interactive play. If players attain certain winning combinations on the primary game, they move on to play a secondary game for a chance at winning additional bonuses without additional wagering. The player can win in both the primary game and the secondary game. In our secondary bonus games, the player has various choices to make regarding the bonus features. For example, in some games the player can select from a variety of tokens or characters to obtain or reveal the bonus and, in other games, the player is awarded free spins. Amusing, entertaining and familiar graphics and musical themes add to the player appeal of our games.

We generate revenue in two principal ways. First, we generate product sales revenues from the sale of new and used gaming machines and VLTs, conversion kits for existing gaming machines (including game and/or operating system conversions), parts, amusement-with-prize gaming machines, equipment manufactured under OEM agreements to casinos and other licensed gaming machine operators, and the sale of gaming related systems for smaller international casino operators. Second, we earn gaming operations revenues from leasing gaming machines and VLTs to casinos and other licensed gaming machine operators in legal gaming jurisdictions. Also we earn royalties from third parties, who maintain license agreements with us to use our game content and other intellectual property.

Our gaming machines are installed in all of the major regulated gaming jurisdictions in the United States, as well as in over 100 international gaming jurisdictions. Revenue information for the past three years includes ($ in millions):

	2009		% of Revenue		2008		% of Revenue		2007		% of Revenue
Revenues:
Product sales	$	438.5	62.1	%	$	421.2	64.8	%	$	366.3	67.9	%
Gaming operations		267.9	37.9	%		228.9	35.2	%		173.5	32.1	%
Total revenues	$	706.4	100.0	%	$	650.1	100.0	%	$	539.8	100.0	%

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See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and our Consolidated Financial Statements for further information.

Product Sales

We offer the following products for sale:

Ø Video gaming machines. Our video gaming machines are primarily multi-line, multi-coin units, in our Bluebird^®, Bluebird2 and Orion Gaming Twinstar^TM – branded cabinets, that combine advanced graphics, digital music and sound effects, and secondary bonus games. In many of our products, the primary game features a video screen that simulates traditional mechanical reel action. In addition, we have developed games that have innovative variations on the movement and play action of the screen symbols, such as our Cascading Reels^® and Rotating Wilds^® effects. In the bonus round, the video screen can display a variety of amusing, interactive themed content. Depending on the game, the player can wager hundreds of coins per play. We have a strong player following in this product segment since the successful introduction of our Reel ‘em In^® game in 1997. With the introduction of new games and the significant expansion of our video game line since 1997, we undertook a new strategy in fiscal 2007 that focuses on segmenting our video for-sale games into three categories: G+^®, Classic and Innovation. Each product category has its own distinguishable player interface and game play features that communicate the game play experiences that each video game offers. We introduced 29 new video games for sale during fiscal 2009, compared to 26 new games in fiscal 2008. We presently have 186 games approved for our video for-sale product line.

Ø Mechanical reel gaming machines. Our product line of mechanical reel gaming machines in our Bluebird and Bluebird2 cabinets include five-reel and three-reel, multi-line, multi-coin gaming machines that are powered by the same CPU-NXT and CPU-NXT2 operating systems as our video gaming machines. Our mechanical reel products feature state-of-the-art lighting and sound elements that make our gaming machines stand out on a casino floor. We presently have 142 for-sale games approved for our mechanical reel product line, including 17 games under our Hot Hot Super Jackpot^® series of games that we first introduced in fiscal 2006, which included the first bonus bet additional side bet feature on a five-reel mechanical gaming machine in the market. We introduced 32 new mechanical reel games in fiscal 2009 compared to 29 in fiscal 2008.

Ø Video poker gaming machines. Our video poker product line currently consists of several games including 3 WAY-ACTION^® and Reel ’em In Poker™. We presently have seven games approved for our video poker product line.

Ø Parts sales, conversion kits, AWP, OEM, used games and gaming systems. We sell replacement parts and game conversion kits for our legacy, Bluebird, Bluebird2 and Orion Gaming’s Twinstar gaming machines. We also sell CPU-NXT conversion kits, which enable casinos to upgrade legacy WMS gaming machines to obtain all the features and functionality of the CPU-NXT operating system for a lesser price compared to the purchase of a new Bluebird brand cabinet. In addition, we also sell our own and competitors used gaming machines that are acquired on a trade-in basis or our gaming machines that were previously placed on a participation basis. We expect that our revenues from these sources will increase in the future as our installed base of sold gaming machines continues to grow. We also sell AWP products in certain international markets, a product line that was acquired with the Orion Gaming acquisition, and we manufacture and sell legacy, Bluebird and Twinstar gaming cabinets in limited cases under OEM agreements to certain third parties. Lastly, with the acquisition of SiP in July 2007, we now sell gaming systems, including linked progressive systems and slot accounting systems applicable for smaller international casino operators.

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A summary distribution by major category of our product sales revenues is as follows:

	Year Ended June 30,
	2009		2008		2007
Video gaming machines	49.2	%	46.6	%	47.7	%
Mechanical reel gaming machines	15.6		19.9		16.4
Video poker gaming machines	—		0.1		0.3
Other product sales:
Conversions	23.0		21.7		15.5
Used gaming machines	12.2		10.8		16.9
Other	—		0.9		3.2
Total	100.0	%	100.0	%	100.0	%

Gaming Operations

Our gaming operations business includes the following:

Ø Participation games. Participation games are gaming machines owned by us that we lease based upon any of the following payment methods: (1) a percentage of the daily net win which is the casino’s earnings generated by casino patrons playing the gaming machine, (2) a fixed daily fee for the gaming machine, or (3) primarily in the case of wide-area progressive gaming machines, a percentage of the amount wagered or a combination of a fixed daily fee plus a percentage of the amount wagered. We are able to lease these gaming machines on a participation basis because of their superior earnings performance and/or the popularity of the brand that generates higher wagering and net win to the casinos or gaming machine operators than the gaming machines we sell outright. Our participation games include the following categories:

Ø Wide-Area Progressive (“WAP”) participation games. A WAP system electronically links gaming machines that are located across multiple casinos within a single gaming jurisdiction, or across Native American gaming jurisdictions. The linked gaming machines contribute to and compete for large, system-wide progressive jackpots and are designed to increase gaming machine play for participating casinos by giving the players the opportunity to win a larger jackpot than on a non-linked gaming machine. Our WAP games include titles under our proprietary brands and licensed brands such as MONOPOLY, including MONOPOLY GRAND HOTEL^®, BIG EVENT^®, CLINT EASTWOOD^® based games, POWERBALL, TOP GUN™, THE WIZARD OF OZ™ , TIME MACHINE^®, Reel ‘em In Compete To Win^®, and JOHN WAYNE^®. Net win per gaming machine on WAP systems is generally higher than on other types of participation gaming machines. We operate WAP systems in Arizona, Colorado, Mississippi, Missouri, Nevada and New Jersey and in Native American casinos. We often leverage our WAP games by also using them on local-area progressive systems (“LAP”) or stand-alone participation gaming machines in those jurisdictions where we do not operate a WAP system. WAP participation games typically are leased where we earn revenue based on a percentage of the amount wagered or a combination of a fixed daily fee plus a percentage of the amount wagered. WAP participation games generate our highest daily lease rate and gross profit contribution; however, the gross margin percentage is below the other two types of participation games because we are responsible for funding the WAP jackpot award, which we expense as cost of gaming operations in our Consolidated Statements of Income.

Ø Local-Area Progressive participation games. A LAP system electronically links gaming machines that are located within a single casino to a progressive jackpot for that specific casino. Our LAP gaming machines feature our proprietary brands, Jackpot Party Progressive^® and Life of Luxury^®, as well as licensed brands such as GREEN ACRES™, THE DUKES OF HAZZARD™ and HAPPY DAYS™, and in those jurisdictions where we do not operate a WAP system, the POWERBALL

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brand. Our LAP products leverage both exclusive brand names and game play intellectual property, and typically offer players the chance to win multiple progressive jackpots, all of which tend to drive up the average bet on these games. Net win per gaming machine on LAP systems is generally similar to non-linked stand-alone gaming machines on a casino floor. LAP participation games are leased where we earn revenue based on a percentage of the daily net win of the gaming machine or a fixed daily fee.

Ø Stand-alone participation games. We lease certain participation games on a non-linked basis, which we call stand-alone games. Our stand-alone games feature titles, among others, under the MONOPOLY and PRESS YOUR LUCK™ brands and, in those jurisdictions where we do not operate a WAP system, THE WIZARD OF OZ, TOP GUN and CLINT EASTWOOD based games. Our stand-alone gaming machines generally feature larger, more elaborate top boxes and provide game play experiences not possible on a single screen game or on gaming machines that we sell. Stand-alone participation games are leased where we earn revenue based on a percentage of the daily net win of the gaming machine or a fixed daily fee, or for our Adaptive Gaming^® STAR TREK^® games, on a percentage of the amount wagered on the game.

The components of our installed base of participation games were as follows:

	Year Ended June 30,
	2009	% of Installed Base		2008	% of Installed Base		2007	% of Installed Base
WAP gaming machines at year end	2,523	24.4	%	1,820	19.5	%	1,507	18.2	%
LAP gaming machines at year end	2,386	23.1		2,134	22.9		2,333	28.2
Stand-alone gaming machines at year end	5,441	52.5		5,367	57.6		4,436	53.6
Total installed participation base at year end	10,350	100.0	%	9,321	100.0	%	8,276	100.0	%
Average participation installed base during the year	9,666			8,771			7,299

Other gaming operations revenues are derived from:

Ø Casino-owned daily fee games. This category consists of gaming machines where the casino purchases the base gaming machine and leases the top-box and game from us at a lower fixed daily amount than if they were to lease the entire gaming machine. Casino-owned daily fee games typically feature a second liquid crystal display (“LCD”) screen in the topbox that provides additional entertaining bonus experiences for the player. In the case of products offered as casino-owned daily fee games, we also give casinos the option to either lease the complete gaming machine, top box and game (in which case the unit is classified as a stand-alone participation game), or to purchase outright the base gaming machine, top box and game at a premium price (which is classified as product sales revenue).

Ø Video Lottery Terminals. Our VLTs include both video and mechanical reel gaming machines. They feature advanced graphics, digital sound effects and music and incorporate many of the same features from our other gaming machines. We offer a variety of multi-game and single-themed VLTs. Our VLTs may be operated as stand-alone units or may interface with central monitoring computers operated by government agencies. Our VLTs typically are located in places where casino-style gaming is not the only attraction, such as racetracks, bars and restaurants. We do not include leased VLTs in our installed base of participation games. In certain jurisdictions, VLT operators can purchase outright our VLTs, in which case the purchases are classified as product sales revenues. In other jurisdictions, VLT operators can only lease our VLTs, in which case the lease payments are classified as other gaming operations revenues.

Ø Leased for-sale games. Some customers prefer to lease our standard gaming machines rather than to purchase them. In these cases, we lease the gaming machine, either for a fixed daily fee or a percentage

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of the net win of the gaming machine. Often, the customer is given the option to purchase the leased gaming machine. We do not include leased for-sale gaming machines in our installed base of participation games.

Ø Licensing. We derive revenue from licensing our games and intellectual property to third parties. Methods for determining the license or royalty revenue vary, but generally are based on a fixed amount for each licensed game purchased, placed or shipped in a period, or a fixed daily royalty amount for each game. We earn license or royalty revenues primarily from Multimedia Games Inc., Stargames Corporation Pty. Ltd. and Bally Technologies, Inc. (“Bally Technologies”). Our agreement with Stargames Corporation Pty. Ltd. ended in January 2008 which commenced an agreed upon sell off period. Our agreement with Multimedia Games Inc. ended June 30, 2009 although there are on-going annual fees owed for continued use of our games. Our agreement with Bally Technologies with respect to distribution of WMS game themes in Class II markets in Florida terminated March 26, 2008 and the agreement for distribution of WMS game themes to Class II markets in Washington will expire December 31, 2009.

Ø Centrally Determined Systems: Beginning in fiscal 2010, we will offer video and mechanical reel gaming machines and VLT’s for Class II and certain VLT markets that connect to a central server system provided by BluBeri Technologies Inc., which determines the outcome of the games. These systems primarily operate in Native American casinos in Washington, Florida and Oklahoma as well as in Mexico. In certain of these jurisdictions, our customers rent the gaming machine, in which case the rental payments are shown as gaming operations revenues and in other jurisdictions customers purchase the gaming machines in which case the revenues will be shown as product sales revenues. In each case, for the use of the central determination system, we will receive either a fixed daily fee or a percentage of the net win generated by the gaming machines or VLT’s connected to the system.

Acquisitions

In early fiscal year 2007, for $30.1 million, we acquired 100% of the outstanding stock of privately held Orion Gaming, a Netherlands-based holding company that designs, manufactures and distributes casino-based gaming machines and OEM and AWP gaming machines. The acquisition expanded our international presence and game library, while adding a proven product development team focused on international opportunities. In the June 2009 quarter, we ceased manufacturing in the Netherlands and integrated the manufacturing of Orion Gaming products into our Spain and United States facilities. Orion Gaming operates as a separate subsidiary of WMS. See Note 7, “Intangible Assets” to our Consolidated Financial Statements.

In early fiscal year 2008, we completed the acquisition of 100% of the outstanding stock of privately held SiP, an Austrian-based company focused on developing and selling gaming related systems, including linked progressive systems and slot accounting systems applicable for smaller international casino operators. The total consideration for SiP, including acquisition costs, was $4.9 million. The final purchase price allocation resulted in $3.1 million of identifiable intangible assets and $1.8 million of goodwill. SiP operates as a separate subsidiary. See Note 7, “Intangible Assets” to our Consolidated Financial Statements.

We have an active business development group that coordinates our efforts to expand our product offerings and helps ensure we have access to intellectual properties and technologies needed for our business. While we have only closed on two acquisitions in the past three years, we have been very active in licensing and acquiring intellectual properties, technologies and brands from third parties, investing $13.5 million, $19.5 million and $27.9 million in fiscal 2009, 2008 and 2007, respectively. See Note 13, “Commitments, Contingencies and Indemnifications” to our Consolidated Financial Statements.

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Industry Overview

The gaming industry is a large and dynamic worldwide marketplace, subject to extensive local jurisdictional regulations. Casino and other legal gaming operators continuously seek to increase revenue growth and profitability. The importance of gaming machine revenue to casino operators’ profitability has created demand for gaming machines that have the ability to generate superior net daily win. As a result, gaming equipment manufacturers have increasingly focused on enhancing the overall entertainment value and appeal of games and gaming machines, which drives the demand for the replacement of older games and gaming machines. The earnings performance of our products is the primary driver of customer demand. See “Overview” included in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Demand for our products is also driven by:

Ø Casino expansion and new casino openings;

Ø The replacement cycle of gaming machines at existing casinos;

Ø Opening of new gaming jurisdictions; and

Ø Our reputation, reliability and after-sales service support.

In the United States, Native American casinos represent a significant portion of the market. Native American gaming differs from the traditional casino market in that it is regulated under the Indian Gaming Regulatory Act of 1988, which classifies legalized gaming as follows:

Ø Class I gaming includes traditional Native American social and ceremonial games. Class I gaming is regulated exclusively at the Native American tribe level.

Ø Class II gaming includes bingo, electronic aids to bingo, and, if played at the same location where bingo is offered, pull-tabs and other games similar to bingo. Class II gaming is regulated by individual Native American tribes, with the National Indian Gaming Commission having concurrent jurisdiction.

Ø Class III gaming includes all other forms of gaming that are not included in either Class I or Class II, including our traditional gaming machines and is permissible only pursuant to either (1) a compact agreement entered into between the tribe and the host state, where such compact has been approved by the Secretary of the Interior and published in the Federal Register; or (2) Class III Procedures issued by the Secretary of the Interior.

We believe technology changes and development during the last decade that drove the demand for the past replacement cycles were: (1) the development of video gaming machines that simulate mechanical reel gaming machines, (2) the introduction of gaming machines with secondary bonus rounds, (3) cashless gaming and (4) low denomination wagering coupled with local-area and wide-area progressive jackpots. We expect technology to continue to be a significant element that drives demand, along with the emphasis by casinos for the types of gaming products that deliver higher net win per gaming machine. We believe that server-enabled networked gaming (“NG”) will be the next significant technology development in the gaming machine industry. NG refers to a networked gaming system that links groups of server-enabled gaming machines to a remote server in the casino data center. Once the gaming machines are connected to the server-enabled network, new applications, game functionality, and system-wide features can be enabled. These networks will require regulatory approval in gaming jurisdictions prior to any implementation and will represent a significant addition to our existing portfolio of product offerings. See “Government Regulation” below for additional information.

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Business Strategy

In order to continue to grow revenues, profits and cash flow, we have been executing on five key business strategies throughout fiscal years 2008 and 2009, and because of the financial and operating success achieved with this focus, we expect to continue to execute on these business strategies in fiscal 2010. These five business strategies are as follows:

Strategies One and Two: Leverage Our Product Development Expertise to Introduce Innovative New Games and Expand Our Product Sales Offerings to: 1) Increase our Ship Share in the United States and Canada and 2) Expand and Grow Our International Business: We have over 60 years of experience developing fun, humorous and entertaining products in a variety of industries. During the past six years, we have enhanced our product development efforts by adding key management, design personnel and software engineers to our product development group. We renovated our facilities and organized our game development group into a studio team structure that continues to promote innovation while driving a more focused development approach. We place substantial emphasis on our Player Driven Innovation process that incorporates player feedback and market research into our development process in order to create game content and gaming experiences that appeal to casino patrons. We develop, acquire and license intellectual property and advanced technologies that we believe enable innovative and appealing games which, coupled with a focused product portfolio management plan, allows us to expand our offering of differentiated products to casino operators. We believe our product development capabilities, combined with the additional functionalities and enhanced features of our advanced technologies and gaming platforms, enable us to optimize the entertainment value of our products, continue to expand our product offerings and increase our global market penetration.

We first commercialized our innovative Bluebird gaming machines in the December 2003 quarter. Bluebird gaming machines incorporate features such as an ergonomic design, 19-inch digital, high-resolution flat screen monitors for the video version of the product that can display advanced graphics generated by our CPU-NXT operating system, simultaneous coin-in/coin-out and cashless capabilities, and sound systems by Bose Corporation (“BOSE”), including the BOSE^® FREE FIELD^® directed audio system that reduces peripheral, distracting noises.

In the December 2008 quarter we began the global launch of our new gaming machine, Bluebird2, which contains advanced technologies that enable this gaming machine to support gaming as it exists today and in the server-enabled networked gaming world. The Bluebird 2 gaming machine contains dual 22 inch LCD displays for enhanced video display and a programmable button panel where the amounts bet per line and the number of lines played can change with each new game. The Bluebird2 gaming machine is NG capable and supports all of the peripheral devices of the original Bluebird gaming machine. The Bluebird2 gaming machine also incorporates an improved BOSE premium sound system developed exclusively for our gaming machines. The new BOSE audio system is designed with innovative directional sound technology, allowing the player to experience lifelike sound reproduction similar to that of a live production. The Bluebird2 gaming machine is slimmer than our Bluebird cabinet and requires less space on a casino floor, allowing casino operators to place more gaming machines in the same space. The Bluebird2 gaming machine uses our CPU-NXT2 operating system which provides higher resolution graphics, faster computing power and greater memory than the original Bluebird cabinet. Demand for this product exceeded our expectations and Bluebird2 gaming machines accounted for 35% of new units shipped in fiscal 2009 and we expect this percentage to increase in the coming years as our customers transition to the new product. In fiscal 2010, we will offer customers the ability to upgrade their Bluebird gaming machines to be server-enabled through the purchase of upgrade kits.

For the United States and Canada, we believe that WMS and three of its competitors (International Game Technology Inc. (“IGT”), Bally Technologies and Aristocrat Leisure Ltd (“Aristocrat”) account for over 90% of the new units shipped. We have announced that we will be directly pursuing the Class II and central determinant market in the United States and Canada beginning in fiscal 2010, upon the expiration of game content licensing agreements with third parties who had previously been distributing our products into these markets.

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We are authorized to conduct business in over 100 international gaming jurisdictions. International new unit shipments accounted for 36.6% of global shipments in fiscal 2009, compared to 35.2% in fiscal 2008 and 30% in fiscal 2007. We expect continued penetration of our video and mechanical reel gaming machines into the international markets with the launch in fiscal 2009 of our Bluebird2 gaming machines and the Bluebird upgrade kits in fiscal 2010 and from Orion Gaming’s new Twinstar2 gaming machine with the N-Able^™ operating system, which launched in late fiscal 2008.

In July 2007, we further expanded our international opportunities and revenue building base with the acquisition of Austrian-based SiP which extends our international presence, while also expanding our technology and our product offerings. SiP is focused on developing and selling gaming related systems, including linked progressive systems and slot accounting systems applicable for smaller international casino operators. In fiscal 2008, we combined the existing capabilities of SiP with the new Twinstar2 gaming machine from Orion Gaming to expand future international revenue opportunities.

We expect further demand from the expected launch in the December 2009 quarter of our new value-priced gaming machine called Helios^TM, which will be targeted to select international markets where the economics of the facilities do not justify the premium price points of Bluebird, Bluebird2 or Orion’s Twinstar or Twinstar2 gaming machines. We also will be directly entering two new markets for WMS in fiscal 2010: New South Wales, Australia and Mexico. We had previously served these markets through content licensing arrangements with third parties, and now that those agreements have expired we will be able to sell our gaming machines in those markets.

Also we continue to achieve benefits from the opening of new international offices and the addition of new geographically dispersed sales account executives. We have offices in Argentina, Austria, Australia, Canada, the Netherlands, Italy, China, South Africa, Spain and the United Kingdom. The Australia, the Netherlands and United Kingdom offices house internationally focused game development studios, and both the Netherlands and United Kingdom also house distribution functions. The rest of the offices are primarily sales and distribution offices, with the Austria office also housing our SiP staff of developers and engineers.

As a result of our continued focus on creating innovative new games and products for our product sales business, and our direct launch into new markets worldwide, we expect to grow our global product sales revenues, profits and cash flow.

Strategy Three: Maximize the Return on Invested Capital of Our Participation Games and Exclusive Licenses of Popular Brands: Certain of our games and products are only available through lease arrangements where we earn a daily lease rate that is based on either a percentage of the net win, the amount wagered on the gaming machine or a fixed daily lease rate. We invest our capital in the placement of these leased gaming machines and since late fiscal 2007, our business strategy has been to maximize our return on invested capital in this business. A key element of our success has been to limit the number of units of each game theme installed in each casino. The result is that due to the popularity of the games, with a limited supply, the performance of the games has remained high for a longer period. We have also removed participation gaming machines from lower performing casinos and placed them in higher performing casinos to enhance our return on investment. Due to the popularity and earnings performance of our participation games the average installed base of these gaming machines increased by 10.2% in fiscal 2009, 20.2% in fiscal 2008 and 16.1% in fiscal 2007, while our net revenue per day increased by 10.4% in fiscal 2009, 9.9% in fiscal 2008 and 1.1% in fiscal 2007.

For many of our participation game themes we utilize popular brands and intellectual property from third parties. As the exclusive licensee of the MONOPOLY brand for use with gaming machines, we have converted a popular board game brand into a successful line of superior-earning gaming machines. In fiscal 2009, we announced an extension and expansion of our agreement with Hasbro Inc. and Hasbro International, Inc. (collectively, “Hasbro”), which allows us to continue to use the MONOPOLY brand through calendar 2016 with options through 2019 and also allows us to use certain of their other board game brands, such as BATTLESHIP^®

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and CLUE^®. We also have licensed additional brands, including THE WIZARD OF OZ, JOHN WAYNE, TOP GUN, and POWERBALL which we use to create series of new participation games utilizing these brands. By combining the name recognition of these brands with creative game content and design, we are able to lease these products to casinos and other licensed gaming machine operators as participation games, generating a high-margin recurring revenue stream for ourselves, as well as for the casinos. We continue to pursue new licensed brands based on the feedback from focus group testing of casino patrons.

During fiscal 2007, we began introducing new product lines in our participation business that utilized our licensed and internally developed portfolio of intellectual properties and technologies. These participation products provided casino patrons new gaming experiences that they could not achieve on the products that we sell to casinos. These intellectual properties and technologies contained elements of the foundational technologies for networked gaming, in advance of when the networked systems will be commercialized. Subsequently we have introduced new games for each of these product lines and in fiscal 2008 we began introducing participation products that combined the technologies of two of these new product lines in one product. In fiscal 2009, we introduced a fourth new gaming platform: Adaptive Gaming. These new participation product lines are as follows:

Ø Community Gaming^®: The first of the new product lines was introduced in the September 2006 quarter with the MONOPOLY Big Event game. Community Gaming is intended to build a table-game-like camaraderie amongst the players as they all play for a common bonus outcome. The Community Gaming experience consists of a bank of gaming machines linked to an overhead video screen that displays the bonus round. When the Big Event bonus triggers, a server that controls the overhead video screen enables all qualifying players on the bank to enter the bonus round and win together. MONOPOLY Big Event has been providing players with their first exposure to the excitement of a true communal gaming experience, and we followed this in fiscal 2008 with PRESS YOUR LUCK and Bigger Bang^™ Big Event games. This new platform has been the primary driver of the growth in our installed footprint of stand-alone participation gaming machines. We had more than 2,000 Community Gaming gaming machines installed in our participation base at June 30, 2009.

Ø Sensory Immersion: The second new product line to debut was our Sensory Immersion platform with the TOP GUN game launched in March 2007, and we followed this with THE WIZARD OF OZ game launched in October 2007. This new product line utilizes our new CPU-NXT2 operating system with real-time, 3-D animation and BOSE3Space audio system to offer a multi-sensory player experience. In fiscal 2009, we launched DIRTY HARRY^®: MAKE MY DAY™ and TIME MACHINE. At June 30, 2009, our installed base of Sensory Immersion gaming machines was over 1,600 units. More importantly, the uniqueness of this platform coupled with its game mechanics is providing casino customers with high coin-in and net win, and was a significant contributor to our increased average daily revenue per unit in fiscal 2008 and 2009.

Ø Transmissive Reels^®: This product line was the third new product line and was launched in the June 2007 quarter. By overlaying video animation directly over mechanical reels, Transmissive Reels combines the appeal of mechanical reel gaming with the visually engaging interactive real-time, 3-D animation of video gaming machines. In fiscal year 2009, we launched THE WIZARD OF OZ Transmissive Reels gaming machine. At June 30, 2009, we had more than 1,700 of the Transmissive Reels gaming machines installed.

Ø Adaptive Gaming: We conducted a field trial of our fourth new participation product line in the third and fourth quarters of fiscal 2008 and launched this product line in the September 2008 quarter with the STAR TREK game. With this new product line, a player can establish a unique user name and password to log into any STAR TREK game on this product line in any jurisdiction. Through connectivity of these games through our wide-area network to WMS data centers, once the player terminates a gaming session, the player’s status will be saved. Then when the same player logs on to another STAR TREK game at that same casino or in any other casino and uses the same unique user name and password, the player’s game will start again where the player last ended the game. In addition, if the player completes all of the bonus rounds in the first episode of STAR TREK, the second episode is enabled for that player

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and when all of the bonus rounds in the second episode are completed, a third STAR TREK episode is enabled for that player. We will be introducing new episodes of the STAR TREK game in fiscal 2010, along with launching another series of games using this platform. In the June 2009 quarter, we launched Reel ‘em In Compete to Win that uses the Adaptive Gaming Technology. At June 30, 2009, we had more than 700 of Adaptive Gaming gaming machines installed.

Our expanding margins and revenue growth, along with the improved return on capital deployed in our gaming operations business also were key contributors behind the significant operating cash flow we generated. By continuing to focus on return on investment in our participation business and introducing innovative new participation games and products, we intend to continue to grow our participation revenues, profitability and cash flows.

Strategy Four: Drive Margin Improvements: Our gross margin and operating margins have shown continuing growth over the last three years. Total gross margin, exclusive of depreciation and distribution expense, was 63.5%, 59.4%, and 56.5% for fiscal 2009, 2008 and 2007, respectively, while our operating margin was 19.3%, 16.1%, and 13.7% for the same periods, respectively. We have cross-functional teams focused on margin improvement and several of our strategy deployment projects focus on different aspects of margin improvement. We benefit from the higher average selling price of new units, along with higher-margin premium priced products that we sell and higher net revenue per day from our participation games also contributes to higher margin. We continue to implement lean sigma initiatives (e.g. processes which help us focus on improving quality and eliminating non-value added steps) to further our process improvement initiatives and improve the flow of our business transactional processes. We also expect to benefit from raw material sourcing initiatives and from an expanded volume of business, which should result in greater volume discounts of raw material component parts from our suppliers and enable us to spread our manufacturing overhead cost over a larger number of units thereby reducing cost per unit. By continuing to drive margin improvements, we believe we will be able to continue to increase net income and generate the necessary capital to fund the other elements of our business strategy.

Strategy Five: Increase Cash Flow from Operations: Our cash flow from operations has remained strong throughout the past three fiscal years as a result of increased net income and non-cash expenses and improved working capital utilization. Our cash flow from operations was $179.2 million in fiscal 2009, $186.2 million in fiscal 2008 and $118.9 million in fiscal 2007. Our fiscal 2009 cash flow from operations approximated the prior year even as we implemented a program mid-year to provide a higher amount of financing terms to select customers given the impact that the struggling economy was having on their businesses. While we selectively granted a higher level of financing terms, our total receivable days sales outstanding was 119 days at June 30, 2009 up 10 days from 109 days at June 30, 2008, and the aging of our receivables improved between those time periods, despite the financial challenges that our customers faced. In fiscal 2009, we increased our inventory turns and better managed our accounts payable. Due to increased profitability, working capital management and containment of capital spending, our cash and cash equivalents balance, inclusive of restricted cash and cash equivalent, increased from $53.2 million at June 30, 2007 to $119.6 million at June 30, 2008 and to $154.7 million at June 30, 2009. We expect that with the continued execution of all of the business strategies discussed above, that our cash flow from operations will continue to increase in fiscal 2010.

Design, Research and Product Development

Our designers, engineers and artists build upon over 60 years of experience that we, together with our predecessors, have in designing and developing fun, humorous and exciting games. We are continually developing new games in order to refresh the installed base of our gaming machines and implementing new hardware, operating system and software technologies and functionality to enhance player entertainment. We utilize our unique Player Driven Innovation approach to the development of new games and technologies, which has resulted in the creation of innovative products. We also perform market tests of our products with the cooperation of casino operators to assess reliability and player appeal. Our gaming machines and games are

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usually designed and programmed by our internal engineering staff and game development studios. Our game design teams operate in a studio environment that encourages creativity, productivity and cooperation among designers.

Our Chicago research and development facility is a state-of-the-art technology campus that houses most of our research and development team, including four game development studios. We have additional game development studios in Las Vegas, London, Sydney and the Netherlands and additional research and development staff in Atlanta, Chicago, Las Vegas, Reno and Austria. Each of our game development studios works concurrently on multiple games and is staffed with producers, software developers, graphic artists, mathematicians and game developers. In some cases, we may outsource testing and graphic design functions to independent firms under contract to us. In addition, we have a defined process to review new game ideas submitted by third parties for consideration by us to license, develop and commercialize.

Recently we opened the Casino Evolved^™ Advanced Technology Lab (“CEATL”) at our technology campus in Chicago, Illinois. The CEATL is a dynamic collaborative research and development laboratory focused on advancing the development of products that highlight our leadership in evolving the casino slot floor to a networked environment for the benefit of casino operators and their customers. It also serves as a platform for the future evolution of products and services that will allow entertaining gaming content to be enabled on new platforms.

During fiscal 2009, 2008 and 2007, we expensed $98.4 million, $79.9 million, and $58.1 million, respectively, of design, research and product development costs. We expect amounts spent on research and development will continue to grow in the future as we expand our product development initiative by designing games and gaming machines that enhance the player experience and drive profitability for us and casino operators. For further discussion on server-enabled network gaming (“NG”), see Item 7 – “Management Discussion’s and Analysis of Financial Condition and Results of Operations.”

Sales and Marketing

We are authorized to sell or lease our gaming machines to casinos in 192 tribal jurisdictions, 32 state jurisdictions, and 129 other legalized gaming jurisdictions worldwide. See “Government Regulation — General” below. In most gaming jurisdictions, we sell our gaming machines directly, rather than through the use of distributors, which we believe allows us to provide superior customer service and enhances profitability.

From our introduction of the Bluebird cabinet and CPU-NXT in September 2003 through June 30, 2009, we shipped over 153,000 Bluebird gaming machines and CPU-NXT upgrade kits for our legacy gaming machines. In addition, since the launch of our Bluebird2 gaming machine in the September 2008 quarter through June 30, 2009, we have shipped over 9,200 units, and Bluebird2 gaming machines accounted for 35% of our new unit shipments in fiscal 2009. We expect Bluebird2 gaming machines to grow as a percentage of total new unit sales over the coming years as customers transition to this new gaming machine.

We sell and lease our gaming machines through 30 salespeople in offices in several United States locations, and 13 salespeople in international locations. Our salespeople earn a salary and commissions. The sale of gaming machines takes place throughout our fiscal year and the order sizes typically range from a small quantity of units to over 1,000 units. We conduct one-on-one meetings with our customers to demonstrate our products at their locations, host customers at private demonstrations in our offices and at other locations, and participate in various trade shows domestically and internationally each year. In certain cases, we participate in responding to competitive requests for proposals from private and public entities who are seeking to purchase gaming machines. We advertise in trade and consumer publications that appeal to casino operators, their employees and casino patrons. Usually, with the launch of a featured product or product category, we will design web-based learning experiences for both employees and customers. We use thematic and interactive web-based micro sites as a means to educate our customers and players about our products, and allow them to learn and explore different aspects of our products at their convenience, while also providing instant win and sweepstakes prizes.

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Our field service team is a customer-focused organization, responsible for attending to the needs of our customers. Our field service technicians install, remove and convert gaming machines at the customer’s request, work with our customers in performing routine maintenance on participation gaming machines owned by us that are located at our customers’ casinos, initiate sales of replacement parts and conversion kits, and assist with general maintenance of gaming machines owned by our customers. We also have a centralized call center that allows us to be even more responsive to our customers’ needs.

In response to rapidly changing slot technology and the need for casinos to have vendor-neutral, consistent, and easily accessible training specifically targeted to slot floor personnel, we launched Slot Machine University^® (“SMU”) in fiscal 2007. SMU is an interactive, online training and certification program (www.slotmachineuniversity.com) applicable for professionals working in all facets of slot technology and is the first of its kind to meet the strict requirements for the International Association for Continuing Education and Training accreditation. SMU offers a universal learning solution that helps individuals working in slot technology to support and maintain the wide variety of gaming machines and networked systems used in the gaming industry. Course topics encompass basic slot functionality appropriate for beginning technicians to advanced networking skills required for the future NG environment. As we continue to grow our business internationally, we intend to translate SMU into various languages to support our customers. Courses are offered on a subscription basis, and we believe this service demonstrates our commitment to listen and respond to our customers’ evolving needs.

For international markets, we have translated our most popular games into Spanish, Portuguese, French, Italian and Mandarin Chinese. No single country outside of the United States accounted for 10% or more of our revenues in fiscal 2009, 2008 or 2007. Revenues derived from customers outside of the United States accounted for approximately $155 million, $156 million and $135 million for fiscal 2009, 2008 and 2007, respectively. Geographic revenue information is determined by country of destination. Substantially all international sales are made in United States dollars. Revenue from participation games has been primarily limited to Canada and the United States, and we expect this trend to continue. See Note 15, “Information on Geographic Areas,” to our Consolidated Financial Statements for further information on international sales.

We generally offer customers payment terms of 30 to 90 days from the date of invoice. In certain circumstances, we offer extended payment terms typically for up to one year but in limited cases up to three years, in which case we usually charge interest to the customer. In fiscal 2009, due to the slowing economy and credit availability challenges, we implemented a program to increase the amount of financing terms offered to select customers. We expect to continue this program in fiscal 2010 until the economy and availability of credit improves. No single customer accounted for 10% or more of our revenues in fiscal 2009, 2008 or 2007.

Competition

The gaming machine market is highly competitive and is characterized by the continuous introduction of new games and new technologies. Our ability to compete successfully in this market is based, in large part, upon our ability to:

Ø develop and offer games and gaming machines with higher earnings performance than the games and gaming machines from our competitors;

Ø create an expanding and constantly refreshed portfolio of games;

Ø identify and develop or obtain rights to commercially marketable intellectual properties; and

Ø adapt our products for use with new technologies.

Ø implement product innovation and reliability;

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Ø offer mechanical and electronic reliability;

Ø generate brand recognition;

Ø implement effective marketing and customer support; and

Ø offer competitive prices and lease terms.

We estimate that about 25 companies in the world manufacture gaming machines and VLTs for legalized gaming markets. Of these companies, we believe that Aristocrat, Bally Technologies, IGT, Konami Co. Ltd., Lottomatica’s G-Tech Holdings subsidiaries Atronic Casino Technology and Speilo Manufacturing Inc., Multimedia Games, Inc., Novomatic Group of Companies, and WMS have a majority of this worldwide market. In the categories of video and mechanical reel gaming machines, we compete with market leader IGT, as well as Aristocrat, Lottomatica’s Atronic Casino Technology subsidiary, Bally Technologies, Franco Gaming Ltd., Konami Co. Ltd., Multimedia Games, Inc., the Novomatic Group of Companies, and Unidesa Gaming and Systems. In the VLT category, we compete primarily with Bally Technologies, IGT, Lottomatica’s G-Tech Holdings and Speilo subsidiaries, and Scientific Games Corp.

Our competitors vary in size from small companies with limited resources to a few large multi-national corporations with greater financial, marketing and product development resources than ours. The larger competitors, particularly IGT, have an advantage in being able to spend greater amounts than us to develop new technologies, games and products that are attractive to players and customers. In addition, some of our competitors have developed, sell or otherwise provide to customers security, centralized player tracking and accounting systems which allow casino operators to accumulate accounting and performance data about the operation of gaming machines. We have not offered these systems in the past and, with the acquisition of SiP, we expect to only offer these systems to smaller international customers.

Manufacturing

We currently manufacture substantially all of our gaming machines at our facility in Waukegan, Illinois. We are continuously reconfiguring our assembly lines in order to lower our manufacturing lead times, eliminate wasteful activities, improve productivity, and effectively increase our production capacity. We completed an expansion of our Waukegan facility in July 2007 to a total of 350,000 square feet in order to consolidate under one roof warehousing and distribution activities that were maintained at outside-leased facilities, which improved production efficiencies. In fiscal 2009, we ceased manufacturing activities of Orion Gaming products in the Netherlands, transferring such activities to our Waukegan and Barcelona facilities. We also refurbish used gaming machines at our Las Vegas facility.

Manufacturing commitments are generally based on sales orders from customers. However, due to uneven order flow from customers, component parts common to all gaming machines are purchased and assembled into a partial product that are inventoried in order to be able to quickly fill final customer orders. Our manufacturing processes generally consist of assembling component parts and sub-assemblies into a complete gaming machine. Through the use of lean sigma processes in the design of our new Bluebird2 gaming machine, in addition to setting up the supply chain processes for this gaming machine, we achieved our operating and strategic sourcing initiatives, and we currently can ship a standard black Bluebird2 gaming machine within two weeks of receiving the customer order, which is less than the lead time for our Bluebird product.

We generally warrant our new gaming machines sold in the U.S. for a period of 90 days, while we generally warrant our gaming machines sold internationally for a period of 180 days to one year. We provide several after-sale services to our customers including customer education programs, 24 hour customer service telephone hot-line, a website for technical support, field service support programs and spare parts programs. Our warranty

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costs have not been significant. From time to time we may also sell used gaming machines, including products made by us as well as those produced by our competitors which we have taken back as trade-ins from our customers. Generally, we acquire used gaming machines as trade-ins toward the purchase of new gaming machines. While a small secondary market exists in the United States, used gaming machines are typically sold to United States-based distributors and then resold in international markets where new machine purchases may prove to be too costly. Where appropriate, we incur costs to recondition used gaming machines for resale or we may elect to destroy the used gaming machines. We also occasionally sell used gaming machines in lots on an “as is” basis to licensed used equipment brokers and customers.

The raw materials used in manufacturing our gaming machines include various metals, plastics, wood, glass and numerous component parts, including electronic subassemblies and LCD screens. We believe that our sources of supply of component parts and raw materials are generally adequate and we have few sole-sourced parts.

We continue to implement cost savings and efficiency initiatives and focus on best practices, including lean sigma, in order to improve the efficiency of our manufacturing processes and reduce time to fulfill orders. We continue to make improvements in sourcing and supply management, in inventory and warehouse management, and other manufacturing processes. We are implementing a new sales operations strategy in an effort to produce gaming machines more ratably throughout the quarter, with the goal of significantly reducing quarter-end compression in manufacturing. We also have ongoing manufacturing initiatives, such as enhanced strategic sourcing and supplier management, value engineering the products and designing products for both ease of manufacturability and installation, that we expect will help improve gross margins in future quarters.

Patent, Trademark, Licenses, Copyright and Product Protection

Each game, gaming machine and associated equipment embodies a number of separately protected intellectual property rights, including trademarks, copyrights and patents. We believe these intellectual property rights are significant assets to our business in the aggregate. During fiscal 2009, 2008 and 2007, we utilized technology licensed from two separate third parties in substantially all of the products we sold or leased. In addition intellectual property from another licensor was utilized in leased units which generated over 10% of our total revenues. We seek to protect our investment in research and development and the unique and distinctive features of our products and services by maintaining and enforcing our intellectual property rights.

We have obtained patent protection covering many of our products. We were granted approximately 30 U.S. patents during fiscal 2009, and continue to apply for many patents in the United States and elsewhere to protect inventions in our products and resulting from our research and development efforts. We generally seek to obtain trademark protection in the U.S. for the names or symbols under which we market and license our products. We also rely on our copyrights, trade secrets and proprietary know-how. In addition, some of our most popular gaming machines are based on trademarks and other intellectual property licensed from third parties. We file for patent rights and trademark protection internationally in a number of key countries, based upon the nature of the patent or trademark, the laws of the given country and our anticipated product placements in that country.

Brand Licenses and Technology

We believe that our use of brand name intellectual property contributes to the appeal and success of our products, and that our future ability to license, acquire or develop new brand names is important to our continued success. Therefore, we continue to invest in the market positioning of WMS and the awareness and recognition of our brand names and brand names that we license.

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Certain of our games are based on popular brands licensed from third parties, such as Hasbro, Fremantle Media North America, CBS Studios Inc., Turner Entertainment Co. and Warner Bros. Consumer Products Inc. Typically, we are obligated to make minimum guaranteed royalty payments over the term of the license agreement and to make advanced payments against those commitments. The licensor typically must inspect and approve any use of the licensed property. In addition, each license typically provides that the licensor retains the right to exploit the licensed property for all other purposes, including the right to license the property for use with any products not related to gaming machines.

Several of our competitors have pooled their intellectual property patents that provide cashless gaming capabilities, specifically ticket-in ticket-out technology. Using this technology, when casino patrons cash out from a gaming machine they receive a printed ticket instead of coins. We have a non-exclusive, royalty-bearing license for certain patents related to this technology with IGT through the expiration date of the relevant patents and pass through the license fee to our customers for our product sales business.

On June 11, 2009, we entered into a new long-term license agreement with Hasbro whereby we agreed to license certain intellectual property and proprietary rights owned or controlled by Hasbro in titles such as MONOPOLY, BATTLESHIP and CLUE for use in our chance-based electronic gaming machines. The agreement is effective April 1, 2009 and has an initial term through December 31, 2016. We have the right to extend the license for an additional three-year term if certain conditions are satisfied. We currently have approvals for more than 60 MONOPOLY-branded games, including 16 MONOPOLY WAP games. Over the last three fiscal years, we added 19 MONOPOLY games to our participation game portfolio.

Other licensed brands we use in our products include: an exclusive agreement to develop, market and distribute games using the brands POWERBALL; MEN IN BLACK; JOHN WAYNE; HAPPY DAYS; STAR TREK; THE WIZARD OF OZ; GREEN ACRES; TOP GUN; and THE DUKES OF HAZZARD. We also license DIRTY HARRY, featuring Clint Eastwood.

The current operating system for our gaming machines, CPU-NXT, was developed in 2003 by Sierra Design Group Inc., which is now a wholly owned subsidiary of our competitor, Bally Technologies. We have a perpetual license to use this technology and have no continuing payment obligation for this license. Our CPU-NXT2 operating system was developed internally and is based on CPU-NXT.

In February 2008, we entered into a ten-year non-exclusive, royalty-bearing patent cross-license agreement with IGT. This agreement provides for a cross license of intellectual property evidenced by certain patents owned by each of us relating to computing and NG gaming infrastructures.

We have a technology transfer agreement with Cyberscan Technology Inc. (d/b/a Cyberview Technology), under which we purchased versions of Cyberview’s server-enabled and downloadable gaming system and related technologies. In addition, Cyberview granted us a non-exclusive, perpetual, irrevocable, worldwide license to its technology patent portfolio related to NG and rights to share in a portion of any value Cyberview receives for this patent portfolio. The assets of Cyberview Technology were acquired by IGT in July 2008.

Government Regulation

General

We sell our games and gaming machines in legal gaming jurisdictions worldwide. The manufacture and distribution of gaming equipment and related software is subject to regulation and approval by various city, county, state, provincial, federal, tribal and foreign agencies.

We believe we hold all of the licenses and permits necessary to conduct our business. In all, we are authorized to sell or lease our gaming machines to casinos in 353 jurisdictions worldwide, including 129 international gaming jurisdictions.

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WMS and our key personnel have obtained or applied for all approvals necessary to maintain compliance with these regulatory agency requirements. The regulatory requirements vary among jurisdictions, but the majority of jurisdictions require licenses, permits, or findings of suitability for the company, individual officers, directors, major stockholders and key employees, and documentation of qualification. We must satisfy all conditions for each gaming license or permit. Our gaming equipment also must be approved either by a gaming agency lab or a private lab authorized by the gaming authority.

In some jurisdictions, regulators govern not only the activities within their own jurisdiction but also activities that occur in other jurisdictions to ensure that the entities it licenses are in compliance with local standards on a worldwide basis. Nevada is such a jurisdiction. The Nevada gaming authorities require us and our gaming subsidiary, WMS Gaming, to maintain Nevada standards of conduct for all of our gaming activities and operations worldwide. To make our compliance efforts more efficient, we have centralized all licensing, compliance and non-product approval gaming regulatory matters, including the shipment of gaming equipment and related software worldwide.

The gaming industry is complex and constantly evolving, particularly in new jurisdictions. We continue to devote significant resources to ensure regulatory compliance throughout our company. Additionally, we have an active gaming compliance committee consisting of one outside consultant and two members of our board of directors that works in concert with our compliance department in order to avoid any appearances of impropriety as a result of a business relationship or new market opportunity. We have never been denied a gaming-related license, nor have our licenses ever been suspended or revoked.

Since the gaming law requirements of many jurisdictions are similar, we are not including descriptions of all jurisdictions due to the number of jurisdictions to which we are subject. Following are the specifics of selected gaming law requirements as a representative example of the gaming regulation to which we are subject.

Nevada Regulations

Overview of Regulatory Framework:

The manufacture, sale and distribution of gaming machines for use or play in Nevada or for use outside of Nevada are subject to extensive state and local laws, regulations and ordinances of the Nevada Gaming Commission, the Nevada State Gaming Control Board, and various county and municipal regulatory authorities (collectively, the “Nevada gaming authorities”). The laws, regulations and ordinances primarily cover the responsibility, financial stability and character of gaming equipment manufacturers, distributors and operators, as well as persons financially interested in or involved in gaming operations. We currently hold all necessary gaming licenses to manufacture, distribute and operate a slot route or a wide-area progressive system.

The laws, regulations and supervisory procedures of the Nevada gaming authorities are based on public policy and seek to:

Ø prevent unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity;

Ø establish and maintain responsible accounting practices and procedures;

Ø maintain effective control over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and safeguarding the assets and revenues, providing reliable record keeping and requiring the filing of periodic reports to the Nevada gaming authorities;

Ø prevent cheating and fraudulent practices;

Ø provide a source of state and local revenues through taxation and licensing fees; and

Ø provide strict regulation of all persons, locations, practices, associations and activities relating to casino operations and the manufacture and distribution of gaming machines and related software and equipment.

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Licensing Requirements:

Of Our Security Holders

A holder of our stock or of our issued debt may be required to file an application, be investigated and be subject to a suitability hearing as a beneficial holder if the Nevada Gaming Commission has reason to believe that the holder’s ownership in our securities would be inconsistent with its public policies and those of the State of Nevada. As with any other gaming applicant, the holder will be required to pay all costs associated with any investigation conducted by the Nevada gaming authorities.

A security holder will have to abide by the following requirements:

Ø If the holder acquires 5% or more of our securities, report acquisition of beneficial interest in our securities to the Nevada gaming authorities.

Ø If the holder acquires 10% or more of our securities, file a gaming application within 30 days after receiving written notice from the Chairman of the Nevada Gaming Control Board.

If the person holding our voting securities is a corporation, partnership or a trust, and is required to be found suitable, the entity will be required to submit to the Nevada gaming authorities detailed business and financial information, including a list of its beneficial owners.

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada gaming authorities may be found unsuitable and may be subject to criminal penalties. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. We are required to render maximum assistance to the Nevada gaming authorities in determining the identity of our beneficial owners.

If an institutional investor holds more than 10%, but not more than 15%, of our voting securities, that investor may apply to the Nevada gaming authorities for a waiver of the finding of suitability if it holds the voting securities for investment purposes only. Under certain circumstances, an institutional investor may be able to hold up to 19% for a limited period of time. To qualify for this waiver, the institutional investor must have acquired the voting securities in the ordinary course of business. In addition, the institutional investor may not hold the securities for the purpose of causing (1) the election of a majority of the members of our board of directors, (2) a change in our corporate charter, bylaws, management, policies or operations, or those of any of our gaming affiliates, or (3) any other action which the Nevada gaming authorities would find inconsistent with holding our voting securities for investment purposes only.

Of Our Company:

We are registered with the Nevada Gaming Commission as a publicly traded corporation. We are required to periodically file detailed financial and operating reports to the agency and furnish any other information which the Nevada gaming authorities may require.

As a registered company, we also adhere to the following restrictions imposed by the Nevada gaming authorities:

Ø Any individual having a material relationship or material involvement with us may be required to be found suitable and individually licensed.

Ø Our officers, directors and key employees must file license applications with the Nevada gaming authorities and may be required to be licensed or found suitable by them. The Company pays all costs of any such investigation.

Ø Each stockholder applicant is required to pay all costs of any investigation.

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Ø Changes of an applicant’s position with us must be reported to the Nevada gaming authorities.

Ø We must sever all relationships with an officer, director or key employee that the Nevada gaming authorities have found unsuitable and may be required to terminate the employment of any person that refuses to file a gaming application when requested.

Ø We are required to maintain a current stock ledger in the State of Nevada, which may be examined by the Nevada gaming authorities at any time.

Ø The Nevada gaming authorities have the power to require that our stock certificates bear a legend indicating that the securities are subject to the Nevada Gaming Control Act (although compliance with this requirement has not been requested to date).

Ø We may not make a public offering of our securities without the prior approval of the Nevada Gaming Commission if the securities or the proceeds are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for these purposes or for similar transactions. We currently hold an approval to make certain public offerings through March 2010, subject to certain conditions. This shelf approval can be rescinded for good cause and does not mean that for any offering we may make, the Nevada gaming authorities have found, recommended or approved the issued securities or passed on the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful.

Ø We are subject to disciplinary action if, after we receive notice that a person is unsuitable to be a security holder or to have any other relationship with us, we:

Ø pay that unsuitable person any dividend, interest or other distribution on any of our securities;

Ø allow that person to exercise, directly or indirectly, any voting rights conferred through securities held by that person;

Ø pay remuneration in any form to that person;

Ø fail to pursue all lawful efforts to require the unsuitable person to relinquish voting securities including, if necessary, the immediate repurchase of the voting securities for cash at fair market value;

Ø fail to pursue all lawful efforts to terminate our relationship with that person; or

Ø make any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction.

Ø If we violate the Nevada gaming authorities’ rules and regulations, our gaming licenses could be limited, conditioned, suspended or revoked and we, and those involved with us, could be fined for each separate violation.

Ø Changes in control whether through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person where control of WMS is obtained, may not occur without the prior approval of the Nevada gaming authorities. Persons seeking to acquire control of us must satisfy the Nevada gaming authorities’ standards prior to assuming control.

Any decision made by the Nevada gaming authorities regarding a person’s suitability or licensing is not subject to judicial review. We believe we have obtained all required licenses and/or approvals necessary to carry on our business in Nevada, including receiving the necessary findings of suitability of our officers, directors and key personnel.

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Of Our WMS Gaming Subsidiary

WMS Gaming manufactures, sells and distributes gaming machines in Nevada and for use outside Nevada and in 2004, began to operate a wide-area progressive system in Nevada casinos. WMS Gaming holds the necessary license to conduct this activity in addition to sharing in gaming revenue under our slot route operator’s license which covers our participation games.

WMS Gaming’s gaming licenses are subject to the following restrictions:

Ø The Nevada gaming authorities have broad discretion in reviewing the conduct of a licensee on a continuing basis.

Ø The officers, directors and key employees of our gaming subsidiary must file license applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by them.

Ø A person may not become a stockholder of or receive any percentage of profits from our licensed gaming subsidiary without first obtaining licenses and approvals from the Nevada gaming authorities.

Ø We are required to report substantially all loans, leases, sales of securities and similar financing transactions of a material nature to the Nevada Gaming Control Board and/or have them approved by the Nevada Gaming Commission.

Ø Our gaming activity licenses are not transferable.

Changes in Control:

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and publicly traded corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Gaming Commission has established a regulatory framework to guard against the potentially adverse effects of these business practices upon Nevada’s gaming industry.

Approvals are, in certain circumstances, required from the Nevada Gaming Commission before we can make exceptional repurchases of voting securities above their current market price and before a corporate acquisition opposed by management can be consummated. Nevada’s gaming laws and regulations also require prior approval by the Nevada Gaming Commission if we were to adopt a plan of recapitalization proposed by our board of directors in opposition to a tender offer made directly to our stockholders for the purpose of acquiring control of us.

Gaming Equipment Approvals:

Nevada has its own laboratory within its agency. Before we can sell a new gaming machine in Nevada, it must first be approved by the Nevada agency. The agency conducts rigorous testing of the gaming machine and related equipment, and may require a field trial of the gaming machine and platform before determining that the gaming machines and platform meet the agency’s strict technical standards. Throughout the course of offering our gaming machines and related software in Nevada, the Nevada gaming authorities may require subsequent modifications and subsequent approvals.

We do not have any control over the length of time that the agency takes to review our products. However, we work closely with the agency’s staff to timely respond to their inquiries and assist them, where we can, in their evaluation, inspection and review of our products. We also do this for all other state labs (Michigan, Mississippi, New Jersey, Ontario, Pennsylvania) and Gaming Laboratories International, Inc., an independent lab used by many jurisdictions worldwide.

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Taxes and License Fees:

License fees and taxes are imposed by the Nevada gaming authorities and are either payable quarterly, semiannually or annually. The fees and taxes are computed in various ways depending on the type of gaming or activity conducted by our subsidiary and on the cities and counties in which our subsidiary conducts operations. Annual fees are payable to the Nevada State Gaming Control Board for renewal of licenses as a manufacturer, distributor, operator of a slot machine route and operator of an inter-casino linked system. Nevada law also requires that we pay our proportionate share of the gaming taxes from the revenue generated from our participation games placed in Nevada casinos.

Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with any such person, and who proposes to participate in the conduct of gaming operations outside of Nevada, is required to deposit with the Nevada State Gaming Control Board, and thereafter maintain, a revolving fund to pay the expenses of investigation of the licensee’s participation in foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the Nevada Gaming Commission. As a licensee, we are required to comply with reporting requirements imposed by Nevada law. We are also subject to disciplinary action by the Nevada gaming authorities if we:

Ø knowingly violate any laws of the foreign jurisdiction pertaining to our foreign gaming operations;

Ø fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations;

Ø engage in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees; or

Ø employ, contract with or associate with a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the grounds of personal unsuitability.

Federal Registration

WMS Gaming is required to register annually with the Criminal Division of the United States Department of Justice in connection with the sale, distribution or operation of gaming equipment. The Federal Gambling Devices Act of 1962 (commonly known as the Johnson Act) makes it unlawful, in general, for a person to manufacture, transport or receive gaming machines or components across interstate lines unless that person has first registered with the U.S. Attorney General of the Department of Justice. We also have various record-keeping and equipment-identification requirements imposed by this act. Violation of the Johnson Act may result in seizure and forfeiture of the equipment, as well as other penalties. Our WMS Gaming subsidiary is required to register and renew our registration annually.

Native American Regulation

Numerous Native American tribes have become engaged in or have licensed gaming activities on Native American tribal lands as a means of generating revenue for tribal governments. Gaming on Native American lands, including the terms and conditions under which gaming equipment can be sold or leased to Native American tribes, is or may be subject to regulation under the laws of the tribes, the laws of the host state, and the Indian Gaming Regulatory Act of 1988, which includes regulation and oversight by the National Indian Gaming Commission and the Secretary of the United States Department of the Interior. Furthermore, gaming on Native American lands may also be subject to the provisions of statutes relating to contracts with Native American tribes, which are also administered by the Secretary of the United States Department of the Interior.

The Indian Gaming Regulatory Act of 1988 requires that the tribe and the host state enter into a written agreement called a tribal-state compact, that specifically authorizes Class III gaming. The compact must be approved by the Secretary of the United States Department of the Interior, with the notice of approval published

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in the Federal Register. Tribal-state compacts vary from state to state. Many require that equipment suppliers meet ongoing registration and licensing requirements of the state and/or the tribe and some impose background check requirements on the officers, directors, principals and shareholders of gaming equipment suppliers. Under the Indian Gaming Regulatory Act of 1988, tribes are required to regulate gaming on their tribal lands under ordinances approved by the National Indian Gaming Commission. These ordinances may impose standards and technical requirements on hardware and software and may impose registration, licensing and background check requirements on gaming equipment suppliers and their officers, directors, principals and shareholders.

We have the required licenses to manufacture and distribute our products in the Native American jurisdictions in which we do business and to operate our wide-area progressive systems.

International Regulation

Many foreign jurisdictions permit the importation, sale and/or operation of gaming equipment in casino and non-casino environments. Where importation is permitted, some countries prohibit or restrict the payout feature of the traditional gaming machine or limit the operation of gaming machines to a controlled number of casinos or casino-like locations. Each gaming machine must comply with the individual jurisdiction’s regulations. Some jurisdictions require the licensing of gaming machine operators and manufacturers. We manufacture and supply gaming equipment, as well as license our games and intellectual property to customers in various international markets worldwide. We have the required licenses to manufacture and distribute our products in the foreign jurisdictions in which we do business.

Seasonality

Sales of our gaming machines to casinos are generally strongest in the spring and slowest in the summer months, while gaming operations revenues are generally strongest in the spring and summer. Typically our total revenues are lowest in the September quarter and build in each subsequent quarter with the June quarter generating our highest total quarterly revenues. In addition, quarterly revenues and net income may increase when we receive a larger number of approvals for new games from regulators than in other quarters, when a game or platform that achieves significant player appeal is introduced, if a significant number of new casinos open or existing casinos expand, or if gaming is permitted in a significant new jurisdiction.

Employees

As of June 30, 2009, we employed 1,712 persons, including 177 that are internationally based. Approximately 274 of our domestic employees are represented by the International Brotherhood of Electrical Workers (the “IBEW”). Our collective bargaining agreement with the IBEW relates to our Waukegan, Illinois manufacturing facility and expires on June 30, 2011. We believe that our relations with our employees are satisfactory.

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ITEM 1A. RISK FACTORS

We urge you to carefully review the following discussion of the specific risks and uncertainties that affect our business. These include, but are not limited to, the following:

Gaming licenses, regulatory approvals and gaming legislation impact the ability to operate our business and sell and lease our products:

Ø The manufacture and distribution of gaming machines is subject to extensive federal, state, local and foreign regulations and taxes. Most of the jurisdictions in which we operate require licenses, permits, documentation of qualification, including evidence of financial stability, and other forms of approval of our company and our officers, directors, major security holders and key personnel, along with our products. Licenses, approvals or findings of suitability may be revoked, suspended or conditioned. We cannot assure you that we will be able to obtain or maintain all necessary registrations, licenses, permits or approvals, that the licensing process will not result in delays or adversely affect our operations and our ability to maintain key personnel, or that complying with these regulations will not increase our costs.

Ø The gaming authorities in some jurisdictions may investigate companies or individuals who have a material relationship with us or our security holders to determine whether the selected individual or security holder is acceptable to those gaming authorities. While any such investigated company, individual or security holder must pay the costs of the investigation, such an investigation may be time consuming and distracting to our operations. Failure of companies, individuals or security holders to cooperate with any such investigation could negatively impact our ability to obtain or maintain our licenses.

Ø Each of our games and gaming machine hardware and software must be approved in each jurisdiction in which it is placed, and we cannot assure you that a particular game and gaming machines, hardware or software will be approved in any jurisdiction. Our NG technology will require regulatory approval in gaming jurisdictions prior to any shipment or implementation and we cannot assure you that we will receive the approvals.

Ø To expand into new jurisdictions, we may need to be licensed, obtain approvals of our products and/or seek licensure of our officers, directors, major security holders, key personnel or business partners. If we fail to seek, do not receive or receive a revocation of a license in a particular jurisdiction for our games and gaming machines, hardware or software, we cannot sell or place on a participation or leased basis our products in that jurisdiction.

Ø Delays in, amendments to or repeals of legislation approving gaming or the expansion of gaming in jurisdictions in which we operate or plan to commence operations, may adversely affect our operations. Delays in approvals of our customers’ operations or expansions of their operations may adversely affect our operations.

Ø Some jurisdictions require gaming manufacturers to obtain government approval before engaging in certain transactions, such as business combinations, reorganizations, borrowings, stock offerings and share repurchases. Obtaining such pre-approvals can be time consuming and costly. We cannot assure you that we will be able to obtain or maintain all necessary approvals or that the approval process will not result in delays or changes to our business plans.

Our business is vulnerable to changing economic conditions and current unfavorable economic conditions have impacted and could continue to negatively impact the play levels of our participation games, new unit sales demand, and our ability to collect outstanding receivables from our customers:

Ø Existing unfavorable general economic conditions reduce disposable income of casino patrons and result in fewer patrons visiting casinos. This decline in disposable income could result in reduced play

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levels on our participation games, causing our cash flows and revenues from a large share of our recurring revenue products to decline. Additionally, higher airfares, gasoline prices and other costs may adversely affect the number of players visiting our customer’s casinos. Current unfavorable economic conditions have also resulted in a tightening in the credit markets, decreased liquidity in many financial markets, and resulted in significant volatility in the credit and equity markets. Any significant or prolonged decrease in consumer spending on leisure activities could greatly affect the casino industry, causing some or all of our customers to decrease spending or ultimately declare bankruptcy, each of which would adversely affect our business.

Ø A decline in the relative health of the gaming industry and the difficulty or inability of our customers to obtain adequate levels of capital to finance their ongoing operations reduces their resources available to purchase our products and services, which adversely affects our revenues. If we experience a significant unexpected decrease in demand for our products, we could incur losses and also be required to increase our inventory obsolescence charges.

Ø Furthermore, current unfavorable economic conditions have and could continue to impact the ability of our customers to make timely payments to us. We implemented a program to provide more than historical financing terms to certain of our customers in 2009 which could increase our collection risk. We experienced a greater number of customers filing for protection under the bankruptcy laws in fiscal 2009 than in previous years and our bad debt expense increased to $7.1 million. If customers are not able to pay us, we may incur additional provisions for bad debt related to lack of collectibility of certain receivables.

New products, such as NG, may be subject to complex revenue recognition standards, which could materially affect our financial results:

Ø As we introduce new products and our commercial transactions become increasingly complex, additional analysis and judgment is required to account for them and to recognize revenues in accordance with generally accepted accounting principles. Transactions may include multiple element arrangements and/or software components and applicable accounting principles or regulatory product approval delays could change the timing of revenue recognition and could adversely affect our financial results for any given period. Fluctuations may occur in our revenue and related deferred revenues and reflect our continued shift toward more multiple element contracts that include systems and software.

Our profitability depends on our ability to continue to develop, in a timely basis, new technologies and high earning products that appeal to the player:

Ø The gaming machine business is characterized by the rapid development of new technologies and the introduction of new products using such technologies. We must continually adapt our products to incorporate new technologies and if we cannot adapt, or do not timely adapt new technologies, our operations may be adversely impacted.

Ø The success of a newly introduced technology, such as NG, is dependent on our casino customers’ acceptance of a dynamic change in the way they manage their casino floors. While we have designed WAGE-NET^™ to support our customers’ existing investment in our Bluebird and Bluebird2 products, such acceptance may nevertheless only build gradually over time. Delays in acceptance by our customers of new technologies may adversely affect our operations.

Ø Our success depends upon our ability to adapt our manufacturing capabilities and processes to meet the demands of producing new and innovative products. Because our newer products are generally more technologically sophisticated than those we have produced in the past, we must continually refine our production capabilities to meet the needs of our product innovation. If we cannot efficiently adapt our manufacturing infrastructure to meet the needs of our product innovations, or if we are unable to make upgrades to our production capacity in a timely manner, our business could be negatively impacted.

Ø Our success also depends on continually developing and successfully marketing new games and gaming machines with strong and sustained player appeal. A new game or gaming machine will be accepted by

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casino operators only if we can show that it is likely to produce more revenue and net win to the casino operator than our existing products or our competitors’ products. Gaming machines can be installed in casinos on a trial basis, and only after a successful trial period are the gaming machines purchased by the casinos. Additionally, we are at risk that customers may cancel orders for products that are not performing to expectations at other casinos. If a new product does not achieve significant market acceptance, we may not recover our development, regulatory approval and promotion costs.

Ø Participation gaming machines are replaced on short notice by casino operators if the gaming machines do not meet and sustain revenue and profitability expectations. Therefore, these gaming machines are particularly susceptible to pressure from competitors, declining popularity, changes in economic conditions and increased taxation and are at risk of replacement by the casinos, which would end our recurring revenues from these gaming machines unless they can be placed with another customer or repurposed.

Ø Our success depends on our ability to avoid, detect, replicate and correct software and hardware anomalies and fraudulent manipulation of our gaming machines. All of our games are designed with security features to prevent fraudulent activity. However we can not guarantee that these features will effectively stop all fraudulent activities. If our security features do not prevent fraud we could adversely be affected.

Ø Our gaming machines have experienced anomalies and fraudulent manipulation in the past. Games and gaming machines may be replaced by casinos and other gaming machine operators if they do not perform according to expectations, or may be shut down by regulators. The occurrence of anomalies in, or fraudulent manipulation of, our gaming machines may give rise to claims for lost revenues and related litigation by our customers and may subject us to investigation or other action by gaming regulatory authorities including suspension or revocation of our gaming licenses, or disciplinary action. Additionally, in the event of such issues with our gaming machines, substantial engineering and marketing resources may be diverted from other projects to correct these issues, which may delay our other projects.

We are dependent on our intellectual property and trade secrets and must ensure we are licensed to use intellectual property and trade secrets owned by others:

Ø Our competitors have been granted patents covering, among other items, numerous gaming machine features, bonusing techniques and related technologies. If our products use processes or other subject matter that is claimed under our competitors’ patents, or if other companies obtain patents claiming subject matter that we use, those companies may bring infringement actions against us. We might then be forced to discontinue the affected products or be required to obtain licenses from the company holding the patent, if it is willing to give us a license, in order to continue to develop, manufacture or market our products. We might also be found liable for treble damage claims relating to past use of the patented subject matter if the infringement is found to be willful.

Ø Substantially all of our gaming machines utilize trademarks and other intellectual properties licensed from third parties. Our future success may depend upon our ability to obtain, retain and/or expand licenses for popular intellectual properties in a competitive market. In the event that we cannot renew and/or expand existing licenses, we may be required to discontinue or limit our use of the games or gaming machines that use the licensed technology or bear the licensed marks.

Ø Our success may depend in part on our ability to obtain trademark protection for the names or symbols under which we market our products and to obtain copyright protection and patent protection of our proprietary technologies, intellectual property and other game innovations. We cannot assure you that we will be able to build and maintain goodwill in our trademarks or obtain trademark or patent protection, that any trademark, copyright or issued patent will provide competitive advantages for us or that our intellectual properties will not be successfully challenged or circumvented by competitors.

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Ø We also rely on trade secrets and proprietary know-how. We enter into confidentiality agreements with our employees and independent contractors regarding our trade secrets and proprietary information, but we cannot assure you that the obligation to maintain the confidentiality of our trade secrets or proprietary information will be honored. Despite various confidentiality agreements and other trade secret protections, our trade secrets and proprietary know-how could become known to, or independently developed by, competitors.

Ø We have entered into multiple agreements to license intellectual property and technologies that, as of June 30, 2009, had a net book value of $68.6 million and total potential future commitment of $112.7 million, including contingent payments. We also have other finite lived intangible assets, including patents, customer relationships and trademarks with aggregate net book value of $19.7 million as of June 30, 2009. If we determine that we may not realize the value of any of the finite lived intangible net assets or commitments, we would record an immediate charge against earnings up to the full amount of these net assets or commitments in the period in which such determination is made. See Note 7, “Intangible Assets” to our Consolidated Financial Statements for further information on the amount of intellectual property and technologies recorded on our Consolidated Balance Sheets and Note 13, “Commitments, Contingencies and Indemnifications” to our Consolidated Financial Statements for further information on total potential future commitments.

Our industry is competitive:

Ø The gaming machine business is intensely competitive. Some of our competitors are large companies with greater financial, marketing and product development resources than ours. In addition, new competitors may enter our key markets. Obtaining space and favorable placement on casino gaming floors is a competitive factor in our industry. Competitors with a larger installed base of gaming machines than ours have an advantage in obtaining and retaining the most space and best positions in casinos.

Ø In addition, some of our competitors have developed and sell or otherwise provide to customers centralized player tracking and accounting systems which allow casino operators to accumulate accounting and performance data about the operation of gaming machines. While, with the acquisition of SiP, we can now offer a centralized player tracking and accounting system, we anticipate SiP’s systems will only be used in small international casinos. By not having such a system for large casinos, we are at a competitive disadvantage.

Ø Our profitability is somewhat dependent on our ability to successfully enter into new markets (e.g. Class II) and new channels of distribution. We can not assure you that our products will receive the proper regulatory approvals, be accepted by customers or casino players or will perform as well in these markets as they have in our traditional markets.

Our business is subject to political, market, and financial risks:

Ø The gaming industry can be affected by public opinion of gaming. In the event that there is a decline in public acceptance of gaming, either through unfavorable legislation affecting the introduction of gaming into emerging markets, or through legislative and regulatory changes, including tax increases, in existing gaming markets, our ability to continue to sell and lease our gaming machines in those markets and jurisdictions would be adversely affected. We cannot assure you that public opinion will continue to support legalized gaming.

Ø Our gross margins are impacted by decreases to our selling prices or our average daily revenue in our gaming operations business and increases to our costs of products sold including higher material costs due to the fluctuating commodities markets, higher labor costs and increased freight charges reflecting escalating gas prices. We may experience lower gross margins in the future if any of these events occurs.

Ø We face risks associated with doing business in international markets related to political and economic instability and related foreign currency fluctuations. Unstable governments and changes in treaties and

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legislation may affect the international gaming market with respect to gaming regulation, taxation, tariffs and import duties, and the legality of gaming in some markets, as we experienced with the decline in the Russian market in fiscal 2006. Additionally, we may have increased costs in connection with complying with international laws.

Ø Compliance with applicable environmental, health and safety laws and regulations, including new regulations requiring higher standards, may increase our costs, limit our ability to utilize our current supply chain and force design changes to our products. These changes could reduce the net realizable value of our inventory, which would result in an immediate charge to our Consolidated Income Statements. Non-compliance could negatively impact our operations and financial position as a result of fines, penalties, and the cost of mandated remediation or delays to our manufacturing.

Ø In certain sales of new gaming machines and placement of participation gaming machines we have offered free gaming machines and/or free conversions, while at the same time we continue to charge our customers for gaming machines and conversions, including CPU-NXT and CPU-NXT2 upgrade kits. We cannot be sure that competitive pressure will not cause us to increase the number of free gaming machines and conversions we are expected to offer to our customers, which would decrease the revenue we expect to receive and reduce our gross profit.

Ø If we cannot maintain and execute adequate internal control over financial reporting or implement required new or improved controls that provide reasonable assurance of the reliability of the financial reporting and preparation of our financial statements for external use, we may suffer harm to our reputation, fail to meet our public reporting requirements on a timely basis, or be unable to properly report on our business and the results of our operations. Additionally, the inherent limitations of internal control over financial reporting may not prevent or detect all misstatements or fraud, regardless of the adequacy of those controls.

Ø Our credit facility contains financial covenants which may restrict our ability to, among other things, make certain levels of capital expenditures; incur additional debt; incur liens; change the nature of our business; merge with or acquire other companies, liquidate or dissolve; limit share repurchases; and sell, transfer, lease or dispose of all or substantially all of our assets. In addition our credit facility expires on December 31, 2009 and while we expect to be able to extend or replace such facility, under the current economic conditions and capital markets, no assurance can be made that we will be able to negotiate such agreements or that such agreements would not place further limitations on our operations. In addition, if we experience another financial crisis and collapse of the capital markets, causing our stock price to fall and stay below $13.19 per share, holders of our $115 million of convertible debt due July 2010, may not convert into common stock. Therefore we might have to extinguish the debt with available cash or borrow on our credit facility or a combination of both, and we cannot provide assurance that we will be able to fund that amount of payment.

We are dependent on our employees.

Ø The loss or unavailability of one or more of our executive officers or the inability to attract or retain key employees in the future could have an adverse effect on our operations.

Ø Our ability to continue to develop new technologies and create innovative products depends on our ability to recruit and retain talented employees. A lack of skilled, technical workers could delay or negatively impact our business plans.

The existence of our preferred stock could adversely affect the market price of our common stock.

Ø Our certificate of incorporation authorizes the issuance of five million shares of preferred stock with designations, rights and preferences that may be determined from time to time by the board of directors. Accordingly, our board has broad power, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock. Our board of directors could use preferred stock to

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discourage, delay or prevent a change in control. Our board has no current plans, agreements or commitments to issue any shares of preferred stock. The existence of the preferred stock, however, could adversely affect the market price of our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Manufacturing Facility & Corporate Headquarters

Our main manufacturing facility and corporate headquarters is located in Waukegan, Illinois, a suburb of Chicago, where we own a facility of more than 350,000 square feet that houses our manufacturing and corporate administrative personnel and it also includes warehouse space. This facility was built in 1995 and expanded and improved in both 1998 and 2007. The 2007 expansion enabled us to bring under one roof raw materials and finished goods that had previously been stored at separate third-party warehouses. The fiscal 2007 expansion of our Waukegan facility ensures that it will be adequate in capacity and condition to satisfy our expected future growth requirements.

Chicago Technology Campus

Our engineering and game development headquarters is located in Chicago, Illinois, where we own a facility of more than 129,000 square feet that houses our Chicago engineering and game development personnel. Our Chicago facility has been renovated into a research and development center to accommodate the growth of our engineering and game development staff. This facility supports engineering and game development for all North American markets and certain international markets. We own a parcel of land and a building in Chicago down the street from our technology campus which we renovated for use in fiscal 2009 by our commercial operations team. In fiscal 2008 we purchased an additional parcel of land and building down the street from our Chicago technology campus for further expansion and in fiscal 2009 we purchased two other parcels in the same area for future expansion. We have one tenant that occupies the buildings on these three parcels. We are working with an architect to develop a master plan for this entire campus.

Bergen op Zoom, the Netherlands

We own a facility in Bergen op Zoom, the Netherlands that we use for game development and sales and distribution.

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Leased Facilities

In addition to the principal and material physical properties described above, we maintain leased space worldwide including:

North America	Europe and South Africa	Asia Pacific / Latin America
Atlanta, Georgia Atlantic City, New Jersey Itasca, Illinois Chicago, Illinois Dover, Delaware Golden, Colorado Gulfport, Mississippi Kansas City, Missouri Las Vegas, Nevada Plantation, Florida Reno, Nevada Toronto, Ontario, Canada Robinsonville, Mississippi	Aosta, Italy Barcelona, Spain Graz, Austria Guateng, South Africa Uxbridge, England Amsterdam, Netherlands	Buenos Aires, Argentina Macau, China Sydney, Australia

ITEM 3. LEGAL PROCEEDINGS

On October 2, 2003, La Societe de Loteries du Quebec (“Loto-Quebec”) filed claims against us and Video Lottery Consultants Inc., a subsidiary of IGT (“VLC”) in the Superior Court of the Province of Quebec, Quebec City District (200-06-000017-015). The pleadings allege that Loto-Quebec would be entitled to be indemnified by the manufacturers of Loto-Quebec’s VLTs, specifically WMS and VLC, if the class action plaintiffs, described below, are successful in the pending class action lawsuit against Loto-Quebec. In July 2008, we entered into a settlement agreement with Loto-Quebec under which Loto-Quebec agreed to suspend the action in warranty against us in exchange for our agreement to continue cooperating with the defense of the class action lawsuit against Loto-Quebec and, in the event of an adverse outcome in such lawsuit against Loto-Quebec, to arbitration of any warranty claim by Loto-Quebec. The settlement agreement reserves all of our defenses against Loto-Quebec.

The class action lawsuit discussed in Loto-Quebec’s claim was brought on May 18, 2001 against Loto-Quebec in the Superior Court of the Province of Quebec. It alleges that the members of the class developed a pathological gambling addiction by using Loto-Quebec’s VLTs and that Loto-Quebec, as owner, operator and distributor of VLTs, failed to warn players of the alleged dangers associated with VLTs. Spielo Manufacturing Inc., another manufacturer of VLTs, voluntarily intervened to support Loto-Quebec’s position. Class status was granted by the Court on May 6, 2002, authorizing Jean Brochu to act as the representative plaintiff. The class, which is currently undetermined, but potentially comprising more than 119,000 members, is requesting damages totaling almost $700 million Canadian dollars, plus interest. The trial began in September 2008 and is continuing. It is too early to assess the outcome of these actions and to determine whether any further claim will be pursued by Loto-Quebec under the terms of our settlement agreement.

In December 2008, we settled a trademark lawsuit against a third party for a cash receipt in the amount of $5.0 million, which is included in the Interest income and other, net line in our Consolidated Statements of Income for the year ended June 30, 2009.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Product names mentioned in this Report are trademarks of WMS Gaming Inc., except for the following marks: 3 WAY ACTION is a trademark of Yehia Awada; 3SPACE, BOSE and FREE FIELD are trademarks of Bose Corporation; BATTLESHIP, CLUE and MONOPOLY are trademarks of Hasbro, Inc; CLINT EASTWOOD is a registered trademark of Clint Eastwood; DIRTY HARRY is a trademark of Warner Bros. Consumer Products Inc.; G2E is a trademark of Reed Elsevier Inc. and the American Gaming Association; G2S and S2S are trademarks of the Gaming Standards Association; GREEN ACRES is a trademark of Orion Pictures Corporation; HAPPY DAYS and STAR TREK are trademarks of CBS Studios Inc.; JOHN WAYNE is a trademark of Wayne Enterprises, L.P.; PRESS YOUR LUCK is a trademark of FremantleMedia Operations BV; MEN IN BLACK is a trademark of Columbia Pictures Industries, Inc; POWERBALL is a trademark of the Multi-State Lottery Association; THE DUKES OF HAZZARD is a trademark of Warner Bros. Entertainment Inc.; THE WIZARD OF OZ is a trademark of Turner Entertainment Co.; TIME MACHINE is a trademark of Next Generation Entertainment (Aust) Pty Limited; TOP GUN is a trademark of Paramount Pictures Corporation.

PART II

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

Our common stock, par value $0.50, trades publicly on the New York Stock Exchange (“NYSE”) under the symbol “WMS.” On August 24, 2009, there were approximately 724 holders of record of our common stock.

The following table shows the high and low sale prices of our common stock for the two most recent fiscal years, as reported on the NYSE:

	High		Low
Fiscal Year Ended June 30, 2009
First Quarter	$	34.20	$	26.42
Second Quarter		29.94		17.99
Third Quarter		28.30		15.67
Fourth Quarter		35.84		21.44
Fiscal Year Ended June 30, 2008
First Quarter	$	33.10	$	24.61
Second Quarter		37.14		30.89
Third Quarter		40.78		31.66
Fourth Quarter		38.74		29.45

Dividend Policy

No cash dividends were declared or paid on our common stock during fiscal 2009 or 2008. Our ability to pay future cash dividends will depend upon, among other things, our earnings, anticipated expansion, capital requirements and financial condition. We do not expect to pay cash dividends in the foreseeable future.

We have a revolving credit agreement, as amended, that provides for $100 million of unsecured borrowing through December 31, 2009, including the potential to expand the line up to $125 million. Up to $10 million of the credit facility is available for the issuance of letters of credit. The credit agreement requires that we maintain certain financial ratios, which could limit our ability to acquire companies, declare dividends or make any distribution to holders of any shares of capital stock, or repurchase or otherwise acquire shares of our common stock. At June 30, 2009, approximately $114.2 million was available for such purposes under the most restrictive of these covenants.

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We have agreed to make additional payments of interest on our convertible subordinated notes if we declare a cash dividend on our common stock. The amount of the additional payments will be equal to the cash dividends that would be payable to the holders of the notes if the holders had converted their notes into shares of our common stock on the record date for the dividend. However, no such payment needs be made if the dividend that would otherwise trigger the payment causes an adjustment to the note conversion rate.

Issuance of Unregistered Securities

On June 11, 2009, WMS Gaming Inc. entered into a new Gaming Device License Agreement (the “2009 License”) with Hasbro whereby WMS Gaming agreed to license certain intellectual property and proprietary rights owned or controlled by Hasbro in titles such as MONOPOLY, BATTLESHIP and CLUE for use in WMS Gaming’s chance-based electronic gaming machines. As part of the inducement to Hasbro to enter into the 2009 License, our Board of Directors approved an amendment (the “Warrant Modification Agreement”) to that certain warrant to purchase our common stock which remains outstanding and was issued to Hasbro in 2003 in connection with a licensing arrangement (the “2003 Warrant”) for the MONOPOLY brand. The Warrant Modification Agreement provides that the term of the 2003 Warrant will be extended until December 31, 2018. In addition, the expiration date of the 2003 Warrant will be extended for three years if we elect to extend the 2009 License. The 2003 Warrant is 60% vested and, under the Warrant Modification Agreement, Hasbro waived its right to accelerated vesting of the 2003 Warrant. On June 11, 2009, our Board of Directors, also as part of the inducement to Hasbro to enter into the 2009 License, approved a grant of a warrant to purchase up to 500,000 shares of our common stock (the “2009 Warrant”). The 2009 Warrant’s exercise price is $30.03 per share of our common stock (the closing price on June 11, 2009, the date of grant), subject to adjustment. The 2009 Warrant will only vest if certain conditions are met: (1) we request Hasbro’s consent to an assignment of the 2009 License upon the undertaking of certain transactions by us and Hasbro gives its consent to such assignment and (2) such transaction is effected. Each year that the three conditions are not met, the number of shares subject to the 2009 Warrant decrease; provided however, that the number of underlying shares will not be less than 375,000 shares. If not vested and exercised, the 2009 Warrant will expire on December 31, 2018, which expiration date will extend for three years if we elect to extend the 2009 License. The 2009 Warrants have been, and the shares of the our common stock issuable upon exercise will be issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), afforded by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder, as a transaction with an accredited investor not involving a public offering. Hasbro has represented that it is an accredited investor and that it is acquiring the warrants and our common stock issuable upon exercise thereof for its own account, for investment only and not with a view to the resale or distribution of the securities. See Note 12, “Equity Compensation Plan” to our Consolidated Financial Statements.

Repurchases of Common Shares

The following table provides information relating to repurchases of our common shares for the fourth quarter of fiscal 2009:

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Maximum Number (Or Approximate Dollar Value) of Shares that May Yet Be Purchased under the Plans or Programs(1)
April 1, 2009 – April 30, 2009	—	$	—	—	$	74,522,853
May 1, 2009 – May 31, 2009	—	$	—	—	$	74,522,853
June 1, 2009 – June 30, 2009	—	$	—	—	$	74,522,853
Total	—	$	—	—	$	74,522,853

(1) On August 3, 2009, our Board of Directors authorized the repurchase of an additional $75 million of our common stock over the following twenty-four months increasing our remaining repurchase authorization to approximately $150 million. This authorization increases the existing program, previously authorized on

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August 4, 2008, from $150 million to $225 million and extended the expiration date to August 3, 2011. Pursuant to the authorization, purchases may be made from time to time in the open market, through block purchases or in privately negotiated transactions. The timing and actual number of shares repurchased will depend on market conditions. During fiscal 2009, we purchased 1,602,470 shares for approximately $35.5 million at an average cost of approximately $22.15 per share.

ITEM 6. SELECTED FINANCIAL DATA

The data as of June 30, 2009 and 2008 and for the years ended June 30, 2009, 2008 and 2007 are derived from our audited Consolidated Financial Statements and related Notes that are included elsewhere in this Report. The data as of June 30, 2007, 2006 and 2005 and for the years ended June 30, 2006 and 2005 are derived from our audited Consolidated Financial Statements and related Notes that are included in other reports filed with the Securities and Exchange Commission.

The selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements.

	Fiscal Year Ended June 30,
	2009			2008			2007			2006			2005
	(in millions, except per share amounts)
Statement of Operations Data:
Revenues	$	706.4		$	650.1		$	539.8		$	451.2		$	388.4
Operating income		136.6			104.4			74.2			49.0			30.7
Income before income taxes		140.4			105.6			71.7			49.2			30.3
Provision for income taxes		48.2			38.1			22.8			15.9			9.1
Net income(1)(2)(3)(4)(5)	$	92.2		$	67.5		$	48.9		$	33.3		$	21.2
Earnings per share:
Basic	$	1.87		$	1.34		$	1.01		$	0.71		$	0.46
Diluted	$	1.59		$	1.15		$	0.86		$	0.63		$	0.41
Weighted-average common shares:
Basic common stock outstanding		49.2			50.2			48.4			47.1			46.1
Diluted common stock and common stock equivalents		59.1			60.6			59.6			56.9			56.6
Dividends per common share	$	—		$	—		$	—		$	—		$	—
Cash Flow Data:
Net cash provided by (used in):
Operating activities	$	179.2		$	186.2		$	118.9		$	103.1		$	6.1
Investing activities		(113.8	)		(117.8	)		(158.8	)		(94.1	)		(45.8	)
Financing activities		(29.8	)		(5.2	)		35.6			(4.6	)		15.4
Effect of exchange rates on cash and cash equivalents		(0.7	)		0.4			2.4			(0.5	)		(0.4	)
Increase (decrease) in cash and cash equivalents	$	34.9		$	63.6		$	(1.9	)	$	3.9		$	(24.7	)
	As of June 30,
	2009			2008			2007			2006			2005
	(in millions)
Balance Sheet Data:
Cash and cash equivalents	$	135.7		$	100.8		$	37.2		$	39.1		$	35.2
Working capital		334.3			296.7			255.5			234.2			241.8
Total assets		856.0			772.7			655.7			526.4			478.4
Long-term debt		115.0			115.0			115.0			115.0			115.0
Stockholders’ equity		591.4			510.8			433.6			325.6			285.2

(1) Net income in fiscal 2009 includes $11.2 million of after-tax share-based payment expenses compared to $9.4 million, $7.7 million, $7.6 million and $2.4 million in fiscal 2008, 2007, 2006 and 2005, respectively.

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The increase in share-based payment expense in fiscal years subsequent to fiscal 2005 is due to the Company’s adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment”, effective July 1, 2005. See Note 2, “Principal Accounting Policies” to our Consolidated Financial Statements.

(2) Net income in fiscal 2009 includes a $3.1 after-tax gain from a cash settlement of trademark litigation and a $1.1 million income tax benefit related to the period January 1, 2008 through June 30, 2008 due to the retroactive reinstatement of the research and development tax credit legislation in December 2008.

(3) Net income in fiscal 2008 includes a $2.3 million after-tax write down to net realizable value of a technology license.

(4) Net income in fiscal 2007 includes a $1.0 million after-tax charge for expenses associated with management separation costs during the period and a $0.7 million income tax benefit related to the period January 1, 2006 through June 30, 2006, due to the retroactive reinstatement of the research and development tax credit legislation in December 2006.

(5) Net income in fiscal 2005 includes: an after-tax charge of $0.7 million for employee separation costs; an after-tax gain of $0.4 million in other income from the license of certain intellectual property of a discontinued business; pre- and after-tax income of $1.5 million related to final settlement of tax advances with our former subsidiary, Midway Games Inc., which we previously fully reserved; and a non-cash after-tax charge of $2.9 million relating to net inventory charges to reduce legacy inventory to net realizable value.

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

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and Notes thereto included elsewhere in this Report. This discussion and analysis also contains forward-looking statements and should also be read in conjunction with the disclosures and information contained in “Cautionary Note” and Item 1A. “Risk Factors” in this Report. The following discussion and analysis is intended to enhance the reader’s understanding of our business environment.

As used in this Report, the terms “we”, “us”, “our”, and “WMS” mean WMS Industries Inc., a Delaware corporation, and its subsidiaries. All references to years, unless otherwise noted, refer to our fiscal year, which ends on June 30. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.

OVERVIEW

Our mission is: through imagination, talent and technology, we create and provide the world’s most compelling gaming experiences. We design, manufacture and distribute gaming machines and video lottery terminals (“VLTs”) for customers in legalized gaming jurisdictions worldwide. Our products consist primarily of video gaming machines, mechanical reel gaming machines and VLTs. Our gaming machines are installed in all of the major regulated gaming jurisdictions in the United States, as well as in over 100 international gaming jurisdictions. We generate revenue in two principal ways: product sales and gaming operations.

Throughout our fiscal 2009, the financial market crisis disrupted credit and equity markets worldwide and led to a weakened global economic environment. The effect of the weakened global economy and the fallout from the financial market crisis has been a challenge for our industry with some gaming operators delaying or canceling construction projects, coupled with many customers reducing their annual capital budgets for calendar 2009. The economic crisis reduced disposable income for casino patrons and resulted in fewer patrons visiting casinos. In anticipation of the lengthening replacement cycle and in response to the challenging economic environment, we reduced the number of new positions we hired in fiscal 2009, and took actions to contain non-payroll related spending. In fiscal 2010, we will remain focused on controlling spending and prioritizing capital expenditures and other discretionary items. The economic crisis lowered the number of new units we sold in fiscal 2009. We believe the industry will rebound once the economy and credit markets improve in the future.

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We had expected that with our launch of the network gaming enabled Bluebird2 gaming machines, concurrent with certain of our competitors launching their networked gaming enabled products, the industry would experience an improvement in the replacement cycle which has been at an abnormally low level for the past few years. However, as discussed above, the economy slowed just as the new gaming machines were being launched, so we did not see the expected improvement in the replacement cycle. Even with the adverse economic environment and its impact on our industry causing customers to constrain their capital budgets, we launched our Bluebird2 gaming machines in the December 2008 quarter with premium features at a significantly higher price, and demand outpaced expectations. For fiscal 2009, Bluebird2 units accounted for 35% of our total new units shipped. We continue to believe that once the economy improves and capital budgets of our customers increase, the replacement demand will improve, and we’ll also experience an increase in demand from casino expansions and new casino openings.

We believe several recent developments fueled by the challenging economic situation will benefit us in the long term. In the United States, legislators have passed or are considering enabling or expansion of gaming legislation in Ohio, Illinois, Kansas, Iowa, Maryland, and Massachusetts. The breadth and timing of such opportunities remains uncertain due to the political process in these jurisdictions as well as the difficult credit environment facing our customers and the risk of continued economic uncertainty. We are also focused on entering the Mexico market as it moves to Class III gaming, and the New South Wales, Australia market, as well as opportunities for new or expanded gaming in Italy, Singapore and Taiwan.

Product Sales

Product sales revenue includes the sale of new and used gaming machines and VLTs, parts, conversion kits (including game theme and/or operating system conversions), amusement-with-prize (“AWP”) gaming machines, gaming-related systems for smaller international casino operators and equipment manufactured under original equipment manufacturing (“OEM”) agreements to casinos and other licensed gaming machine operators. We derive product sales revenue from the sale of the following:

Ø Multi-line, multi-coin video gaming machines, in our Bluebird, Bluebird2 and Orion Financement Company (“Orion Gaming”) Twinstar™ and Twinstar2-branded gaming machines;

Ø Mechanical reel-spinning gaming machines in our Bluebird and Bluebird2-branded gaming machines;

Ø Video poker machines in our Bluebird and Bluebird2-branded gaming machines, which are primarily offered as a casino-owned daily fee game, where the casino purchases the base gaming machine and then leases the top box and game for a lower lease price point;

Ø Replacement parts and conversion kits for our legacy, Bluebird, Bluebird2, Twinstar, Twinstar2 and AWP gaming machines, and CPU-NXT^® and CPU-NXT2 upgrade kits;

Ø Used gaming machines that are acquired on a trade-in basis or that were previously placed on a participation basis;

Ø AWP gaming machines in certain international markets;

Ø Gaming-related systems, including linked progressive systems and slot accounting systems applicable to smaller international casinos; and

Ø Gaming machines in legacy, Bluebird and Twinstar cabinets in limited cases under OEM agreements to certain third parties.

Gaming Operations

We earn gaming operations revenues from leasing participation games, gaming machines, and VLTs, and earn royalties that we receive from third parties under license agreements to use our game content and intellectual property. Our gaming operations include the following product lines:

Ø Participation games, which are gaming machines owned by us that we lease based upon any of the following payment methods: (1) a percentage of the net win, which is the casino’s earnings generated by

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casino patrons playing the gaming machine; (2) fixed daily fees; or (3) a percentage of the amount wagered or a combination of a fixed daily fee plus a percentage of the amount wagered. We have the ability to lease these gaming machines on a participation basis because of the superior performance of the game and/or the popularity of the brand, which generates higher wagering and net win to the casinos or gaming machine operators than the gaming machines we sell outright. Participation games include:

Ø Wide-area progressive (“WAP”) participation games;

Ø Local-area progressive (“LAP”) participation games; and

Ø Stand-alone participation games.

Ø Casino-owned daily fee games, where the casino or gaming machine operator purchases the base gaming machine and pays a lower daily lease fee for the top box and game;

Ø Leased gaming machines;

Ø Video lottery terminals; and

Ø Licensing revenues from licensing our game content and intellectual properties to third parties.

OUR FOCUS

As previously discussed, we are currently operating in a challenging economic environment and the combination of economic uncertainty, lower demand for replacement products and reduced opportunities from new or expanded casinos has negatively impacted our consolidated results. We expect to benefit from certain new or expansion projects currently in process, but the breadth and timing of such opportunities remains uncertain due to the difficult credit environment facing our customers and the risk of continued economic uncertainty. While we expect demand in the replacement market will remain sluggish in the near term, it is possible that gaming operators’ replacement buying demand will begin to improve in calendar 2010.

As we navigate these macroeconomic challenges, we remain focused on five key strategic priorities: 1) drive growth in our gaming operations business, while selectively investing our capital deployed in that business; 2) grow our United States and Canadian market share by innovating differentiated products; 3) expand the breadth and profitability of our international business; 4) improve our gross margins and operating margins; and 5) increase our cash flow from operations.

1. Priority: Drive growth in our gaming operations business, while selectively investing our capital deployed in that business.

Fiscal 2009 Result: During the year ended June 30, 2009, our average installed base of participation gaming machines increased 10.2% over the prior year and, at June 30, 2009, our total installed participation footprint stood at 10,350 units compared to 9,321 units at June 30, 2008. Growth in the installed base was primarily led by our WAP gaming machines, which at June 30, 2009 comprised 24.4% of the footprint compared to 19.5% at June 30, 2008. The WAP footprint increased by 703 units in the year ended June 30, 2009 compared to June 30, 2008, largely reflecting the successful launch of new games on our new participation product lines. The increase in WAP games represented 68.3% of the total annual increase in installed participation gaming machines. A shift in strategy in fiscal 2007 to focus on return on investment of our gaming operations assets helped result in revenue per day for the year ended June 30, 2009 increasing by 10.4% to a record $69.93 per day from $63.34 per day for fiscal 2008. This strategy includes limiting the number of gaming machines for specific new themes at each casino and re-deploying gaming machines from casinos generating lower revenue per day to casinos generating higher revenue per day. By controlling the initial placement of participation products, we continued to reduce the capital invested in gaming operations compared to the prior year. A 10.4% improvement in the average daily revenue, coupled with the 10.2% improvement in the average installed base, produced a 21.3% year-over-year increase in participation revenue in our gaming operations business to $246.7 million, which attests to the continued strong play levels and player appeal of our participation products.

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2. Priority: Grow our United States and Canadian market share by innovating differentiated products.

Fiscal 2009 Result: The United States and Canadian replacement cycle has lengthened and the challenges facing our industry and the overall economy have continued, thus overall industry demand has been reduced. Our year-over-year new unit shipment volume comparison was negative and was impacted by lower overall industry demand, a tough comparison as the prior year included the sale of more than 1,000 units to Native American casinos in California following the passage of a voter referendum, partially offset by the current year being favorably impacted by rapid acceptance of our newly launched, premium-priced Bluebird2 gaming machine. As a result of these factors, our new unit shipments in the United States and Canada were down 7.6% compared to the prior year. To further diversify our revenue streams, we announced late in fiscal 2009 that we would directly enter the Class II, electronic bingo and central determinant market following expiration of our previous licensing agreements for those markets. Through an alliance with Bluberi Gaming Technologies Inc. (“Bluberi”), a Canadian-based technology firm, over time we will combine our existing library of over 200 for-sale games with Bluberi’s proven system capabilities for the Class II, electronic bingo and central determinant markets. We are dependent, in part, on innovative new products, casinos expansions and new market opportunities to generate growth. We have continued to increase our spending on research and development activities to be able to offer creative and high earning products to our customers and for the year ended June 2009, such expenses are up $18.5 million or 23.2% over the prior year to $98.4 million. Expansion and new market opportunities may come from political action as governments look to gaming to provide tax revenues in support of public programs and view gaming as a key driver for tourism.

3. Priority: Expand the breadth and profitability of our international business.

Fiscal 2009 Result: Shipments to international markets represented 36.6% of our total new unit shipments in the year ended June 30, 2009, compared with 35.2% for the prior year. During the year ended June 30, 2009 international new unit shipments decreased 1.4% from the prior year, as economic challenges are evident in some regions, principally Western European markets, as well as the impact of the higher mix of premium Bluebird2 units. We are accomplishing continued international success through the simultaneous introduction of new products in the Canadian and U.S. and international markets, thereby capitalizing globally on the popularity and success of our newest products. In late fiscal 2008, Orion Gaming launched its new Twinstar2 gaming machine and its new N-Able operating system which we expect will drive greater demand for Orion Gaming products in the future. In April 2009, we announced a new value-priced gaming platform called Helios which will be targeted at select international markets where the economics of the facilities do not justify the premium priced points of the Bluebird, Bluebird2 or Orion’s Twinstar or Twinstar2 gaming machines. In fiscal 2010, we also will begin selling new units directly to customers in Mexico and New South Wales, Australia through a local distributor, two markets that we previously served through content licensing agreements with third parties. Also, we continue to achieve benefits from the opening of new international offices and the addition of new geographically dispersed sales account executives.

4. Priority: Improve our gross margins and operating margins.

Fiscal 2009 Result: Our operating margin improved 320 basis points to 19.3% for the year ended June 30, 2009 from 16.1% for the prior year, even as research and development expenses increased year-over year by $18.5 million, or 23.2%. For the year ended June 30, 2009, our overall gross margin improved by 410 basis points to 63.5% led by a 310 basis point increase to 51.5% in our product sales gross margin largely attributable to the solid sales of and margin achieved with our new, premium Bluebird2 gaming platform and an increase in our gaming operations margin to 83.3%. We are still implementing our lean sigma and strategic sourcing initiatives, but we are realizing positive results, and we believe these initiatives will continue to drive margin improvement in future years. In the future we expect to benefit from higher average selling prices and lease revenues coupled with an expanded volume of business that should result in greater volume discounts from our suppliers and enable us to spread our manufacturing overhead costs over a larger number of units thereby reducing cost per unit.

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In addition, through disciplined cost management, we continue to expect to realize operating leverage from higher revenues as our total operating costs are not expected to grow at the same percentage as revenues. Our research and development spending includes the ongoing investment we are making to create intellectual property and advanced technologies that will power our innovative products in the future and support our existing product lines. We believe our product development capabilities, combined with additional functionalities and enhanced features of our advanced technologies and gaming platforms, enable us to optimize the entertainment value of our products and improve our gross margins and operating margins.

5. Priority: Increase our cash flow from operations.

Fiscal 2009 Result: For the year ended June 30, 2009 net cash provided by operations was comparable to the prior year reflecting a decrease by $7.0 million to $179.2 million, or 3.8%. The net cash provided by operations for the year ended June 30, 2009 reflects higher net income, deferred income tax expense and other non-cash items more than offset by a reduction in depreciation and amortization and changes in operating assets and liabilities. These operating asset and liability changes were impacted by a combination of our granting a greater amount of longer-term financing options for select customers during these challenging economic times and a greater percentage of new units shipped in the last month of the quarter, which was partially offset by our continued cross functional focus on improving utilization of working capital resulting in improving our inventory turns and better management of our accounts payables. In addition, in our cash flows from investing activities we made significant improvement in our management of the capital deployed in our gaming operations business. During fiscal 2009, the installed footprint of participation gaming machines increased 1,029 units or 11.0%, while our investment in gaming operations equipment totaled $47.0 million, compared to the $50.4 million invested in the prior year. As a result of the strong cash flow from operations, our total cash, cash equivalents and restricted cash as of June 30, 2009, rose 29.3% to $154.7 million from $119.6 million as of June 30, 2008.

The priorities for the utilization of our cash flow are to; continue to enhance stockholder value by emphasizing internal and external investments to create and license advanced technologies and intellectual property; seek acquisitions that can extend our international presence, increase our intellectual property portfolio and expand our earnings potential; and, when appropriate, repurchase shares in the open market or in privately negotiated transactions. For the year ended June 30, 2009, our research and development spending increased $18.5 million over the prior year. We spent $53.3 million in property, plant and equipment, $47.0 million on additions to gaming operations equipment, $13.5 million to acquire or license intangible and other assets and we funded approximately $40.5 million of common share repurchases.

NG

We believe that server-enabled networked gaming (“NG”) will be the next significant technology development in the gaming machine industry. NG refers to a networked gaming system that links groups of server-enabled gaming machines to a remote server in the casino data center. Once the gaming machines are connected to the server-enabled network, new applications, game functionality, and system-wide features can be enabled. These networks will require regulatory approval in gaming jurisdictions prior to any implementation and will represent a significant addition to our existing portfolio of product offerings. We have been introducing the foundational technologies and hardware for NG to the market through our new participation product lines since the September 2006 quarter and we continued to implement this strategy in fiscal 2009 leading up to the launch of our WAGE-NET^™ NG system in fiscal 2010.

Our vision for NG expands on the basic functionality of downloadable games, remote configuration of betting denominations and central determination of game outcomes, and emphasizes enhanced game play and excitement for the player. In a networked environment, we believe game play will no longer be limited to an individual gaming machine; rather, we believe NG will permit game play to be communal among many players. We also expect that with networked gaming machines we will be able to offer system wide features and game

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functionality along with applications that add value to casino operators’ operations. We will continue NG development, working with our competitors and customers to ensure the future is powered by an open standards approach where games, networks, servers and software from multiple suppliers are compatible with each other through the use of industry standard communication protocols.

Our path to the NG marketplace takes elements of our technology road map and converts them into commercializable products in advance of the launch of the full functionality of NG systems. Fiscal 2007 was highlighted by the successful launch of our Community Gaming participation product line, made possible by using a server outside the gaming machine to drive the bonusing activity for an entire bank of games, thereby creating a true communal gaming experience. In fiscal 2007, we also commercialized the next step forward in computing power and capability with our CPU-NXT2 operating system and platform, which is also the basis for our server-enabled Bluebird2 gaming machines that we launched in the December 2008 quarter. CPU-NXT2 also drives our Transmissive Reels participation product line and real-time, 3D graphics and surround sound capabilities for our Sensory Immersion participation product line. We combined an interactive see-through liquid crystal display (“LCD”) with the traditional appeal of authentic mechanical spinning reels to make Transmissive Reels a potential fixture for mechanical reel gaming machines on the NG slot floor. We launched Adaptive Gaming, another key component to our NG technology in July 2008. We conducted a soft launch of our new server-ready Bluebird2 gaming machine in the September 2008 quarter with the commercial launch beginning in the December 2008 quarter. At the G2E trade show in November 2008 and the IGE trade show in January 2009, we also demonstrated the inter-operability of our WAGE-NET system, Bluebird2 gaming machines using the CPU-NXT2 operating system and new games with other manufacturers’ products and systems using industry standard communication protocols developed by the Gaming Standards Association (“GSA”): G2S and S2S.

In February 2008, we entered into a ten-year non-exclusive, royalty-bearing patent cross-license agreement with International Game Technology Inc., (“IGT”). This agreement provides for a cross license of intellectual property evidenced by certain patents owned by each of us relating to computing and NG infrastructures. In May 2008, we received GLI approval on the first-point release of our WAGE-NET NG system, incorporating GSA communication standards and basic NG functionality, which as part of a technical beta test was placed at a popular tribal casino. We received GLI approval for the second-point release of WAGE-NET in January 2009 which has been in technical beta test at popular casinos on the East Coast and will be in a technical beta test in Mississippi later this year. In July 2008, we received approval for the first-point release of WAGE-NET from the Nevada gaming regulators and began a field trial at a popular Las Vegas strip casino. In December 2008, after successful completion of the field trial, we obtained the approval by the Nevada Gaming Commission of the first generation WAGE-NET system, including the remote configuration and downloadable applications. This version of WAGE-NET is GSA compliant, demonstrates our total commitment to support open architecture and standards-based protocols that our casino customers want and should expect, and will be further refined with additional features and functionality as we move forward toward a commercialized version of the WAGE-NET system in fiscal 2010.

OTHER KEY FISCAL 2009 ACTIVITIES

Common Stock Repurchase Program

On August 3, 2009, our Board of Directors authorized the repurchase of an additional $75 million of our common stock over the following twenty-four months increasing our remaining repurchase authorization to approximately $150 million. This authorization increases the existing program, previously authorized on August 4, 2008, from $150 million to $225 million and extended the expiration date to August 3, 2011. Pursuant to the authorization, purchases may be made from time to time in the open market, through block purchases or in privately negotiated transactions. The timing and actual number of shares repurchased will depend on market conditions. During fiscal 2009, we purchased 1,602,470 shares for approximately $35.5 million at an average cost of approximately $22.15 per share.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States. Accordingly, we are required to make estimates incorporating judgments and assumptions we believe are reasonable based on our historical experience, contract terms, trends in our company and the industry as a whole, as well as information available from other outside sources. Our estimates affect amounts recorded in the financial statements and actual results may differ from initial estimates. Our accounting policies are more fully described in Note 2, “Principal Accounting Policies” in our Consolidated Financial Statements.

We consider the following accounting estimates to be the most critical to fully understand and evaluate our reported financial results. They require us to make subjective or complex judgments about matters that are inherently uncertain or variable. Senior management discussed the development, selection and disclosure of the following accounting estimates, considered most sensitive to changes from external factors, with the Audit and Ethics Committee of our Board of Directors.

Revenue Recognition

We evaluate the recognition of revenue based on the criteria set forth in the following accounting pronouncements; American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 97-2, “Software Revenue Recognition”, as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition With Respect to Certain Transactions”, Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements”, as revised by SAB No. 104, “Revenue Recognition” and Emerging Issues Task Force (“EITF”) Issue 00-21”, “Accounting for Revenue Arrangements with Multiple Deliverables”. Our revenue recognition principle for both product sales and gaming operations is to record revenue when all the following criteria are met:

Ø Persuasive evidence of an agreement exists;

Ø The price to the customer is fixed or determinable;

Ø Delivery has occurred, title has been transferred, and any acceptance terms have been fulfilled;

Ø No significant contractual obligations remain; and

Ø Collectibility is reasonably assured.

Determining whether these requirements have been met may require us to make assumptions and exercise judgment that could significantly impact the timing and amount of revenue reported each period. In addition, we may enter into arrangements which include multiple elements or deliverables such as gaming machines, software systems and services. In such cases additional judgments and estimates are necessary to ensure the appropriate amounts of revenue are recorded in a given period. We annually investigate sales contracts with extended payment terms in excess of one year to determine if there is sufficient history to prove assurance of collectability under the original sales contract payments terms. Based upon this investigation, we have concluded that adequate supporting historical documentation exists to conclude collectability is probable for sales contracts with extended payment terms of 36 months or less.

The application of revenue recognition policies is critical due to the nature of the product sales contracts we execute. When multiple product deliverables are included under a sales contract, we allocate revenue to each product based upon its respective fair value against the total contract value and defer revenue recognition on those deliverables where we have not met all requirements of revenue recognition. Fair value is determined based on the prices charged when each element is sold separately. Revenues are recognized in accordance with our accounting policies for the separate elements when the products have value on a stand-alone basis and fair value of the separate elements exists. While determining fair value and identifying separate elements requires judgment, generally fair value and the separate elements are readily identifiable as we also sell those elements unaccompanied by other elements. In accordance with EITF 00-21 we allocate revenue to each unit of accounting

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based upon its fair value as determined by vendor specific objective evidence (“VSOE”). VSOE of fair value for all elements of an arrangement is based upon the normal pricing and discounting practices for those products and services when sold individually.

The application of our revenue recognition policies and changes in our assumptions or judgments affect the timing and amounts of our revenues, cost of gaming operations, and cost of product sales. We anticipate an increase in our deferred revenues as we enter into NG in fiscal 2010 which we expect will result in an increasing number of multiple element contracts that include software and more of our product becomes subject to accounting rules for software revenue recognition. Deferred revenue totaled $7.5 million at June 30, 2009 and $5.2 million at June 30, 2008.

For LAP and stand-alone participation gaming machines, revenues are calculated based on gaming machine performance data provided to us by our customers (such as a percentage of the amount of a gaming machine’s win per day or fixed fee based on the actual number of days the gaming machine was on the casino floor). Due to the timing of the receipt of such performance data, we are required to make estimates of our LAP and stand-alone participation revenue based on an analysis of the historical data reported to us and taking into account anticipated or known events that may affect the historical trend, such as contract cancellations or additional gaming machine placements at a particular customer’s facility. We compare our estimates to the actual data, once received, and adjust our revenue estimates accordingly.

We apply the provisions of SOP 97-2, to sales of certain of our products, when appropriate. SOP 97-2 primarily effects our Bluebird2 and Systems in Progress GmbH (“SiP”) revenues and will impact future revenues in a NG environment because development of Bluebird2, SiP and future NG revenues has become more focused on computer software applications and systems to be sold and leased than our previous products. As we begin to commercialize NG system software in fiscal 2010, the application of SOP 97-2 will require us to obtain VSOE from third parties for each NG software product prior to recognizing revenue on any related gaming machine sales which may delay the recognition of revenue, and increase deferred revenues and deferred costs.

The application of this policy affects the level of our product sales and gaming operations revenue, cost of product sold, cost of gaming operations, accounts receivable, deferred revenue, deferred costs and accrued expenses. Other than the expanded application of SOP 97-2 with the launch of the Bluebird2 platform in fiscal 2009, in fiscal 2009, 2008 and 2007, we had no material changes in the critical accounting estimates arising from the application of this policy and we do not anticipate material changes in the near term.

Income Tax Accounting

We conduct business globally and are subject to income taxes in US federal, state, local, and foreign jurisdictions. Determination of the appropriate amount and classification of income taxes depends on several factors, including estimates of the timing and probability of realization of deferred income taxes, reserves for uncertain income tax positions, and income tax payment timing.

We record deferred income tax assets and liabilities based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying U.S., state and applicable foreign jurisdiction enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. The ability to realize the deferred income tax assets is evaluated through the forecasting of taxable income, in each jurisdiction, using historical and projected future operating results, the reversal of existing temporary differences, and the availability of tax planning strategies.

We apply an estimated annual effective income tax rate to our quarterly operating results to calculate the provision for income tax expense. In the event there is a significant, unusual or infrequent item recognized in our quarterly operating results, the income tax attributable to that item is recorded in the interim period in which it occurs. We modify our annual effective income tax rate if facts and circumstances change between quarters. Our effective income tax rates for fiscal 2009, 2008 and 2007 were 34.3%, 36.1%, and 31.8%, respectively.

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No taxes have been provided on certain undistributed foreign earnings that are planned to be indefinitely reinvested. If future events, including material changes in estimates of cash, working capital and long-term investment requirements necessitate that these earnings be distributed, an additional provision for withholding taxes may apply, which could materially affect our future effective income tax rate.

As a matter of course, we are regularly audited by various taxing authorities, and sometimes these audits result in proposed assessments where the ultimate resolution may result in our owing additional taxes. We establish reserves when, despite our belief that our tax return positions are appropriate and supportable under local tax law, we believe certain positions are likely to be challenged and we may not succeed in realizing the income tax benefit. We evaluate these reserves each quarter and adjust the reserves and the related interest in light of changing facts and circumstances regarding the probability of realizing tax benefits, such as the progress of a tax audit or the expiration of a statute of limitations. We believe the estimates and assumptions used to support our evaluation of tax benefit realization are reasonable. However, final determinations of prior-year income tax liabilities, either by settlement with tax authorities or expiration of statutes of limitations, could be materially different than estimates reflected in our Consolidated Balance Sheets and historical income tax provisions in our Consolidated Statements of Income. The outcome of these final determinations could have a material effect on our income tax provision, net income, or cash flows in the period in which that determination is made. We believe our income tax positions comply with applicable tax law and that we have adequately provided for any known income tax contingencies.

Prior to fiscal 2008, we recognized income tax accruals with respect to uncertain income tax positions based upon Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies.” We currently apply Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). Upon adoption of FIN 48 we recorded a $1.8 million increase in our liability for unrecognized income tax benefits with a corresponding reduction in our retained earnings as of July 1, 2007. Under FIN 48, the benefits of income tax positions that are more likely than not of being sustained upon audit based on the technical merits of the tax position are recognized in our Consolidated Financial Statements; positions that do not meet this threshold are not recognized. For income tax positions that are at least more likely than not of being sustained upon audit, the largest amount of the benefit that is more likely than not of being sustained is recognized in our Consolidated Financial Statements.

The application of this policy affects the level of our income tax expense, current income tax receivables and liabilities, and current and non-current deferred income tax assets and liabilities. Other than the $1.8 million impact from the adoption of FIN 48 effective July 1, 2007, in fiscal 2009, 2008 and 2007, we had no material changes in the critical accounting estimates arising from the application of this policy and we do not anticipate material changes in the near term. See Note 9, “Income Taxes” to our Consolidated Financial Statements.

In the September 2008 quarter, the Internal Revenue Service began an audit of our U.S. federal income tax returns for fiscal years 2004 through 2007. In addition, we are currently under audit in a major state for the same years. As a result of these audits it is reasonably possible that the total amount of the unrecognized income tax benefits will significantly change within the next 12 months. At this time we are unable to estimate the amount of the potential change. Approximately $5.5 million of unrecognized income tax benefits are currently subject to the audits referred to above. At this time we believe appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years. We, or one of our subsidiaries, files income tax returns in the U.S. federal, various state, local and foreign jurisdictions. We are no longer subject to any significant U.S. federal, state, local or foreign income tax examinations by tax authorities for years before fiscal 2004.

Share-Based Compensation Expense

We account for share-based compensation in accordance with the provisions of SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”). Pre-tax share-based compensation expense was $18.0 million, $15.2 million, and $12.4 million for fiscal 2009, 2008 and 2007, respectively. In fiscal 2009, we recorded a provision for equity-base performance units outstanding of $3.4 million that relate to the thirty-six month periods

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ended June 30, 2009, 2010 and 2011, based on the current assessment of achievement of the performance goals. In fiscal 2008, we recorded a provision for equity-base performance units outstanding of $2.7 million that relate to the thirty-six month periods ended June 30, 2009 and 2010, based on the current assessment of achievement of the performance goals. Additional charges will be recorded in future periods depending on the assessment of achievement of the performance goals. Prior to fiscal 2008, we concluded that the achievement of the performance goals was not probable and therefore a provision related to the awards was not required.

Under the fair value recognition provisions of SFAS 123R, stock-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period of the award. Determining the appropriate fair value model and calculating the fair value of share-based awards requires judgment, including estimating stock price volatility, forfeiture rates and expected life. If actual results differ significantly from these estimates, share-based compensation expense and our results of operations could be materially impacted. See Note 2, “Principal Accounting Policies” to our Consolidated Financial Statements.

The application of this policy affects the level of our cost of product sales, cost of gaming operations, research and development expenses, selling and administrative expenses, additional paid-in capital and income tax expense. During fiscal 2009, 2008 and 2007, we had no material changes in the critical accounting estimates arising from the application of this policy and we do not anticipate material changes in the near term.

Allowances for Slow-Moving and Obsolete Inventories

We value inventory based on estimates of potentially excess and obsolete inventory after considering forecasted demand and forecasted average selling prices. However, forecasts are subject to revisions, cancellations and rescheduling. Actual demand may differ from anticipated demand, and such differences may have a material effect on our Consolidated Financial Statements. Demand for parts inventory is subject to technical obsolescence. Inventory on hand in excess of forecasted demand is written down to net realizable value.

An active market exists mostly outside of North America for used gaming machines. When we receive a gaming machine on trade-in, we estimate a carrying value for the gaming machine. The value is based upon an estimate of the condition of the gaming machine, as well as our experience in selling used gaming machines and could change due to changes in demand in general for used gaming machines. We either sell these trade-ins as-is or renovate the gaming machines before resale. We also sell participation gaming machines as used gaming machines when we no longer need them in our gaming operations business. Therefore, we review our used gaming machine inventory for impairment on a quarterly basis. Actual demand for new and used gaming machines may differ from anticipated demand, and such differences may have a material effect on our Consolidated Financial Statements.

We sold over 4,900 and over 4,500 used gaming machines in fiscal 2009 and 2008, respectively. At June 30, 2009 and 2008, our inventories included 1,303 and 748 legacy gaming machines, respectively, and $1.0 million and $1.4 million of total legacy inventory, respectively.

During fiscal 2009, 2008 and 2007 we recorded provisions for inventory write-downs of $13.3 million, $10.1 million and $5.3 million, respectively.

The application of this policy affects the amount of our inventory and cost of product sales. In fiscal 2009, 2008 and 2007, we had no material changes in the critical accounting estimates arising from the application of this policy and we do not anticipate material changes in the near term.

Participation Gaming Machine Depreciation and Net Realizable Value

We depreciate the Bluebird and Bluebird2-branded participation gaming machines over a three-year useful life to residual value, while we depreciate the top boxes over a one-year useful life. A material adverse impact could occur if the actual useful life of the participation gaming machines or top boxes is less than what was used

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in estimating depreciation expense, or if actual residual value is less than the anticipated residual value. At June 30, 2009 and 2008 we had $68.0 million and $75.4 million net book value of gaming operations equipment recorded in our Consolidated Balance Sheet. On a quarterly basis we assess the carrying value of our gaming operations equipment and adjust the carrying value to net realizable value as appropriate based on expected future usage.

The application of this policy affects the level of our gaming operations equipment, accumulated depreciation on gaming operations equipment, cost of gaming operations, depreciation expense, income tax expense and deferred income tax assets and liabilities. In fiscal 2009, 2008 and 2007, we had no material changes in the critical accounting estimates arising from the application of this policy and we do not anticipate material changes in the near term.

Intellectual Property and Licensed Technology Valuations

We license intellectual property and technologies from third parties that we use in our games and gaming machines. At June 30, 2009 and 2008, we had $68.6 million and $67.1 million capitalized on our Consolidated Balance Sheets for such costs, along with commitments not on our Consolidated Balance Sheets for an additional $112.7 million and $21.0 million, respectively, including contingent payments. As part of our contracts with the licensors, we typically provide a minimum guaranteed commitment and prepay royalties and license fees, usually at the time the contract is signed, even though the product may not be introduced until months or years later. We capitalize the royalty and license fee advances as intangible assets.

When products using the licensed intellectual property or technology begin to generate revenue, we begin amortization of the amount advanced. In cases where the advance represents a paid up license, the advance is amortized based on the estimated life of the asset. In those cases where the license agreement provides for a royalty to be earned by the licensor for each gaming machine sold or placed on a lease, the advance is amortized based on the royalty rates provided in the license agreement. In both cases the amortization of the advances are included in cost of product sales if related to a product sale or cost of gaming operations if related to placement or lease of gaming operations equipment. We regularly evaluate the estimated future benefit of royalty and license fee advances, as well as minimum commitments not yet paid, to determine amounts unlikely to be realized from forecasted sales or placements of our gaming machines. If actual or revised forecasts fall below the initial estimate, then we may need to revise the remaining useful life and/or record an impairment charge to write down the asset to net realizable value as we did in the fiscal 2008 when we recorded a $3.7 million pre-tax write-down to net realizable value for a licensed technology.

See Note 7, “Intangible Assets” and Note 13, “Commitments, Contingencies, and Indemnifications,” to our Consolidated Financial Statements for further information. The application of this policy affects the level of our current assets, non-current assets, current liabilities, cost of product sales, cost of gaming operations, research and development expense and selling and general expense. Other than the fiscal year 2008 pre-tax write down of $3.7 million to net realizable value for a licensed technology, in fiscal 2009, 2008 and 2007, we had no material changes in the critical accounting estimates arising from the application of this policy and we do not anticipate material changes in the near term.

RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. Subsequent to the issuance of SFAS 157, the FASB issued FASB Staff Position (“FSP”) 157-2 “Effective Date of FASB Statement No. 157” (“FSP 157-2”). FSP 157-2 delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. For the instruments

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subject to the effective date delay under FSP 157-2, the effective date to adopt the fair value provisions for us will be July 1, 2009. On October 10, 2008, the FASB issued FSP No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active”. FSP No. 157-3 does not change the fair value measurement principles in SFAS 157, but rather provides guidance for the application of those measurement principles in the extreme inactive markets that currently exist. The adoption of SFAS 157 in fiscal 2009 had no material impact on our Consolidated Financial Statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of SFAS 115”, (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities using different measurement techniques. The fair value measurement provisions are elective and can be applied to individual financial instruments. SFAS 159 requires additional disclosures related to the fair value measurements included in the entity’s financial statements. We adopted this Statement beginning July 1, 2008 which had no material impact on our Consolidated Financial Statements.

In April 2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible Assets”, (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”, (“SFAS 142”). Previously, under the provisions of SFAS 142, an entity was precluded from using its own assumptions about renewal or extension of an arrangement where there was likely to be substantial cost or material modifications. FSP 142-3 removes the requirement of SFAS 142 for an entity to consider whether an intangible asset can be renewed without substantial cost or material modification to the existing terms and conditions and requires an entity to consider its own experience in renewing similar arrangements. FSP 142-3 is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years, which for us will be in Fiscal 2010. Early adoption is prohibited. The disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. We will continue to evaluate the impact of the provisions of FSP 142-3 on our Consolidated Financial Statements.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, which establishes principles and requirements for reporting events or transactions occurring after the balance sheet date. It requires an entity to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued. This pronouncement also requires an entity to consider supplementing the financial statements with pro forma financial information if an unrecognized subsequent event is significant and to reissue financial statements filed with the SEC or other regulatory agencies if failure to do so could make the financial statements misleading. We adopted this statement for the quarter ended June 30, 2009 and updated our disclosures accordingly.

In June 2009, the FASB issued SFAS No. 168, “Accounting Standards Codification and Hierarchy of Generally Accepted Accounting Principles”, which establishes the Codification as the single source of authoritative US GAAP. This statement is effective for interim and annual statements issued after September 15, 2009 and will change the way we reference accounting standards in future filings.

RESULTS OF OPERATIONS

Gulf Coast Hurricanes

We carry both property and business interruption insurance. We incurred damages to our leased facility in Gulfport, Mississippi in August 2005 which was covered by our property insurance, after the deductible. We began litigation relating to our business interruption claims against the insurance company in the Mississippi courts in the September 2006 quarter and the trial occurred in March 2009. On August 4, 2009, we received a judgment in our favor but based on the court’s interpretation of the policy, only nominal damages were awarded to us. This judgment will have no material impact on our Consolidated Financial Statements.

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Seasonality

Sales of our gaming machines to casinos are generally strongest in the spring and slowest in the summer months, while gaming operations revenues are generally strongest in the spring and summer. Typically our total revenues are lowest in the September quarter and build in each subsequent quarter with the June quarter generating our highest total quarterly revenues. In addition, quarterly revenues and net income may increase when we receive a larger number of approvals for new games from regulators than in other quarters, when a game or platform that achieves significant player appeal is introduced, if a significant number of new casinos open or existing casinos expand, or if gaming is permitted in a significant new jurisdiction.

Fiscal Year Ended June 30, 2009 Compared to Fiscal Year Ended June 30, 2008

Below are our Revenues, Gross Margins and Key Performance Indicators. This information should be read in conjunction with our Consolidated Statements of Income (in millions, except unit and per share data):

										Percent Increase (Decrease)
	Year Ended June 30,						Increase (Decrease)
	2009			2008
Product Sales Revenues
New unit sales revenues	$	375.1		$	358.0		$	17.1		4.8	%
Other product sales revenues		63.4			63.2			0.2		0.3
Total product sales revenues	$	438.5		$	421.2		$	17.3		4.1
New units sold		26,406			27,931			(1,525	)	(5.5	)
Average sales price per new unit	$	14,203		$	12,817		$	1,386		10.8
Gross profit on product sales revenues(1)	$	225.7		$	203.9		$	21.8		10.7
Gross margin on product sales revenues(1)		51.5	%		48.4	%		310	bp	6.4
Gaming Operations Revenues
Participation revenues	$	246.7		$	203.4		$	43.3		21.3
Other gaming operations revenues		21.2			25.5			(4.3	)	(16.9	)
Total gaming operations revenues	$	267.9		$	228.9		$	39.0		17.0
WAP gaming machines at year end		2,523			1,820			703		38.6
LAP gaming machines at year end		2,386			2,134			252		11.8
Stand-alone gaming machines at year end		5,441			5,367			74		1.4
Total installed participation base at year end		10,350			9,321			1,029		11.0
Average participation installed base		9,666			8,771			895		10.2
Average revenue per day per participation machine	$	69.93		$	63.34		$	6.59		10.4
Installed casino-owned daily fee games at year end		507			819			(312	)	(38.1	)
Average casino-owned daily fee games installed base		763			776			(13	)	(1.7	)
Gross profit on gaming operations revenues(1)	$	223.2		$	182.3		$	40.9		22.4
Gross margin on gaming operations revenues(1)		83.3	%		79.6	%		370	bp	4.6
Total revenues	$	706.4		$	650.1		$	56.3		8.7
Total gross profit(1)	$	448.9		$	386.2		$	62.7		16.2
Total gross margin(1)		63.5	%		59.4	%		410	bp	6.9
Total operating income	$	136.6		$	104.4		$	32.2		30.8
Total operating margin		19.3	%		16.1	%		320	bp	19.9

bp basis points

(1) As used herein, gross profit and gross margin exclude depreciation and distribution expense.

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Revenues and Gross Profit

Total revenues for fiscal 2009 increased 8.7%, or $56.3 million, over the fiscal 2008, reflecting:

Ø A $17.1 million, or 4.8%, increase in new unit sales revenue as a result of:

Ø A 10.8% increase in the average selling price of new gaming machines to a record $14,203, principally reflecting the greater sales mix of premium-priced products, which included the sale of more than 9,200 Bluebird2 gaming machines, representing approximately 35.0% of our total new unit sales.

Ø Partially offset by a 1,525 unit, or 5.5%, decrease in new units sold as:

Ø New units sold in the United States and Canada totaled 16,732 units, a decrease of 7.6%, due to lower industry demand resulting from the slowing economy and tightening in the credit markets. Fiscal 2008 included the impact of the sale of more than 1,000 units to Native American casinos in California following the passage of a voter referendum.

Ø International new units sold decreased 1.4% from the prior year to 9,674 units, reflecting economic challenges and tightening credit markets across some of the international regions, principally the Western European markets.

Ø Sales of mechanical reel products totaled 6,360 units, or approximately 24.1% of total new units sold compared to 29.9% of units sold in the prior year. We believe our customers reduced their capital spending on this product line in the first half of fiscal 2009 in advance of our launch of the new Bluebird2 mechanical reel gaming machine with Transmissive Reel technology late in March 2009 quarter; and

Ø We launched our new networked-enabled Bluebird2 video gaming machines in the December 2008 quarter, followed by the 5-reel mechanical Bluebird2 in the March 2009 quarter and the 3-reel mechanical and slant version of the Bluebird2 in the June 2009 quarter. We had expected that Bluebird2 gaming machines would have accounted for 15.0% to 20.0% of our total unit sales in fiscal 2009, however due to the higher earnings performance experienced by our customers for these products, they accounted for 35.0% of our annual new unit shipments. With a list price 20.0% higher than our Bluebird gaming machines and our customers fixed capital budgets, some customers were not able to afford to buy as many Bluebird2 gaming machines as if they had purchased our Bluebird gaming machines, and we believe this also had a negative impact on the number of new unit sales in fiscal 2009.

Ø A $0.2 million, or 0.3%, increase in other product sales revenues, reflecting higher sales of lower-margin used gaming machines and parts, partially offset by a slight decrease in game conversion revenues:

Ø We sold over 4,900 used gaming machines during the fiscal 2009, compared to over 4,500 used gaming machines in the prior year; and

Ø We earned revenue on more than 9,300 game conversion kits in fiscal 2009, compared to 9,000 game conversion kits in the prior year, however conversion revenues decreased slightly in fiscal 2009 as the average selling price achieved was modestly lower than in fiscal 2008.

Ø A $43.3 million, or 21.3%, growth in participation revenues due primarily to:

Ø A 10.2% increase, or 895 units, in the average installed base of participation gaming machines in fiscal 2009 driven by the growth in our stand-alone, WAP and LAP gaming machines. Our controlled roll-out strategy has led to the desired result of a higher level of incremental footprint for our products. The stand-alone installed base increased by 74 units primarily due to growth in our Community Gaming product line series throughout the last twelve months and the launch in the September 2008 quarter of our fourth new participation product line, Adaptive Gaming. The LAP units in the installed base as of June 30, 2009 increased by 252 units compared to the prior year due to new game series launched during fiscal 2009. The WAP units in the installed base at June 30,

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2009 was 38.6% or 703 units higher than at June 30, 2008, reflecting continued strong performance of our Sensory Immersion and Transmissive Reels product lines and our latest WAP game, Reel ‘Em In Compete to Win. The WAP installed base accounted for 24.4% and 19.5% of the installed base at June 30, 2009 and 2008, respectively; and

Ø Overall average revenue per day increased by $6.59, or 10.4%, principally reflecting favorable player response to the new games for our four innovative participation product lines and our active program to relocate low-performing participation gaming machines to casinos where we expect higher performance.

Ø A $4.3 million, or 16.9%, decrease in other gaming operations revenues as we experienced lower royalty revenues as a result of license agreements for certain markets coming to the end of the license term and us electing to not renew such agreements so we can directly enter these markets, such as Class II and Australia.

Total gross profit, as used herein excluding depreciation and distribution expense, increased 16.2%, or $62.7 million, to $448.9 million for the year ended June 2009 from $386.2 million for the prior year. Our gross margins may not be comparable to those of other entities as we include the costs of distribution, which amounted to $21.4 million and $20.4 million in fiscal 2009 and 2008 respectively, in selling and administrative expenses. This improvement reflects:

Ø Gross margin on product sales revenues was 51.5% for fiscal 2009, compared to 48.4% for the prior year. Gross margin for fiscal 2009 reflects continued operating improvements, primarily resulting from our lean sigma and strategic sourcing initiatives, coupled with a higher average selling price due to greater sales of premium gaming machines, including our new Bluebird2 platform and partially offset by a lower volume of business and $3.2 million in higher excess and obsolete inventory charges as we transition to the new Bluebird2 gaming machine. We launched the Bluebird2 gaming machine in the December 2008 quarter and met our goal of achieving a similar gross margin for this new product as we were currently achieving for the original Bluebird product; and

Ø Gross margin on gaming operations revenues was 83.3% in fiscal 2009, compared to 79.6% from the prior year, reflecting favorable WAP jackpot expense experience and the positive influence of the higher revenue per day from our high performing Community Gaming, Sensory Immersion, Transmissive Reels and Adaptive Gaming games partially offset by the greater number of WAP gaming machines, which have a lower gross margin, in the installed base.

We expect to generate continued revenue growth in fiscal 2010 and fiscal 2011 as we increase our global market share due to the popularity of our products, launch new, expanded market distribution opportunities, increase our average selling price as our premium Bluebird2 gaming machines become a higher percentage of overall sales and continue to grow our participation installed base and average revenues per day through the introduction of new and innovative participation games and product lines. We expect royalty revenues to decline in fiscal 2010 and 2011 from fiscal 2009 levels as several of our content licensing agreements terminated in fiscal 2009 or were in an agreed upon sell-off period. We expect continued improvements in our product sales gross margin, resulting from the ongoing implementation of process improvements throughout the entire organization with the utilization of lean sigma tools to improve quality and eliminate waste, results from our strategic sourcing initiatives and the benefits from higher unit volumes and ongoing leveling of the production schedule throughout each quarter.

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Operating Expenses

Operating expenses were as follows (in millions of dollars):

	Year Ended June 30,
	2009				2008				Increase
	Dollar		As % of Revenue		Dollar		As % of Revenue		Dollar		Percent
Research and development	$	98.4	13.9	%	$	79.9	12.3	%	18.5		23.2	%
Selling and administrative		145.5	20.6			130.0	20.0		15.5		11.9
Depreciation		68.4	9.7			71.9	11.1		(3.5	)	(4.9	)
Total operating expenses	$	312.3	44.2	%	$	281.8	43.4	%	30.5		10.8	%

Research and development expenses increased 23.2% to $98.4 million in fiscal 2009, compared to $79.9 million in the prior year. The year-over-year increase reflects:

Ø our planned expanded product development initiatives for the continued creation of intellectual property and the ongoing expansion of our product portfolio;

Ø higher costs to accelerate new systems and enterprise-wide system applications for our Casino Evolved™ suite of innovative, high-value products in preparation for the launch of NG systems in fiscal 2010;

Ø increased payroll-related costs associated with headcount increases to accomplish the initiatives stated above and higher performance-based incentive costs associated with improved operating performance; and

Ø Fiscal 2008 included a $3.7 million pre-tax write down to net realizable value related to a licensed technology.

During fiscal 2009, we introduced 61 new WMS-branded games for sale and 26 new participation and casino-owned daily fee games, compared to the introduction in fiscal 2008 of 55 new WMS-branded games for sale and 25 new participation and casino-owned daily fee games.

Selling and administrative expenses increased 11.9%, or $15.5 million, to $145.5 million in fiscal 2009 compared to $130.0 million in the prior year. The year-over-year increase includes:

Ø increased payroll-related costs primarily related to headcount increases to support international expansion and overall growth in our business, and higher performance based incentive costs associated with improved operating performance;

Ø non-cash bad debt expenses increasing by $3.6 million to $7.1 million due to the downturn in the global economy and an increase in customers filing for protection from bankruptcy; and

Ø higher legal expense primarily associated with the litigation on insurance claims related to Hurricane Katrina.

Depreciation expense decreased $3.5 million to $68.4 million in fiscal 2009 compared to $71.9 million in the prior year. This reflects improved capital efficiencies achieved in the gaming operations business resulting from the ongoing disciplined rollout of new participation games resulting in lower capital spending and increased longevity of the participation gaming machine placements coupled with a greater number of participation gaming machines reaching salvage value.

For fiscal 2010 and 2011, we expect to increase research and development spending to support our expanding portfolio of innovative and differentiated product offerings, further our progress with our NG

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initiatives, and create new game development tools, technological advancements and innovations in game play. The increased spending is also anticipated to support further growth of our game library and enhance the productiveness of our development efforts. Selling and administrative expenses are anticipated to increase more modestly in fiscal 2010 and 2011 and are expected to decline slightly as a percent of revenues in fiscal 2010 and 2011. In line with the more moderate rate of growth expected for our installed participation footprint, we anticipate our capital investment in gaming operations equipment to flatten or decrease in fiscal 2010 and 2011, and estimate capital expenditures for property, plant and equipment to increase modestly in fiscal 2010 and 2011.

Operating Income

Our operating income increased by $32.2 million or 30.8% in fiscal 2009 on an 8.7% increase in total revenues. Our fiscal 2009 operating margin of 19.3% represented a 320 basis point increase over the 16.1% operating margin achieved in the prior year. This improvement was achieved by the improvements in both product sales and gaming operations gross margins, coupled with higher-margin gaming operations accounting for 37.9% of total revenues in fiscal 2009 compared to 35.2% in the prior year, partially offset by operating expenses increasing by 10.8%, or 210 basis greater than the increase in total revenues.

For fiscal 2010 and 2011, we expect to continue to achieve improvements in our operating margin as improvements in revenue and gross profits will be paired with operating expenses being a slightly lower percentage of overall revenues than in fiscal 2009.

Interest Expense

We incurred interest expense of $4.0 million for both fiscal 2009 and 2008, primarily related to our 2.75% convertible subordinated notes, amortization of debt issuance costs, and in fiscal 2009, interest and fees on borrowings under our revolving credit facility.

Interest and Other Income, Net

Interest and other income, net increased by $2.6 million to $7.8 million for year ended June 2009 compared to $5.2 million for the prior year. Fiscal 2009 includes a pre-tax gain of $5.0 million from a cash settlement we received from trademark litigation.

Income Taxes

The effective income tax rate was 34.3% in fiscal 2009 compared to 36.1% in fiscal 2008. In early October 2008, the Federal research and development tax credit was reinstated retroactive to the beginning of calendar year 2008 and will continue through calendar year 2009. As the research and development tax credit legislation will expire on December 31, 2009, we expect our effective income tax rate for fiscal 2010 and 2011 to be approximately 36% assuming governments do not change statutory tax rates for those periods.

The fiscal 2009 effective income tax rate reflects:

Ø increased pre-tax income;

Ø higher domestic manufacturing deduction; and

Ø reinstatement of the research and development tax credit in October 2008, retroactive to the beginning of the calendar year 2008. The effective tax rate includes the credit earned from January 1, 2008 through June 30, 2008, which aggregated $0.02 per diluted share, in addition to the tax credit earned during fiscal 2009.

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The fiscal 2008 effective income tax rate reflects:

Ø the domestic manufacturing deduction; and

Ø no impact of the Federal research and development tax credit in the March 2008 and June 2008 quarters as the legislation had expired on December 31, 2007.

Earnings Per Share

Diluted earnings per share increased 38.3% on an 8.7% increase in revenues to $1.59 for year ended June 2009 from $1.15 for prior year. The increase in earnings per share is attributable to increased net income for the year and a lower number of diluted common stock and common stock equivalents primarily driven by our share repurchase program.

Impact of Inflation

During the past three years, the general level of inflation affecting us has been relatively low. Our ability to pass on future cost increases in the form of higher sales prices will depend on the prevailing competitive environment and the acceptance of our products in the marketplace.

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Fiscal Year Ended June 30, 2008 Compared to Fiscal Year Ended June 30, 2007

Below are our Revenues, Gross Margins and Key Performance Indicators. This information should be read in conjunction with our Consolidated Statements of Income (in millions, except unit and per share data):

	Year Ended June 30,						Increase (Decrease)			Percent Increase (Decrease)
	2008			2007
Product Sales Revenues
New unit sales revenues	$	358.0		$	317.0		$	41.0		12.9	%
Other product sales revenues		63.2			49.3			13.9		28.2
Total product sales revenues	$	421.2		$	366.3		$	54.9		15.0
New units sold		27,931			25,613			2,318		9.1
Average sales price per new unit	$	12,817		$	12,378		$	439		3.5
Gross profit on product sales revenues(1)	$	203.9		$	167.7		$	36.2		21.6
Gross margin on product sales revenues(1)		48.4	%		45.8	%		260	bp	5.7
Gaming Operations Revenues
Participation revenues	$	203.4		$	153.6		$	49.8		32.4
Other gaming operations revenues		25.5			19.9			5.6		28.1
Total gaming operations revenues	$	228.9		$	173.5		$	55.4		31.9
WAP gaming machines at year end		1,820			1,507			313		20.8
LAP gaming machines at year end		2,134			2,333			(199	)	(8.5	)
Stand-alone gaming machines at year end		5,367			4,436			931		21.0
Total installed participation base at year end		9,321			8,276			1,045		12.6
Average participation installed base		8,771			7,299			1,472		20.2
Average revenue per day per participation machine	$	63.34		$	57.66		$	5.68		9.9
Installed casino-owned daily fee games at year end		819			760			59		7.8
Average casino-owned daily fee games installed base		776			728			48		6.6
Gross profit on gaming operations revenues(1)	$	182.3		$	137.3		$	45.0		32.8
Gross margin on gaming operations revenues(1)		79.6	%		79.1	%		50	bp	0.6
Total revenues	$	650.1		$	539.8		$	110.3		20.4
Total gross profit(1)	$	386.2		$	305.0		$	81.2		26.6
Total gross margin(1)		59.4	%		56.5	%		290	bp	5.1
Total operating income	$	104.4		$	74.2		$	30.2		40.7
Total operating margin		16.1	%		13.7	%		240	bp	17.5

bp basis points

(1) As used herein, gross profit and gross margin exclude depreciation and distribution expense.

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Revenues and Gross Profit

Total revenues for fiscal 2008 increased 20.4%, or $110.3 million, over fiscal 2007, reflecting:

Ø A $41.0 million, or 12.9%, increase in new unit sales revenue as a result of:

Ø A 2,318 unit, or 9.1%, increase in new units sold.

• International new units sold increased 30.2% over the prior year, reflecting growth in China with our Mandarin-based games and continued growth throughout Europe, South Africa and South America;

• United States and Canada new units sold in fiscal 2008 were essentially flat to fiscal 2007 due to the continued sluggish United States and Canada replacement market and the slowing of the economy offsetting a higher number of new casino openings and expansions in fiscal 2008;

• The United States and Canada new unit sales in fiscal 2008 benefited from shipments of new units to five California casinos as a result of amended compacts while fiscal 2007 benefited from initial and ongoing shipments of new units to properties located in the newly opened Pennsylvania and Broward County, Florida jurisdictions, as well as a strong contribution from Oklahoma which was a new market for us at the time; and

• Sales of mechanical reel products totaled 8,344 units, or approximately 29.9% of total new units sold compared to 25.4% of units sold in the prior fiscal year.

Ø A 3.5% increase in the average selling price of new gaming units, principally reflecting the benefit of higher list prices.

Ø A $13.9 million, or 28.2%, increase in other product sales revenues, reflecting strong sales of conversion kits and used gaming machines as follows:

Ø We earned revenue on more than 9,000 conversion kits in fiscal 2008, compared to over 7,200 conversion kits in the fiscal 2007 period, due to the positive response to our new video and mechanical reel games; and

Ø We sold approximately 4,500 used gaming machines at higher prices in fiscal 2008, compared to nearly 6,600 used gaming machines in fiscal 2007.

Ø A $49.8 million, or 32.4%, growth in participation revenues due primarily to:

Ø A 20.2% increase in the average installed base of participation gaming machines, driven by the growth in our WAP and stand-alone installed bases. The WAP units in the installed base as of June 30, 2008 was 313 units higher than at June 30, 2007, reflecting continued strong performance of our Sensory Immersion and Transmissive Reels product lines in fiscal 2008. Our controlled roll-out strategy has led to the desired result of a higher level of incremental footprint for the WAP units. The WAP installed base accounted for 19.5% and 18.2% of the installed base at June 30, 2008 and 2007, respectively; and

Ø Overall average revenues per day increased by $5.68, or 9.9%, principally reflecting favorable player response to the new games for our three new innovative participation product lines.

Ø A $5.6 million, or 28.1%, increase in other gaming operations revenues as we experienced a net increase in royalty revenue from third party licensees due to the popularity of our licensed games.

Total gross profit, as used herein excluding distribution and depreciation expense, increased 26.6%, or $81.2 million, to $386.2 million for the fiscal 2008 period from $305.0 million for the fiscal 2007 period. Our gross margins may not be comparable to those of other entities as we include the costs of distribution, which amounted to $20.4 million and $17.2 million in fiscal 2008 and 2007 respectively, in selling and administrative expenses. This improvement reflects:

Ø Gross margin on product sales revenues of 48.4% for the fiscal 2008 period, compared to 45.8% for the fiscal 2007 period. Gross margin for the fiscal 2008 period reflects continued success with the ongoing

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implementation of our lean sigma process improvement and strategic sourcing initiatives, the benefits from a higher volume of business, greater sales of higher-margin conversion kits, and a higher average selling price for new gaming machines, partially offset by a lower mix of premium-priced products than a year ago; and

Ø Gross margin on gaming operations revenues of 79.6% in the fiscal 2008 period was up slightly from fiscal 2007, reflecting the positive influence of the high performing Community Gaming, Sensory Immersion and Transmissive Reels games and favorable overall WAP jackpot experience offset by the greater number of WAP gaming machines in the installed base.

Operating Expenses

	Year Ended June 30,
	2008				2007				Increase
	Dollar		As % of Revenue		Dollar		As % of Revenue		Dollar		Percent
Research and development	$	79.9	12.3	%	$	58.1	10.8	%	$	21.8	37.5	%
Selling and administrative		130.0	20.0			109.8	20.3			20.2	18.4
Depreciation		71.9	11.1			62.9	11.7			9.0	14.3
Total operating expenses	$	281.8	43.4	%	$	230.8	42.8	%	$	51.0	22.1	%

Research and development expenses increased $21.8 million to $79.9 million in fiscal 2008, compared to $58.1 million in the prior year. The year-over-year increase reflects:

Ø our expanded product development initiatives for the continued creation of intellectual property and the ongoing expansion of our product portfolio;

Ø higher payroll-related costs resulting from headcount increases and performance based incentives associated with improved operating performance;

Ø higher costs to accelerate new systems and enterprise-wide system applications for our suite of innovative, high-value products in preparation for the advent of NG;

Ø a $3.7 million pre-tax write down to net realizable value related to a licensed technology; and

Ø the inclusion of research and development expenses for SiP since the mid-July 2007 acquisition.

During fiscal 2008, we introduced 55 new WMS-branded games for sale and 25 new participation and casino-owned daily fee games, compared to the introduction in fiscal 2007 of 49 new games for sale and 28 new participation and casino-owned daily fee games.

Selling and administrative expenses increased $20.2 million to $130.0 million in fiscal 2008 compared to $109.8 million in fiscal 2007. The increase includes:

Ø higher marketing, promotion and distribution costs related to the roll-out of new products and branding initiatives;

Ø increased payroll-related costs associated with headcount increases to support international expansion and overall growth in our business and performance based incentives associated with improved operating performance during the past twelve months;

Ø higher spending on customer service activities to support our larger participation installed base and increased customer touch points; and

Ø higher legal expenses and non-cash charges for bad debt expense, as well as the impact of consolidating SiP results since the mid July 2007 acquisition.

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Depreciation expense increased $9.0 million to $71.9 million in fiscal 2008 compared to $62.9 million in fiscal 2007. This reflects the steady increase in the installed base of participation games throughout fiscal 2007 and 2008, as evidenced in the 20.2% year-over-year increase in the average installed base of participation machines. The increase also reflects depreciation related to SiP. We invested $50.4 million in gaming operations gaming machines, top boxes and related equipment during fiscal 2008, $75.9 million during fiscal 2007, and $68.7 million during fiscal 2006.

Operating Income

Our operating income in fiscal 2008 increased by $30.2 million, or 40.7%, to $104.4 million on a 20.4% increase in total revenues. Our fiscal 2008 operating margin of 16.1% represented a 240 basis point increase over the 13.7% operating margin achieved in the prior year. This improvement was achieved by the improvements in both product sales and gaming operations gross margins, coupled with higher-margin gaming operations accounting for 35.2% of total revenues in fiscal 2008 compared to 32.1% in the prior year, partially offset by operating expenses increasing at 22.1% or 170 basis points greater than the increase in total revenues.

Interest Expense

We incurred interest expense of $4.0 million and $5.1 million for fiscal 2008 and 2007, respectively, primarily related to our 2.75% convertible subordinated notes, amortization of debt issuance costs and, in fiscal 2007, interest and fees on borrowings under our revolving credit facility.

Interest and Other Income, Net

Interest and other income, net increased by $2.6 million to $5.2 million primarily due to higher interest income earned on cash in fiscal 2008 as a result of higher average cash balances and better short-term cash management in fiscal 2008.

Income Taxes

The effective income tax rates were approximately 36.1% and 31.8% for fiscal 2008 and 2007, respectively.

The fiscal 2008 effective income tax rate reflects:

Ø increased pre-tax income;

Ø the domestic manufacturing deduction;

Ø the research and development income tax credit expiration on December 31, 2007; and

Ø the impact of unrecognized income tax benefits resulting from the implementation of FIN 48 effective July 1, 2007.

The fiscal 2007 effective income tax rate reflects:

Ø utilization of the export sales deduction, which expired in December 2006;

Ø the domestic manufacturing deduction; and

Ø the effect of the retroactive reinstatement of the research and development tax credit legislation which was reinstated in December 2006, retroactive to January 1, 2006. The effective income tax rate includes the credit earned from January 1, 2006 through June 30, 2006, which aggregated $0.01 per diluted share, in addition to the income tax credit earned during fiscal 2007.

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Earnings Per Share

Diluted earnings per share increased to $1.15 for fiscal 2008 from $0.86 for fiscal 2007. The increase in earnings per share is attributable to increased net income in fiscal 2008 partially offset by a higher diluted share count, primarily resulting from the issuance of common shares upon exercise of stock options.

LIQUIDITY AND CAPITAL RESOURCES

The financial market crisis disrupted credit and equity markets worldwide and led to a weakened global economic environment throughout our fiscal 2009. The affect of the weakened global economy and the fallout from the financial market crisis has been a challenge for our industry with some gaming operators delaying or canceling construction projects, coupled with many customers reducing their annual capital budgets for calendar 2009, which had a more significant impact in the second half of our fiscal 2009.

The amount of cash flow from operations we generate is largely dependent on our profitability and the amount of working capital necessary to support our revenue base. Therefore, in any given reporting period, the amount of cash consumed or generated by operations will primarily relate to the rate of revenue and profitability increase or decrease, causing a corresponding increase or decrease in working capital. In periods when revenues are increasing, the expanded working capital needs will be funded from available cash, cash equivalents, cash flow from operations, and, if necessary, proceeds from our revolving credit facility, additional borrowings or additional equity offerings. We utilize these sources to fund investments in property, plant and equipment, gaming operations equipment and agreements to license or acquire third-party brands, intellectual properties or technologies that we have not developed internally. Also, we will from time to time issue or retire borrowings or repurchase equity in an effort to maintain a cost- effective capital structure consistent with our anticipated capital requirements. With the ongoing uncertainty in the credit and capital markets, there can be no assurance that other sources of capital will be available to us on acceptable terms or at all. Based on past performance and current expectation, we believe the combination of these resources will satisfy our needs for working capital, jackpot liabilities, capital expenditures, debt service, and other liquidity requirements associated with our existing operations into the foreseeable future.

Our primary sources of liquidity are:

Ø Existing cash and cash equivalents;

Ø Cash flows from operations; and

Ø Debt capacity available under our revolving credit facility.

Selected balance sheet accounts at June 30 are summarized as follows (in millions):

					Increase
	2009		2008		Dollar			Percent
Total cash, cash equivalents, and restricted cash(1)	$	154.7	$	119.6	$	35.1		29.3	%
Total current assets(A)		450.0		413.3		36.7		8.9
Total assets		856.0		772.7		83.3		10.8
Total current liabilities(B)		115.7		116.6		(0.9	)	(0.8	)
Long-term debt		115.0		115.0		—		—
Stockholders’ equity		591.4		510.8		80.6		15.8
Net working capital (A) – (B)		334.3		296.7		37.6		12.7

(1) Pursuant to various state gaming regulations, we maintain certain restricted cash accounts to ensure availability of funds to pay wide-area progressive jackpot awards either in lump sum payments or in installments. Cash, cash equivalents, and restricted cash includes restricted cash of $19.0 million and $18.8 million as of June 30, 2009 and June 30, 2008, respectively. Cash required for funding WAP systems jackpot payments is considered restricted cash and is not available for general corporate purposes.

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Our net working capital increased $37.6 million from June 30, 2008, and was primarily affected by the following components:

Ø An increase in cash, cash equivalents and restricted cash of $35.1 million due primarily to our increased profitability, controlled capital investing and better management of select working capital items;

Ø An increase in total current accounts and notes receivable, net, of $15.7 million or 7.9%, to $214.2 million compared to $198.5 million at June 30, 2008, reflecting the impact of greater product sales revenues in the June quarter 2009 compared to the June quarter 2008, and an effort launched in fiscal 2009 to expand the amount of financing terms provided to customers given the downturn in the economy, partially offset by improved collection efforts to reduce aged accounts receivable. Our days sales outstanding for current and long-term account and notes receivables were 119 days at June 30, 2009 compared to 109 days at June 30, 2008;

Ø A decrease in inventories of $16.8 million or 28.0% to $43.1 from $59.9 million at June 30, 2008 due to continuing efforts to increase inventory turns which were 4.2 at June 30, 2009 compared to 3.1 at June 30, 2008;

Ø An increase in other current assets of $2.7 million, net of lower deferred income taxes; and

Ø A $9.6 million decrease in other accrued liabilities primarily resulting from the settlement of a share repurchase liability from June 2008 and lower current income taxes payable.

As described in Note 13, “Commitments, Contingencies and Indemnifications” to our Consolidated Financial Statements, we have royalty and license fee commitments for brand, intellectual property and technology licenses of $112.7 million including contingent payments that are not recorded in our Consolidated Balance Sheets.

We believe that total cash, cash equivalents and restricted cash of $154.7 million at June 30, 2009, inclusive of $19.0 million of restricted cash, and cash flow from operations will be adequate to fund our anticipated level of expenses, cash to be invested in property, plant and equipment and gaming operations equipment, cash to be used to license or acquire brands, technologies or intellectual properties from third parties, the levels of inventories and receivables required in the operation of our business, and any repurchases of common stock for the upcoming fiscal year. We take a prudent and conservative approach to maintaining our available liquidity while credit market and economic conditions remain unfavorable. We continue to focus on reinvesting in our business through our installed base of gaming operations machines, as well as other strategic capital deployment objectives to expand our geographic reach, product lines and customer base. We will cautiously deploy our capital in order to preserve maximum flexibility. For fiscal 2010 and fiscal 2011, we expect cash flow from operations to continue to be strong. We do not believe we will need to raise a significant amount of additional capital in the short-term or long-term, and we have access to our $100 million revolving credit facility through December 31, 2009. We intend to extend or replace this facility prior to its expiration. Due to the current economic conditions and capital markets challenges, we can provide no guarantee that we will be able to negotiate such an agreement or that such agreement would not place further limitations on our operations. We will, however, assess market opportunities as they arise.

Of our $154.7 million of total cash, cash equivalents and restricted cash at June 30, 2009, approximately $96.6 million is invested in various money market funds. The banking institutions that sponsor these money market funds have elected to participate in the Temporary Guarantee Program for U.S. Money Market Funds sponsored by the U.S. Treasury which guarantees the amount invested in these money market funds at September 19, 2008 and our balance invested at that date was approximately $99 million. Currently this program ends on September 18, 2009. Late in 2008, the Federal Deposit Insurance Corporation approved a final rule to strengthen the agency’s Temporary Liquidity Guarantee Program. This program guarantees newly issued senior unsecured debt of banks, thrifts, and certain holding companies, and provides full coverage of non-interest bearing deposit transaction accounts. Under this program, participating institutions will be able to provide customers full coverage on non-interest bearing accounts, which currently will be in effect until the end of calendar 2009. The remaining $58.1 million of cash, cash equivalents and restricted cash is primarily cash held at

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various banking institutions. Approximately $9.0 million is held in cash accounts at international bank institutions and the remaining $49.1 million is primarily held in non-interest-bearing accounts at JPMorgan Chase and Bank of America, such that these deposits are covered by the Temporary Liquidity Guarantee Program.

Convertible Subordinated Notes

At June 30, 2009, we had $115 million of convertible subordinated notes outstanding, bearing interest at 2.75%, maturing on July 15, 2010. The notes are convertible at any time into an aggregate of 8.7 million shares of our common stock at a conversion price of $13.19 per share, subject to adjustment. The notes are not callable. We pay interest on the notes semi-annually on January 15 and July 15 of each year, aggregating $3.2 million annually. The conversion of the 2.75% convertible subordinated notes to common stock is dependent on individual holders’ choices to convert, which is dependent on the spread of the market price of our stock above the conversion strike price of $13.19 per share, and would reduce our annual interest expense. None of the holders have converted any of their convertible subordinated notes into our common stock. Our convertible notes are conventional convertible debt instruments in which the holder may only realize the value of the conversion option by exercising the option and receiving a fixed number of shares of our common stock.

Revolving Credit Facility

We have a revolving credit agreement, as amended, that provides for $100 million of unsecured borrowings through December 31, 2009, including the potential to expand the line up to $125 million. Up to $10 million of the credit facility is available for the issuance of letters of credit. The credit agreement requires that we maintain certain financial ratios, which could limit our ability to acquire companies, declare dividends or make any distribution to holders of any shares of capital stock, or purchase or otherwise acquire such shares of our common stock. At June 30, 2009, approximately $114.2 million was available for such purposes under the most restrictive of these covenants. No amounts were outstanding under the revolving credit facility as of June 30, 2009 and June 30, 2008. In October 2008, due to the volatility and lack of liquidity in the capital markets, we borrowed $25 million on our revolving credit facility and invested the proceeds in treasury bills with 30 day maturities. We repaid the $25 million by December 31, 2008. In January 2009, due to the continued volatility and lack of liquidity in the capital markets, we borrowed $25 million on our revolving credit facility and invested the proceeds in treasury bills with 30 day maturities. We repaid the $25 million by March 31, 2009 and did not borrow any amounts under our revolving credit facility in the June 2009 quarter. We intend to extend or replace our revolving credit facility before it expires, although we can provide no guarantee that we will be able to effect our intensions.

The financial covenants under the credit facility consist of a leverage ratio and an interest coverage ratio. The maximum leverage ratio is currently 3.25x and is computed as total debt outstanding at the end of each quarter divided by the trailing twelve months earnings before interest, income taxes, depreciation and amortization, including non-cash charges. The minimum interest coverage ratio is currently 2.5x and is computed as trailing twelve months earnings before interest and income taxes divided by trailing twelve months interest charges.

Common Stock Repurchase Program

On August 3, 2009, our Board of Directors authorized the repurchase of an additional $75 million of our common stock over the following twenty-four months increasing our remaining repurchase authorization to approximately $150 million. See – “Other Key Fiscal 2009 Activities” in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operation.

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Cash Flows Summary

Cash flows from operating, investing and financing activities, as reflected in our Consolidated Statements of Cash Flows, are summarized in the following table (in millions):

	Year Ended June 30,									2009 to 2008 Change			2008 to 2007 Change
	2009			2008			2007
Net cash provided by (used in):
Operating activities	$	179.2		$	186.2		$	118.9		$	(7.0	)	$	67.3
Investing activities		(113.8	)		(117.8	)		(158.8	)		4.0			41.0
Financing activities		(29.8	)		(5.2	)		35.6			(24.6	)		(40.8	)
Effect of exchange rates on cash and cash equivalents		(0.7	)		0.4			2.4			(1.1	)		(2.0	)
Net increase (decrease) in cash and cash equivalents	$	34.9		$	63.6		$	(1.9	)	$	(28.7	)	$	65.5

Operating activities: The $7.0 million decrease in cash provided by operating activities in the fiscal 2009 year compared to the fiscal 2008 year resulted from:

Ø A positive impact from the $24.7 million increase in net income, partially offset by a $3.5 million decrease in depreciation and a $5.5 million decrease in amortization;

Ø A positive impact from other non-cash items of $22.5 million, including a $6.1 million increase in non-cash items, a $2.8 million increase in share-based compensation, and a $13.6 million change in deferred income taxes, more than offset by;

Ø A $45.2 million negative impact from changes in operating assets and liabilities. This decrease is comprised of a $19.1 million incremental increase in total accounts and notes receivable activity as we granted a greater a number of longer-term financing options for select customers and more of our quarterly shipments for the June 2009 quarter took place in the month of June than had occurred in June 2008, an $18.3 million greater decrease in current liabilities activity partially offset by a $7.0 million greater decrease in inventory activity.

The $67.3 million increase in cash provided by operating activities in the fiscal 2008 year compared to the fiscal 2007 year resulted from:

Ø A positive impact from the $18.6 million increase in net income and a $9.0 million increase in depreciation;

Ø A positive impact from a $16.2 million increase in non-cash items, including share-based compensation, amortization of intangibles and other assets and other non-cash items; and

Ø A positive impact from improved utilization of working capital indicated by a $29.9 million net decrease in changes in operating assets and liabilities, as the fiscal 2008 period decrease in inventories and increase in current liabilities was only partially offset by an increase in accounts and notes receivable and other current assets.

Investing Activities: The $4.0 million decrease in cash used by investing activities for the year ended June 30, 2009 compared to the prior year was primarily due to:

Ø A $3.4 million decrease in the amount invested in gaming operations machines, top boxes and related equipment during the year ended June 2009 to $47.0 million despite the 11% increase in the participation installed base due to better management of these assets. We expect that capital expenditures for gaming operations equipment will decrease slightly in fiscal 2010 and 2011;

Ø A $6.0 million reduction in payments to acquire or license intangible and other assets to $13.5 million in the year ended June 2009 as we identified fewer items to license or acquire, partially offset by;

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Ø A $5.0 million increase in the amount invested in property, plant and equipment during the year ended June 2009 to $53.3 million, as we continue to invest in future expansion, higher spending on information technology, as well as investments in manufacturing tools and internally developed and purchased software. We expect that capital expenditures for property, plant and equipment will increase modestly in fiscal 2010 and 2011.

The $41.0 million decrease in cash used by investing activities in fiscal 2008 compared to the fiscal 2007 year was primarily due to:

Ø Lower cash used in purchasing businesses by $20.7 million as only $0.2 million of cash was used for the acquisition of SiP in the fiscal 2008 period compared to net cash of $20.9 million used for the acquisition of Orion Gaming during fiscal 2007;

Ø A $25.5 million decrease in the amount invested in gaming operations machines, top boxes and related equipment during the fiscal 2008 period to $50.4 million;

Ø An $8.4 million reduction in payments to acquire or license intangible and other assets to $19.5 million in the fiscal 2008 period as we entered into fewer new agreements, partially offset by;

Ø A $14.2 million increase in the amount invested in property, plant and equipment during the fiscal 2008 period to $48.3 million, due primarily to the acquisition of land and buildings near our Chicago technology campus to provide for future expansion, higher spending on information technology, renovation of our Waukegan, Illinois facility, as well as investments in manufacturing tools and internally developed and purchased software.

Financing Activities: The $24.6 million increase in cash used by financing activities for the year ended June 2009 compared to the prior year was primarily due to:

Ø An incremental $5.5 million used to repurchase treasury stock in the 2009 period as we paid $40.5 million for the year ended June 2009 to repurchase common stock compared to $35.0 million in the prior year; and

Ø A $19.1 million reduction in cash received and tax benefits realized from exercised stock options. The amount we receive from the exercise of stock options is dependent on individuals’ choices to exercise options, which are dependent on the spread of the market price of our stock above the exercise price of vested options.

The $40.8 million decrease in cash provided by financing activities in fiscal 2008 compared to fiscal 2007 was primarily due to:

Ø The use of $35 million in fiscal 2008 to repurchase common stock compared to none in fiscal 2007; and

Ø A $5.8 million reduction in the cash received and tax benefits from the exercised stock options.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

We are not dependent on off-balance sheet financing arrangements to fund our operations. We utilize financing arrangements for operating leases of equipment and facilities, none of which are in excess of our current needs. We also have minimum guaranteed royalty payments for intellectual property and technologies that are not recorded on our Consolidated Balance Sheets. Typically, we are obligated to make minimum commitment royalty payments over the term of our licenses and to advance payment against those commitments.

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Our obligations under these arrangements, under our convertible subordinated notes and other contractual obligations at June 30, 2009, were as follows (in millions):

Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating leases	$	24.2	$	4.6	$	7.8	$	7.1	$	4.7
Royalty and license fee payments		112.7		14.6		29.6		32.3		36.2
Non-cancelable raw material purchase orders		18.5		18.5		—		—		—
Accrued WAP jackpot liability		9.6		9.6		—		—		—
Convertible subordinated notes		115.0		—		115.0		—		—
Interest payments		4.7		3.2		1.5		—		—
Performance bonds		1.0		1.0		—		—		—
Other, including guaranteed minimums in employment agreements		26.2		16.6		6.5		1.2		1.9
Total	$	311.9	$	68.1	$	160.4	$	40.6	$	42.8

The total potential royalty and license fee commitments increased to $112.7 million at June 30, 2009 from $21.0 million at June 30, 2008, due to new agreements we entered into for brand and technology licenses, partially offset by advances and payments made on existing commitments. Potential royalty and license fee commitments could increase in the future as we enter into new intellectual property, technology or brand licensing agreements. See Note 13, “Commitments, Contingencies and Indemnifications” to our Consolidated Financial Statements.

Non-cancelable raw material purchase orders increased to $18.5 million as of June 30, 2009 from $2.1 million as of June 30, 2008, due to our commitment to a last time buy on a particular computer chip used in a large portion of our current gaming machines.

We have performance bonds outstanding of $1.0 million at June 30, 2009, to one customer, related to product sales, and we are liable to the issuer in the event of exercise due to our non-performance under the contract. Events of non-performance do not include the financial performance of our products.

As of June 30, 2009, we had a liability for unrecognized income tax benefits of $7.0 million. We cannot make a reasonable estimate of the period of cash settlement for the liability for unrecognized income tax benefits. See Note 9, “Income Taxes” to our Consolidated Financial Statements.

Letters of Credit

Outstanding letters of credit issued under our line of credit to ensure payment to certain vendors and government agencies totaled $0.9 million at June 30, 2009.

WMS Licensor Arrangements

Our sales agreements that include software and intellectual property licensing arrangements provide a clause whereby WMS indemnifies the third-party licensee against liability and damages (including legal defense costs) arising from any claims of patent, copyright, trademark, or trade secret infringement. Should such a claim occur, we could be required to make payments to the licensee for any liabilities or damages occurred. Historically, we have not incurred any significant cost due to the infringement claims. As we consider the likelihood of incurring future costs to be remote, no liability has been incurred.

Indemnifications

We have agreements in which we may be obligated to indemnify other parties with respect to certain matters. Generally, these indemnification provisions are included in sales orders and agreements arising in the

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normal course of business under which we customarily agree to hold the indemnified party harmless against claims arising from a breach of representations related to matters such as title to assets sold and licensed, defective equipment or certain intellectual property rights. Payments by us under such indemnification provisions are generally conditioned on the other party making a claim. Such claims are typically subject to challenge by us and to dispute resolution procedures specified in the particular sales order or contract. Further, our obligations under these agreements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of the obligations and the unique facts of each particular agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of June 30, 2009, we were not aware of any obligations arising under indemnification agreements that would require material payments except for the matter disclosed in Note 14, “Litigation,” to our Consolidated Financial Statements.

We have agreements with our directors and certain officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. We have also agreed to indemnify certain former officers and directors of acquired companies. We maintain director and officer insurance, which may cover our liabilities arising from these indemnification obligations in certain circumstances. As of June 30, 2009, we were not aware of any obligations arising under these agreements that would require material payments.

Special Purpose Entities and Derivative Instruments

We do not have any special purpose entities for investment or the conduct of our operations. We have not entered into any derivative financial instruments, although we have granted stock options, restricted stock, equity based performance units and deferred stock units to our employees, officers, directors and consultants and warrants to a licensor, and we have issued convertible subordinated notes.

Self-Insurance

We are self-insured for various levels of workers’ compensation, electronic errors and omissions liability, automobile collision insurance, as well as employee medical, dental, prescription drug and disability coverage. We purchase stop-loss coverage to protect against significant claims. Accrued insurance claims and reserves include estimated settlements for known claims, and estimates of claims incurred but not reported.

Product Warranty

We generally warrant our new gaming machines sold in the U.S. for a period of 90 days while we generally warrant our gaming machines sold internationally for a period of 180 days to one year. Our warranty costs have not been significant.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to market risks in the ordinary course of our business, primarily associated with interest rate and foreign currency fluctuations. We do not currently hedge either of these risks, or utilize financial instruments for trading or other speculative purposes.

Interest Rate Risk

We have exposure to interest rate risk from our convertible subordinated notes and revolving credit facility. The notes are at a fixed rate and the revolving credit facility is at a variable rate.

As of June 30, 2009, we had $115.0 million of convertible fixed-rate debt with an interest rate of 2.75% and a fair value of $274.8 million. Using a discounted cash flow model, and assuming no change in the market price of our common stock into which the debt is convertible, we currently estimate that a 50 basis point change in the

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prevailing market interest rates would impact the fair value of our fixed rate debt by approximately $1.1 million, but would not impact our cash flows or future results of operations. However, the fair value of our convertible fixed rate debt is more significantly dependent on the market price of our common stock into which it can be converted.

We have a revolving credit agreement that provides for $100 million of unsecured borrowing through December 31, 2009, including the potential to expand the line up to $125 million. Borrowings under this facility bear interest at a certain percentage above the agent’s prime rate, or above the LIBOR rate. There were no outstanding borrowings under this facility as of June 30, 2009.

Foreign Currency Risk

We sell substantially all of our products in U.S. Dollars to protect ourselves from foreign currency risk. We do have subsidiaries or branches in Alderney, Argentina, Australia, Austria, Canada, China, the Netherlands, Slovakia, Spain, South Africa, and the United Kingdom for distribution and development operations. These subsidiaries transact business in their respective foreign currencies and are exposed to risks resulting from fluctuations in foreign currency exchange rates. We estimate that a hypothetical 10% strengthening (or weakening) of the U.S. dollar for fiscal 2009 would have an immaterial impact on our business.

The net assets of these subsidiaries are exposed to foreign currency translation gains and losses, which are included as a component of accumulated other comprehensive income in stockholders’ equity in our Consolidated Balance Sheets. Such translation resulted in unrealized loss of $4.8 million and an unrealized gain of $6.8 million for fiscal 2009 and 2008, respectively.

In addition, foreign governments could impose restrictions on currency movements that might make it costly or impossible to repatriate earnings to the U.S.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Consolidated Financial Statements are included in this Report immediately following Part IV.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation as of June 30, 2009 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2009.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect

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misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of June 30, 2009.

The effectiveness of our internal control over financial reporting as of June 30, 2009 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report included herein.

ITEM 9B. OTHER INFORMATION

Not Applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference from our definitive proxy statement to be filed on or about October 27, 2009 with the SEC.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from our definitive proxy statement to be filed on or about October 27, 2009 with the SEC.

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

The information required by this item is incorporated by reference from our definitive proxy statement to be filed on or about October 27, 2009 with the SEC.

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

The information required by this item is incorporated by reference from our definitive proxy statement to be filed on or about October 27, 2009 with the SEC.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference from our definitive proxy statement to be filed on or about October 27, 2009 with the SEC.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) (1) Financial Statements. See “Index to Financial Information” on page F-1.

(2) Financial Statement Schedule. See “Index to Financial Information” on page F-1.

(3) Exhibits.

Exhibit	Description
3.1	Amended and Restated Certificate of Incorporation of WMS dated February 17, 1987; Certificate of Amendment dated January 28, 1993; and Certificate of Correction dated May 4, 1994, incorporated by reference to WMS’ Annual Report on Form 10-K for the year ended June 30, 1994 (the “1994 10-K”).
3.2	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of WMS, as filed with the Secretary of State of the State of Delaware on February 25, 1998, incorporated by reference to WMS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
3.3	Amended and Restated By-Laws of WMS, as amended and restated through May 7, 2007, incorporated by reference to WMS’ Current Report on Form 8-K, filed on May 10, 2007.
10.4	Voting Proxy Agreement dated, November 8, 2003, among Louis J. Nicastro, Neil D. Nicastro, WMS and Phyllis G. Redstone, incorporated by reference to WMS’ Current Report on Form 8-K, filed on November 12, 2002.
10.5	Amendment to Voting Proxy Agreement, effective as of October 18, 2006, by and between Phyllis G. Redstone, Neil D. Nicastro, Brian R. Gamache and WMS Industries, Inc., incorporated by reference to our Current Report on Form 8-K, filed on October 20, 2006.
10.6	License Agreement Summary and License Agreement (the “License Agreement”) between WMS Gaming Inc., Hasbro, Inc. and Hasbro International, Inc. dated as of April 1, 2009. Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the Commission.
10.7	Warrant to purchase common stock of the Registrant dated June 11, 2009, between WMS and Hasbro Inc., incorporated by reference to WMS’s Current Report on Form 8-K, filed on June 17, 2009 (the “June 2009 8-K”).
10.8	Warrant modification agreement, dated as of June 11, 2009 between WMS Gaming Inc. and Hasbro Inc., incorporated by reference to the June 2009 8-K.
10.9	Warrant to purchase common stock of the Registrant, dated September 15, 2003, issued to Hasbro, Inc., incorporated by reference to WMS’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.10	Game Manufacturer Cashless License Agreement, dated as of October 1, 2006, between IGT and WMS Gaming, Inc., incorporated by reference to WMS’ Current Report on Form 8-K, filed on October 3, 2006. Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the Commission.
10.11	IGT/WMS Patent Cross License Agreement, between WMS Gaming Inc. and IGT, dated as February 14, 2008, incorporated by reference to WMS’ Current Report on Form 8-K, filed on February 21, 2008. Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the Commission.
10.12	License and Development Agreement between WMS Gaming Inc. and Sierra Design Group (“SDG”), dated as of April 24, 2002, incorporated by reference to WMS’ Quarterly Report on Form 10-Q for the quarter ended December 31, 2003 (the “2003 2Q 10-Q”). Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the Commission.

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Exhibit	Description
10.13	First Amendment to License and Development Agreement between WMS Gaming Inc. and SDG, dated June 12, 2003, incorporated by reference to the 2003 2Q 10-Q. Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the Commission.
10.14	Second Amendment to License and Development Agreement between WMS Gaming Inc. and SDG, dated July 15, 2003, incorporated by reference to the 2003 2Q 10-Q.
10.15	Third Amendment to License and Development Agreement between WMS Gaming Inc. and SDG, dated November 7, 2003, incorporated by reference to the 2003 2Q 10-Q. Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the Commission.
10.16	Letter Amendment to License and Development Agreement between WMS Gaming Inc. and SDG, dated February 3, 2004, incorporated by reference to Form 10-K for the year ended June 30, 2004. Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the Commission.
10.17	Indenture, dated June 25, 2003, between WMS and BNY Midwest Trust Company (the “Indenture”), incorporated by reference to WMS’ Current Report on Form 8-K, filed on June 25, 2003 (the “2003 8-K”).
10.18	Form of Note contained in and incorporated by reference to Exhibit A to the Indenture incorporated by reference to the 2003 8-K.
10.19	Registration Rights Agreement, dated June 25, 2003, between WMS and BNY Midwest Trust Company, incorporated by reference to the 2003 8-K.
10.20	$100 million Credit Agreement, dated May 1, 2006, between WMS and JPMorgan Chase Bank, N.A., as Administrator Agent, JP Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger, LaSalle National Association, as Syndication Agent, and Bank of America, N.A. as Documentation Agent, incorporated by reference to WMS’ Current Report on Form 8-K, filed on May 5, 2006.
10.21	Amendment No. 1 to Credit Agreement, dated as of June 29, 2007, between WMS and JPMorgan Chase Bank, N.A., as Administrative Agent, JP Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger, LaSalle Bank National Association, as Syndication Agent and Bank of America, N.A., as Documentation Agent, incorporated by reference to WMS’ Current Report on Form 8-K, filed on July 3, 2007.
10.22	Amendment No. 2 to Credit Agreement, dated as of June 30, 2008, between WMS and JPMorgan Chase Bank, N.A., as Administrative Agent, JP Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger, LaSalle Bank National Association, as Syndication Agent and Bank of America, N.A., as Documentation Agent, incorporated by reference to WMS’ Current Report on Form 8-K, filed on July 3, 2008.
10.23	Amendment No. 3 to Credit Agreement, dated as of September 19, 2008, between WMS and JPMorgan Chase Bank, N.A., as Administrative Agent, JP Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger, LaSalle Bank National Association, as Syndication Agent and Bank of America, N.A., as Documentation Agent, incorporated by reference to WMS’ Current Report on Form 8-K, filed on September 24, 2008.
10.24	Amendment No. 4 to Credit Agreement, dated June 11, 2009, between WMS and JPMorgan Chase Bank, N.A., as Administrator Agent, JP Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger, LaSalle National Association, as Syndication Agent, and Bank of America, N.A. as Documentation Agent, incorporated by reference to the June 2009 8-K.

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Exhibit	Description
	Management Contracts and Compensatory Plans or Arrangements
10.25	WMS Industries Inc. 1998 Non-Qualified Stock Option Plan, incorporated by reference to WMS’ Registration Statement No. 333-57585 on Form S-8, filed on June 24, 1998.
10.26	WMS Industries Inc. 2000 Non-Qualified Stock Option Plan, incorporated by reference to WMS’ Annual Report on Form 10-K for the fiscal year ended June 30, 2000.
10.27	WMS Industries Inc. 2000 Stock Option Plan, incorporated by reference to Appendix B to WMS’ Proxy Statement for its 2001 Annual Meeting of Stockholders, filed on December 8, 2000.
10.28	WMS Industries Inc. 2002 Stock Option Plan, incorporated by reference to Appendix B to WMS' Proxy Statement for its 2002 Annual Meeting of Stockholders, filed on September 25, 2002.
10.29	Amended and Restated 2005 Incentive Plan, as adopted by our stockholders on December 15, 2006, incorporated by reference to Appendix A to our Proxy Statement, filed on October 26, 2006.
10.30	WMS Industries Inc. Amended and Restated 2009 Employee Stock Purchase Plan, incorporated by reference to WMS’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.
10.31	Form of Stock Option Agreement under the WMS Industries Amended and Restated 2005 Incentive Plan, incorporated by reference to WMS’ Annual Report on Form 10-K for the fiscal year ended June 30, 2005.
10.32	Form of Restricted Stock Agreement under the WMS Industries Amended and Restated 2005 Incentive Plan incorporated by reference to WMS’ Annual Report on Form 10-K for the fiscal year ended June 30, 2005.
10.33	Form of Equity-Based Performance Award Agreement under the WMS Industries Amended and Restated 2005 Incentive Plan incorporated by reference to WMS’ Annual Report on Form 10-K for the fiscal year ended June 30, 2005.
10.34	Form of Deferred Stock Unit Agreement under the WMS Industries Amended and Restated 2005 Incentive Plan incorporated by reference to WMS’ Annual Report on Form 10-K for the fiscal year ended June 30, 2006.
10.35	Form of Restricted Stock Unit Agreement under the WMS Industries Amended and Restated 2005 Incentive Plan incorporated by reference to WMS’ Annual Report on Form 10-K for the fiscal year ended June 30, 2007.
10.36	Form of Performance-based Restricted Unit Agreement under the WMS Industries Amended and Restated 2005 Incentive Plan incorporated by reference to WMS’ Annual Report on Form 10-K for the fiscal year ended June 30, 2008.
10.37	WMS Industries Inc. Nonqualified Deferred Compensation Plan, amended and restated effective January 1, 2009, incorporated by reference to WMS’ Current Report on Form 8-K, filed on February 24, 2009.
10.38	Letter of Termination of Employment Agreement between Louis J. Nicastro and WMS, dated June 14, 2001, incorporated by reference to WMS Annual Report on Form 10-K for the fiscal year ended June 30, 2001 (the “2001 10-K”).
10.39	Form of Officer and Director Indemnity Agreement, incorporated by reference to WMS’ Current Report on Form 8-K, filed on December 15, 2004.
10.40	Advisory Agreement between Louis J. Nicastro and WMS Industries Inc., dated May 5, 2008, incorporated by reference to WMS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2008.

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Exhibit	Description
10.41	Employment Agreement between Brian R. Gamache and WMS, dated December 27, 2004, incorporated by reference to WMS’ Current Report on Form 8-K, filed on December 30, 2004.
10.42	Letter Agreement, dated as of August 9, 2005, between WMS and Brian R. Gamache incorporated by reference to WMS’ Current Report on Form 8-K, filed on August 15, 2005.
10.43	Amendment to Executive Employment Agreement, dated July 1, 2008, between WMS and Brian R. Gamache, incorporated by reference to WMS’ Current Report on Form 8-K, filed on July 3, 2008.
10.44	Employment Agreement between Orrin J. Edidin and WMS, dated February 18, 2005, incorporated by reference to WMS’ Current Report on Form 8-K, filed on February 24, 2005.
10.45	Letter Agreement, dated as of August 9, 2005, between WMS and Orrin J. Edidin incorporated by reference to WMS’ Current Report on Form 8-K, filed on August 15, 2005.
10.46	Amendment to Executive Employment Agreement, dated July 1, 2008, between WMS and Orrin J. Edidin, incorporated by reference to WMS’ Current Report on Form 8-K, filed on July 3, 2008.
10.47	Employment Agreement between Scott D. Schweinfurth and WMS dated February 18, 2005, incorporated by reference to WMS’ Current Report on Form 8-K, filed on February 24, 2005.
10.48	Letter Agreement, dated as of August 9, 2005, between WMS and Scott D. Schweinfurth incorporated by reference to WMS’ Current Report on Form 8-K, filed on August 15, 2005.
10.49	Amendment to Executive Employment Agreement, dated July 1, 2008, between WMS and Scott D. Schweinfurth, incorporated by reference to WMS’ Current Report on Form 8-K, filed on July 3, 2008.
10.50	Employment offer letter, dated November 22, 2002, to Kathleen J. McJohn, Vice President, General Counsel and Secretary, incorporated by reference to WMS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.
10.51	Employment Agreement, dated September 7, 2005, between WMS and Larry J. Pacey, incorporated by reference to WMS’ Current Report on Form 8-K, filed on July 3, 2008.
10.52	Amendment to Executive Employment Agreement, dated July 1, 2008, between WMS and Larry J. Pacey, incorporated by reference to WMS’ Current Report on Form 8-K, filed on July 3, 2008.
10.53	Deferred Compensation Agreement, dated January 27, 2007, between WMS and Larry J. Pacey, incorporated by reference to WMS’ Current Report on Form 8-K, filed on July 3, 2008.
10.54	Description of Executive Compensation—Salary increases, incorporated by reference to WMS’ Current Report on Form 8-K filed on July 3, 2008.
	Other
21	Subsidiaries of the Registrant.
23	Consent of Ernst & Young LLP.
31	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 13(a)-14(a) of the Securities Exchange Act of 1934 (Section 302 of the Sarbanes-Oxley Act of 2002).
32	Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

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WMS INDUSTRIES INC.

INDEX TO FINANCIAL INFORMATION

	Page No.
Financial Statements and Financial Statement Schedule
Report of independent registered public accounting firm	F-2
Report of independent registered public accounting firm on internal control over financial reporting	F-3
Consolidated balance sheets at June 30, 2009 and June 30, 2008	F-4
Consolidated statements of income for the years ended June 30, 2009, 2008 and 2007	F-5
Consolidated statements of stockholders’ equity and comprehensive income for the years ended June  30, 2009, 2008 and 2007	F-6
Consolidated statements of cash flows for the years ended June 30, 2009, 2008 and 2007	F-7
Notes to consolidated financial statements	F-8
Financial statement schedule II—Valuation and Qualifying Accounts for the years ended June  30, 2009, 2008 and 2007	F-38

All other schedules are omitted since the required information is not present in amounts sufficient to require submission of the schedule or because the information required is included in the Consolidated Financial Statements and Notes thereto.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

WMS Industries Inc.

We have audited the accompanying consolidated balance sheets of WMS Industries Inc. (the “Company”) as of June 30, 2009 and 2008, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended June 30, 2009. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of WMS Industries Inc. at June 30, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, effective July 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes.”

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), WMS Industries Inc.’s internal control over financial reporting as of June 30, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 27, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Chicago, Illinois

August 27, 2009

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Stockholders of

WMS Industries Inc.

We have audited WMS Industries Inc.’s internal control over financial reporting as of June 30, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). WMS Industries Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

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

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, WMS Industries Inc. maintained, in all material respects, effective internal control over financial reporting as of June 30, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of WMS Industries Inc. as of June 30, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended June 30, 2009 of WMS Industries Inc. and our report dated August 27, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Chicago, Illinois

August 27, 2009

F-3

WMS INDUSTRIES INC.

CONSOLIDATED BALANCE SHEETS

June 30, 2009 and 2008

(in millions of U.S. dollars and millions of shares)

	2009			2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	135.7		$	100.8
Restricted cash and cash equivalents		19.0			18.8
Total cash, cash equivalents and restricted cash		154.7			119.6
Accounts and notes receivable, net		214.2			198.5
Inventories		43.1			59.9
Other current assets		38.0			35.3
Total current assets		450.0			413.3
NON-CURRENT ASSETS:
Gaming operations equipment, net		68.0			75.4
Property, plant and equipment, net		158.8			125.7
Intangible assets, net		99.3			106.3
Deferred income tax assets		31.2			34.9
Other assets, net		48.7			17.1
Total non-current assets		406.0			359.4
TOTAL ASSETS	$	856.0		$	772.7
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	50.4		$	47.0
Accrued compensation and related benefits		27.9			22.6
Other accrued liabilities		37.4			47.0
Total current liabilities		115.7			116.6
NON-CURRENT LIABILITIES:
Deferred income tax liabilities		17.8			16.2
Long-term debt		115.0			115.0
Other non-current liabilities		16.1			14.1
Total non-current liabilities		148.9			145.3
Commitments, contingencies and indemnifications (see Note 13)		—			—
STOCKHOLDERS’ EQUITY:
Preferred stock (5.0 shares authorized, none issued)		—			—
Common stock (100.0 shares authorized, 51.0 shares issued)		25.5			25.5
Additional paid-in capital		311.9			298.1
Treasury stock, at cost (1.8 and 0.8 shares, respectively)		(45.4	)		(24.8	)
Retained earnings		296.1			203.9
Accumulated other comprehensive income		3.3			8.1
Total stockholders’ equity		591.4			510.8
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	856.0		$	772.7

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-4

WMS INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended June 30, 2009, 2008 and 2007

(in millions of U.S. dollars and millions of shares, except per share amounts)

	2009			2008			2007
REVENUES:
Product sales	$	438.5		$	421.2		$	366.3
Gaming operations		267.9			228.9			173.5
Total revenues		706.4			650.1			539.8
COSTS AND EXPENSES:
Cost of product sales(1)		212.8			217.3			198.6
Cost of gaming operations(1)		44.7			46.6			36.2
Research and development		98.4			79.9			58.1
Selling and administrative		145.5			130.0			109.8
Depreciation(1)		68.4			71.9			62.9
Total costs and expenses		569.8			545.7			465.6
OPERATING INCOME		136.6			104.4			74.2
Interest expense		(4.0	)		(4.0	)		(5.1	)
Interest and other income, net		7.8			5.2			2.6
Income before income taxes		140.4			105.6			71.7
Provision for income taxes		48.2			38.1			22.8
NET INCOME	$	92.2		$	67.5		$	48.9
Earnings per share:
Basic	$	1.87		$	1.34		$	1.01
Diluted	$	1.59		$	1.15		$	0.86
Weighted-average common shares:
Basic common stock outstanding		49.2			50.2			48.4
Diluted common stock and common stock equivalents		59.1			60.6			59.6
(1)    Cost of product sales and cost of gaming operations exclude the following amounts of depreciation, which are included separately in the depreciation line item:
Cost of product sales	$	4.1		$	3.7		$	2.4
Cost of gaming operations	$	51.9		$	59.5		$	53.3

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-5

WMS INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

For the Years Ended June 30, 2009, 2008 and 2007

(in millions of U.S. dollars and millions of shares)

Common Shares Issued	Common Shares Held in Treasury			Common stock		Additional paid-in capital			Treasury stock, at cost			Retained Earnings			Accumulated other comprehensive income			Total stockholders’ equity
48.6	(1.2	)	Balance, June 30, 2006	$	16.2	$	227.2		$	(15.5	)	$	97.6		$	0.1		$	325.6
—	—		Comprehensive income:
—	—		Net income		—		—			—			48.9			—			48.9
—	—		Foreign currency translation adjustment		—		—			—			—			3.2			3.2
—	—		Comprehensive income		—		—			—			—			—			52.1
1.4	0.8		Vesting of restricted stock and exercise of stock options and related tax benefits		0.5		26.4			8.7			—			—			35.6
—	—		Forfeiture of restricted shares		—		0.3			—			—			—			0.3
—	0.4		Stock issued for business acquisition		—		2.8			6.8			—			—			9.6
—	—		Effect from adoption of SFAS No. 158, net of tax		—		—			—			—			(2.0	)		(2.0	)
—	—		Share-based payment expense		—		12.4			—			—			—			12.4
—	—		Impact of three-for-two stock split		8.3		—			—			(8.3	)		—			—
50.0	—		Balance, June 30, 2007		25.0		269.1			—			138.2			1.3			433.6
—	—		Comprehensive income:
—	—		Net income		—		—			—			67.5			—			67.5
—	—		Foreign currency translation adjustment		—		—			—			—			6.8			6.8
—	—		Comprehensive income		—		—			—			—			—			74.3
1.0	0.4		Vesting of restricted stock and exercise of stock options and related tax benefits		0.5		13.7			15.2			—			—			29.4
—	(1.2	)	Purchase of treasury shares		—		—			(40.0	)		—			—			(40.0	)
—	—		Stock issued for business acquisition		—		0.1			—			—			—			0.1
—	—		Effect from adoption of FIN 48		—		—			—			(1.8	)		—			(1.8	)
—	—		Share-based payment expense		—		15.2			—			—			—			15.2
51.0	(0.8	)	Balance, June 30, 2008		25.5		298.1			(24.8	)		203.9			8.1			510.8
—	—		Comprehensive income:
—	—		Net income		—		—			—			92.2			—			92.2
—	—		Foreign currency translation adjustment		—		—			—			—			(4.8	)		(4.8	)
—	—		Comprehensive income		—		—			—			—			—			87.4
—	0.6		Vesting of restricted stock and exercise of stock options and related tax benefits		—		(6.0	)		14.9			—			—			8.9
—	(1.6	)	Purchase of treasury shares		—		—			(35.5	)		—			—			(35.5	)
—	—		Hasbro warrant modification		—		1.8			—			—			—			1.8
—	—		Share-based payment expense		—		18.0			—			—			—			18.0
51.0	(1.8	)	Balance, June 30, 2009	$	25.5	$	311.9		$	(45.4	)	$	296.1		$	3.3		$	591.4

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-6

WMS INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended June 30, 2009, 2008 and 2007

(in millions of U.S. dollars)

	2009			2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	92.2		$	67.5		$	48.9
Adjustments to reconcile net income to net cash provided (used in) by operating activities:
Depreciation		68.4			71.9			62.9
Amortization of intangible and other assets		18.7			24.2			16.9
Share-based compensation		18.0			15.2			12.4
Other non-cash items, primarily inventory reserves and bad debt expense		20.4			14.3			8.2
Deferred income taxes		6.6			(7.0	)		(0.6	)
Change in operating assets and liabilities, net of business acquisitions:
Restricted cash		(0.2	)		(2.8	)		(2.4	)
Accounts and notes receivable		(53.5	)		(34.4	)		(26.5	)
Inventories		4.8			11.8			—
Other current and long-term assets and long-term liabilities		0.7			4.1			(11.6	)
Current liabilities		3.1			21.4			10.7
Net cash provided by operating activities		179.2			186.2			118.9
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to gaming operations equipment		(47.0	)		(50.4	)		(75.9	)
Purchase of property, plant and equipment		(53.3	)		(48.3	)		(34.1	)
Payments to acquire or license intangible and other assets		(13.5	)		(19.5	)		(27.9	)
Purchase of business, net of cash acquired		—			(0.2	)		(20.9	)
Other		—			0.6			—
Net cash used in investing activities		(113.8	)		(117.8	)		(158.8	)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock		(40.5	)		(35.0	)		—
Proceeds from borrowings under revolving credit facility		50.0			—			15.0
Repayments of borrowings under revolving credit facility		(50.0	)		—			(15.0	)
Cash received from exercise of stock options		7.9			21.0			26.7
Tax benefits from exercise of stock options		2.8			8.8			8.9
Net cash (used in) provided by financing activities		(29.8	)		(5.2	)		35.6
Effect of Exchange Rates on Cash and Cash Equivalents		(0.7	)		0.4			2.4
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		34.9			63.6			(1.9	)
CASH AND CASH EQUIVALENTS, beginning of year		100.8			37.2			39.1
CASH AND CASH EQUIVALENTS, end of year	$	135.7		$	100.8		$	37.2

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-7

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

1. BUSINESS OVERVIEW

We are engaged in one business segment: the design, manufacture and distribution of gaming machines (video and mechanical reel type) and video lottery terminals (“VLTs”) for customers in legalized gaming jurisdictions worldwide. We have production facilities in the United States with development and distribution offices located in the United States, Argentina, Australia, Austria, Canada, China, Italy, the Netherlands, South Africa, Spain, and the United Kingdom. In fiscal year 2009, we integrated the manufacturing of Orion Gaming products into our Spain and United States facilities.

We market our gaming machines in two principal ways. First, product sales include the sale of new and used gaming machines and VLTs, conversion kits, parts, amusement-with-prize gaming machines, equipment manufactured under original equipment manufacturing agreements to casinos and other gaming machine operators and gaming related systems for smaller international casino operators. Second, we license our game content and intellectual property to third parties for distribution and we lease gaming machines and VLTs to casinos and other licensed gaming machine operators for payments based upon (1) a percentage of the net win, which is the earnings generated by casino patrons playing the gaming machine, (2) fixed daily fees or (3) a percentage of the amount wagered or a combination of a fixed daily fee and a percentage of the amount wagered. We categorize our lease arrangements into five groups: wide-area progressive (“WAP”) participation gaming machines; local-area progressive (“LAP”) participation gaming machines; stand-alone participation gaming machines; casino-owned daily fee games; and gaming machines, VLT and other leases. We refer to WAP, LAP and stand-alone participation gaming machines as “participation games” and when combined with casino-owned daily fee games, royalties we receive under license agreements with third parties to utilize our game content and intellectual property, and gaming machine, VLT and other lease revenues, we refer to this business as our “gaming operations.”

Data for product sales and gaming operations is only maintained on a consolidated basis as presented in our Consolidated Financial Statements, with no additional separate data maintained for product sales and gaming operations (other than the revenues and costs of revenues information included in our Consolidated Statements of Income and gaming operations equipment and related accumulated depreciation included in our Consolidated Balance Sheets).

2. PRINCIPAL ACCOUNTING POLICIES

Basis of Presentation and Consolidation Policy

Our Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles and, pursuant to the rules and regulations of the Securities and Exchange Commission, include all adjustments necessary to fairly present our consolidated financial position, results of operations, and cash flows for each period presented. Our Consolidated Financial Statements include the accounts of WMS Industries Inc. and its wholly owned subsidiaries (“WMS” or the “Company”). All significant intercompany accounts and transactions have been eliminated. These financial statements include subsequent events evaluated through the date of the financial statement issuance on August 27, 2009.

Reclassifications

Certain amounts within net cash provided by operating activities included in the prior years’ Consolidated Statements of Cash Flows have been reclassified to conform with the current year’s presentation. These reclassifications are immaterial and did not affect the reported amounts of total net cash provided by operating activities included in our Consolidated Statements of Cash Flows.

F-8

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

Revenue Recognition

We evaluate the recognition of revenue based on the criteria set forth in the following accounting pronouncements; Statement of Position (“SOP”) 97-2, “Software Revenue Recognition”, as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition With Respect to Certain Transactions”, Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements,” as revised by SAB No. 104, “Revenue Recognition” and Emerging Issues Task Force (“EITF”) Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. Our revenue recognition policy for both product sales and gaming operations is to record revenue when all the following criteria are met:

Ø Persuasive evidence of an agreement exists;

Ø The price to the customer is fixed or determinable;

Ø Delivery has occurred, title has been transferred, and any acceptance terms have been fulfilled

Ø No significant contractual obligations remain; and

Ø Collectibility is reasonably assured.

Product Sales

We sell gaming machines and VLTs typically with payment terms of 30 to 90 days. In certain circumstances we offer extended payment terms typically for up to one year but in limited cases up to three years, which obligation may be secured by the related equipment and may accrue interest recognized at market rates. In fiscal 2009, due to the slowing economy and credit availability challenges our customers experienced, we implemented a program to increase the amount of financing terms offered to select customers. We expect to continue this program in fiscal 2010 until the economy and availability of credit improves. Revenues are reported net of incentive rebates or discounts. We annually investigate sales contracts with extended payment terms in excess of one year to determine if there is sufficient history to prove assurance of collectability under the original sales contract payments terms. Based upon this investigation, we have concluded that adequate supporting historical documentation exists to conclude collectability is probable for sales contracts with extended payment terms of 36 months or less.

When multiple product deliverables are included under a sales contract, we allocate revenue to each unit of accounting based upon its respective fair value against the total contract value and defer revenue recognition on those deliverables where we have not met all requirements of revenue recognition. We allocate revenue to each unit of accounting based upon its fair value as determined by vendor specific objective evidence (“VSOE”). VSOE of fair value for all elements of an arrangement is based upon the normal pricing and discounting practices for those products and services when sold individually.

We recognize revenue when the product is delivered, acceptance terms have been fulfilled and the other criteria listed above are met. We defer revenue for any undelivered units of accounting. Deliverables are divided into separate units of accounting if:

Ø each item has value to the customer on a stand alone basis;

Ø we have objective and reliable evidence of the fair value of the undelivered items; and

Ø delivery of any undelivered item is considered probable and substantially in our control.

If we cannot objectively determine the fair value of any undelivered units of accounting included in an arrangement, all revenues are deferred until all of the items are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered units of accounting.

F-9

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

Our services for initial installation, as well as standard warranty and technical support, are not separately priced components of our sales arrangements and are included in our revenues when the associated product sales revenue is recognized. Labor costs for gaming machine installs and participation placements, as well as labor costs associated with performing routine maintenance on participation gaming machines are included in selling and administrative expenses. We accrue for the cost of installing gaming machines sold to our customers at the time of sale, based on the percent of such gaming machines that we expect to install for our customers. We capitalize the costs to install gaming operations equipment.

We apply the provisions of SOP 97-2, to sales of certain of our products, when appropriate. SOP 97-2 primarily effects our Bluebird2 and SiP revenues and will impact future revenues in a networked gaming (“NG”) environment because development of Bluebird2, SiP and future NG revenues has become more focused on computer software applications and systems to be sold and leased than our previous products. As we begin to commercialize NG system software in fiscal 2010, the application of SOP 97-2 will require us to obtain VSOE from third parties for each NG software product prior to recognizing revenue on any related gaming machine sales which may delay the recognition of revenue, and increase deferred revenues and deferred costs. NG refers to a networked gaming system that links groups of server-enabled gaming machines to a remote server in the casino data center.

Gaming Operations

We earn gaming operations revenues from leasing gaming machines, VLTs and other leased equipment, and earn royalties from third parties under license agreements to use our game content and intellectual property.

For WAP leasing agreements, revenues are recognized for each gaming machine based upon a percentage of coin-in, which is the amount of coins, currency and credits wagered on the gaming machine or a combination of a fixed daily fee and a percentage of coin-in. Participating casinos pay a percentage of the coin-in from WAP gaming machines directly to us for services related to the design, assembly, installation, operation, maintenance, and marketing of the WAP systems and to administer the progressive jackpot funding. Revenues are recognized as earned when collectibility is reasonably assured. WAP systems entail a configuration of numerous electronically linked gaming machines located in multiple casino properties within a single gaming jurisdiction connected to our central computer system via a network of communications equipment. WAP system gaming machines differ from non-linked gaming machines in that they build a progressive jackpot with every wager until a player hits the top award winning combination.

A LAP system electronically links gaming machines within a single casino to a site controller which builds a series of small progressive jackpots within that specific casino based on every wager made on the LAP system; whereas a WAP jackpot system links gaming machines in multiple casinos to a progressive jackpot within a single gaming jurisdiction. Each casino funds LAP progressive jackpots won by patrons of its casino.

We also offer participation gaming machines on a non-linked basis, which we call stand-alone games. Stand-alone and LAP progressive participation lease agreements are based on either a pre-determined percentage of the daily net win of each gaming machine or a fixed daily rental fee, or for one specific product, a percentage of the coin-in.

Casino-owned daily fee game lease agreements are for a fixed daily fee per day. Casino-owned daily fee games are games for which we sell the base gaming machine to the casino at a normal sales price and earn a normal product sales gross profit and then earn a lower ongoing daily fee from leasing the top box and game to the casino. We exclude casino-owned daily fee games from our installed base of participation gaming machines.

VLTs may be operated as stand-alone units or may interface with central monitoring systems operated by government agencies. Our leased VLTs typically are located in places where casino-type gaming is not the only

F-10

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

attraction, such as racetracks, bars and restaurants, and are usually operated by the lottery organization of the jurisdiction. Our revenues are based on a fixed percentage of the daily net win of the VLTs or a fixed daily rate. We exclude our leased VLTs from our installed base of participation gaming machines.

Some customers prefer to lease our standard for-sale gaming machines as an option rather than to purchase them. In these cases, we lease the gaming machine, either for a fixed daily fee or as a percentage of the net win of the gaming machine. We do not include leased for-sale units in our installed base of participation gaming machines.

Under agreements with licensees who are generally located in geographic areas or operate in markets where we are not active, we license our games, artwork, and other intellectual property. License royalties are recorded as earned when the licensee purchases or places the game or other intellectual property, and collectibility is reasonably assured.

Sales of Used Gaming Machines

Cash generated from the remanufacture and sale of used gaming machines, including cash generated from the remanufacture and sale of used gaming operations machines, is included in our Consolidated Statement of Cash Flows in cash flow from operating activities for the periods in which such sales occur and have not been material in fiscal 2009, 2008 and 2007.

Translation of Non-U.S. Currency Amounts

The local currency is the functional currency (primary currency in which business is conducted) for our non-U.S. subsidiaries and their assets and liabilities are translated into U.S. dollars at fiscal year-end exchange rates. Revenue and expense items are translated at average exchange rates prevailing during the fiscal year. Translation adjustments are included in accumulated other comprehensive income in our Consolidated Statement of Stockholders’ Equity and Comprehensive Income. Gains and losses arising from intercompany foreign currency transactions that are of a long-term investment nature are reported in the same manner as translation adjustments. Foreign currency transaction gains (losses) are included in Interest and other income, net and totaled $(2.4) million, $0.4 million and ($0.3) million in fiscal years 2009, 2008 and 2007, respectively.

Cash, Cash Equivalents and Restricted Cash

All highly liquid investments with maturities of three months or less when purchased are considered cash equivalents. Restricted cash of $19.0 million and $18.8 million at June 30, 2009 and 2008, respectively, is required to fund WAP systems’ jackpot payments.

Accounts Receivable, Notes Receivable, Allowance for Doubtful Accounts and Bad Debt Expense

We carry our accounts and notes receivable at face amounts less an allowance for doubtful accounts. On a quarterly basis, we evaluate our receivables and establish the allowance for doubtful accounts based on a combination of specific customer circumstances, credit conditions and our history of write-offs and collections. We recorded $7.1 million of bad debt expense in fiscal 2009 compared to $3.5 million in fiscal 2008 and $1.7 million in fiscal 2007.

F-11

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

The following summarizes the components of current and long-term Accounts and notes receivable, net for fiscal 2009 and 2008:

	As of June 30,
	2009			2008
Current:
Accounts receivable	$	105.6		$	134.8
Notes receivable		112.6			66.7
Allowance for doubtful accounts		(4.0	)		(3.0	)
Current accounts and notes receivable, net	$	214.2		$	198.5
Long-term, included in Other assets, net:
Notes receivable	$	39.6		$	7.7
Allowance for doubtful accounts		(1.3	)		—
Long-term notes receivable, net	$	38.3		$	7.7
Total accounts and notes receivable, net	$	252.5		$	206.2

Our policy is to generally not charge interest on receivables after the invoice payment becomes past due. A receivable is considered past due if payments have not been received within agreed upon invoice terms. With regard to notes receivable, interest income is recognized ratably over the life of the note receivable and any related fees or costs to establish the notes are charged to expense as incurred, as they are considered insignificant. Actual or imputed interest, if any, is determined based on current market rates at the time the note originated and is recorded in Interest and other income, net, ratably over the payment period.

The fair value of notes receivable is estimated by discounting expected future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and remaining maturities. As of June 30, 2009 and 2008, the fair value of the notes receivable, net approximated the carrying value.

Inventories

Inventories are valued at the lower of cost (determined by the first-in, first-out method) or market. We value inventory quarterly based on estimates of potentially excess and obsolete inventory after considering forecasted demand and forecasted average selling prices. However, forecasts are subject to revisions, cancellations and rescheduling. Actual demand may differ from anticipated demand, and such differences may have a material effect on our consolidated financial statements. Demand for parts inventory is subject to technical obsolescence. Inventory on hand in excess of forecasted demand is written down to net realizable value when such determination is made.

An active market exists mostly outside of North America for used gaming machines. When we receive a gaming machine on trade-in, we estimate a carrying value for the gaming machine based on the condition of the gaming machine, as well as our experience in selling used gaming machines and such estimates could change due to changes in demand in general for used gaming machines. We either sell these trade-ins as-is or renovate the gaming machines before resale. We also sell participation gaming machines as used gaming machines when we no longer need them in our gaming operations business. Therefore, we review our used gaming machine inventory for impairment on a quarterly basis. Actual demand for new and used gaming machines may differ from anticipated demand, and such differences may have a material effect on our consolidated financial statements.

F-12

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

Freight-out and Warehousing Costs

Freight-out and warehousing costs are included in cost of product sales in our Consolidated Statements of Income. Freight-out costs for gaming operations equipment are capitalized and depreciated over the useful life of the related asset.

Research and Development Costs, and Costs for Computer Software Utilized in Products Sold or Leased

We account for research and development costs in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 2, “Accounting for Research and Development Costs.” (“SFAS 2”). Accordingly, costs associated with product development are expensed as incurred and included in research and development in our Consolidated Statements of Income.

We purchase, license and incur costs for computer software which will be utilized in the products we sell or lease. Such costs are capitalized under SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,” (“SFAS 86”). According to SFAS 86, costs incurred in creating a computer software product are charged to expense when incurred as research and development pursuant to SFAS 2 until “technological feasibility” has been established for the product, after which point costs are capitalized. Generally our products reach technological feasibility when a working model of the software is available. Annual amortization of capitalized software costs is recorded on a product by product basis at the greater of the amount computed using (a) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or (b) the straight-line method over the remaining estimated economic life.

We incur regulatory approval costs for our products after technological feasibility is achieved. Capitalized regulatory approval costs, net were $7.9 million and $6.3 million as of June 30, 2009 and 2008, respectively which are included in other non-current assets. Amortization expense for previously capitalized regulatory approval costs totaled $6.7 million, $5.2 million and $2.1 million in fiscal 2009, 2008 and 2007, respectively. Regulatory approval costs related to projects that are discontinued are expensed when the determination is made.

Gaming Operations Equipment and Property, Plant and Equipment

Gaming operations equipment and Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation of these assets is computed on a straight-line basis over the following estimated useful lives:

Buildings and improvements	10 to 40 years
Leasehold improvements	Lesser of term of lease or useful life
Machinery and equipment	3 to 10 years
Gaming operations equipment	1 to 3 years
Furniture and fixtures	10 years
Capitalized internal use software costs	3 to 7 years

Significant replacements and improvements are capitalized. Other maintenance and repairs are expensed.

We review the carrying amount of these assets when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated

F-13

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. When an impairment loss is to be recognized for an asset, it is measured by comparing the carrying value to the fair value. Fair value is generally measured as the present value of estimated future cash flows.

We account for costs incurred to develop software for internal use in accordance with SOP 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Consequently, any costs incurred during preliminary project stages are expensed; costs incurred during the application development stages are capitalized and costs incurred during the post-implementation/operation stages are expensed. Once the software is placed in operation, we depreciate the capitalized asset cost over its useful life, which can be up to 7 years for software related to our Oracle ERP system. The net book value of capitalized internal use software costs was $30.1 million and $17.6 million as of June 30, 2009 and 2008, respectively which are included in both capitalized internal use software costs and construction-in-progress categories.

Intangible Assets

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” (“SFAS 142”) we classify intangible assets into three categories: (1) intangible assets with finite lives subject to amortization; (2) intangible assets with indefinite lives not subject to amortization; and (3) goodwill. We test intangible assets with finite lives for impairment when conditions exist that indicate the carrying value may not be recoverable. We do not amortize intangible assets with indefinite lives and goodwill. For intangible assets with indefinite lives and goodwill, we perform tests for impairment at least annually or more frequently when events or circumstances indicate that assets might be impaired. We perform our impairment tests of goodwill at our reporting unit level which is at the consolidated level. Such impairment tests for goodwill include comparing the fair value with the reporting unit’s carrying value, inclusive of the goodwill. The fair value of a reporting unit refers to the amount at which the unit as consolidated could be bought or sold in a current transaction between willing parties. As an initial indication of potential goodwill impairment, we compared our market capitalization based on outstanding shares to our book value as of June 30, 2009, which resulted in an excess of market value over book value of almost $1.0 billion. Fair values of other intangible assets with indefinite lives are derived using discounted cash flow analyses. When appropriate, we consider the assumptions that we believe hypothetical marketplace participants would use in estimating future cash flows. In addition, where applicable, an appropriate discount rate is used, based on our cost of capital rate or location-specific economic factors. In case the fair value is less than the carrying value of the assets, we record an impairment charge to reduce the carrying value of the assets to fair value.

We determine the useful lives of our identifiable finite lived intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any agreement, the history of the asset, our long-term strategy for the use of the asset, any laws or other local regulations which could impact the useful life of the asset and, other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have definite lives are amortized, generally on a straight-line basis, over their useful lives. See Note 7, “Intangible Assets.”

We capitalize as identifiable finite lived intangible assets advances for royalty and licensing fees made in connection with licensing agreements we have for our use of third party brands, intellectual property and technologies. When the products using the licensed intellectual property or technology begin to generate revenue, we begin amortization of the amount advanced. In cases where the advance represents a paid up license, the advance is amortized based on the estimated life of the asset. In those cases where the license agreement provides for a royalty to be earned by the licensor for each gaming machine sold or placed on a lease, the advance is

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WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

amortized based on the royalty rates provided in the license agreement. In both cases the amortization of the advances is included in cost of product sales if related to a product sale, or cost of gaming operations if related to placement or lease of gaming machines or licenses in gaming operations revenues. To the extent we determine that the products developed would not fully recover the amounts capitalized and future minimum commitments in the license agreement, we will record an immediate impairment charge in our Consolidated Statements of Income at the time of such determination.

WAP Jackpot Liabilities and Expenses

WAP jackpots are payable either immediately in the case of instant pay progressive jackpots or, for non-instant pay jackpots, at the jackpot winner’s choice, in a lump sum or in equal installments over a 20-year period. For non-instant pay jackpots, winners may elect to receive a single lump sum payment for the value of the jackpot, discounted to present value at applicable interest rates, in lieu of 20 annual installments. We record a WAP jackpot liability based on the actual volume of coin-in or gaming machine play plus the initial progressive meter liability (“reset”) on each WAP system in each jurisdiction, discounted to net present value for non-instant pay jackpots. We defer jackpot expense for the reset liability on each WAP linked system, which is subsequently amortized as jackpot expense in cost of gaming operations as revenues are generated from the coin-in or gaming machine play. Our jackpot liabilities totaled $9.6 million and $11.3 million at June 30, 2009 and 2008, respectively. Our jackpot expense was $14.2 million, $17.9 million and $13.3 million for fiscal 2009, 2008 and 2007, respectively. To fund our WAP jackpot liabilities, we are required to maintain restricted cash and cash equivalents, as described above.

Advertising Expense

The cost of advertising is charged to expense as incurred. The cost of advertising for fiscal 2009, 2008 and 2007 was $0.8 million, $1.0 million and $1.0 million, respectively.

Accounting for Income Taxes

We account for income taxes using the asset and liability method provided in SFAS No. 109, “Accounting for Income Taxes”. Under this method, income taxes are provided for amounts currently payable and for amounts deferred as income tax assets and liabilities based upon differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Deferred income taxes are measured using the U.S., state and foreign jurisdictions enacted tax rates that are assumed to be in effect when the basis differences reverse. We recognize accrued interest and penalties associated with uncertain income tax positions as part of income tax expense. Income taxes on our foreign subsidiaries are provided at the tax rates applicable to the tax jurisdictions in which they are located.

We apply the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) to our uncertain income tax provisions. Under FIN 48, the benefits of tax positions that are more likely than not of being sustained upon audit based on the technical merits of the tax position are recognized in our Consolidated Financial Statements; positions that do not meet this threshold are not recognized. For tax positions that are at least more likely than not of being sustained upon audit, the largest amount of the benefit that is more likely than not of being sustained is recognized in our Consolidated Financial Statements.

F-15

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

Share-Based Compensation—Stock Option Assumptions

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in fiscal 2009, 2008 and 2007:

	2009		2008		2007
Risk-free interest rate	2.2	%	3.3	%	4.8	%
Expected life of options (in years)	4.65		4.75		5.16
Expected volatility .	0.39		0.35		0.36
Dividend yield	0.0	%	0.0	%	0.0	%

For fiscal 2009, 2008 and 2007, the expected life of each award granted was calculated using the “simplified method” in accordance with Staff Accounting Bulletin (“SAB”) No. 107 and as amended in SAB No. 110. We do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected life of options. The expected volatility rate has been calculated based on weekly closing prices of our common shares from July 1, 2003. In accordance with the guidance in SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) we estimate expected volatility based on the historical realized volatility giving consideration to how future experience might reasonably be expected to differ from historical experience. We calculate the historical volatility beginning July 1, 2003, as we believe our stock price volatility prior to that date would be expected to differ significantly from subsequent stock price volatility as, prior to July 1, 2003, we focused on resolving issues in our legacy operating system software, whereas after that date we began introducing our new operating system, new gaming cabinet and new game themes, and re-emerging as the business we are today. See Note 12, “Equity Compensation Plan.” The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term that approximates the expected life of the award. Expected dividend yield is based on historical dividend payments.

Cost of Product Sales, Cost of Gaming Operations and Selling and Administrative Expenses

Cost of product sales consists primarily of raw materials, labor and manufacturing overhead. These components of cost of product sales also include licensing and royalty charges, inbound and outbound freight charges, purchasing and receiving costs, inspection costs, and internal transfer costs.

Cost of gaming operations consists primarily of wide-area progressive jackpot expenses, licensing and royalty charges, telephone costs, gaming operations taxes and fees and parts.

Selling and administrative expenses consist primarily of sales, marketing, distribution, installation and corporate support functions such as administration, information technology, legal, regulatory compliance, human resources and finance. The costs of distribution were $21.4 million, $20.4 million and $17.2 million for the fiscal year ended 2009, 2008 and 2007, respectively.

Use of Estimates

Our Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles. Such preparation requires us to make estimates and assumptions that affect the amounts reported in our Consolidated Financial Statements and Notes thereto. Actual results could differ from those estimates.

F-16

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

Fair Value Measurements

We apply the provisions of SFAS 157, “Fair Value Measurements” (“SFAS 157”) to our financial assets and financial liabilities. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs when measuring fair value. The adoption of SFAS 157 effective July 1, 2008 did not have a material impact on our consolidated financial statements.

SFAS No. 157 describes three levels of inputs that may be used to measure fair value:

Level 1 Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs to the valuation method include:

Ø Quoted prices for similar assets or liabilities in active markets;

Ø Quoted prices for identical or similar assets or liabilities in inactive markets;

Ø Inputs other than quoted prices that are observable for the asset or liability;

Ø Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Ø If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

As of June 30, 2009, the only assets subject to fair value measurement in accordance with SFAS 157 were investments in various money market funds totaling approximately $96.6 million. These money market investments are included in cash and cash equivalents and restricted cash and cash equivalents on our Consolidated Balance Sheets and are considered level 1 securities valued at quoted market prices.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, and receivables. We place cash and cash equivalents in high credit quality financial institutions and in short-duration high-quality securities. With the exception of U.S. Government and Agency securities and overnight investment sweeps, our short-term investment policy limits the amount of credit exposure in any one financial institution, industry group or type of investment. Cash on deposit may be in excess of Federal Deposit Insurance Corporation limits (“FDIC”). As a result of the financial market crisis, our recent investment decisions and priorities have been based on capital preservation rather than on investment returns. We invest our cash and cash equivalents balances to comply with the Temporary Guarantee Program of the U.S. Money Market Funds sponsored by the U.S. Treasury and Temporary Liquidity Guarantee Program sponsored by the FDIC.

F-17

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

Our receivables are concentrated in the following legalized gaming jurisdictions at June 30, 2009:

United States and Canada	59	%	International	41	%
Nevada	9	%	Argentina	8	%
Canada	6	%	Peru	6	%
Other (less the 5% individually)	44	%	Other (less the 5% individually)	27	%

As of June 30, 2009, approximately 16% of our employees are covered by a collective bargaining agreement which expires on June 30, 2011.

Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. Subsequent to the issuance of SFAS 157, the FASB issued FASB Staff Position (“FSP”) 157-2 “Effective Date of FASB Statement No. 157” (“FSP 157-2”). FSP 157-2 delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. For the instruments subject to the effective date delay under FSP 157-2, the effective date to adopt the fair value provisions for us will be July 1, 2009. On October 10, 2008, the FASB issued FSP No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP 157-3”) FSP 157-3 does not change the fair value measurement principles in SFAS 157, but rather provides guidance for the application of those measurement principles in the extreme inactive markets that currently exist. The adoption of SFAS 157 in fiscal 2009 had no material impact on our Consolidated Financial Statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of SFAS 115”, (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities using different measurement techniques. The fair value measurement provisions are elective and can be applied to individual financial instruments. SFAS 159 requires additional disclosures related to the fair value measurements included in the entity’s financial statements. We adopted this Statement beginning July 1, 2008 which had no material impact on our Consolidated Financial Statements.

In April 2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”) which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. Previously, under the provisions of SFAS 142, an entity was precluded from using its own assumptions about renewal or extension of an arrangement where there was likely to be substantial cost or material modifications. FSP 142-3 removes the requirement of SFAS 142 for an entity to consider whether an intangible asset can be renewed without substantial cost or material modification to the existing terms and conditions and requires an entity to consider its own experience in renewing similar arrangements. FSP 142-3 is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years, which for us will be in Fiscal 2010. Early adoption is prohibited. The disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. We will continue to evaluate the impact of the provisions of FSP 142-3 on our Consolidated Financial Statements.

F-18

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, which establishes principles and requirements for reporting events or transactions occurring after the balance sheet date. It requires an entity to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued. This pronouncement requires an entity to consider supplementing the financial statements with pro forma financial information if an unrecognized subsequent event is significant and to reissue financial statements filed with the SEC or other regulatory agencies if failure to do so could make the financial statements misleading. We adopted this statement for the quarter ended June 30, 2009 and updated our disclosures accordingly.

In June 2009, the FASB issued SFAS No. 168, “Accounting Standards Codification and Hierarchy of Generally Accepted Accounting Principles”, which establishes the Codification as the single source of authoritative U.S. GAAP. This statement is effective for interim and annual statements issued after September 15, 2009 and will change the way we reference accounting standards in future filings.

3. EARNINGS PER SHARE

Basic and diluted earnings per share are calculated as follows for the three fiscal years ended June 30:

	2009		2008		2007
Net income	$	92.2	$	67.5	$	48.9
After tax interest expense and amortization of issuance cost on convertible subordinated notes		1.9		2.1		2.2
Diluted earnings (numerator)	$	94.1	$	69.6	$	51.1
Basic weighted average common shares outstanding		49.2		50.2		48.4
Dilutive effect of stock options		1.0		1.5		2.4
Dilutive effect of restricted common stock and warrants		0.2		0.2		0.1
Dilutive effect of convertible subordinated notes		8.7		8.7		8.7
Diluted weighted average common stock and common stock equivalents (denominator)		59.1		60.6		59.6
Basic earnings per share of common stock	$	1.87	$	1.34	$	1.01
Diluted earnings per share of common stock and common stock equivalents	$	1.59	$	1.15	$	0.86
Common stock equivalents excluded from the calculation of diluted earnings per share because their impact would render them anti-dilutive		2.3		0.7		1.0

Included in our anti-dilutive common stock equivalents for 2009 are warrants to purchase 500,000 shares of our common stock which are contingent upon future events that were issued to Hasbro Inc. and Hasbro International, Inc. (“Hasbro”). See Note 12 – “Equity Compensation Plan – Warrants”. These warrants were excluded from the calculation because the vesting criteria were not met. Included in our anti-dilutive common stock equivalents for 2007 are warrants to purchase 375,000 shares of our common stock issued to Hasbro in 2003. See Note 12 – “Equity Compensation Plan – Warrants”.

F-19

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

4. BUSINESS ACQUISITIONS

In fiscal 2008, we completed the acquisition of 100% of the outstanding stock of privately held Systems in Progress GmbH (“SiP”), an Austrian-based company focused on developing and selling gaming related systems, including linked progressive systems and slot accounting systems applicable for smaller international casino operators. The total consideration for SiP, including acquisition costs, was $4.9 million. The final purchase price allocation resulted in $3.1 million of identifiable intangible assets and $1.8 million of goodwill. SiP operates as a separate subsidiary. Pro forma financial information is not provided as this acquisition is not material to our consolidated financial statements.

5. INVENTORIES

Inventories consisted of the following at June 30:

	2009		2008
Raw materials and work-in-process	$	26.8	$	40.1
Finished goods		16.3		19.8
Total inventories	$	43.1	$	59.9

Cost elements included in work-in-process and finished goods include raw materials, direct labor and overhead expenses. We recorded raw material and finished goods inventory write-downs totaling approximately $13.3 million, $10.1 million and $5.3 million for fiscal 2009, 2008 and 2007, respectively. These charges are classified in cost of products sales in our Consolidated Income Statement.

6. GAMING OPERATIONS EQUIPMENT AND PROPERTY, PLANT AND EQUIPMENT

The components of Gaming operations equipment were as follows at June 30:
	2009			2008
Gaming operations equipment	$	279.3		$	245.3
Less accumulated depreciation		(211.3	)		(169.9	)
Net gaming operations equipment	$	68.0		$	75.4
The components of Property, plant and equipment were as follows at June 30:
	2009			2008
Land	$	17.8		$	11.3
Buildings and improvements		72.6			59.5
Machinery and equipment		70.2			71.5
Capitalized internal use software costs		22.7			16.5
Furniture and fixtures		14.1			14.3
Construction-in-process		35.3			24.8
		232.7			197.9
Less accumulated depreciation		(73.9	)		(72.2	)
Net property, plant and equipment	$	158.8		$	125.7

F-20

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

7. INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill are as follows:

Goodwill balance at June 30, 2007	$	17.4
Impact of SiP acquisition		1.8
Foreign currency translation adjustment		2.7
Goodwill balance at June 30, 2008		21.9
Foreign currency translation adjustment		(2.0	)
Goodwill balance at June 30, 2009	$	19.9

Other Intangible Assets

The following table summarizes additions to other intangible assets during fiscal 2009.

	Total Additions
Finite lived intangible assets:
Royalty advances for licensed brands, talent, music and other	$	9.7
Licensed or acquired technologies		2.9
Patents		2.4
Customer relationships		—
Trademarks		0.2
Total	$	15.2

Certain of our intangible assets including goodwill are denominated in foreign currency and, as such, include the effects of foreign currency translation.

Other intangible assets consisted of the following as of June 30:

		2009							2008
	Useful Life (Years)	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Finite lived intangible assets:
Royalty advances for licensed brands, talent, music and other	1 -15	$	79.8	$	(44.2	)	$	35.6	$	72.9	$	(37.6	)	$	35.3
Licensed or acquired technologies	1- 15		42.6		(9.6	)		33.0		39.2		(7.4	)		31.8
Patents	4-17		20.9		(4.2	)		16.7		18.5		(2.1	)		16.4
Customer relationships	6		4.7		(2.3	)		2.4		5.2		(1.7	)		3.5
Trademarks	4		1.1		(0.5	)		0.6		0.9		(0.3	)		0.6
Total		$	149.1	$	(60.8	)	$	88.3	$	136.7	$	(49.1	)	$	87.6
Indefinite lived intangible assets:
Acquired brand names		$	3.6	$	—		$	3.6	$	3.6	$	—		$	3.6

F-21

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

General

The following table reconciles goodwill and other intangible assets presented above to Intangible assets recorded on our Consolidated Balance Sheets at June 30:

	2009			2008
Goodwill	$	19.9		$	21.9
Finite lived intangible assets, net		88.3			87.6
Indefinite lived intangible assets		3.6			3.6
Less: royalty advances and licensed or acquired technologies, short-term		(12.5	)		(6.8	)
Non-current intangible assets	$	99.3		$	106.3

Amortization expense for finite lived intangible assets was $14.2 million, $19.9 million and $13.3 million for fiscal 2009, 2008 and 2007, respectively. Fiscal 2008 includes a $3.7 million pre-tax write-down to net realizable value of a technology license.

The estimated aggregate amortization expense for finite live intangible assets for each of the next five years is as follows:

Year ended June 30,
2010	$	12.5
2011		8.6
2012		8.5
2013		5.6
2014		5.3

The estimated aggregate future intangible amortization as of June 30, 2009 does not reflect the significant commitments we have for future payments for intangible assets. See Note 13, “Commitments, Contingencies and Indemnifications.”

8. OTHER ACCRUED LIABILITIES

The components of other accrued liabilities were as follows at June 30:

	2009		2008
Accrued WAP jackpot liability	$	9.6	$	11.3
Accrued royalties and licensing fees		8.8		7.8
Deferred revenue		7.5		5.2
Current income taxes payable		1.0		9.2
Accrued common stock repurchase		—		5.0
Other accrued liabilities		10.5		8.5
Total other accrued liabilities	$	37.4	$	47.0

F-22

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

9. INCOME TAXES

The following is a summary of income (loss) before income taxes of U.S. and international operations for the fiscal years ended June 30:

	2009		2008			2007
United States	$	139.7	$	106.1		$	69.4
International		0.7		(0.5	)		2.3
Total	$	140.4	$	105.6		$	71.7

Significant components of the provision (benefit) for income taxes were as follows for the fiscal years ended June 30:

	2009			2008			2007
Current:
Federal	$	34.6		$	32.2		$	12.4
State		4.3			3.7			1.0
Foreign		0.7			0.4			1.1
Total current		39.6			36.3			14.5
Deferred:
Federal		5.9			(6.1	)		(0.2	)
State		0.8			(0.5	)		(0.4	)
Foreign		(0.1	)		(0.4	)		—
Total deferred		6.6			(7.0	)		(0.6	)
Tax benefit from exercise of stock options		2.0			8.8			8.9
Income tax provision, net	$	48.2		$	38.1		$	22.8

Deferred income taxes reflect the net tax effects of temporary differences between the amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred income tax assets and liabilities at June 30 were:

	2009			2008
Deferred income tax assets resulting from:
Current:
Receivables valuation allowances	$	1.4		$	1.2
Inventory valuation reserves		1.4			2.5
Accrued liabilities and other items not currently deductible		3.2			3.6
Total current deferred income tax assets		6.0			7.3
Non-current:
Share-based payment expense		14.9			10.8
Book over tax depreciation		13.3			20.7
Other non-current		3.0			3.4
Total non-current deferred income tax assets		31.2			34.9
Deferred income tax liabilities resulting from:
Capitalized regulatory approval and internal use software development costs		(9.8	)		(8.1	)
Capitalized patents and trademarks		(8.0	)		(8.1	)
Total non-current deferred income tax liabilities		(17.8	)		(16.2	)
Total net deferred income tax assets	$	19.4		$	26.0

F-23

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

No deferred income tax provision has been recorded for United States taxes related to approximately $12.9 million of undistributed earnings of certain foreign subsidiaries, which are considered to be permanently reinvested. Determination of the deferred income tax liability on these unremitted earnings is not practicable because such liability, if any, is dependent on circumstances existing if and when the remittance occurs.

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

The provision for income taxes differs from the amount computed using the statutory United States Federal income tax rate as follows for the fiscal years ended June 30:

	2009		2008		2007
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	2.9		2.9		2.8
Domestic manufacturer’s deduction	(1.8	)	(1.7	)	(0.7	)
Research and development tax credits	(3.1	)	(1.4	)	(4.1	)
Permanent items	0.2		0.5		0.5
Change in income tax contingencies	1.1		0.9		(0.2	)
Export sales deductions	—		—		(0.8	)
Other, net	—		(0.1	)	(0.7	)
Effective income tax rate	34.3	%	36.1	%	31.8	%

The lower effective tax rate in fiscal 2009 primarily results from the impact of the retroactive reinstatement of the research and development credit to January 1, 2008. The research and development tax credit legislation expired on December 31, 2007. In early October 2008 the Federal research and development tax credit was reinstated retroactive to the beginning of calendar year 2008. The effective income tax rate for fiscal 2009 includes approximately $0.02 per diluted share impact of the retroactive reinstatement of the research and development tax credit to the beginning of calendar year 2008.

F-24

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

We currently apply FIN 48 under which the benefits of income tax positions that are more likely than not of being sustained upon audit based on the technical merits of the tax position are recognized in our Consolidated Financial Statements; positions that do not meet this threshold are not recognized. For income tax positions that are at least more likely than not of being sustained upon audit, the largest amount of the benefit that is more likely than not of being sustained is recognized in our Consolidated Financial Statements. Upon applying FIN 48, we recorded a $1.8 million increase in our liability for unrecognized income tax benefits that was accounted for as a reduction in our retained earnings as of July 1, 2007. The reconciliation of the beginning and ending gross unrecognized income tax benefits, excluding accrued interest and penalties of $0.8 million and $0.6 million for fiscal 2009 and 2008, respectively is as follows:

	2009			2008
Balance at July 1	$	5.8		$	5.2
Additions related to prior year tax positions		—			—
Reductions related to prior year tax positions		—			(0.2	)
Additions related to current year positions		1.4			0.8
Reductions due to settlements and payments		(0.2	)		—
Reductions due to lapse of Statute		—			—
Balance at June 30,	$	7.0		$	5.8

Of the total unrecognized tax benefits, including accrued interest and penalties of $0.8 million, $7.6 million (net of the federal benefit) represents the portion that, if recognized, would reduce the effective income tax rate.

In the September 2008 quarter, the Internal Revenue Service began an audit of our U.S. federal income tax returns for fiscal years 2004 through 2007. In addition, we are currently under audit in a major state for the same years. As a result of these audits it is reasonably possible that the total amount of the unrecognized income tax benefits will significantly change within the next 12 months. At this time we are unable to estimate the amount of the potential change. Approximately $5.5 million of unrecognized income tax benefits are currently subject to the audits referred to above. At this time we believe appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years. We, or one of our subsidiaries, files income tax returns in the U.S. federal, various state, local and foreign jurisdictions. We are no longer subject to any significant U.S. federal, state, local or foreign income tax examinations by tax authorities for years before fiscal 2004.

10. CONVERTIBLE SUBORDINATED NOTES AND REVOLVING CREDIT FACILITY

Convertible Subordinated Notes

At June 30, 2009, we had $115 million of convertible subordinated notes outstanding, bearing interest at 2.75% maturing on July 15, 2010. The notes are exchangeable at any time into an aggregate of 8.7 million shares of our common stock at a conversion price of $13.19 per share, subject to adjustment. The notes are subordinated in right of payment to all existing and future senior debt and are effectively subordinated to all of the indebtedness and liabilities of our subsidiaries. The notes are not callable. We pay interest on the notes semi-annually on January 15 and July 15 of each year, aggregating $3.2 million annually. The conversion of the 2.75% convertible subordinated notes to common stock is dependent on individual holders’ choices to convert, which is dependent on the spread of the market price of our stock above the conversion strike price of $13.19 per share, and such conversion would reduce our annual interest expense. Our convertible notes are conventional convertible debt instruments in which the holder may only realize the value of the conversion option by exercising the option and receiving a fixed number of shares of our common stock. None of the holders have converted any of their convertible subordinated notes into our common stock.

F-25

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

As of June 30, 2009, the fair value of the convertible subordinated notes was $274.8 million. The fair value of our convertible fixed rate debt is significantly dependent on the market price of our common stock into which it can be converted. We have no maturities of debt or sinking fund requirements through June 30, 2010.

Revolving Credit Facility

At June 30, 2009, $100 million was available on our revolving senior credit facility which will expire, under its current terms, on December 31, 2009. We are currently in negotiations to amend and extend our existing facility or enter into a new credit facility. The terms of any such amendment or new facility may include a decrease in the aggregate commitment available to us under that facility, increased interest rates and facility fees, and include new covenants and undertakings that may restrict our operations. We cannot guarantee that we will successfully extend or replace our revolving credit facility before it expires although we intend to do so.

Our revolving credit agreement, as amended, provides for $100 million of unsecured borrowings through December 31, 2009, including the potential to expand the line up to $125 million. Up to $10 million of the credit facility is available for the issuance of letters of credit. The credit agreement requires that we maintain certain financial ratios, which could limit our ability to acquire companies, declare dividends or make any distribution to holders of any shares of capital stock, or purchase or otherwise acquire such shares of our common stock. At June 30, 2009, approximately $114.2 million was available for such purposes under the most restrictive of these covenants. No amounts were outstanding under the revolving credit facility as of June 30, 2009 and June 30, 2008.

In October 2008, due to the volatility and lack of liquidity in the capital markets, we borrowed $25 million on our revolving credit facility and invested the proceeds in treasury bills with 30 day maturities. We repaid the $25 million by December 31, 2008. In January 2009, due to the continued volatility and lack of liquidity in the capital markets, we borrowed $25 million on our revolving credit facility and invested the proceeds in treasury bills with 30 day maturities. We repaid the $25 million by March 31, 2009 and did not borrow any amounts under our revolving credit facility in the June 2009 quarter.

The financial covenants under the credit facility consist of a leverage ratio and an interest coverage ratio. The maximum leverage ratio is currently 3.25x and is computed as total debt outstanding at the end of each quarter divided by the trailing twelve months earnings before interest, income taxes, depreciation and amortization, including non-cash charges. The minimum interest coverage ratio is currently 2.5x and is computed as trailing twelve months earnings before interest and income taxes divided by trailing twelve months interest charges.

11. STOCKHOLDERS’ EQUITY

General

Our authorized common stock consists of 100.0 million shares at $0.50 par value. Additionally, we have 5.0 million shares of $0.50 par value preferred stock authorized. The preferred stock is issuable in series, and the relative rights and preferences and the number of shares in each series are to be established by our Board of Directors.

F-26

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

Common Stock Repurchase Program

On August 3, 2009, our Board of Directors authorized the repurchase of an additional $75 million of our common stock over the following twenty-four months increasing our remaining repurchase authorization to approximately $150 million. This authorization increases the existing program, previously authorized on August 4, 2008, from $150 million to $225 million and extended the expiration date to August 3, 2011. As of June 30, 2009, we had approximately $75 million remaining of our repurchase authorization. Pursuant to the authorization, purchases may be made from time to time in the open market, through block purchases or in privately negotiated transactions. The timing and actual number of shares repurchased will depend on market conditions. During fiscal 2009, we purchased 1,602,470 shares for approximately $35.5 million at an average cost of approximately $22.15 per share. At June 30, 2008, we had purchased approximately $5.0 million of our common stock which was settled and paid in fiscal 2009.

12. EQUITY COMPENSATION PLAN

General

We currently have one equity compensation plan under which new grants may be made: our Amended and Restated 2005 Incentive Plan (the “Plan”), which was originally approved by our stockholders in fiscal 2005 and approved, as amended, in fiscal 2007. The Plan consolidated shares available under our previous stock option plans into the new Plan, although outstanding equity grants under the previous plans are still governed by those individual plans. The Plan permits us to grant options to purchase shares of our common stock, restricted stock, and other stock awards. Options may be granted as incentive stock options, designed to meet the requirements of Section 422 of the Internal Revenue Code or they may be “non-qualified” options that do not meet the requirements of that section. The Compensation Committee of our Board of Directors determines, or at times recommends to the Board: which of the eligible employees, non-employee directors, consultants and advisors should receive equity awards; the terms, including any vesting periods or performance requirements of the awards; and the size of the awards. The non-employee members of our Board of Directors determine any award made to non-employee directors.

The purpose of the Plan is to encourage our employees, non-employee directors, consultants and advisors to acquire an ownership interest in our common stock and to enable these individuals to realize benefits from an increase in the value of our common stock. We believe that this benefit provides these individuals with greater incentive to work to improve our business and encourages their continued provision of services to us and, generally, promotes our interests and those of our stockholders.

We issue new shares and shares from treasury for shares delivered under the Plan. The parameters of our share repurchase activity are not established solely with reference to the dilutive impact of shares issued under the Plan. However, we expect that, over time, share purchases may partially offset the dilutive impact of shares to be issued under the Plan.

A maximum of 12.8 million shares were authorized for awards under our plans. As of June 30, 2009, 1.0 million shares of common stock remained available for possible future issuance under our Plan after the impact of approximately 0.4 million shares of equity based performance units.

F-27

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

A summary of information with respect to share-based compensation expense included in our Consolidated Statements of Income are as follows, for the fiscal years ended June 30:

	2009			2008			2007
Selling, general and administrative	$	12.1		$	10.2		$	9.3
Research and development		5.8			4.9			3.0
Cost of product sales		0.1			0.1			0.1
Share-based compensation expense included in pre-tax income		18.0			15.2			12.4
Income tax benefit related to share-based compensation		(6.8	)		(5.8	)		(4.7	)
Share-based compensation expense included in net income	$	11.2		$	9.4		$	7.7
Diluted earnings per share impact of share-based compensation expense	$	0.19		$	0.16		$	0.13

Stock Options

Pursuant to the Plan, for stock options, the exercise price per share with respect to each option is determined by the Compensation Committee and is not less than the fair market value of our common stock on the date on which the stock option is granted. The Plan has a term of 10 years, unless terminated earlier, and stock options granted under the Plan prior to December 2006 have terms up to 10 years, whereas stock options granted under the Plan beginning in December 2006 have terms up to 7 years. Vesting generally occurs equally over one to four years on the grant-date anniversary. Compensation expense is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. On occasion, we may issue stock options that immediately vest, in which case compensation expense equal to the total fair value of the option grant is immediately recognized. For options granted in fiscal 2009, the range in fair value was from $6.71 – $11.41 per share based on the Black-Scholes calculation using the following range of assumptions depending on the characteristics of the option grant: risk-free interest rates between 1.49% – 2.80%; expected life between 4.50 – 4.75 years; expected volatility of 0.39; and 0.0% dividend yield. Stock option activity was as follows for fiscal 2009:

	Number of Stock Options		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(1)
Stock options outstanding at June 30, 2008	4.6		$	20.53
Granted	1.2			27.30
Exercised	(0.5	)		16.74
Expired or Cancelled	—			—
Forfeited	—			—
Stock options outstanding at June 30, 2009	5.3		$	22.37	5.4	$	49.1
Stock options exercisable at June 30, 2009	3.2		$	19.49	5.0	$	38.4

(1) Intrinsic value is defined as the amount by which the fair value of the underlying stock exceeds the exercise price of a stock option.

F-28

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

Other information pertaining to stock options was as follows for the years ended June 30:

	2009		2008		2007
Weighted average grant-date fair value per share of stock options granted	$	9.83	$	10.73	$	8.40
Total grant-date fair value of stock options vested		7.4		8.3		7.9
Total intrinsic value of stock options exercised		7.8		23.4		23.0

For fiscal 2009, 2008 and 2007, cash received from the exercise of stock options was $7.9 million, $21.0 million and $26.7 million, respectively, and the income tax benefit realized from exercise of stock options was $2.8 million, $8.8 million and $8.9 million, respectively. As of June 30, 2009, there was $10.0 million of total stock option compensation expense related to non-vested stock options not yet recognized, which is expected to be recognized over a weighted average period of 2.7 years.

In fiscal 2005, our Board of Directors approved a Director Emeritus Program for directors who reach age 75 or have served on the Board of Directors for at least 20 years. The Director Emeritus Program is being phased in to maintain continuity and avoid losing the benefit of valuable experience. For fiscal 2008 and 2007, 37,500 and 37,500, respectively, fully vested five-year stock options were issued to two directors emeritus upon their retirement from the Board. No directors retired in fiscal 2009.

Restricted Stock Awards Grants

Upon the recommendation of our Compensation Committee, our Board of Directors has, on occasion, granted restricted stock, restricted stock units, and performance based restricted stock units to certain employees, non-employees, and directors to motivate them to devote their full energies to our success, to reward them for their services and to align their interests with the interests of our stockholders.

Under the Plan, participants may be granted restricted stock awards, representing an unfunded, unsecured right, which is nontransferable except in the event of death of the participant, to receive shares of our common stock on the date specified in the participant’s award agreement. The restricted stock awards granted under this plan are subject to vesting generally from a range of two to four years on the grant-date anniversary. Compensation expense is recognized on a straight-line basis over the vesting period for the entire award. Restricted stock share and restricted stock unit activity was as follows for fiscal 2009:

	Restricted Stock Shares		Weighted Average Grant- Date Fair Value(1)
Nonvested balance at June 30, 2008	0.3		$	27.60
Granted	0.1			29.35
Vested	(0.1	)		29.03
Nonvested balance at June 30, 2009	0.3		$	27.53

F-29

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

	Restricted Stock Units (including Performance -based Stock Units)	Weighted Average Grant-Date Fair Value(1)
Nonvested balance at June 30, 2008	0.1	$	25.31
Granted	0.2		29.35
Vested	—		—
Nonvested balance at June 30, 2009	0.3	$	28.53

(1) For restricted stock, grant-date fair value is equal to the closing market price of a share of our common stock on the grant date.

As of June 30, 2009, there was $10.4 million of total restricted stock award compensation expense related to nonvested awards not yet recognized, which is expected to be recognized over a weighted average period of 2.4 years.

Equity-Based Performance Units

As of June 30, 2009, we had 385,349 equity-based performance units outstanding with a weighted average grant-date fair value per unit of $23.92. The equity-based performance units contain performance goals set by the Board of Directors based on certain performance criteria over the following periods: thirty-six month period ending June 30, 2009 for 177,400 units; thirty-six month period ending June 30, 2010 for 89,911 units; and thirty-six month period ending June 30, 2011 for 118,038 units. The number of shares of stock to be awarded to participants is dependent upon the achievement of the performance goals and the extent to which each goal is achieved or exceeded, requires a minimum threshold performance before any shares are issued and can result in shares issued up to 200% of the targeted number of shares under each grant. In fiscal 2009, 2008 and 2007 we recorded a provision for equity-based performance units outstanding of $3.4 million, $2.7 million and zero, respectively that relate to the thirty-six month periods ended June 30, 2009, 2010 and 2011 based on the current assessment of achievement of the performance goals. Additional charges will be recorded in future periods depending on the assessment of achievement of the performance goals.

	Equity-based Performance Units	Weighted Average Grant-Date Fair Value(1)
Nonvested balance at June 30, 2008	0.3	$	21.52
Granted	0.1		29.35
Vested	—		—
Nonvested balance at June 30, 2009	0.4	$	23.92

(1) For equity-based performance units, grant-date fair value is equal to the closing market price of a share of our common stock on the grant date.

Deferred Stock

In fiscal 2005, non-management members of the Board of Directors were awarded an aggregate of 39,824 units of deferred stock under the Plan, of which 24,890 units remain outstanding as of June 30, 2009. The deferred stock units vested immediately and shares of our common stock will be issued upon each director’s departure from the Board, assuming proper notice from the Board member. Grantees are not entitled to vote their deferred stock units or to receive cash dividends, but they are entitled to receive make whole payments on any declared and paid dividends on our common stock.

F-30

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

Warrants

In fiscal 2004, our Board of Directors, as part of the inducement to Hasbro to extend their license agreement with us, approved a grant of warrants to purchase 375,000 shares of our common stock valued at $3.9 million using the Black-Scholes pricing model and certain assumptions at the date of issuance the 2003 Warrants. The warrants’ exercise price is $23.36 per share of our common stock, subject to adjustment. The warrants are non-cancelable and vest with respect to 20% of the underlying shares in each year commencing on January 1, 2007 until fully vested on January 1, 2011, subject to earlier vesting under specified circumstances. The warrants were to expire on September 14, 2013.

In June 2009, we entered into a new Gaming Device License Agreement (the “2009 License”) with Hasbro whereby we agreed to license certain intellectual property and proprietary rights owned or controlled by Hasbro. As part of the inducement to Hasbro to enter into the 2009 License, our Board of Directors approved an amendment (the “Warrant Modification Agreement”) to the 2003 Warrants to purchase our common stock. The Warrant Modification Agreement provides that the term of the 2003 Warrants will be extended until December 31, 2018. In addition, the expiration date of the 2003 Warrants will be extended for three years if we elect to extend the 2009 License. The 2003 Warrants are 60% vested. We accounted for the extension of the 2003 Warrants as a modification of terms in accordance with SFAS No. 123R whereby we computed the incremental compensation cost of the modification comparing the fair value of the modified warrants to the fair value of the original warrants immediately before its terms were modified. The incremental fair value using the Black-Scholes model was $4.76 per share for a total of $1.8 million additional compensation cost which will be amortized over the extended license period.

Also in connection with the 2009 License, our Board of Directors approved a new grant of a warrant to purchase up to 500,000 shares of our common stock (the “2009 Warrants”). The 2009 Warrants exercise price is $30.03 per share of our common stock (the closing price on June 11, 2009, the date of grant), subject to adjustment. The 2009 Warrants will only vest if certain conditions are met: (1) we request Hasbro’s consent to an assignment of the 2009 License upon the undertaking of certain transactions by us, and Hasbro gives its consent to such assignment, and (2) such transaction is effected. Each year that the three conditions are not met the number of shares subject to the 2009 Warrant decrease; provided however, that the number of underlying shares will not be less than 375,000 shares. If not vested and exercised, the 2009 Warrants will expire on December 31, 2018. We may also elect to extend the 2009 License for a period of three years from December 31, 2018 if certain conditions are satisfied.

During fiscal 2009, 2008 and 2007, we recognized $0.5 million of expense respectively for the value of the 2003 Warrants and the modification thereof.

Employee Stock Purchase Plan

Effective July 1, 2009, we adopted an Employee Stock Purchase Plan (“ESPP”) as defined under Section 423 of the Internal Revenue Code allowing eligible employees to elect to make contributions through payroll deductions which will be used to purchase our common stock at a purchase price equal to 85% of the fair value of a share of common stock on the date of purchase. Shares reserved under the ESPP are 500,000.

F-31

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

13. COMMITMENTS, CONTINGENCIES AND INDEMNIFICATIONS

Future minimum rental commitments under non-cancelable operating leases were as follows as of June 30, 2009:

2010	$	4.6
2011		4.0
2012		3.8
2013		3.7
2014		3.4
Thereafter		4.7
	$	24.2

Rent expense for fiscal 2009, 2008 and 2007 was $4.9 million, $3.9 million and $4.5 million, respectively. We include stated scheduled rent increases in calculating future minimum lease payments under non-cancellable operating leases and the minimum lease payments are recognized as rent expense on a straight-line basis over the minimum lease term. We have an option to purchase the facility that we rent in Las Vegas, NV which, if we elected to exercise, would occur between May and November of 2010 or in May 2012.

We routinely enter into license agreements with others for the use of brands, intellectual properties and technologies in our products. These agreements generally provide for royalty advances and license fee payments when the agreements are signed and minimum commitments which are cancellable in certain circumstances.

In June 2009, we entered into the 2009 License with Hasbro to license certain intellectual property and proprietary rights owned or controlled by Hasbro in titles, such as MONOPOLY, BATTLESHIP and CLUE, for use in our chance-based electronic gaming machines. The 2009 License, which is not assignable without Hasbro’s consent, is effective April 1, 2009 and has an initial term through December 31, 2016. We have the right to extend the 2009 License for an additional three-year term if certain conditions are satisfied. We are required to make minimum annual guaranteed royalty payments during the term of the 2009 License. See Note 12, Equity Compensation Plan – Warrants” for further information.

At June 30, 2009, we had total royalty and license fee commitments, advances and payments made and potential future royalty and license fee payments as follows:

	Minimum Commitments
Total royalty and license fee commitments, including contingent payments of $2.3 million	$	232.1
Advances and payments made		(119.4	)
Potential future payments, including contingent payments of $2.3 million	$	112.7

The total potential royalty and license fee commitments increased to $112.7 million at June 30, 2009 from $21.0 million at June 30, 2008, due to new agreements we entered into for brand and technology licenses partially offset by advances and payments made on existing commitments. Potential royalty and license fee commitments could increase in the future as we enter into new intellectual property, technology or brand licensing agreements. See Note 7, “Intangible Assets” for the related assets that are recorded on our Consolidated Balance Sheets.

F-32

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

As of June 30, 2009, we estimate that potential future royalty payments in each fiscal year will be as follows:

	Minimum Commitments
2010	$	14.6
2011		14.3
2012		15.3
2013		16.0
2014		16.3
Thereafter		36.2
Total	$	112.7

Non-cancelable raw materials purchase orders increased to $18.5 million as of June 30, 2009 from $2.1 million as of June 30, 2008, due to our commitment to a last time buy on a particular computer chip used in a large portion of our current gaming machines.

We have performance bonds outstanding of $1.0 million at June 30, 2009, to one customer, related to product sales, and we are liable to the issuer in the event of exercise due to our non-performance under the contract. Events of non-performance do not include the financial performance of our products.

Indemnifications

We have agreements in which we may be obligated to indemnify other parties with respect to certain matters. Generally, these indemnification provisions are included in sales orders and agreements arising in the normal course of business under which we customarily agree to hold the indemnified party harmless against claims arising from a breach of representations related to matters such as title to assets sold and licensed, defective equipment or certain intellectual property rights. Payments by us under such indemnification provisions are generally conditioned on the other party making a claim. Such claims are typically subject to challenge by us and to dispute resolution procedures specified in the particular sales order or contract. Further, our obligations under these agreements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of the obligations and the unique facts of each particular agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of June 30, 2009, we were not aware of any obligations arising under indemnification agreements that would require material payments, except for the matter disclosed in Note 14, “Litigation.”

We have agreements with our directors and certain officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. We have also agreed to indemnify certain former officers and directors of acquired companies. We maintain director and officer insurance, which may cover our liabilities arising from these indemnification obligations in certain circumstances. As of June 30, 2009, we were not aware of any obligations arising under these agreements that would require material payments.

F-33

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

Special Purpose Entities and Derivative Instruments

We do not have any special purpose entities for investment or the conduct of our operations. We have not entered into any derivative financial instruments, although we have granted stock options, restricted stock, equity based performance units and deferred stock units to our employees, officers, directors and consultants and warrants to a licensor, and we have issued convertible subordinated notes.

Letters of Credit

Outstanding letters of credit issued under our line of credit to ensure payment to certain vendors and government agencies totaled $0.9 million at June 30, 2009.

WMS Licensor Arrangements

Our sales agreements that include software and intellectual property licensing arrangements provide a clause whereby WMS indemnifies the third-party licensee against liability and damages (including legal defense costs) arising from any claims of patent, copyright, trademark, or trade secret infringement. Should such a claim occur, we could be required to make payments to the licensee for any liabilities or damages occurred. Historically, we have not incurred any significant cost due to the infringement claims. As we consider the likelihood of incurring future costs to be remote, no liability has been incurred.

Self-Insurance

We are self-insured for various levels of workers’ compensation, electronic errors and omissions liability, automobile collision insurance, as well as employee medical, dental, prescription drug and disability coverage. We purchase stop-loss coverage to protect against significant claims. Accrued insurance claims and reserves include estimated settlements for known claims, and estimates of claims incurred but not reported.

Product Warranty

We generally warrant our new gaming machines sold in the U.S. for a period of 90 days, while we generally warrant our gaming machines sold internationally for a period of 180 days to one year. Our warranty costs have not been significant.

14. LITIGATION

On October 2, 2003, La Societe de Loteries du Quebec (“Loto-Quebec”) filed claims against us and Video Lottery Consultants Inc., a subsidiary of IGT (“VLC”) in the Superior Court of the Province of Quebec, Quebec City District (200-06-000017-015). The pleadings allege that Loto-Quebec would be entitled to be indemnified by the manufacturers of Loto-Quebec’s VLTs, specifically WMS and VLC, if the class action plaintiffs, described below, are successful in the pending class action lawsuit against Loto-Quebec. In July 2008, we entered into a settlement agreement with Loto-Quebec under which Loto-Quebec agreed to suspend the action in warranty against us in exchange for our agreement to continue cooperating with the defense of the class action lawsuit against Loto-Quebec and, in the event of an adverse outcome in such lawsuit against Loto-Quebec, to arbitration of any warranty claim by Loto-Quebec. The settlement agreement reserves all of our defenses against Loto-Quebec.

F-34

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

The class action lawsuit discussed in Loto-Quebec’s claim was brought on May 18, 2001 against Loto-Quebec in the Superior Court of the Province of Quebec. It alleges that the members of the class developed a pathological gambling addiction by using Loto-Quebec’s VLTs and that Loto-Quebec, as owner, operator and distributor of VLTs, failed to warn players of the alleged dangers associated with VLTs. Spielo Manufacturing Inc., another manufacturer of VLTs, voluntarily intervened to support Loto-Quebec’s position. Class status was granted by the Court on May 6, 2002, authorizing Jean Brochu to act as the representative plaintiff. The class, which is currently undetermined, but potentially comprising more than 119,000 members, is requesting damages totaling almost $700 million Canadian dollars, plus interest. The trial began in September 2008. It is too early to assess the outcome of these actions and to determine whether any further claim will be pursued by Loto-Quebec under the terms of our settlement agreement.

In December 2008, we settled a trademark lawsuit against a third party for a cash payment to us in the amount of $5.0 million, which is included in the Interest income and other, net line in our Consolidated Statements of Income for the year ended June 30, 2009.

15. INFORMATION ON GEOGRAPHIC AREAS

Revenues derived from customers in the United States and Canada accounted for approximately 78%, 76% and 75% of our total revenues for the fiscal years ended June 30, 2009, 2008 and 2007, respectively. United States and Canada had more than 90% of our total long-lived assets as of June 30, 2009, 2008 and 2007. No other country in which we conduct business had greater than 10% of our total revenues or long-lived assets for the periods presented.

Geographic revenue information is determined by country of destination. Our operations outside the United States include: gaming operations equipment located in Canada, Europe and South Africa; sales and distribution offices in Argentina, Austria, Canada, China, Italy, the Netherlands, South Africa, Spain and the United Kingdom; and game development studios in Australia, the Netherlands and the United Kingdom. Substantially all of our revenues from customers outside the United States are denominated in U.S. dollars. At June 30, 2009 and 2008 approximately 41% and 25% respectively, of total current and long term trade accounts and notes receivable were from customers located outside of United States and Canada.

16. RETIREMENT PLANS

We sponsor 401(k) defined contribution plans within the United States. The plans cover full-time employees and provide for our contributions of up to 4.5% of covered employees’ compensation as defined in the plan. We also provide a deferred compensation plan within the United States to certain key employees. Our expense for these two plans totaled $4.4 million, $3.7 million and $2.6 million in fiscal 2009, 2008 and 2007, respectively.

We have two frozen defined benefit pension plans related to previously discontinued operations. Pension expense for these plans was not significant in the aggregate. In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”). This statement requires an employer to recognize the over-funded or under-funded status of a defined benefit and postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The adoption of SFAS No. 158 had no material effect on our net income or cash flows.

F-35

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

17. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Additional cash flow information was as follows for the fiscal years ended June 30:

	2009		2008		2007
Income taxes paid	$	45.5	$	21.9	$	15.5
Interest paid		3.7		3.4		3.4
Gaming operations equipment transferred to inventory		1.6		1.9		4.4

18. HURRICANE DAMAGE

We carry both property and business interruption insurance. We incurred damages to our leased facility in Gulfport, Mississippi in August 2005 which was covered by our property insurance, after the deductible. We began litigation relating to our business interruption claims against the insurance company in the Mississippi courts in the September 2006 quarter and the trial occurred in March 2009. On August 4, 2009, we received a judgment in our favor but based on the court’s interpretation of the policy, only nominal damages were awarded to us. This judgment will have no material impact on our Consolidated Financial Statements.

19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Summarized quarterly financial information is as follows for fiscal 2009 and 2008:

	Sept. 30 2008		Dec. 31 2008		Mar. 31 2009		Jun. 30 2009
Fiscal 2009 Quarters
Revenues	$	151.4	$	178.4	$	180.8	$	195.8
Gross profit, excluding depreciation expense		95.6		109.6		117.3		126.4
Net income		15.7		23.7		24.4		28.4
Earnings per share:
Basic	$	0.31	$	0.48	$	0.50	$	0.58
Diluted	$	0.27	$	0.41	$	0.43	$	0.49
Weighted-average common shares:
Basic common stock		49.9		49.3		48.8		48.8
Diluted common stock and common stock equivalents		60.0		58.9		58.2		59.0

	Sept. 30 2007		Dec. 31 2007		Mar. 31 2008		Jun. 30 2008
Fiscal 2008 Quarters
Revenues	$	132.5	$	159.2	$	172.8	$	185.6
Gross profit, excluding depreciation expense		79.6		93.5		101.4		111.7
Net income		11.1		16.0		18.8		21.6
Earnings per share:
Basic	$	0.22	$	0.32	$	0.37	$	0.43
Diluted	$	0.19	$	0.27	$	0.32	$	0.36
Weighted-average common shares:
Basic common stock		49.8		50.2		50.5		50.5
Diluted common stock and common stock equivalents		60.8		61.0		60.9		60.8

F-36

WMS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in millions of U.S. dollars and millions of shares, except per share amounts)

The December 2008 quarter includes a $3.1 million after-tax gain or $0.05 per diluted share, related to a cash settlement of trademark litigation.

The December 2008 quarter includes a $1.4 million or $0.02 per diluted share benefit related to the period of January 1, 2008 through September 30, 2008 due to the retroactive reinstatement of the research and development tax credit legislation.

The June 2008 quarter includes a $2.3 million after-tax, or $0.04 per diluted share, impact to write down to net realizable value a licensed technology.

F-37

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

Years Ended June 30, 2009, 2008 and 2007

( in millions of U.S. dollars)

Column A	Column B		Column C				Column D		Column E
	Balance at Beginning of Period		Additions				Deductions		Balance at End of Period
			Charged to Costs and Expenses		Charged to Other Accounts		Amounts Written off or Reclassified
Allowance for total accounts and notes receivables:
2009	$	3.0	$	7.1	$	—	$	4.8	$	5.3
2008	$	2.5	$	3.5	$	—	$	3.0	$	3.0
2007	$	2.6	$	1.7	$	—	$	1.8	$	2.5

F-38

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 27th day of August, 2009.

WMS INDUSTRIES INC.
By:	/S/    BRIAN R. GAMACHE
	Brian R. Gamache
	Chairman of the Board & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been duly signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Positions	Date
/S/    BRIAN R. GAMACHE         Brian R. Gamache	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	August 27, 2009
/S/    SCOTT D. SCHWEINFURTH         Scott D. Schweinfurth	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)	August 27, 2009
/S/    JOHN P. MCNICHOLAS, JR.         John P. McNicholas, Jr.	Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer)	August 27, 2009
/S/    LOUIS J. NICASTRO         Louis J. Nicastro	Founding Director	August 27, 2009
/S/    EDWARD W. RABIN, JR.         Edward W. Rabin, Jr.	Lead Director	August 27, 2009
/S/    HAROLD H. BACH, JR.         Harold H. Bach, Jr.	Director	August 27, 2009
/S/    ROBERT J. BAHASH         Robert J. Bahash	Director	August 27, 2009
/S/    PATRICIA M. NAZEMETZ         Patricia M. Nazemetz	Director	August 27, 2009
/S/    NEIL D. NICASTRO         Neil D. Nicastro	Director	August 27, 2009
/S/    IRA S. SHEINFELD         Ira S. Sheinfeld	Director	August 27, 2009
/S/    BOBBY L. SILLER         Bobby L. Siller	Director	August 27, 2009
/S/    WILLIAM J. VARESCHI, JR.         William J. Vareschi, Jr.	Director	August 27, 2009

EX-10.6

EXHIBIT 10.6

GAMING DEVICE LICENSE AGREEMENT

Contract No. 124788

This Gaming Device License Agreement (“Agreement”) is made as of the 1^st day of April, 2009 (the “Effective Date”) by and between:

Licensor:	HASBRO, INC. and HASBRO INTERNATIONAL, INC.
	1027 Newport Avenue
	Pawtucket, Rhode Island 02862-1059
	USA
	(401) 727-5617 (Telephone)
	(401) 727-5595 (Fax)
and
Licensee:	WMS GAMING INC.
	800 South Northpoint Boulevard
	Waukegan, Illinois 60085
	(847) 785-3085 (Telephone)
	(847) 785-3177 (Fax)

This Agreement consists of the attached License Agreement Summary (the “Summary”), the License Agreement Basic Terms (the “Basic Terms”) and all schedules and exhibits thereto. To the extent of a conflict or inconsistency between the terms and conditions in the Summary and the Basic Terms, the Summary shall control. Capitalized terms not defined in context have the meanings set forth in the Summary. The terms and conditions of the Agreement shall only be binding if Licensee signs and returns this Agreement below and Licensor countersigns same.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Hasbro Contract Number 124788. ©2006-2009 Hasbro, Inc. and WMS Gaming Inc. All rights reserved. This document shall not be deemed an offer and shall not be binding unless signed by all named parties.

The parties hereby declare, and by these presents confirm, their express desire that this contract be written in English. Les parties déclarent qu’elles ont demandé et par les présentes confirment leur désir exprès que cette convention soit rédigée en anglais.

AGREED TO AND ACCEPTED BY:
HASBRO, INC.	WMS GAMING INC.
By:	By:
Date:	Date:
HASBRO INTERNATIONAL, INC.
By:
Date:

The “Date of Execution” of this Agreement is June 12, 2009.

ii

LICENSE AGREEMENT SUMMARY

Contract No: 124788

1. Certain Basic Terms and Definitions

“Licensed Properties” means the intellectual property and proprietary rights owned or controlled by Licensor in all versions (other than versions that are co-branded with third parties (“Co-Branded Versions”)), subsequently developed versions and international versions and translations of the MONOPOLY, BATTLESHIP, CLUE (CLUEDO), YAHTZEE, and [*] board games sold by Licensor, including without limitation their respective attributes, associated logo(s), names, characters, symbols, designs, likenesses, visual representations, style elements, artwork, trademarks, trade dress, copyrighted elements, rules, features, game play and game mechanics, and patents owned or controlled by Licensor and used in any of the foregoing board games (provided, however, that if there is a third-party license fee or royalty for use of any such patent, then Licensor shall inform Licensee of such patent and Licensee shall be solely responsible for payment of the license fee or royalty and Licensee covenants and agrees to pay the same). Licensor represents and warrants that there is no such patent owned or licensed by Licensor and used in the current versions of the MONOPOLY, BATTLESHIP, CLUE (CLUEDO), YAHTZEE, and [*] board games for which Licensee would be responsible for payment of a license fee or royalty as provided in the immediately preceding sentence. In no event shall Licensee have the right to utilize the Licensed Properties as depicted in or adapted for any live action presentation, audio program or recording, theatrical motion picture, direct-to-video program, or television program, series or game show.

“Licensed Articles” means (i) any “Gaming Device” that utilizes the Licensed Properties; and (ii) gaming services and software applications using the Licensed Properties which relate to Gaming Devices, including services through which Gaming Devices are linked for progressive jackpots, whether through local area networks, wide area networks or otherwise as well as network-enabled, server-based, server-enabled or downloadable gaming applications used in connection with such Gaming Devices or Licensed Articles (collectively “Network-Enabled Gaming”).

“Gaming Device” means: any mechanical, electromechanical or electronic device or machine dedicated for use only for chance-based gaming (but which may have a skill factor in the base game or bonus rounds as provided in the last sentence of this paragraph) in legal gaming establishments and peripheral systems, including all Class II and Class III gaming devices as these terms are understood pursuant to the Indian Gaming Regulatory Act and its subsequent legal or regulatory interpretations falling within the foregoing definition, unless falling within the exclusions or restrictions contained in this Agreement, and associated equipment (e.g., chairs, signage and Network-Enabled Gaming systems) used in connection with such a device or machine, through which a player places a wager, the outcome of the wager is determined (whether in the device, the peripheral systems or associated equipment) and on which the outcome of the wager (win or loss) is displayed (but the wager may be placed and the outcome displayed on separate Gaming Devices that are within the same gaming establishment) (e.g., slot machines, whether video, reel spinning or otherwise, and video lottery terminals, electronic table games, video poker machines, dedicated handheld / mobile gaming devices provided by casinos or other legal gaming establishments for use only in casinos and other legal gaming establishments, all of the foregoing which may be provided through Network-Enabled Gaming, but subject to the exclusions set forth below). Such chance-based gaming devices may have game play or bonus rounds that include a limited skill factor, and may include video poker and blackjack or other games notwithstanding that there is a skill factor in poker, blackjack or other game.

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

i

Gaming Devices and Licensed Articles do not include the following items, including machines or devices, peripheral systems or equipment, or gaming services or products related to the following items: [*].

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

ii

[*]

For the avoidance of doubt, it is acknowledged and agreed that exclusion (A) above includes [*], and accordingly such [*] are not included in the definitions of Licensed Articles or Gaming Devices, but the parties expressly agree that [*] are not excluded by exclusion (A) above. Licensee may offer free interactive on-line advertising games utilizing the Licensed Properties that simulate, illustrate, or explain the play of the Licensed Articles to market, advertise, and promote the Licensed Articles; provided that such free interactive games shall be subject to all of the terms and provisions of this Agreement with respect to the Licensed Articles, including, without limitation, Licensor’s approval rights, Licensee shall accrue no revenue from the use and distribution of the same, and there shall be limitations on the amount and quality of play of such interactive games so that the player cannot or will not play such interactive games for a sustained period of time, either in one playing session or in multiple sessions over time, and further that Licensor shall have the right not to approve such interactive games if it determines that the interactive games would be competitive with or infringe on the rights granted by Licensor to other licensees for interactive on-line amusement games using the Licensed Properties. In the event that Licensor determines, in its sole and absolute discretion, and regardless of whether Licensor shall have previously approved the interactive game, that any such interactive game is competitive with or arguably infringes the rights granted by Licensor to any such other licensee for amusement games or is not in compliance with the provisions herein, then Licensee shall modify or cease the distribution and offering of such interactive game as directed by Licensor.

[*]

“Pre-Existing Agreement” means the license to the MONOPOLY Licensed Property between Licensor and Licensee, dated the 1^st day of September, 1997, as amended.

“Territory”: Worldwide, subject to possible withdrawal of certain Regions from the scope of the Territory as provided in this Agreement. It is understood that Hasbro, Inc. shall be deemed “Licensor” hereunder with respect to all rights and obligations of Licensor in the United States, its territories, and possessions, and Hasbro International, Inc. shall be deemed “Licensor” hereunder as to all rights and obligations of Licensor elsewhere in the Territory.

“Regions”: For purposes of this Agreement, the Territory is divided into five (5) “Regions” as follows: (1) North America (including the territories and possessions of the United States and Canada, Mexico, the Caribbean and cruise ships, but excluding Central America); (2) Central America and South

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

iii

America (not including Mexico); (3) Europe (including the United Kingdom and Russia) and Africa; (4) Australia/New Zealand; and (5) Asia (including Japan).

“Channels of Distribution”: Legal gaming establishments.

“Term”: The Term of this Agreement shall consist of an Initial Term and, if exercised as provided below, an Extension Term.

“Initial Term”: The Effective Date (April 1, 2009) through December 31, 2016, unless earlier terminated in accordance with the terms of this Agreement. Provided, however, that the Initial Term for the [*] Licensed Property shall commence on [*] (except that commencing on the Effective Date Licensee is expressly authorized to design, develop, manufacture and seek regulatory approval for Licensed Articles using the [*] Licensed Property and during the [*], Licensee may display Licensed Articles utilizing the [*] Licensed Property at trade shows, consult with casinos or other legal gaming establishments, distributors and other third parties with regard to the placement of such Licensed Articles, and make announcements that Licensor has granted such rights to Licensee as well as advertise, promote and market such Licensed Articles; provided, however, Licensee may also make such disclosures prior to such time period solely to the extent that such disclosures are required by applicable laws, rules and regulations).

“Extension Term”: January 1, 2017 through December 31, 2019, unless earlier terminated in accordance with the terms of this Agreement. In the event that Licensee is not in default of any material terms of this Agreement both at the time of exercise and on the last day of the Initial Term, Licensee may exercise its option to extend the Term of this Agreement for the Extension Term by sending written notice to Licensor of Licensee’s exercise of such option no later than [*]; provided, however, that such exercise of the Extension Term shall not be effective unless the following condition (the “Extension Royalty Requirement”) has been satisfied: Licensee has earned royalties totaling at least [*] in the Territory in the period beginning [*] through [*], provided, however, that Licensee may cure a shortfall of earned royalties in the stated timeframe in the amount of [*] or less by a cash payment in the amount of the shortfall (the “De Minimis Payment”) made on or before [*]. For avoidance of doubt, for the purpose of determining whether the Extension Royalty Requirement has been satisfied, earned royalties for the period [*] through [*] shall not include royalties earned in the month of [*] notwithstanding that payment of such royalties is due not later than [*] and so may be paid during the Initial Term, and royalties that are earned in [*] but are not due and payable until [*] shall be included for purposes of determining whether the Extension Royalty Requirement has been satisfied. Advance Payments paid but not earned as royalties do not count against the Extension Royalty Requirement.

“Required Notices” means the following notices:

- For MONOPOLY: “The MONOPOLY name and logo, the distinctive design of the game board, the four corner squares, the MR. MONOPOLY name and character, as well as each of the distinctive elements of the board and playing pieces are trademarks of Hasbro for its property trading game and game equipment. © [year of publication] Hasbro. All Rights Reserved.” (provided, however, that if space prevents use of this notice, a shorter notice is as follows: “MONOPOLY is a trademark of Hasbro used with permission. © [year of publication] Hasbro. All Rights Reserved.”)

- For the other Licensed Properties: “[LICENSED PROPERTY] is a trademark of Hasbro and is used with permission. © [year of publication] Hasbro. All Rights Reserved. Licensed by Hasbro.”

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

iv

“Affiliate” means, as to a particular party, an entity or person that is controlled by, controls, or is under common control with, such party. The term “control” (or the like) shall mean the power to elect a majority of the board of directors or other governing group of an entity or the power to direct management of such party, whether, in each case, through the ownership of voting securities, by contract, or otherwise.

2. Payment Terms

2.1 Royalties.

(a) Royalties

(i) Lease Placements. For Licensed Articles, including Licensed Property Associated Gaming Devices (as defined below), which are not sold outright by Licensee or a sublicensee that has been pre-approved in writing by Licensor, but rather are leased or otherwise placed with third parties under arrangements where Licensee will receive ongoing payments from their operation and for any other Licensed Articles not covered by Sections 2.1(a)(ii) and 2.1(a)(iii) of this Summary below, Licensee will pay Licensor a royalty equal to [*] of the gross revenue received by Licensee or sublicensee, whichever is greater, for the use of such Licensed Articles, less any fees payable to third parties such as government levies, third party commissions, prizes for players (or funds to support such prizes), royalties to other licensors and amounts payable to casinos.

(ii) Flat Fee. For Licensed Articles including Licensed Property Associated Gaming Devices which are not sold outright by Licensee or a sublicensee that has been pre-approved in writing by Licensor, but rather are leased or otherwise placed with third parties under arrangements where Licensee will receive ongoing payments from their operation, which are placed in such jurisdictions where Licensor is precluded by statute, regulation, rule, ordinance or order from receiving royalty payments based upon such percentage of revenue as provided above without Licensor first being licensed, approved or found suitable, Licensee will pay Licensor for each day each Licensed Article is operating the royalties in the applicable jurisdictions as set forth on the schedule attached hereto as Exhibit 7 (the “Flat Fee Schedule”). See Section 2.1(b) of this Summary regarding adjustments to the Flat Fee Schedule.

(iii) Sale. For Licensed Articles including Licensed Property Associated Gaming Devices which are sold by Licensee or by a sublicensee of Licensee that has been pre-approved in writing by Licensor, Licensee shall pay Licensor a royalty of [*] of Licensee’s Net Sales of such Licensed Articles (including but not limited to slot machines and slot machine conversions) or, if applicable, such sublicensee’s Net Sales whichever is higher. The term “Net Sales” shall mean gross sales less only fees payable to third parties that are not recognized as revenue by Licensee under generally accepted accounting principles consistently applied in accordance with Licensee’s normal practices such as government taxes, TITO license fees, freights costs, prizes for players (or funds to support such prizes) and the following discounts and credits: corporate discounts, tradeshow discounts, volume discounts, no-trial discounts, no-trade-in discounts and trade-in credits, provided that they are payable to third parties and not recognized as revenue by Licensee under generally accepted accounting principles consistently applied in accordance with Licensee’s normal practices. No deductions shall be made for cash discounts, marketing allowances, bad debt or uncollectible accounts. All costs and expenses incurred in the manufacture, sale, distribution or exploitation of the Licensed Articles, or otherwise incurred by Licensee or an approved sublicensee, shall be paid by Licensee or such sublicensee, and no such costs or expenses shall be deducted from any royalty payable to Licensor.

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

v

Any Gaming Device that Licensee sells that does not include Licensed Property, but which Licensee converts within [*] of such initial sale to a Gaming Device that includes Licensed Property shall be considered a Licensed Article and Royalties shall be paid to Licensor for the sale of the Gaming Device, as set forth in this Section 2.1(a) (iii).

(iv) Certain Royalty Clarifications

(A) For the avoidance of doubt, the parties acknowledge and agree that where a Gaming Device is a Licensed Property Associated Gaming Device Licensee shall pay royalties as set forth in Sections 2.1(a)(i)-(iii), based upon the revenues from the use, placement, operation or sales of the Licensed Property Associated Gaming Device (and for the avoidance of doubt, and without expanding the scope or definition of Licensed Property Associated Gaming Devices as set forth in Section 2.1(a)(iv)(B), (i) expressly including, without limitation, all such revenues with respect to any games, features, wagers or applications (including Network-Enabled Gaming Applications) accessed or played by the player from or through such Licensed Property Associated Gaming Device, regardless of whether or not such games, features, wagers or applications include Licensed Property (including, without implied limitation, primary wagering games that do not utilize Licensed Property in the game theme, game play, iconography or characters, such as the primary wagering games on the Player Terminals in the current MONOPOLY BIG EVENT game), but subject to Section 2.1(a)(iv)(C) and expressly agreeing that Licensed Property Side Games are not within the scope or definition of Licensed Property Associated Gaming Devices, and (ii) expressly excluding revenues associated with the use, placement, operation or sales of unbranded infrastructure associated with Network-Enabled Gaming Devices, such as servers), as applicable based on the type of placement, calculated as set forth in the applicable Section (and for royalty payments which are to be made under Section 2.1(a)(ii), the parties shall establish a Flat Fee set in good faith that is estimated to be [*] of the applicable projected revenues, less the permitted deductions).

(B) A “Licensed Property Associated Gaming Device” shall mean a Gaming Device that has any one or more of the following criteria: (i) Licensed Property appears on the hardware (including a top-box) or cabinetry of the Player Terminal and/or on the physical signage connected to the Player Terminal, or (ii) Licensed Property is displayed on the video display of the Player Terminal (which, for the avoidance of doubt, includes, without limitation, the top-box) and/or displayed on signage connected to the Player Terminal before, during or after game play, other than where such display is either only infrequent and incidental or where such use is as a “Licensed Property Side Game” (defined below), or (iii) the primary wagering game played on the Player Terminal utilizes Licensed Property in the game theme, game play, iconography or characters, or (iv) the Player Terminal is linked (other than through a “Licensed Property Side Game”) to a display, game, bonus round or the like, which is linked to one or more other Player Terminals (“Multiple Machine Display”), and on or in which Licensed Property is displayed or used at least [*]. For the avoidance of doubt it is understood and agreed that, without implied limitation, a Player Terminal shall be a Licensed Property Associated Gaming Device if it meets criteria (iv), notwithstanding that it does not meet any of the other criteria, including, without limitation, that its primary wagering game does not utilize Licensed Property in the game theme, game play, iconography or characters (for example, the Player Terminals in the current MONOPOLY BIG EVENT game). A handheld mobile Gaming Device shall be a Licensed Property Gaming Device if it meets any one or more of the foregoing criteria (i) through (iv).

(C) The parties recognize that there may be Non-LP Network-Enabled Gaming Applications (defined below) for which a royalty is payable based on its use in connection with Licensed Property Associated Gaming Devices, but where the revenues of Licensee or its sublicensees derived from such Non-LP Network-Enabled Gaming Application cannot be tied to the specific Licensed Property Associated Gaming Devices (i.e., where the Non-LP Network-Enabled Gaming Application is

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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distributed by means of a Multiple Machine Display, casino-wide seat licenses or where a flat fee is paid for the Non-LP Network-Enabled Gaming Applications and [*]. In such a situation, royalties of [*] shall be applied to the [*] from the Non-LP Network-Enabled Gaming Application calculated as the [*].

(D) For the avoidance of doubt, that parties acknowledge and agree that where a Licensed Property Side Game is displayed on a non-Licensed Property Associated Gaming Device, Licensee shall pay royalties attributable to such Licensed Property Side Game as set forth in Sections 2.1(a)(i)-(iii), as applicable based on the type of placement, as set forth above, and not on the revenues from such non-Licensed Property Associated Gaming Device.

(E) Notwithstanding anything to the contrary contained herein, the parties acknowledge and agree that Licensee may design or develop certain Network-Enabled Gaming Applications that may not fall within any of the foregoing situations. In such an event, Licensee will present the situation to Licensor in order to determine whether there is a mutually agreeable royalty structure to apply, but neither party shall be obligated to agree to any such royalty structure, except in its sole and absolute discretion; if the parties cannot agree on a royalty structure, Licensee shall not utilize or incorporate Licensed Property in such proposed Gaming Devices.

(G) Certain Definitions

(1) “Network-Enabled Gaming Application” means an application that is provided by or controlled by a server and not provided by or controlled by a Gaming Device that is a Player Terminal.

(2) “Licensed Property Network-Enabled Gaming Application” means a Network-Enabled Gaming Application that utilizes a Licensed Property.

(3) “Non-LP Network-Enabled Gaming Application” means a Network-Enabled Gaming Application that is not a Licensed Property Network-Enabled Gaming Application.

(4) “Licensed Property Side Game” means a Licensed Property Network-Enabled Gaming Application that is separately selected by the player apart from the primary wagering game on the Player Terminal, not integrated into the game play of the primary wagering game, is not funded through the pay tables of the primary wagering game and is not displayed on the Player Terminal or its associated signage until the player makes a selection to see the side games (i.e., the player presses a button or takes some other action to call up a menu of side games)

(5) “Player Terminal” means a device where a player places a wager or on which the outcome of the wager is displayed.

(v) For Category B2, B3 and B4 machines in the United Kingdom which are distributed through a sublicense, Licensee shall pay Licensor a royalty equal to [*] of the [*].

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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[*]

(b) Flat Fee Schedule Adjustments. [*] the parties shall confer and negotiate in good faith to make adjustments, if necessary or appropriate, to the Flat Fee Schedule for the upcoming subsequent [*] in an effort to have the royalties to be paid using the Flat Fee Schedule in such subsequent [*] approximate an effective Royalty rate of [*] of the projected revenues for such subsequent [*] for the applicable Licensed Articles to which the Flat Fee Schedule and its rates would apply, subject to applicable gaming regulatory requirements. The projected revenues shall be based upon forecasted placements of Gaming Devices and their associated projected revenues, consistent with Licensee’s internal planning, which projections shall be included in the Business and Marketing Plan provided pursuant to Section 4 of this Summary giving consideration to a number of factors, including but not limited to, the then-current footprint and financial performance of Licensed Articles, the trend in growth or shrinkage of the then-current footprint of Licensed Articles, the number and timing of new Licensed Articles scheduled for introduction during the subsequent [*], the types of games scheduled for introduction (e.g., WAP or stand alone, video or mechanical, etc.), customer acceptance of participation products generally, anticipated consumer acceptance of the Licensed Articles and player trends (e.g., volatility, denomination, free spin games, picking games, etc.), projected introductions of new platforms and technologies (e.g., Network-Enabled Gaming, account-based wagering, handheld, transmissive and community gaming, etc.), macro changes to the relevant gaming markets, the competitive landscape, the macro economy, changes in regulations (i.e., smoking bans), changes in taxation, jurisdictional approvals, new gaming markets opening, expansions and contractions to existing casinos/slot floors, new casino openings, the accuracy of prior [*]’s projections, and any projected increase or decrease in the consumer demand for Gaming Devices themed for the applicable Licensed Properties (including, without limitation, the impact based upon new product or promotional releases or activities and changes to consumer awareness and popularity of the Licensed Properties). For the avoidance of doubt, the listing of certain factors in the preceding sentence does not preclude other relevant factors from being taken into account and does not mean that all of the listed factors will necessarily be relevant in any given [*]. In connection with the parties conferring on and setting of the new Flat Fee Schedule, Licensee shall provide Licensor, as part of the annual Business and Marketing Plan, supplemented as necessary, with an understanding of the underlying assumptions relied upon in its forecasting consistent with the information provided by Licensee to Licensor in setting the Flat Fee Schedule for [*]. In setting the subsequent [*] Flat Fee Schedule, or otherwise, the parties shall not seek to true up or otherwise reconcile any prior [*] effective royalty rates. If Licensor and Licensee have not agreed on the revised Flat Fee Schedule for the upcoming [*] by December 31, then the issue shall be settled by the Dispute Resolution Procedure set forth in Section 10 of this Summary.

2.2 Total Royalty Guarantee. Licensee shall pay to Licensor minimum guaranteed royalties of not less than [*] (the “Total Royalty Guarantee”), payable as follows:

(a) In each [*], Licensee shall pay to Licensor [*] minimum guaranteed royalties (each an “[*] Guarantee”), fully-recoupable against royalties earned in such [*], payable by advance payments (each an “Advance Payment”) for each such [*] as set forth below.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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With respect to each [*], Licensee guarantees to pay to Licensor the [*] Guarantee amount set forth above for royalties with respect to Licensed Articles earned during the period [*] (other than for [*], where the applicable period is from [*]), payable in [*] Advance Payments [*], each equal to [*] of the [*] Guarantee amount as set forth above, due on [*] (other than [*] where there shall be only [*] Advance Payment due on [*]), such Advance Payments to be applied and off-set against royalties earned in such [*]. Notwithstanding the foregoing, if the actual earned royalties in any [*] are greater than [*] of the total Advance Payment as of [*], then the [*] Advance Payment due on [*] shall be off-set and reduced by the amount that actual earned royalties exceed the first Advance Payment that was payable on [*]. [*].

(b) All [*] Guarantee payments, including Advance Payments, are non-refundable. Each [*] Guarantee shall be applicable only to the royalties earned in the applicable [*]. As an example, but without limitation, the [*] Guarantee for the period from [*] shall not include, and the Advance Payments for such period shall not be recouped against, royalties earned in [*] notwithstanding that such royalties are payable on [*], and instead such royalties earned in [*] and paid in [*] shall apply against the [*] Guarantee and (if applicable) be offset against the [*] Advance Payments.

(c) Advance Payment for [*]. For the [*] Guarantee of [*], Licensee shall be credited with the previously paid balance of the [*] guarantee payment (pursuant to the Pre-Existing Agreement) of [*]. Accordingly, the remaining Advance Payment owed to Licensor for [*] is [*], which shall be due and payable on [*] unless previously out-earned and paid by actual royalties. Furthermore, the License Extension Fee set forth in Section 2.3 of this Summary shall be credited against and shall be off-set against the Advance Payment and [*] Guarantee for [*].

2.3 License Extension Fee. In consideration of the license extension, on [*] Licensee shall pay Licensor a license extension fee in the amount of [*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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(“License Extension Fee”). The License Extension Fee is separate from and not to be off-set against royalties, but shall be off-set and applied against the Advance Payment and [*] Guarantee for [*].

2.4 Currency; Electronic Payments. All amounts payable hereunder shall be paid in and are stated in United States Dollars calculated using the average exchange rate for the relevant currency quoted by the Wall Street Journal for the relevant month when the payments are made, costs of transfer being for the account of Licensee. Further, all payments to Licensor shall be made in United States Dollars by wire transfer, with directions for such transfers to be provided from Licensor to Licensee in a side letter (“Side Letter”) separate from this Agreement (for the avoidance of doubt, the contents of the Side Letter shall be treated as Confidential Information under Section 27 of the Basic Terms).

3. Additional Provisions

3.1 Failure of a Licensed Property to Receive Regulatory Approval.

(a) In the event that Licensee, despite using good-faith, commercially reasonable efforts, is unable to obtain regulatory approval in the States of Nevada or Mississippi for Gaming Devices or Licensed Articles using one of the Licensed Properties solely because of the nature of the Licensed Property involved (for example, because such Licensed Property is deemed to be contrary to the public policy or associated with products marketed to children and therefore unsuitable for use in connection with Gaming Devices under Nevada Gaming Commission Regulation 14.025 or similar regulations), then Licensee shall have the option, exercised by written notice to Licensor given within thirty (30) days of such regulatory decision, to initiate the procedure in Section 3.1(b) below for replacing such Licensed Property with a substitute Licensed Property.

(b) If Licensee timely gives such notice, then Licensor and Licensee shall discuss in good-faith possible other properties owned or controlled by Licensor that are available for use for Gaming Devices and Licensed Articles at that time and are not then the subject of any negotiations between Licensor and a third-party for use for rights included within the scope of the definition of Licensed Articles or Gaming Devices which could be substituted for such Licensed Property, but the substitution of any such other property for such Licensed Property shall be subject to the approval of Licensor, to be granted or withheld in Licensor’s sole and absolute discretion. In the event that Licensee and Licensor mutually agree on a substitute Licensed Property, then effective on the date agreed upon by Licensor and Licensee the Licensed Property that was the subject of the regulatory decision shall be replaced by such substitute Licensed Property. For the avoidance of doubt, and without implied limitation, there shall be no changes in the Total Royalty Guarantee, [*] Guarantees or royalties based on any such Licensed Property not receiving regulatory approval as aforesaid. If Licensor and Licensee have not agreed on a substituted Licensed Property within thirty (30) days after Licensee’s notices as set forth in Section 3.1(a), then the issue shall be settled by the Dispute Resolution Procedure.

(c) If Licensee fails to timely give such notice as set forth in section 3.1(a), then such Licensed Property shall remain part of this Agreement and no longer be subject to this Section 3.1, and this Agreement shall continue in full force and effect with no change in the terms and provisions of this Agreement.

3.2 Region Clawbacks.

(a) Within [*] after the U.S. Launch of the first Licensed Article using a Licensed Property, Licensee shall in the normal course of business Introduce in each Region of the Territory Licensed Articles using such Licensed Property; provided, however, that with respect to the

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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MONOPOLY Licensed Property Licensee shall in the normal course of business Introduce in each Region of the Territory Licensed Articles using such Licensed Property within [*] of the Effective Date of this Agreement.

(i) For purposes of this provision, “U.S. Launch” shall mean obtaining regulatory approval of a Licensed Article using a Licensed Property in each of Nevada, New Jersey, Mississippi, and Native American gaming jurisdictions. After Licensee has obtained regulatory approval of a Licensed Article using a Licensed Property in one of these jurisdictions, it will thereafter seek to obtain regulatory approval in such other jurisdictions using its good faith business judgment in the normal course of its business. Licensee shall, upon request of Licensor from time to time, inform Licensor of the status of its efforts to obtain the U.S. Launch for each Licensed Property (other than MONOPOLY for which the U.S. Launch has already occurred). Promptly after the U.S. Launch for a Licensed Property, Licensee shall send Licensor a notice stating the date of the U.S. Launch for such Licensed Property. Licensee shall have the right to determine when to develop and have the U.S. Launch for Licensed Articles of each Licensed Property in its sole and absolute discretion.

(ii) For purposes of this provision, “Introduce” shall mean the following:

(A) For the Central America and South America Region, placement in the normal course of business of [*] Licensed Properties.

(B) For the Europe and Africa Region, placement in the normal course of business of [*] Licensed Properties.

(C) For the Australia/New Zealand Region, placement in the normal course of business of [*] Licensed Properties.

(D) For the Asia Region, placement in the normal course of business of [*] Licensed Property.

(b) In the event that Licensee fails to Introduce Licensed Articles using a Licensed Property in a given Region within such [*] period after the first U.S. Launch of Licensed Articles for a Licensed Property (or within [*] after the Effective Date for the MONOPOLY Licensed Property), then Licensor may by written notice to Licensee withdraw Licensee’s rights to such Licensed Property in such Region, such withdrawal of the Region with respect to the given Licensed Property to be effective upon the giving of such notice, but subject to the provisions of Section 14 (Disposal of Stock After Expiration; Continuation of Leases) of the Basic Terms.

(c) For avoidance of doubt, to meet the specified number of placements within a Region that count towards the minimum number of units constituting an Introduction as specified in Section 3.2(a)(ii) of this Summary, the required minimum number of Licensed Articles must simultaneously be in place at any one time within the [*]. As an example, if the requirement of twenty (20) CLUE (CLUEDO) placements in Australia/New Zealand applied in the [*] period from [*], the requirement of [*] placements would not be met by there being only [*] in [*] which are then removed in [*] and a subsequent [*] in [*], but the requirement would be met if on [*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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[*]

there were [*] of such Licensed Articles in the Region even if some units are subsequently removed and not replaced with additional units. MONOPOLY Gaming Devices originally placed pursuant to the Pre-Existing Agreement as of the Effective Date and still in place at the applicable time shall count towards the quantity of MONOPOLY Gaming Devices set forth in Section 3.2(a)(ii) of this Summary.

3.3 United Kingdom. For each Licensed Property being treated separately, within [*] of the first Licensed Article using a Licensed Property (or, with respect to the MONOPOLY Licensed Property, within [*]), Licensee shall simultaneously have available Licensed Articles using such Licensed Property on a minimum of an aggregated total of [*] Category B2, B3 and/or B4 Gaming Devices (as defined under the UK Gambling Act of 2005) (“UK Introduction”). If Licensee has not made a UK Introduction of a Licensed Property within the period set forth herein, then Licensor may by written notice to Licensee withdraw Licensee’s rights to that Licensed Property under this Agreement in the United Kingdom with respect to Category B2, B3 and/or B4 games under the UK Gambling Act of 2005 and its regulations, such withdrawal to be effective upon the giving of such notice, but subject to the provisions of Section 14 (Disposal of Stock After Expiration; Continuation of Leases) of the Basic Terms.

4. Business and Marketing Plan

4.1 Marketing Plan. Commencing no later than November 1, 2009, and annually thereafter by November 1 of each calendar year during the Term, Licensee shall submit to Licensor a written business and marketing plan (“Business and Marketing Plan”) for the Licensed Articles.

(a) Annual Marketing Plan. The marketing plan portion of the Business and Marketing Plan (“Marketing Plan”) shall include with respect to each release or planned release of Licensed Articles a summary of marketing, promotion and advertising strategies, an overview of planned campaigns by Region (or by country if and where applicable), inclusive of milestone timelines and concepts/renderings of marketing materials (print, web, microsites, promotional materials, etc.). The parties expressly agree, that the decision whether and to what extent to advertise, promote or market the Licensed Articles is in Licensee’s sole and absolute discretion and that there is no actual or implied minimum quantity of advertising, promotional or marketing obligations or expenditures hereunder.

(b) Marketing Plan Update. In May of each year during the Term, Licensee shall deliver to the Licensor an update to the Marketing Plan setting forth: (i) with respect to each release or planned release of the Licensed Articles, a summary of marketing, promotion and advertising strategies, an overview of planned campaigns by Region (or by country if and where applicable), inclusive of milestone timelines, and concepts/renderings of marketing materials (print, web, microsites, promotional materials, etc.), and (ii) such additional marketing information as may be reasonably requested in advance by Licensor.

4.2 Business Plan.

(a) The business portion of the Business and Marketing Plan (“Business Plan”) shall set forth:

(i) the current footprints and projected annual footprints, revenues and royalties by Licensed Property and Region (and for the United States and Canada by general geographic region), for the subsequent [*],

(ii) the projected product release schedule by Licensed Property for the subsequent [*], and

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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(iii) a general summary of the major and projected trends and developments in the domestic and international slot machine industry for the preceding and subsequent [*], including those factors to be considered for the Flat Fee Schedule Adjustments pursuant to Section 2.1(b) of the Summary.

(b) Quarterly Business Updates. In February, May and August of each calendar year during the Term, Licensee shall deliver to the Licensor an update of the Business Plan: (i) summarizing the existing footprint and product release schedule by Licensed Property, including any updates on product development, regulatory approval submissions and projected release dates for the current calendar year, (ii) the projected number of units, revenues and royalties for the current calendar year by quarter and an update on the outlook for the subsequent calendar year by Licensed Property and Region, and (iii) such additional information as may be reasonably requested in advance by Licensor from time to time.

4.3 For the avoidance of doubt, the Business and Marketing Plan are to be treated as Confidential Information under Section 27 of the Basic Terms.

5. Warrants

5.1 Existing Warrant. As additional consideration to induce Licensor to enter into this Agreement, Licensee has arranged for WMS Industries, Inc. to amend simultaneously with the execution of this Agreement the existing Common Stock Purchase Warrant (“Existing Warrant”) for 250,000 shares (now 375,000 shares due to a stock split) of the common stock of WMS Industries, Inc. dated September 15, 2003, by and between Hasbro, Inc. and WMS Industries, Inc., to change the “Expiration Date” (as defined therein) to be December 31, 2018, subject to further extension to December 31, 2021 if the Term of this Agreement is extended for the Extension Term. The agreed upon form of amendment to the Existing Warrant is attached to this Agreement as Exhibit 9. Licensor hereby waives its right to accelerate the vesting of the Existing Warrant to purchase the shares of the Common Stock of WMS Industries, Inc. as provided for in that certain Existing Warrant agreement, which shall be amended accordingly. Licensee acknowledges that such amendment is material consideration provided in order to induce Licensor to enter into this Agreement. In the event of a conflict between this Agreement and the Existing Warrant document (as amended), the Existing Warrant document as amended shall control.

5.2 New Warrant. As additional consideration to induce Licensor to enter into this Agreement, Licensee has arranged for WMS Industries Inc. to provide to Hasbro, Inc. a warrant for shares of the common stock of WMS Industries, Inc., solely as set forth below in Section 20 of the Basic Terms, as will be provided in a common stock purchase warrant, to be entered into, by and among Hasbro, Inc. and WMS Industries, Inc. (herein after “New Warrant”) The agreed upon form of common stock purchase warrant for the New Warrant under this Section 5.2 is attached to this Agreement as Exhibit 10. Licensor expressly acknowledges that the vesting of the New Warrant is contingent upon the occurrence of the conditions set forth in Section 20.4 of the Basic Terms, and that in the event that the contingencies are never fulfilled such that the New Warrant never vests shall not be deemed a failure of consideration. Licensee acknowledges that the grant of such contingently vesting New Warrant is material consideration provided in order to induce Licensor to enter into this Agreement. In the event of a conflict between this Agreement and the New Warrant document, the New Warrant document shall control.

6. Pre-Existing Agreement and Prior Audit

6.1 Pre-Existing Agreement. The Pre-Existing Agreement has a license term that prior to the entering into of this Agreement ran through December 31, 2011. Licensor and Licensee agree: (i) for the

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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Pre-Existing Agreement, the “Term” (as defined in such agreement) shall be revised to run through March 31, 2009 with no sell-off/lease-off period; (ii) that the Pre-Existing Agreement shall apply only to revenues and royalties with respect to use of the MONOPOLY Licensed Property and Licensed Articles using the MONOPOLY Licensed Property earned in periods on or before March 31, 2009 and the royalties earned on such Licensed Articles on or before March 31, 2009 shall apply to the guarantee and any applicable advance under the Pre-Existing Agreement for such Licensed Property and not with respect to any [*] Guarantee or the Total Royalty Guarantee under this Agreement (for the avoidance of doubt, there shall be no minimum guaranteed royalties for the period January 1, 2009 through March 31, 2009); and (iii) that this Agreement (and not the Pre-Existing Agreement) shall apply to all Licensed Articles using the MONOPOLY Licensed Property beginning on or after April 1, 2009, even if manufactured or distributed under the Pre-Existing Agreement.

6.2 Settlement of Prior Audit and QME Obligations.

(a) Licensee represents and warrants to Licensor that Licensee is not aware of any breach by Licensee under the Pre-Existing Agreement (other than the possible breaches identified in items (i) through (viii) of this Section 6.2(a) below), and Licensor represents and warrants to Licensee that Licensor is not aware of any breach by Licensor under the Pre-Existing Agreement. Neither the foregoing sentence nor anything else set forth in this Agreement shall constitute an admission by either party of any breaches under the Pre-Existing Agreement. Each party, in reliance on the other party’s foregoing representation and warranty, hereby, except as expressly set forth in this Section 6, expressly waives, releases and extinguishes any and all actual, possible or alleged claims, findings, breaches or failures to perform under the Pre-Existing Agreement, including any possible breaches of the Pre-Existing Agreement raised by any audit, or that could have been raised by any audit, save only: (1) Licensor’s right to audit with respect to the proper and accurate guarantee and royalty payments for the period from January 1, 2008 through March 31, 2009, (2) any claims that Licensee has underreported or underpaid revenues and royalties for any period under the Pre-Existing Agreement, including interest with respect to such underpaid or overpaid royalties, other than the claims specifically identified in items (i) through (viii) of this Section 6.2(a) below which are expressly waived, released and extinguished hereunder; (3) any claims of misuse of the Licensed Property by Licensee, including, without limitation, the distribution or use of unapproved Licensed Articles or that Licensee distributed Licensed Articles outside the scope of the license grant (for example, without limitation, outside the channels of trade or outside the licensed rights); (4) any product liability claims arising prior to the Effective Date with respect to the Licensed Articles; provided, however, that the foregoing waiver, release, and extinguishment shall not be deemed to apply to the provisions of Section 6 of the Pre-Existing Agreement (Indemnification and Product Liability Insurance) as they relate to third-party claims and suits, and damages, losses, costs and expenses with respect thereto, nor shall the foregoing be deemed to waive, release or extinguish any claims under this Agreement, including, without limitation, where such breach is continuing under this Agreement (for example, but without implied limitation, the distribution or use after March 31, 2009 of unapproved Licensed Articles or the distribution of Licensed Articles outside the license grant. Licensor expressly acknowledges that it is waiving its rights to audit or continue to audit the period prior to January 1, 2008. Specifically, and without limitation, Licensor releases, waives and extinguishes the following specific possible breaches by Licensee of the Pre-Existing Agreement occurring during the period April 2002 through December 31, 2007 raised by Licensor’s audits of such period: [*].

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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[*]

Nothing contained in this Section 6, nor anything else set forth in this Agreement, shall constitute an admission or otherwise imply that either party is in breach of any provisions of the Pre-Existing Agreement, including for the period from January 1, 2008 through April 1, 2009.

(b) In addition to the foregoing waiver, Licensor further agrees to waive, release and extinguish all possible claims related to or breaches by Licensee under the Pre-Existing Agreement with respect to compliance with Paragraph 9(d) (Marketing Commitment) of the License Agreement Summary part of the Pre-Existing Agreement as added to said agreement by Amendment 4, including, without limitation, the obligations to submit marketing plans, to spend Qualified Marketing Expenditures in specified amounts, and to pay to Licensor any shortfalls in required Qualified Marketing Expenditure requirements, for all periods prior to April 1, 2009, including, without limitation, calendar year 2008 through March 31, 2009. The parties further agree to waive, release and extinguish all possible claims related to or breaches by the parties for failure to meet and adjust the Flat Fee Schedule under Paragraph 2(a)(ii) of the License Agreement Summary part of the Pre-Existing Agreement for all periods prior to April 1, 2009.

(c) Notwithstanding the foregoing, and subject to Section 6.2(b) of this Agreement, Licensor shall retain the right to audit Licensee with respect to the period from January 1, 2008 through March 31, 2009 with respect only to the proper and accurate reporting and payment of royalties and guarantees to Licensor and proper use of the Licensed Property and use and distribution of the Licensed Articles. Any claimed or alleged findings or breaches with respect to such audit for the period through March 31, 2009 or any other claim or breach under the Pre-Existing Agreement shall not give rise to any claims for breach or default of this Agreement or otherwise form the basis for Licensor to declare a breach or default or seek to terminate this Agreement; provided, however, that the foregoing shall not be deemed to limit Licensor’s rights and remedies, including termination, under this Agreement where such breach is continuing under this Agreement (for example, but without implied limitation, the distribution or use after March 31, 2009 of unapproved Licensed Articles or the distribution of Licensed Articles outside the Channels of Distribution or outside the licensed rights), subject to the notice obligations and cure period as set forth in Section 12(f) of the Basic Terms.

7. [*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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8. [*]

9. [*]

9.1 In the event that during the Term Licensor desires to enter into or renew (other than under an automatic renewal or a unilateral option for a licensee to elect to renew) a license agreement for use of the Licensed Properties or any other properties owned by Licensor for [*] exclusion in the definitions of Gaming Devices and Licensed Articles), Licensor agrees to discuss in good-faith the possibility of entering into a license agreement with Licensee for such rights separate from this Agreement, but neither party shall be obligated to enter into a license agreement for such rights except if each party shall determine to do so in its sole and absolute discretion and only on such terms and conditions as such party may determine in its sole and absolute discretion, and nothing herein shall be deemed to prevent, limit or restrict Licensor from entering into such an agreement with any third-party or from discussing the licensing of such rights with any third-party before, during or after discussions with Licensee. Without implied limitation, Licensee acknowledges and understands that Licensor has existing relationships with companies engaged in [*] and that Licensor is regularly approached by third parties interested in licensing Licensor’s properties for [*], and that Licensor discussing possible licensing of [*] with such third parties is not in violation of this provision.

10. Dispute Resolution Procedure

10.1 Dispute Resolution Procedure. Any matter that under the terms of this Agreement is to be resolved by the “Dispute Resolution Procedure” shall be resolved by conference of officers of Licensor and Licensee as provided below, and if that fails to resolve the matter, by binding arbitration as provided below. In the event that parties are unable to agree on a resolution to such a matter, the parties shall refer the issue to John DeSimone, Vice President Finance & Business Planning, Digital Media & Gaming, for Licensor and Jeff Michel, Executive Director, Licensing and Trademarks, for Licensee or their successors as designated by Licensor and Licensee, respectively. Such procedure shall be invoked by either party by presenting to the other a “Notice of Request for Resolution of Dispute” (a “Notice”) identifying the issues in dispute to be addressed. A telephone conference of the designated officers (or another officer

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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designated by a party, provided such officer is of similar stature in his/her respective company) will be held within five (5) business days after the delivery of the Notice, or such other period as mutually agreed by the parties. In the event that the telephone conference between these persons does not resolve the dispute, then upon delivery of a further Notice, either party may require that the matter be referred for resolution between Mark Blecher, Senior Vice President Digital Media & Gaming, for Licensor and Orrin Edidin, President, for Licensee, or their successors as designated by Licensor and Licensee, respectively. A telephone conference of these persons (or another officer designated by a party, provided such officer is of similar stature in his/her respective company) shall be held within five (5) business days after delivery of the further Notice (and such additional number of days as the parties may then agree). If the second set of officers is not able to resolve the dispute within five (5) business days after their conference (or within the additional number of days agreed to by the parties), then the matter shall be resolved by binding arbitration in New York, New York, in accordance with the rules of the American Arbitration Association by a panel of three arbitrators. Either party may commence the arbitration by notice to the other. Each of the parties shall name one arbitrator and a third arbitrator shall be mutually agreed upon by the parties. Once one party has named an arbitrator, the other party shall have ten (10) days from notice of such selection, to select an arbitrator. If the parties are unable to agree on the third arbitrator within ten (10) days of naming of the second arbitrator, then the third arbitrator shall be chosen as follows: each party shall provide to the other a list of not more than three arbitrators acceptable to such party; each party may “veto” one of the arbitrators on the other party’s list; a list of the non-vetoed potential third arbitrators shall be submitted to the first two arbitrators for selection; and if the first two arbitrators are unable to agree on the third arbitrator, then each party shall provide the name of one of the non-vetoed potential third arbitrators and the third arbitrator shall be chosen by lot from among those two. Each of the arbitrators shall have experience in gaming matters and in licensing matters and shall be independent of either party and their respective affiliates. Each party shall bear the cost of the arbitrator appointed by such party, and the parties shall share the cost of the third arbitrator. The decision of the three arbitrators shall be binding upon the parties.

11. Sublicensing

Licensor hereby consents to Licensee’s sublicense of rights under this Agreement for use of (i) [*], as a distributor, manufacturer, and agent for configuration of Licensed Articles developed by Licensee for use in [*] (as that term is defined under U.S. gaming regulations) jurisdictions, as well as in certain [*]; and (ii) [*] as the distributor, manufacturer, and agent for configuration of Licensed Articles developed by Licensee for use in the [*] (as that term is defined under U.S. gaming regulations) jurisdictions (e.g., [*]) where gaming platforms are configured differently from those in [*] jurisdictions, as well as in certain [*] jurisdictions (e.g., [*]). Additionally, Licensor expressly consents to placement by Licensee of Licensed Articles that are [*] through a sublicense relationship.

12. [*]

In the event that [*]¹ [*].

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

¹ Based upon the most current Morgan Stanley and Goldman Sachs’ reports there are approximately 933,000 slot machines, excluding Class II and central determination games in the United States and Canada. [*]

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[*]

13. Memorandum of Exclusive License

The parties agree to execute contemporaneously with this Agreement, (i) the Memorandum of Exclusive License attached hereto as Exhibit 4-1, which Licensee may record with the United States Copyright Office, and (ii) the Notice of Termination of Exclusive License attached hereto as Exhibit 4-2, which

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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Licensor may record with the United States Copyright Office in the event of proper termination or expiration of this Agreement.

*    *    *

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LICENSE AGREEMENT BASIC TERMS

Contract No. 124788

WHEREAS, Licensor has rights to the Licensed Properties;

WHEREAS, Licensee desires to utilize the Licensed Properties in connection with the development, manufacture, sale, lease, placement, and distribution of articles hereinafter described.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the parties do hereby agree as follows:

l. GRANT OF LICENSE

(a) Licensed Articles. Upon the terms and conditions hereinafter set forth, Licensor hereby grants to Licensee and Licensee hereby accepts the exclusive (as provided in Section 3 of the Basic Terms) right, license and privilege, and any other grant of licensed rights as granted elsewhere in this Agreement (i.e., sublicensing rights in Section 11 of the Summary), of utilizing the Licensed Properties solely upon and in connection with the design, development, manufacture, sale, lease, placement, marketing, advertising, promoting and distribution of the specific articles and services listed in the Licensed Articles definition in the Summary, and no other articles or services of any kind, and only as may be approved by Licensor, in the manner approved, when the Licensed Articles are submitted for approval (collectively, the licensed rights granted pursuant to this Agreement may be referred to as the “License Grant”). The definition of the Licensed Articles shall be strictly construed. Notwithstanding anything herein to the contrary, and without expanding Licensee’s rights hereunder in any way, Licensee shall not have the right to use the “Hasbro” logo, the “MB” logo, the “Parker Brothers” logo, the “OddzOn” logo, or the “Kenner” logo without Licensor’s express prior written approval.

(b) Territory. The license hereby granted extends only to the Territory and only to distribution in the Channels of Distribution. To the extent such restriction is permissible by law, Licensee agrees that it will not make or authorize any use, direct or indirect, of the Licensed Properties in any other area, or outside the Channels of Distribution, and that it will not sell or distribute Licensed Articles to persons who Licensee knows or should know intend or are likely to resell or redistribute them in an area outside the Territory or outside the Channels of Distribution.

(c) Term. The Term of this Agreement is as shown in the Summary, unless sooner terminated in accordance with the provisions hereof.

2. TERMS OF PAYMENT

(a) Rate. Licensee agrees to pay to Licensor as royalties amounts determined as provided in the Summary with respect to the lease, sale, placement, use or distribution of the

Licensed Articles by Licensee or any of its affiliates or by permitted sublicensees. Except as set forth in the Summary as permitted deductions in computing royalties, all costs and expenses incurred in the manufacture, sale, lease, placement, distribution or exploitation of the Licensed Articles, or otherwise incurred by Licensee, shall be paid by Licensee, and no such costs or expenses shall be deducted from any royalty payable to Licensor. All payments to be made by the Licensee to Licensor under this Agreement, unless expressly noted to the contrary, are exclusive of value added tax (if applicable), consumption tax or other sales tax or customs duty which shall, where appropriate, be payable by the Licensee. All taxes, duties, import charges or assessments levied, assessed or imposed by any government authority with respect to the Agreement on the income of the Licensee (or upon Licensor in respect of Licensee’s income) shall be borne by the Licensee (provided that this shall not be deemed to prevent the deduction of any amounts permitted under Section 2(a) of the Summary as deductions from gross revenues in computing royalties), and the Licensee shall indemnify and save harmless Licensor in respect thereof, provided that if in accordance with any applicable law any withholding tax is imposed on any royalty, advances or guarantee payment payable by the Licensee to Licensor under the Agreement, the Licensee or the paying bank shall deduct the sum of tax from the royalty payment and pay it to the competent tax authorities. Within sixty (60) days from such deduction and payment, the Licensee or paying bank shall provide Licensor with a receipt voucher or other document acceptable to the relevant local tax authority, as well as an English language translation thereof, which evidences the receipt by the relevant tax authorities of payment of any tax due so that Licensor can secure the necessary credits.

(b) Terms of Payment. Licensee shall pay the Total Royalty Guarantee, [*] Guarantees, and Advance Payments as set forth in the amounts as set forth in the Summary and elsewhere in this Agreement. No part of such amounts paid toward the Total Royalty Guarantee and [*] Guarantees shall in any event be repayable to Licensee, other than in accordance with Section 12 of the Summary.

(c) Periodic Statements. On or before the twenty-fifth (25th) day after the end of each calendar month, Licensee shall furnish to Licensor complete and accurate royalty statements for such calendar month just ended, using the royalty reporting form attached hereto as Exhibit 1. Such royalty statements shall provide: (i) for sold Licensed Articles, the number sold, country in which sold or to which

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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shipped, description (Licensed Property and specific Gaming Device), gross sales price, and itemized permitted deductions for calculating royalties, (ii) for leased Licensed Articles or other recurring payments on account of Licensed Articles on which Licensee pays a percentage royalty, Licensed Property and specific Gaming Device gross revenue received itemized by country and itemized permitted deductions for calculating royalties, (iii) for Licensed Articles for which Licensee pays royalties based on a Flat Fee Schedule, Licensed Property and specific Gaming Device, and number of days of operation itemized by country (and if within the United States sufficient information to ascertain the appropriate royalty category), (iv) an itemized calculation of the royalties earned and payable with respect to such calendar month, (collectively, the “Required Reporting Information”), certified to be accurate by Licensee, or if a corporation, by an officer of Licensee. Such statements shall be furnished to Licensor whether or not any of the Licensed Articles have been sold, leased or otherwise provided during the month to which such statements refer; provided, however, that Licensee does not have to start providing statements for any Licensed Property until the first calendar month in which royalties are earned with respect to Licensed Articles using that Licensed Property.

(d) Royalty Payments. Royalties in excess of the applicable Advance Payment required and paid hereunder shall be due on the twenty-fifth (25th) day following the last day of the calendar month in which earned. The receipt or acceptance by Licensor of any of the statements furnished pursuant to this Agreement, or of any royalties paid hereunder (or the cashing of any royalty checks paid hereunder) shall not preclude Licensor from questioning the correctness thereof at any time within three (3) years after the expiration and/or termination of this Agreement (but such period shall not be deemed to extend the record retention requirement and audit timing limitations set forth in Section 11 of the Basic Terms), and in the event that any inconsistencies or mistakes are discovered in such statements or payments, they shall immediately be rectified and the appropriate payment made by or credit taken by Licensee. Licensee shall pay Licensor interest on a late royalty payments (including [*] Guarantee and Advance Payment payments and any underpaid royalty payment) at an interest rate of [*] per month, or the highest rate permitted by law, whichever rate is lower, from the date the royalty payment (or underpaid portion thereof) should have been received by Licensor until paid. Royalty payments must be remitted to Licensor by electronic payment as provided in the Summary. The parties agree that if Licensee makes a lease arrangement with its customer as a means of financing the purchase of a Licensed Article which is a Gaming Device, such Gaming Device shall be considered to be sold (not leased) for purpose of this Agreement and Licensee shall pay royalties on such sale as set forth in Section 2.1(a)(iii) of the Summary at the full purchase price minus applicable discounts and deductions upon the inception of the lease, in accordance with Generally Accepted Accounting Principals. The parties acknowledge that

the Licensed Articles include accessories which (A) Licensee may provide to its customers in connection with Licensed Articles which are Gaming Devices or services, and (B) utilize the Licensed Property. An example of such an accessory includes electric signage which calls players’ attention to the presence of Gaming Devices within a casino. Notwithstanding anything to the contrary in this Agreement, Licensee shall not pay Licensor royalties on such accessories. The parties acknowledge that it is customary in the gaming industry for Gaming Devices to be placed on a trial basis in order for: (i) a customer to have, for a limited period of time, the right to return the Gaming Device and unwind the transaction, (ii) Licensee to conduct, for a limited period, a regulatory field trial at the request of a regulatory agency; or (iii) Licensee to conduct, for a limited period, consumer focus group testing and/or field trials (any one of such actions constituting the “Trial Period”). For any Licensed Articles placed on such trial basis, the royalty thereon shall be deemed to accrue only after the Trial Period (including any extensions thereof) has terminated, unless the Trial Period exceeds six (6) months, in which case such royalty shall accrue at the end of such six months.

3. RESERVATION OF RIGHTS; EXCLUSIVITY

(a) Subject to the restrictions set forth in this Section 3, including with respect to Co-Branded Versions, all rights whatsoever in the Licensed Properties not specifically granted herein to Licensee are reserved to Licensor and may be freely exercised at any time by Licensor or its designees without accounting to Licensee and without any claim, charge or encumbrance in favor of Licensee.

(b) Licensor agrees that it shall not grant any other license to the Licensed Properties (or any Co-Branded Versions) within the scope of the License Grant hereunder, and not withdrawn as set forth herein, for use of the Licensed Properties (or any Co-Branded Versions) in connection with the design, development, sale, lease, use placement, or distribution of Licensed Articles during the Term in the Territory through the Channels of Distribution, other than as permitted in this Section 3 below. Nothing in this Agreement shall be construed to prevent Licensor from granting any other licenses for the use of the Licensed Properties or from utilizing the Licensed Properties in any manner whatsoever provided that such licenses and uses do not conflict with the preceding sentence. For the avoidance of doubt, in any case where Licensor withdraws rights granted to Licensee as provided herein, such rights shall no longer be subject to the foregoing exclusive License Grant, and for the avoidance of doubt the parties

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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acknowledge and agree that the foregoing exclusive License Grant shall not apply to the Sell Off Period with respect to such withdrawn rights or after the expiration or termination of this Agreement.

(c) It is further understood that, without limiting the foregoing rights reserved to Licensor, Licensor, without being deemed to have violated the exclusive license rights granted to Licensee, may during the last [*] of the Term grant third parties rights for exploitation after the Term of articles like the Licensed Articles using the Licensed Properties and in connection with such a grant allow the third party to design, develop, manufacture and seek regulatory approvals with respect to such articles during the last [*] of the Term and during the last [*] of the Term to display proposed product at trade shows, consult with casinos or other legal gaming establishments, distributors, and other third parties with regard to the placement of such articles, and make announcements that Licensor has granted such rights to a third party (provided, such third party may also make such disclosures prior to such time period solely to the extent that such disclosures are required by applicable laws, rules and regulations). Notwithstanding the foregoing, such third party may not place articles utilizing the Licensed Property in the Territory in the Channels of Distribution for play by consumers during the Term.

(d) It is further understood that, notwithstanding the foregoing, in accordance with previously terminated or expired license agreements and the existing license agreement(s) for the [*] Licensed Property relating to the use of the Licensed Properties in connection with the Licensed Articles in the Territory, Licensor reserves the right to permit the licensee(s) thereunder, and solely in strict accordance with the terms of the applicable licenses, to sell-off such articles on hand or in process as of the Effective Date within the Territory during the Term (including with respect to such Articles using the [*] Licensed Property for a period through [*] after the effective date for such Licensed Property, which effective date is [*]) or continue the lease terms of such articles previously ordered or in place and that owners of sold machines may have the right to continue using them, provided however, that no such lease or placement on a recurring revenue model of any sort of a third party manufacturer’s or distributor’s Licensed Article may extend more than [*] to Licensee for such Licensed Property in this Agreement (such Effective Date for the [*] Licensed Property being [*]), and such use shall not be deemed to violate the exclusive rights granted to Licensee in Section 3 of this Agreement.

4. GOOD WILL

(a) Licensee recognizes the great value of the good will associated with the Licensed Properties, and acknowledges that the Licensed Properties and all rights therein, including good will pertaining thereto, belong exclusively to Licensor. Licensee further recognizes and acknowledges that an uncured material breach by Licensee of any of its covenants,

agreements or undertakings hereunder with respect to use of the Licensed Properties, legal marking requirements, quality standards, or ethical standards may cause Licensor irreparable damage, which cannot be readily remedied in damages in an action at law, and may, in addition thereto, constitute an infringement of Licensor’s copyrights in or trademarks that are part of the Licensed Properties, thereby entitling Licensor to seek equitable remedies, costs and reasonable attorney’s fees. Nothing in this Agreement shall be construed as requiring Licensor to promote, advertise, or otherwise use or exploit the Licensed Properties during or after the Term (such matters being entirely within Licensor’s discretion), and Licensor shall be under no obligation to sell any products utilizing the Licensed Properties at any time.

(b) Licensor recognizes the great value of the good will associated with the Licensee’s Marks (as defined below), and acknowledges that the Licensee’s Marks and all rights therein, including good will pertaining thereto, belong exclusively to Licensee. Licensor further recognizes and acknowledges that an uncured material breach by Licensor of any of its covenants, agreements or undertakings hereunder with respect to use of the Licensee’s Marks may cause Licensee irreparable damage, which cannot be readily remedied in damages in an action at law, thereby entitling Licensee to seek equitable remedies, costs and reasonable attorney’s fees. Nothing in this Agreement shall be construed as requiring Licensee to promote, advertise, or otherwise use or exploit the Licensee’s Marks during or after the Term (such matters being entirely within Licensee’s discretion), and Licensee shall be under no obligation to sell any products utilizing the Licensee’s Marks at any time.

5. INTELLECTUAL PROPERTY RIGHTS.

(a) Subject to the provisions of Section 5(b) of these Basic Terms, all right, title and interest in and to the Licensed Properties, including, without limitation, all intellectual property with respect thereto, and all intellectual property derived from the Licensed Properties contained, used in, reproduced, or displayed in the Licensed Articles and their marketing and promotional materials, and all intellectual property rights and registrations with respect to the same, are and shall be owned exclusively by Licensor and are hereby assigned to Licensor, together with the associated good will (all of the foregoing, including, without limitation, the Licensed Properties and the intellectual property derived from the Licensed Properties being hereinafter collectively referred to as “Licensor’s IP”). Intellectual property used in the Licensed Articles shall not be considered to be derived from a Licensed Property or constitute Licensor’s IP simply on the basis that it is thematically linked to the general theme of the Licensed Property

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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(e.g., a murder mystery and the CLUE (CLUEDO) board game or the use of a word that is used in the Licensed Property, such as [*] in combination with the MONOPOLY board game). As examples, without implied limitation, the parties expressly agree that trademark rights in marks such as [*] based on such marks being created and used by Licensee for Licensed Articles under this Agreement (provided and to the extent that the same do not include Licensor’s copyrighted works or derivative works thereof) would not be considered derived from the Licensed Properties, would not constitute Licensor’s IP and would be owned by Licensee, but would be subject to the license from Licensee to Licensor of the Licensee’s Marks as set forth below. Licensee covenants and agrees that this Agreement shall be deemed a license, not a transfer, of Licensor’s rights in the Licensed Properties, and that Licensee shall have no interest in or claim to the Licensor’s IP or any other intellectual property owned by Licensor or assigned pursuant to this Agreement to Licensor, including, without limitation, the Licensor’s IP, except to the limited extent of the License to use the same pursuant and subject to the terms and conditions of this Agreement. Licensee shall not utilize the Licensed Properties or any other intellectual property of Licensor except as expressly permitted by this Agreement or pursuant to a separate license agreement with Licensor.

(b) Subject to the provisions of Section 5(a) of these Basic Terms, all right, title and interest in and to the Licensed Articles and the elements thereof, to the extent not consisting of Licensor’s IP shall be the exclusive property of Licensee, including, without limitation, all proprietary inventions, creations and functional elements of the Licensed Articles such as code, routines, tools, algorithms, activities, play mechanics, and any other functional features, and any marks created, designed or developed by Licensee for use in connection with the Licensed Articles and all intellectual property (including trademarks, copyrights and patents), and proprietary inventions whether or not patentable utilized by or contained within the Licensed Articles, to the extent not consisting of the Licensor’s IP. Licensor covenants and agrees that this Agreement shall not transfer any of Licensee’s rights in the Licensed Articles or Licensee’s intellectual property (including Licensee’s Marks), other than as expressly set forth in Section 5(a) of the Basic Terms, and that Licensor shall have no interest in or claim to the Licensed Articles or Licensee’s intellectual property associated therewith other than as expressly set forth in Section 5(a) of the Basic Terms. Licensor shall not utilize the Licensed Articles except pursuant to a separate license agreement with Licensor. All uses hereunder of Licensee’s intellectual property (including Licensee’s Marks) shall inure to Licensee’s benefit.

Licensee hereby grants Licensor a limited, non-exclusive (except as to toys and games and digital games that do not include or involve a wagering theme or simulate Gaming Devices or the play of Gaming Devices or in any manner replicate a casino-style game, where such license shall be exclusive as provided below), worldwide, royalty-free, perpetual, including, for the avoidance of doubt, after the expiration or termination of this Agreement (but terminable in the event of an uncured breach of this license grant to Licensee’s Marks after notice from Licensee as set forth below), and sub-licensable (as set forth immediately below) license to the trademarks owned by Licensee under the provisions of Section 5(a) of this Agreement that: (x) Licensee develops or creates in connection with the design and development of Licensed Articles under this Agreement, (y) are used on Licensed Articles produced under this Agreement, and (iii) which are thematically linked to a Licensed Property (“Licensee’s Marks”), solely as set forth herein. Licensor may use Licensee’s Marks in connection with its own goods and services and may sublicense Licensee’s Marks for a sublicensee’s goods and services, provided that no such use of Licensee’s Marks by Licensor or any of its sublicensees shall be for or in connection with: [*] Notwithstanding anything to the contrary contained herein, Licensor may not during or subsequent to the Term sublicense Licensee’s Marks to any entity that at the time the sublicense is entered into is a manufacturer, distributor or operator of articles like the Licensed Articles. For the avoidance of doubt the license to use the Licensee’s Marks in connection with goods and services, includes, without implied limitation, the right to use such marks in connection with the design, development, manufacture, sale, lease, marketing, advertising, promoting and distribution of such goods and services. Licensor expressly acknowledges and agrees that the Licensee’s Marks are and shall remain Licensee’s sole and exclusive property. Licensor shall ensure that all uses of the Licensee’s Marks by Licensor and its sublicensees shall be only on and in connection with goods and services of quality at least equal to that of the Licensed Articles. The grant to Licensor of rights to use the Licensee’s Marks in connection with toys and games and digital games that do not include or involve a wagering theme or simulate Gaming Devices or the play of Gaming Devices or in any manner replicate a casino-style game, shall be exclusive, and Licensee agrees that it shall not license to others or use for itself

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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(except as provided below) the Licensee’s Marks in connection with toys, games and digital games that do not include or involve a wagering theme or simulate Gaming Devices or the play of Gaming Devices or in any manner replicate a casino-style game, subject to the following conditions set forth below which are required for Licensor to maintain such exclusivity. Notwithstanding the foregoing limited exclusivity, Licensee shall not be precluded from use of the Licensee Marks in connection with Gaming Devices or any advertising, marketing or promotion of its Gaming Devices even if such advertising, marketing or promotion includes or involves a wagering theme, simulates Gaming Devices, involves a non-wagering digital game, the play of Gaming Devices or in any manner replicates a casino-style game. In the event that Licensor or its permitted sublicense(s) has not made use of any given Licensee Mark in interstate commerce in the United States within eighteen (18) months for toys or games or within twenty four (24) months for digital games that do not include or involve a wagering theme or simulate Gaming Devices or the play of Gaming Devices or in any manner replicate a casino-style game, from the date such mark is first introduced to the public in Licensed Articles, (and Licensor has provided Licensee with samples or other sufficient documentation to evidence the same), the licensee to such Licensee Mark shall revert to being non-exclusive. The parties expressly acknowledge and agree that Licensor shall have no obligation to use or exploit any Licensee’s Mark.

Upon written request by Licensee, Licensor shall provide Licensee with the date of the first use of the Licensee’s Marks by Licensor and its sublicensees in interstate commerce in the United States and the date of first use in each country. At Licensee’s request (and with reimbursement of Licensor’s reasonable out-of-pocket costs and expenses as and to the extent provided below), Licensor shall execute (but not create) and provide Licensee with all necessary documents, assignments and signatures which Licensee may reasonably request for the purpose of perfecting Licensee’s title to all intellectual property rights and registrations thereof with respect to the Licensee’s Marks which are the property of Licensee, including, without limitation, those rights which are owned by or assigned to Licensee pursuant to this Agreement. Licensee will reimburse Licensor for any reasonable out-of-pocket expenses Licensor incurs in providing such documents, assignments and signatures, provided that Licensee has approved such costs in advance in writing; provided, however, that this reimbursement shall not apply with respect to any sublicensees or to any assignments necessary from any third party developers, designers or programmers, or any other employees, agents, or subcontractors involved in the design, manufacture or development of goods upon which Licensee’s Marks are used. Licensor agrees to secure assignments of all rights which any sublicensee and any third party developers,

designers or programmers or any other employees, agents or subcontractors involved in the design, manufacture or development of goods upon which Licensee’s Marks are used may otherwise claim in such intellectual property of Licensee. All uses by Licensor and its sublicensees hereunder of Licensee’s Marks shall inure to Licensee’s benefit. If, by operation of law, Licensor is deemed to have acquired any ownership interest in any of Licensee’s Marks, Licensor hereby assigns such interest to Licensee. Upon Licensee’s request, and at no cost to Licensee, Licensor shall provide Licensee with samples for trademark registration and quality assurance purposes of all of its products and all of its sublicensee’s products that use Licensee’s Marks. Licensor shall follow Licensee’s instructions for proper use of Licensee’s Marks in order that protection and/or registrations for the intellectual property with respect thereto may be obtained or maintained. Licensor agrees that it will cause the trademark notices provided by Licensee, and any other notice desired by Licensee, to appear on or within all goods using Licensee’s Marks and on or within all advertising, promotional or display material bearing such goods or marks. Licensor shall ensure that all sublicenses of Licensee Marks shall be in writing and shall contain at a minimum the requirements set forth herein. Licensor’s obligations under this license to Licensee’s Marks shall survive the termination or expiration of this Agreement.

If Licensor shall violate any of its material obligations with respect to the terms and conditions of this license to the Licensee’s Marks, Licensee shall have the right to terminate the license to the Licensee’s Marks hereunder upon thirty (30) days written notice to Licensor stating with particularity the violation(s) of its obligations, and such notice of termination shall become effective unless Licensor shall completely remedy the stated violation(s) within the thirty (30) day period and provide reasonable evidence to Licensee that such violation(s) has been remedied. Licensor acknowledges and agrees that Licensee is licensing the Licensee’s Marks on an as is basis and that Licensee makes no representation or warranty as to the availability of the marks for use on or in connection with any particular goods or services and all warranties, express or implied, including any warranties of non-infringement are expressly disclaimed.

(c) Upon written request by Licensor, Licensee shall provide Licensor with the date of the first use of the Licensed Articles in interstate commerce in the United States and the date of first use in each country of the Territory. At Licensor’s request (and with reimbursement of Licensee’s reasonable out-of-pocket costs and expenses as and to the extent provided below), Licensee shall execute (but not create) and provide Licensor with all necessary documents, assignments and signatures which Licensor may reasonably request for the

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purpose of perfecting Licensor’s title to all intellectual property rights and registrations thereof which are the property of Licensor, including, without limitation, those rights which are owned by or assigned to Licensor pursuant to this Agreement, and further shall provide any necessary written confirmation of Licensor’s license to the Licensee’s Marks hereunder. Licensor will reimburse Licensee for any reasonable out-of-pocket expenses Licensee incurs in providing such documents, assignments and signatures, provided that Licensor has approved such costs in advance in writing; provided, however, that this reimbursement shall not apply to any assignments necessary from any sublicenses or third party developers, designers or programmers of the Licensed Articles or related materials or any other employees, agents or subcontractors involved in the design, manufacture or development of the Licensed Articles. Licensee agrees to secure assignments of all rights which any sublicensee and any third party developers, designers or programmers of the Licensed Articles or related materials or any other employees, agents or subcontractors involved in the design, manufacture or development of the Licensed Articles may otherwise claim in such intellectual property of Licensor. All uses by Licensee hereunder of the trademarks included in the Licensed Properties and Licensor’s IP shall inure to Licensor’s benefit. If, by operation of law, Licensee is deemed to have acquired any ownership interest in any of Licensor’s IP, Licensee hereby assigns such interest to Licensor. Upon Licensor’s request, and at no cost to Licensor, Licensee shall provide Licensor with access to the Licensed Articles that use the trademarks included in Licensor’s IP and provide adequate specimens of use to support a trademark registration (i.e., photographs of the mark used on a Licensed Article) for trademark registration purposes. Upon Licensor’s request, and subject to regulatory constraints, Licensee shall provide Licensor with copies, in such format as Licensor may reasonably request (including, without limitation, digital or electronic) files of all artwork utilizing the Licensed Properties or owned by or assigned to Licensor pursuant to this Agreement. Licensee shall follow Licensor’s instructions for proper use of the Licensed Properties in order that protection and/or registrations for the intellectual property with respect thereto may be obtained or maintained. Licensor shall in good faith consider any request by Licensee to attempt to procure or maintain statutory copyright and trademark protection for elements of the Licensed Property in the Territory, but the decision of whether to attempt to procure or maintain such statutory copyright and trademark protection and the conduct of any such attempts shall be in the sole and absolute discretion of Licensor and at Licensor’s sole cost and expense.

(d) As a condition to the grant of the rights hereunder, Licensee agrees that it will cause the Required Notices, and any other notice desired by Licensor, to appear on or within each Licensed Article sold, leased, placed or distributed by it

and on or within all advertising, promotional or display material bearing the Licensed Properties.

(e) Licensee shall assist Licensor, and will be reimbursed by Licensor for Licensee’s reasonable out-of-pocket costs and expenses as and to the extent set forth below, to the extent necessary or desirable in the procurement of any protection or to protect any of Licensor’s rights to the Licensed Properties and Licensor’s IP, and Licensor, if it so desires, may commence or prosecute any claims or suits in its own name or with the prior consent of Licensee in the name of Licensee, or with the prior consent of Licensee or to the extent permitted by applicable law join Licensee as a party thereto. Licensor will reimburse Licensee for any reasonable out-of-pocket costs and expenses Licensee incurs in rendering such assistance, provided that Licensor has approved such costs in advance in writing. Licensee shall notify Licensor in writing of any infringements or imitations by others of the Licensed Properties on articles similar to the Licensed Articles which may come to Licensee’s attention, and Licensor shall have the sole right to determine whether or not any action shall be taken on account of any such infringements or imitations. Licensee shall not institute any suit or take any action on account of any such infringements or imitations, or otherwise institute any suit or take any action relating to the Licensed Properties, without first obtaining the written consent of Licensor to do so. Except with Licensor’s written consent, neither Licensee, its parent or any of its subsidiaries or affiliates, will register or attempt to register copyrights in any country or to register as a trademark, service mark, copyright or other intellectual property right or registration including domain name registration any of the Licensed Properties or any other intellectual property owned by Licensor, or any trademark, word, symbol or design which is so similar thereto as to suggest association with or sponsorship by Licensor or any of its subsidiaries. In the event of breach of the foregoing, Licensee agrees, at its expense and at Licensor’s request, immediately to terminate the unauthorized registration activity and promptly to execute and deliver, or cause to be delivered to Licensor, such assignments and other documents as Licensor may require to transfer to Licensor all rights to the registrations, rights or applications involved.

(f) Moral Rights. Where applicable and to the extent permissible by law, with respect to the Licensor’s IP, Licensee hereby unconditionally and irrevocably waives all moral rights in the Licensed Articles, and shall obtain all waivers of moral rights and consents from any employee, agent, subcontractor or other third party in relation thereto to the extent that such waivers or consents are enforceable under applicable law.

(g) With respect to any patentable subject matter developed or owned by Licensee, its Affiliates, and their respective successors and assigns prior to the Date of Execution of this Agreement, or to which they have acquired rights prior to the Date of Execution of this Agreement, derived from the

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MONOPOLY Licensed Property or from any other properties licensed by Licensee or an Affiliate of Licensee from Licensor under a license agreement entered into prior to the Date of Execution, whether patented or not, and all rights and interests with respect thereto (such patentable subject matter, inventions, material, rights and interests being referred to herein as the “Patent Property”), Licensee hereby covenants and agrees on behalf of itself and its Affiliates, and their respective successors and assigns, not to sue, in law, equity or otherwise, or institute or maintain any lawsuit or other claim, action or proceeding alleging any infringement or misappropriation of the Patent Property against Licensor or an Affiliate of Licensor by virtue of Licensor or its Affiliate licensing any trademark or copyright to a third party for use in the making, selling, offering to sell, advertising, importing, reproduction or use of any gambling product, service or device produced under a brand, trademark or copyright license from Licensor or its Affiliate, and notwithstanding the expiration of this Agreement. For clarification, such covenant not to sue Licensor and its Affiliates applies only to a suit based on Licensor or its Affiliate as a brand, trademark or copyright licensor and does not extend to or preclude Licensee from asserting a lawsuit, claim, action or other proceeding against Licensor or an Affiliate for such infringement where Licensor or an Affiliate is involved other than as a brand, trademark or copyright (for example, without implied limitation, where Licensor or an Affiliate is a manufacturer, developer or distributor of an infringing gaming device). Notwithstanding the foregoing, Licensee may join Licensor in any such lawsuit or proceeding where it is necessary to do so, such as where Licensor is an indispensible party or pursuant to a compulsory claim or counterclaim, but in such a lawsuit or proceeding where Licensor must be joined as aforesaid, Licensee shall not seek damages from Licensor related to the third party’s use of the Patent Property. Nothing contained herein shall limit or restrict Licensee from instituting or maintaining any lawsuit or other claim, action or proceeding against any third party, including against a licensee of Licensor or its Affiliates, including for any alleged infringement or misappropriation of the Patent Property or any other intellectual property right.

6. WARRANTIES, INDEMNIFICATION AND PRODUCT LIABILITY INSURANCE

(a) Licensee’s Representations and Warranties. Licensee represents and warrants that: (i) this Agreement has been duly authorized, executed, and delivered by Licensee; (ii) it has the full power and authority to enter into and perform its obligations hereunder; (iii) this Agreement constitutes the valid and binding obligation of Licensee, enforceable in accordance with its terms; and (iv) the making of this Agreement does not violate any agreement, grant of rights or obligation existing between Licensee and any other person,

firm, or corporation. Licensee has not made and does not hereby make any representation or warranty with respect to the quantity of placements (if any) of Licensed Articles that Licensee may place. Licensor agrees that it will not make any claim, nor shall any liability be imposed upon Licensee based upon any contention that more placements could have been made or that better business could have been done than what was actually made or done by Licensee or that better prices, revenues or terms could have been obtained, but the foregoing shall not be deemed to waive any claims or rights or remedies that Licensor may have based on Licensee’s failure to perform or observe its expressed obligations set forth in this Agreement.

(b) Licensor’s Representations and Warranties. Licensor represents and warrants that: (i) this Agreement has been duly authorized, executed, and delivered by Licensor; (ii) it has the full power and authority to enter into and perform its obligations hereunder; (iii) this Agreement constitutes the valid and binding obligation of Licensor, enforceable in accordance with its terms; (iv) the making of this Agreement does not violate any agreement, grant of rights, or obligation existing between Licensor and any other person, firm, or corporation; (v) Licensor has not previously granted and will not grant any rights in the Licensed Properties to any third party which conflict with the License Grant granted to Licensee herein; (vi) Licensor is the registered owner of the trademark registrations listed on Exhibit 5 attached hereto; (vii) Licensor is the registered owner of the United States copyright registrations listed on Exhibit 6 attached hereto; and (viii) [*] asserting that Licensor’s use of the intellectual property in the Licensed Properties infringes the intellectual property rights (including but not limited to any patents, copyrights, trademarks and trade dress) of another person, firm or corporation and [*].

(c) Licensor hereby covenants and agrees to indemnify, defend, and hold Licensee, and its Affiliates and subsidiaries, and their respective directors, officers, shareholders, agents and employees, free, clear and harmless of and from any and all third party claims, liabilities, judgments, damages, cost and expenses including, without limitation, reasonable attorneys’ fees and expert witness fees arising out of (i) actual or alleged copyright infringement based on the Licensed Properties as supplied to Licensee by Licensor and used by Licensee pursuant to the terms of this Agreement; (ii) actual or alleged trademark

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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infringement by use of the trademarks contained in the Licensed Properties and used by Licensee pursuant to this Agreement by a claimant [*]; (iii) actual or alleged trademark infringement by use of the trademarks contained in the Licensed Properties and used by Licensee pursuant to this Agreement by a claimant which is a current or former licensee of a Licensed Property from Licensor alleging superior rights to use of such trademarks in connection with articles like the Licensed Articles based on such current or former licensee’s use of such trademarks under its license agreement with Licensor; (iv) a claim by a current or former third-party licensor to Licensor of the Licensed Properties that such third-party is entitled to receive compensation in connection with the use of the Licensed Properties in the Licensed Articles, (v) [*]; and (vi) any and all uses of Licensee’s Marks by Licensor, its Affiliates and their sublicensees, all of the above on the express condition that the Licensee shall promptly notify Licensor in writing of any such claims or suits.

(d) Licensee hereby covenants and agrees to indemnify, defend and hold Licensor, and its Affiliates and subsidiaries, and their respective directors, officers, shareholders, agents and employees, free, clear and harmless of and from any and all third party claims, liabilities, judgments, damages, cost and expenses including, without limitation, reasonable attorneys’ fees and expert witness fees arising out of the manufacture, distribution, sale, lease, placement, use, operation, marketing or advertising of the Licensed Articles (except to the extent covered by Section 6(c) above), including, without limitation: (i) any claim of actual or alleged trademark infringement by Licensee’s or a sublicensee’s use of Licensee’s Marks or other trademarks contained in the Licensed Articles, other than trademarks contained in the Licensor’s IP, and excluding those listed in Exhibit 5, by a claimant alleging superior rights to use such trademarks in connection with slot machines or other Gaming Devices or Licensed Articles, (ii) any patent, process, idea, method or device used by Licensee or a sublicensee in connection with the Licensed Articles (other than with respect to patents utilized in the Licensed Properties), and (iii) any claims, suits, losses and damages (including reasonable attorneys fees and expenses) arising out of actual or alleged defects in the Licensed Articles, whether defects in design, manufacture, or otherwise, all of the above on the express condition that the Licensor shall promptly notify Licensee in writing of any such claims or suits. Licensee agrees that it will obtain, at its own expense, product liability insurance from a recognized insurance company, providing adequate product liability insurance protection (at least in the amount of Two Million United States Dollars (U.S. $2,000,000.00) for Bodily Injury Liability and Property Damage Liability for each occurrence and Five Million United States Dollars (U.S.

$5,000,000.00) in annual aggregate), effective throughout the Term and any renewal, and for at least three (3) years after any expiration or termination of the Agreement, naming the Licensee as named insured and Licensor as additional insured against any claims, suits, losses or damages arising out of any such actual or alleged defects in the Licensed Articles. As proof of such insurance, a certificate of insurance naming Licensor as an additional insured will be submitted to Licensor by Licensee for Licensor to verify Licensee’s compliance with this paragraph before any Licensed Article is distributed or sold, and at the latest, within thirty (30) days after the Effective Date of this Agreement. Licensor shall be entitled to a copy of the then prevailing certificate of insurance, which shall be furnished to Licensor by Licensee. As used in the first and third sentences of this Section 6(d), “Licensor” shall also include the officers, directors, agents and employees of Licensor, and its Affiliates. The certificate of insurance shall include a provision to notify Licensor in writing, prior to the effective date, of any non-standard amendment or early cancellation of such insurance before the effective date thereof, other than in connection with the annual renewals of such policies in the ordinary course of Licensee’s business.

(e) In connection with any claim or suit described in Section 6(c) or 6(d), the party indemnifying under this Section 6 (the “Indemnitor”) shall defend, contest or otherwise protect the indemnified party (the “Indemnitee”) against such claim or suit at the Indemnitor’s own cost and expense. The Indemnitee shall reasonably cooperate with the Indemnitor, at the Indemnitor’s request and expense, in the defense of the claim or suit and shall give the Indemnitor full control over the defense and settlement thereof, provided that no such settlement requiring other than payment of money damages may be made without the Indemnitee’s consent, which will not be unreasonably withheld. In the event that the Indemnitor fails timely to defend, contest or otherwise protect against a claim or suit, the Indemnitee shall have the right to defend, contest or otherwise protect against the same, and upon ten (10) days’ written notice to the Indemnitor, make any compromise or settlement thereof and recover the entire cost thereof from the Indemnitor, including without limitation, reasonable attorneys’ fees, disbursement and all reasonable amounts applied as a result of such suit or claim or compromise or settlement thereof. The obligations of the parties under Sections 6(c), (d) and (e) shall survive the termination or expiration of this Agreement.

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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7. MERCHANDISE AND MANUFACTURING STANDARDS

(a) Specifications. Licensee represents, warrants and covenants that the Licensed Articles will meet the Specifications. “Specifications” means that the Licensed Articles: (1) are of an acceptable quality, making them merchantable and fit for their intended and foreseeable uses; (2) are of such style, quality, and appearance as to be appropriate for and suited to their exploitation, to the protection and enhancement of the Licensed Properties and the good will pertaining thereto; (3) are designed, produced, sold and distributed in accordance with all laws, rules and regulations applicable to the design, manufacture, distribution, use and sale of the Licensed Articles, including, without limitation, all gaming regulatory laws, rules and regulations, and those set forth in Exhibit 3-1 attached hereto and incorporated herein by reference, to the extent applicable to the Licensed Articles; and (4) do not display any content utilizing the Licensed Property that has not been specifically disclosed to and approved in writing by Licensor. Licensee shall conduct safety testing of the Licensed Articles in accordance with Exhibit 3-2 attached hereto. In the event that Licensee changes such safety testing, Licensee shall submit a proposed revised Exhibit 3-2 to Licensor for its approval, which shall not be unreasonably withheld. Upon request by Licensor, Licensee shall provide Licensor with specific test data. Licensee shall maintain any test reports and other safety testing records, as well as all engineering design records, for a period of not less than two (2) years from the date that such document was created.

(b) Approvals.

(i) Licensee shall, before selling, leasing, placing or distributing any Licensed Article, furnish to Licensor free of cost, for Licensor’s written approval, concept documents, preliminary artwork (including, without limitation, artwork for video screens, device cabinets and peripherals), designs, specifications, and final artwork of such Licensed Article, provided however that with respect to the hardware or external physical components of such Licensed Articles, Licensee must furnish to Licensor for approval only those components that display Licensed Properties or other Licensor’s IP. The quality, content, style and appearance of such Licensed Articles shall be subject to the written approval of Licensor. When seeking Licensor’s approval of the Licensed Articles, rather than submitting the Licensed Articles, Licensee may elect to submit artwork therefrom and videotape or other depictions thereof, but if Licensor wishes to examine the Licensed Article itself, Licensee shall make the same available for inspection and review by Licensor at Licensee’s Illinois facilities.

(ii) Any item submitted to Licensor shall not be deemed approved unless and until approved by Licensor in writing or electronically through the Hasbro Property Group

Licensee Approval System or a successor system (collectively, “LAS”), provided that any waiver or modification of a Licensor comment previously made in LAS may be made electronically by email from Licensee. Licensor is not under any obligation to review Licensee’s submission unless Licensee uses Licensor’s approval form or through LAS. With respect to any item submitted by Licensee to Licensor for approval under this Section 7(b), Licensor shall endeavor to provide approval or disapproval of the submitted item within ten (10) business days after receipt of the same, but in no event shall any item be deemed approved unless and until approved by Licensor in writing or electronically as set forth in the first sentence of this Section 7(b)(ii). Approval by Licensor of Licensed Articles or any other item shall not constitute a waiver of Licensor’s rights or Licensee’s duties and obligations under any other provision of this Agreement, including, without limitation, Licensee’s obligations to develop, sell and distribute the Licensed Articles in compliance with the Specifications or Licensee’s obligations to defend, hold harmless, and indemnify Licensor.

(iii) Sale, lease, placement or distribution by Licensee of any Licensed Article which has not been specifically approved by Licensor as hereinabove provided shall be deemed to constitute a material breach of this Agreement. If any Licensed Articles or related materials distributed by Licensee fail materially to conform with the samples or materials previously approved by Licensor, then Licensor may elect, at is sole discretion, without limitation on any other rights and remedies of Licensor, to do one or more of the following: (i) require Licensee to terminate distribution of the Licensed Article or materials at issue; (ii) terminate this Agreement in accordance with the provision of Section 12(e) if Licensor provides the required notice and Licensee fails to cure such default within the allotted time; and/or (iii) subject to the provisions of this sentence and the following sentence, require that Licensee bring any such non-complying Licensed Articles or materials into compliance within thirty (30) days after receipt of written notice from Licensor, and the failure of Licensee to demonstrate that any affected units of such Licensed Articles or materials have been brought into compliance within such prescribed period shall entitle Licensor to terminate this Agreement pursuant to the provisions of Section 12(e) below. After Licensed Articles and related materials have been approved pursuant to this paragraph, Licensee will not then change the same in any material respect without Licensor’s prior written consent, and Licensor shall not withdraw its approval of the same, unless the same shall be defective or harmful, not in compliance with the Specifications, or subject to a claim of infringement (other than a claim of infringement relating only to the Licensee’s intellectual property). In no event shall Licensor be liable for damages caused directly or indirectly by any such withdrawal of approval, including but not limited to claims for lost profits, consequential damages, or costs.

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(iv) As to the exercise by Licensor of its rights to approve the Licensed Articles and any material relating thereto pursuant to this Paragraph 7(b) and Sections 8 and 9 below, Licensor shall not unreasonably withhold or delay such approval, and will take into account gaming industry regulations, standards and practices and the technical limitations of the applications involved.

(c) Manufacturing Ethics and Approval of Manufacturers. Licensee acknowledges that Licensor has a significant interest in ensuring that the Licensed Articles are manufactured, distributed, and sold in accordance with the highest ethical and business standards. Licensee’s, its Affiliates, or third-party manufacturers’, printers’ or packagers’ (collectively “Manufacturers”) facilities that produce components of the Licensed Articles that are branded with Licensor’s IP shall be referred to herein as Facilities and such definition shall supersede the definition of Facilities in Licensor’s Global Business Ethics Principles. Licensee covenants and agrees that any Manufacturers’ Facilities comply and will remain in compliance throughout the Term with Licensor’s Global Business Ethics Principles as modified in Section 7(e) of the Basic Terms (hereinafter, as modified by Section 7(e) of the Basic Terms, the “Principles”), attached hereto as Schedule C and incorporated herein by reference. Licensee covenants and agrees that Licensor or its representative shall have the right from time to time, with prior notice, to inspect and audit any such Facilities, and such inspection and audit process may include, but might not necessarily be limited to, a review of the Facility’s policies, records and payroll documents, walkthrough of the entire Facility, and confidential interviews with management and workers; provided, however, that Licensor shall have no right to audit and inspect any such Facilities located in the United States of America, unless Licensor has received an allegation that such Facility is not in compliance with the Principles or Licensor otherwise has reason to believe that such Facility is not in compliance with the Principles. Licensor’s approval of any such Facility may be conditioned upon such Facility being determined to be in compliance with the Principles. Licensee shall, prior to production of any new Licensed Articles not already being produced under the Pre-Existing Agreement and thereafter on an annual basis on or before each anniversary of the date of this Agreement, provide to Licensor a written disclosure of the name and location of the Facilities (including any such Facilities currently approved under the Pre-Existing Agreement), and if following Licensee providing such a written disclosure there is any change or planned change of the name or location of such Facilities, then Licensee shall give Licensor prompt written notice stating the changes or planned changes, and any such new Facility shall be subject to approval as provided in this Agreement prior to production. Licensee shall not engage any Facility that refuses to consent to Licensor’s inspection and audit of such Facilities, and upon notice from Licensor shall immediately terminate the services

of any such Facility that attempts to prevent any such inspection. Prior to using any Facility Licensee must obtain Licensor’s written approval of such Facility. Facilities approved under the Pre-Existing Agreement as of the Effective Date shall be deemed approved under this Agreement as of the Effective Date with respect to the continued manufacturing of previously approved Licensed Articles; provided, however, that no such prior approval of Licensor shall be required for Facilities located in the United States of America provided that Licensee has provided a written disclosure of the use or intended use of such Facility as provided above, unless Licensor has informed Licensee either that Licensor has received an allegation that such Facility in the United States is not in compliance with the Principles or Licensor has reason to believe such Facility is not in compliance with the Principles. As part of the approval process Licensee must submit to Licensor for Licensor’s review with respect to each such Facility an audit or audits as specified below conducted by a third-party auditor acceptable to Licensor reporting the level of compliance of such Facility with the Principles; provided, however, that no such audit report must be submitted with respect to any such Facilities located in the United States of America (except that if at such time or thereafter Licensor has received an allegation that such Facility is not in compliance with the Principles or Licensor otherwise has reason to believe that such Facility is not in compliance with the Principles, then Licensee must submit to Licensor such an audit for Licensor’s review and approval). Where applicable, Licensee shall submit either one such audit conducted within the last six-month period or two such audits conducted within the last two (2) years. Licensee shall cooperate with Licensor and endeavor to cause the Manufacturer to cooperate with Licensor in addressing any issues or concerns raised by any audit. Licensor may condition its approval of a Manufacturer or Facility on the submission of a corrective action plan and submission of a third-party verification audit within three (3) months from Licensor’s request. If a Manufacturer continues to use any Facility approved by Licensor for production of components of the Licensed Articles that are branded with Licensor’s IP, then Licensee shall submit to Licensor for Licensor’s review annually no later than twelve (12) months from the date of the prior audit submission an audit conducted within the prior year by a third-party auditor acceptable to Licensor reporting the level of compliance of the facility with the Principles; provided, however, that this requirement shall not apply to any such Facilities located in the United States of America, unless Licensor notifies Licensee that Licensor has received an allegation that such Facility is not in compliance with the Principles or Licensor otherwise has reason to believe that such Facility is not in compliance with the Principles. The submission of such audits and Licensor’s approval of any Manufacturer or Facility shall not be deemed to waive or release the other provisions of Section 7(c) above, including, without

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limitation, the right of Licensor or its representatives to inspect and audit Facilities.

(d) In the event that Licensee is contacted by any governmental body or agency (including but not limited to the United States Food And Drug Administration, Federal Trade Commission, Consumer Product Safety Commission, Federal Communications Commission, the U.S. Department of Justice, Health Canada, or any federal, state, or provincial attorney general’s office) concerning any issue of product safety with respect to the Licensed Articles involving a serious injury (that is, an injury requiring hospitalization or emergency room treatment) or death, then Licensee shall so notify Licensor within forty-eight (48) hours of Licensee’s executive management becoming aware of such contact, and thereafter upon request of Licensor, except as may be otherwise required by law, confidentiality requirements and as subject to all applicable privileges, Licensee shall keep Licensor generally informed of its response to any such governmental body or agency with respect to such matter subject to Licensee’s judgment giving due consideration to issues of potential liability, evidence and discovery.

(e) For Facilities located in the United States of America, Licensor agrees that:

(i) The second sentence of Paragraph 1 of the Principles shall be deemed complied with if all employment, including overtime, is in compliance with applicable law.

(ii) Paragraph 6 of the Principles, “Communication of Principles” shall be deemed complied with if information with respect to employee rights, working hours and working conditions is provided to employees in compliance with applicable law.

(iii) in the second paragraph of Paragraph 3 of the Principles shall be deemed complied with if working hours and overtime are provided and compensated in compliance with applicable law.

(iv) Paragraphs 10 of the Principles shall be deemed complied with if Licensor complies with the provisions of Section 7(c) above with respect to allowing inspection and audit of Facilities, providing audit reports, and the taking of corrective actions as and to the extent required by Section 7(c) above.

(v) Paragraph 11 of the Principles shall be complied with if such certification is provided with respect to Facilities owned and operated by Licensee, and for Facilities not owned and operated by Licensor audit reports are provided to the extent required by Section 7(c) above.

8. LABELING; ADVERTISING MATERIAL APPROVALS

(a) Labeling. As a condition to the grant of rights hereunder, Licensee agrees that it will cause to appear on or

within each Licensed Article sold, leased, placed or distributed by it and on or within all advertising, promotional or display material bearing any Licensed Property, the applicable Required Notice (or a shorter or alternative notice as approved by Licensor) and any other notice desired by Licensor, and where such article or advertising, promotional or display material bears a trademark or service mark of Licensor, appropriate statutory notice of registration thereof. It is understood that, in the event that any change or changes in the foregoing notices shall be required, such change or changes shall be instituted within ninety (90) days on a running change, go forward basis only after Licensor gives written notice to Licensee of the requested change, and shall not affect Licensee’s inventory, purchase commitments, or parts or product in process existing at the end of such ninety day period and bearing the notice referenced above; provided, however, that no such change shall be instituted in the software of the Licensed Articles until Licensee elects to submit a new revision of the software for the necessary regulatory approval, and then such change shall be instituted when and where such approval is received and such revision is incorporated into the Licensed Articles. Licensee shall have the right to affix in or on the Licensed Articles and related materials its own notices, legends and markings, as well as those of its third party licensors and developers, those required by law or those required to indicate compliance with regulatory, safety or quality standards (e.g. Underwriters’ Laboratory markings) or as a public service, subject to Licensor’s approval, not to be unreasonably withheld or delayed.

(b) Approvals. A sample of each and every tag, label, imprint, storyboard, copy and layout or other device containing any such notice and all advertising, promotional or display material (including, without limitation, Internet or website materials) bearing a Licensed Property shall be submitted by Licensee to Licensor for its written approval prior to use by Licensee. Licensee must use Licensor’s approval form or process with each submission for Licensor’s approval.

9. PROMOTIONAL MATERIAL

(a) In all cases where Licensee desires artwork involving Licensed Articles to be executed, the cost of such artwork and the time for the production thereof shall be borne by Licensee. All artwork and designs involving the Licensed Properties, or any reproduction thereof, shall be subject to prior written approval of Licensor.

(b) Licensor shall have the right, but shall not be under any obligation, to use the Licensed Properties so as to give the Licensed Properties, Licensor and/or Licensor’s programs full and favorable prominence and publicity; provided, however, that uses of the Licensee’s name and the Licensed Articles shall be subject to Licensee’s consent, such consent not to be unreasonably withheld or delayed.

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(c) Licensee agrees not to offer for sale or lease or advertise or publicize any of the Licensed Articles on radio, broadcast (which term “broadcast” shall not include internet advertising), print or television without the prior written approval of Licensor. For the avoidance of doubt, notwithstanding the foregoing parenthetical stating that the term “broadcast” does not include internet advertising, the content of internet advertising with respect to the Licensed Articles or using the Licensed Properties is subject to Licensor’s prior written approval as provided in this Agreement. Licensee also agrees to submit to Licensor for advance approval designed sketches of all advertising and other publicity material which Licensee proposes to use in connection with the promotion, sale, distribution, and leasing of the Licensed Articles. Licensee shall not use, or authorize the use of, any Licensed Property in connection with the promotion, provision or endorsement of any products, services, forums (including on a website) or activities that: are illegal; are defamatory or demean, ridicule or attack individuals on the basis of age, color, national origin, race, religion, sex, sexual orientation or disability; are pornographic, lewd or obscene; or promote or endorse illegal drug use, or advertise the Licensed Articles on any such website.

(d) Upon request of Licensee, not more than two (2) times in any calendar year for each Licensed Property, Licensor agrees to provide Licensee with information and materials regarding the brand awareness, affinity, and demographic information regarding consumers, users and purchasers of the Licensed Property board games, to the extent that Licensor has such information and materials. Such information shall be treated as Confidential Information of Licensor. Licensor shall not be required to provide Licensee with sales data related to the Licensed Property board games.

10. DISTRIBUTION

(a) Licensee agrees that during the Term of this Agreement it will manufacture, distribute, lease and sell the Licensed Articles and that it will make and maintain arrangements for the distribution of the Licensed Articles, consistent with its customary practices for goods or services of like kind and in accordance with its reasonable business judgment, exercised in good faith.

(b) Licensee agrees that it will sell and distribute the Licensed Articles outright or distribute them otherwise as contemplated by Section 2.1(a) of the Summary consistent with its customary business practices and only within the Channels of Distribution. Licensee shall not sell or distribute Licensed Articles to any entity whose sales or distribution of the Licensed Articles are or will be made for publicity or promotional tie-in purposes, combination sales, premiums, give-aways, or similar methods of merchandising, or who engages in deceptive, illegal, or immoral business practices as to the use of the Licensed Articles. For purposes of this paragraph, the term “premium” shall include, but not be

limited to, free or self-liquidating items offered to the public in conjunction with the sale or promotion of a product or service, or any similar scheme or device, the prime intent of which is to use the Licensed Articles in such a way as to promote, publicize and/or sell services (other than use of the Licensed Articles) and/or product(s) other than the Licensed Articles. In the event any sale or lease is made at a special price to any of Licensee’s Affiliates or to any other person, firm or corporation related in any manner to Licensee or its officers, directors or major stockholders as the end user, and not as part of interim steps of Licensee’s distribution prior to the sale or lease to legal gaming establishments for use by end users, there shall be a royalty paid on such sale or lease based upon the price or lease terms generally charged the trade by Licensee if price or lease terms is part of the calculation of the royalty.

11. RECORDS

Licensee agrees to keep accurate books of account and records covering all transactions relating to its compliance with Sections 2 (including the referenced definitions and provisions contained in the Summary), 6(b) (as it relates to insurance), and 14 of these Basic Terms and Section 3 of the Summary, and Licensor and its duly authorized certified public accountants or other representatives shall have the right, but not more than once per calendar year, on at least thirty (30) days written notice and during Licensee’s normal business hours to an inspection of said books of account and records and of all other documents, materials, and premises in the possession or under the control of Licensee reasonably necessary to determine compliance with the above-referenced terms and provisions of this Agreement and shall have free and full access thereto for said purposes and for the purpose of making extracts therefrom and ensuring Licensor of Licensee’s compliance with the above-referenced terms and provisions of this Agreement. All such books and records related to the proper reporting and paying of royalties shall be maintained for at least [*] following the month to which they pertain. Any such audits shall be limited to no further back than the [*] prior to the calendar quarter in which the Licensor gives notice of its intent to conduct the audit (for example, if Licensor gives notice in [*], the audit shall be limited to no further back than the [*] prior to then (that is, [*]. Licensor shall report audit findings to Licensee within six (6) months after the date that audit starts. In the event that Licensor or its duly authorized certified public accountants shall discover a royalty payment discrepancy of [*] or more pursuant to any such examination, Licensee shall pay to Licensor the fee for such examination, plus reasonable out of pocket costs. The fee for said examination shall be [*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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[*] per day, but in no event shall Licensee be charged in excess of [*] for any individual examination. Royalties found to be due as a result of Licensor’s examination of the Licensee’s books of accounts should be paid immediately with interest at an interest rate of [*], or the highest rate permitted by law, whichever rate is lower, from the date the royalty amount should have been paid to Licensor until paid.

12. TERMINATION

(a) Licensor may withdraw certain rights granted to Licensee as provided in Sections 3.1, 3.2, and 3.3 of the Summary above.

(b) If in any calendar year of the Term Licensee fails to lease, sell, or otherwise provide any Licensed Articles and derives no revenue from the use or operation thereof, Licensor may terminate this license by giving notice of termination to Licensee. Such notice shall be effective when mailed by Licensor.

(c) If Licensee becomes insolvent, or if a petition in bankruptcy or for reorganization is filed by or against it (and in the case of a filing against it, such filing is not dismissed within ninety (90) days), or if any insolvency proceedings are instituted by or against it under any state or federal law (and in the case of a filing against it, such filing is not dismissed within ninety (90) days), or if it makes an assignment for the benefit of its creditors, or if a receiver is appointed for its property and business and remains undischarged for a period of ninety (90) days, or if it liquidates its business in any manner whatsoever, or if any distress, execution or attachment is levied on substantially all of its assets and remains undischarged for a period of ninety (90) days, Licensor shall have the right, if it so elects, to terminate this Agreement and the license hereby granted, upon thirty (30) days’ notice in writing to Licensee. Upon the expiration of such thirty (30) days, this Agreement and the license hereby granted shall cease and terminate.

(d) If Licensor becomes insolvent, or if a petition in bankruptcy or for reorganization is filed by or against it (and in the case of a filing against it, such filing is not dismissed within ninety (90) days), or if any insolvency proceedings are instituted by or against it under any state or federal law (and in the case of a filing against it, such filing is not dismissed within ninety (90) days), or if it makes an assignment for the benefit of its creditors, or if a receiver is appointed for its property and business and remains undischarged for a period of ninety (90) days, or if it liquidates its business in any manner whatsoever, or if any distress, execution or attachment is levied on substantially all of its assets and remains undischarged for a period of ninety (90) days, Licensee shall have the right, if it so elects, to terminate this Agreement and the license hereby granted, upon thirty (30) days’ notice in writing to Licensor. Upon the expiration of such thirty (30) days, this Agreement and the license hereby granted shall cease and terminate. In the event that Licensee elects not to

terminate the Agreement pursuant to this Section, and Licensor or a debtor-in-possession or trustee managing Licensor’s bankruptcy estate elects to reject this Agreement pursuant to Section 365 of the U.S. Bankruptcy Code, and Licensee elects to continue licensing the intellectual property under this Agreement pursuant to Section 365(n) of the U.S. bankruptcy Code, the intellectual property which Licensee may continue licensing pursuant to and, as if fully subject to Section 365(n) shall include the rights to use the trademarks and trade dress that are included within the Licensed Properties hereunder, notwithstanding any provisions of the bankruptcy code to the contrary.

(e) If Licensee shall violate any of its material obligations under the terms of this Agreement, including, without limitation, if this Agreement or any rights and duties hereunder shall be assigned, mortgaged, sublicensed or otherwise encumbered by Licensee or by operation of law, including, without limitation, a Constructive Assignment, without the prior written consent of Licensor as provided in Section 20 below or otherwise in violation of this Agreement (except as provided in Section 20.2 below where Licensee exercises its right to terminate this Agreement and proceed with or continue in existence a Constructive Assignment), Licensor shall have the right to terminate the license granted in this Agreement upon thirty (30) days’ written notice to Licensee stating with particularity the violation(s) of its obligations, and such notice of termination shall become effective unless Licensee shall completely remedy the stated violation(s) within the thirty (30) day period and provide reasonable evidence to Licensor that such violation(s) has been remedied.

(f) If Licensor shall violate any of its material obligations under the terms of this Agreement, Licensee shall have the right to terminate this Agreement upon thirty (30) days’ written notice to Licensor stating with particularity the violation(s) of its obligations, and such notice of termination shall become effective unless Licensor shall completely remedy the stated violation(s) within the thirty (30) day period and provide reasonable evidence to Licensee that such violation(s) has been remedied.

(g) Termination of the license under the provisions of Section 12 shall be without prejudice to any rights which either party may otherwise have against the other, including the right to recover royalties due hereunder or damages caused it by the other’s breach, but subject to Section 30 below. In the event of a material breach by Licensor (including wrongful termination or withdrawal or rights) not cured within the cure period set forth in Section 12(f), in addition to any other rights and remedies available to it under law, equity or otherwise, Licensee may seek a remedy of specific performance of the License Grant, whether to grant such remedy to be

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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determined by the court. Upon the termination of this license, notwithstanding anything to the contrary herein, all royalties on sales theretofore made or revenues theretofore earned in excess of the applicable previously paid Advance Payments, shall become immediately due and payable, and shall not be repayable. In the event of termination on account of Licensee’s material breach not cured in accordance with the requirements set forth in Section 12(e), and such material breach involved (i) Licensee’s failure to make and report any payments when due (including, without limitation, royalties, Advance Payments, and [*] Guarantee payments), (ii) failure to maintain the required records and allow Licensor audit rights as provided in Section 11 above, (iii) the distribution or use of unapproved products or the distribution of Licensed Articles outside the License Grant (for example, without limitation, outside the Territory or Channels of Distribution or outside of the license rights), (iv) failure to comply with the provisions of Section 7(c) with respect to the Global Business Ethics Principles and Manufacturers, (v) failure to maintain the required insurance and provide a insurance certificates with respect to the same, or (vi) if this Agreement or any rights and duties hereunder shall be assigned, mortgaged, sublicensed or otherwise encumbered by Licensee or by operation of law, including, without limitation, a Constructive Assignment, without the prior written consent of Licensor as provided in Section 20 below or otherwise in violation of this Agreement (except as expressly provided for in Section 20.2 where Licensee exercises its right to terminate this Agreement and proceed with or continue in existence a Constructive Assignment), then the balance of the Total Royalty Guarantee, including, without limitation, any [*] Guarantee or Advance Payment amounts with a due date subsequent to the date of termination, shall become immediately due and payable on the date of termination. In the event of termination on account of Licensor’s material breach not cured in accordance with the requirements set forth in Section 12(f), then Licensee shall be relieved of any and all Advance Payments and [*] Guarantee payments that are not due and owing as of the date of the termination.

13. STATEMENTS PRIOR TO AND UPON TERMINATION OR EXPIRATION; LIMITS ON SALES IN LAST [*]

(a) Between [*] of [*] of the Term (for example, assuming the Term is not extended for the Extension Term, between [*]), and again within [*] after such expiration (or, in the event of termination of this license, [*] after receipt of notice of termination or the happening of the event which terminates this Agreement where no notice is required), Licensee shall furnish to Licensor a statement showing the number and description of Licensed Articles on hand or in process of manufacture. Licensor shall have the right to take a physical inventory to ascertain or verify such inventory and statement, and refusal by Licensee to submit to such physical inventory by Licensor shall forfeit Licensee’s right to dispose of such inventory

as provided in Section 14 hereof, Licensor retaining all other legal and equitable rights Licensor may have in the circumstances.

(b) In each of the last [*] of the Term, sales of Licensed Articles shall be subject to the following limitations: (i) such sales in a Region of a Licensed Article using a Licensed Property during each such [*] may not be in a quantity more than [*] than the average quantity of Licensed Articles using the same Licensed Property [*] in that Region per [*] over the [*] prior to such year, and (ii) such sales in a Region of Licensed Articles using a Licensed Property during each such [*] may not be at a price [*] the average selling price of sold Licensed Articles using the same Licensed Property [*] sold in that Region over the [*] prior to such [*]. If Licensee has made no sales of Licensed Articles using any particular Licensed Property (other then the MONOPOLY Licensed Property) or [*], then Licensee may sell such Licensed Articles using the particular Licensed Property or [*] only with the express written waiver of Licensor and in such case subject to such terms and restrictions as Licensor sets forth in the written waiver.

14. DISPOSAL OF STOCK AFTER EXPIRATION; CONTINUATION OF LEASES

(a) After expiration of the Term of this Agreement, Licensee, except as otherwise provided in this Agreement, may dispose of Licensed Articles which are completed and on hand (or are in the process of manufacture under order from a third-party customer of Licensee) at the time of expiration for a period of [*] (hereinafter, the “Sell-Off Period”), provided that (i) royalties with respect to sales during the Sell-Off Period are paid and statements are furnished for that period in accordance with Section 2 of the Summary and Sections 2(c) and (d) of the Basic Terms and are not credited against or offset by any Total Royalty Guarantee or [*] Guarantee, (ii) Licensed Articles using the same Licensed Property [*] had been offered for sale and shipped prior to the

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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expiration of the Term, (iii) such sales are restricted to the Territory and within the Channels of Distribution, (iv) such sales in a Region of Licensed Articles using the same Licensed Property [*] during the Sell-Off Period may not be in a quantity more than [*] than the average quantity for a [*] period of sold Licensed Articles using the same Licensed Property [*] in that Region calculated using such sales over the [*] period prior to expiration, and (v) such sales in a Region of Licensed Articles using the same Licensed Property [*] during the Sell-Off Period may not be at a price more than [*] the average price of sold Licensed Articles using the same Licensed Property [*] in that Region over the [*] period prior to expiration. If Licensee has made no sales of Licensed Articles using any particular Licensed Property (other then the MONOPOLY Licensed Property) or [*], then Licensee may sell such Licensed Articles using the particular Licensed Property [*] in the Sell-Off Period only with the express written waiver of Licensor and in such case subject to such terms and restrictions as Licensor sets forth in the written waiver. With respect to any Licensed Articles that as of the date of expiration of the Term are leased to a third party or have been sold to a third party but are subject to a recurring payment obligation (for example, without limitation, payment for continuing software support), such lease agreement or other agreement with recurring payment obligation may continue for its previously agreed upon contract term, provided that in no event shall it continue for longer than [*] after the date of expiration of the Term of this Agreement and no such agreement may be extended or renewed after the date of expiration of the Term, and at the end of such [*] or shorter period, Licensee shall convert or remove the Licensed Articles such that the machines have been stripped of and do not contain, display, use or reproduce the Licensed Properties or any intellectual property owned by or assigned to Licensor pursuant to this Agreement. Such Licensed Articles that were leased or subject to a recurring payment obligation may not be sold at or during the foregoing period of up to [*] (unless such Licensed Articles were subject to a customer purchase option entered into in the normal course of business prior to the expiration date of the Term of this Agreement, in which event such Licensed Articles may be sold only in accordance with the purchase option terms during the Sell-Off Period and subject to the restrictions contained herein with respect to quantities, price, Licensed Property and, [*] and such sales shall count toward the quantity restrictions set forth above). The foregoing provisions with respect to allowing sell-off of Licensed Articles and continuation of lease, participation and other recurring revenue agreements shall apply in the event of the withdrawal of rights under the License Agreement Summary, Sections 3.1, 3.2, and 3.3, with respect to the Licensed Articles that are the subject of the rights being withdrawn. Licensee shall have a continuing obligation to pay royalties with respect to any revenue for Licensed Articles that is earned after the expiration or termination of this Agreement

or after the withdrawal of such rights, such royalties to be paid and statements with respect thereto provided in accordance with Section 2 of the Summary and Sections 2(c) and (d) of the Basic Terms, provided such royalties may not be credited against or offset by any Total Royalty Guarantee or [*] Guarantee. No such inventory sell off during the Sell-Off Period or continuation of leases as provided hereinabove shall be permitted in the event of termination of this Agreement by Licensor in accordance with Paragraph 12 of the Basic Terms above, including but not limited to termination based on failure of Licensee to pay when due royalties or any portion of the Total Royalty Guarantee, including any [*] Guarantee payment, failure of Licensee to affix notices of copyright, trademark, or service mark as specified in this Agreement, or the sale, lease or distribution of Licensed Articles that have not been approved by Licensor pursuant to this Agreement or that do not conform to the quality and style of the articles approved by Licensor pursuant to Section 7 of the Basic Terms, or by reason of termination for any other causes or events set forth in Section 12 above. In the event of such termination by Licensor by reason of any cause or event contained in Section 12, Licensee, its receivers, representatives, trustees, agents, administrators and successors shall have no further right to sell, lease, exploit or in any way deal in or with any of the Licensed Articles, or any advertising or promotional matter or materials relating thereto, and all licenses of Licensed Articles shall terminate. Any inventory of Licensed Articles remaining after expiration or termination of this Agreement and any permitted Sell-Off Period shall be destroyed, and a certificate of such destruction shall be promptly provided to Licensor by Licensee; provided, however, that the foregoing shall not require Licensee to destroy any machine or components thereof which have been stripped of and do not contain, display, use or reproduce the Licensed Properties or any intellectual property owned by or assigned to Licensor pursuant to this Agreement or otherwise.

(b) Throughout the Term and any Sell-Off Period, Licensee agrees to refrain from “dumping” the Licensed Articles in the market place. “Dumping” shall mean the distribution of Licensed Articles at volume levels significantly above Licensee’s immediately preceding levels with respect to the Licensed Articles and at price levels or license fees or charges so far below prior levels and/or industry

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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norms (including but not limited to lease or placement at prices that would not allow for recapture of the cost of the Licensed Articles) with respect to the Licensed Articles as to disparage and/or devalue the Licensed Property. Licensee shall not build-up inventory of Licensed Articles in anticipation of selling such Licensed Articles during the Sell-Off Period. Nothing herein shall be construed as granting Licensor the right to set or approve Licensee’s pricing, and nothing shall be deemed to restrict Licensee’s ability to set prices in its own unfettered discretion.

15. EFFECT OF TERMINATION OR EXPIRATION

Upon and after the expiration or termination of this license, and any applicable Sell-Off Period, all rights granted to Licensee hereunder shall forthwith revert to Licensor, and Licensee will refrain from further use of the Licensed Properties or Licensor’s IP or any further reference to it, direct or indirect, in connection with the manufacture, sale, lease or distribution of Licensee’s products, except as provided in Paragraph l4.

16. LICENSOR’S REMEDIES

(a) Licensee acknowledges that its failure (except as otherwise provided herein) to cease the manufacture, sale, lease or distribution of the Licensed Articles at the termination or expiration of this Agreement (or any applicable Sell-Off Period) will result in immediate and irremediable damage to Licensor. Licensee acknowledges and admits that there is no adequate remedy at law for such failure to cease manufacture, sale, lease or distribution, and Licensee agrees that in the event of such failure, Licensor shall be entitled to equitable relief by way of temporary and permanent injunctions and such other further relief as any court with jurisdiction may deem just and proper.

(b) Resort to any remedies referred to in this Agreement shall not be construed as a waiver of any other rights and remedies to which either party is entitled under this Agreement or otherwise.

17. EXCUSE FOR NONPERFORMANCE

Neither party shall have any liability for its delay or failure to perform under this Agreement (provided, however, that this shall not apply to obligations to pay money) where caused by national emergency, war, fire, flood, strike, riot, materials shortages, transportation failure or other force majeure beyond its control; provided that if such failure or delay shall continue for a period of one hundred twenty (120) days or more, the other party may terminate this Agreement by giving written notice, in which case the provisions of Section 14 (disposal of stock after expiration; continuation of leases) would apply. In such events, all royalties on sale, lease, placement, and distribution theretofore made shall become immediately due and payable (subject to being off set and applied against previously paid Advance Payments), and no advance, minimum royalties, or royalty guarantee payments shall be repayable, and

no Advance Payment or [*] Guarantee with a due date after the date of termination shall become due or owing. For the avoidance of doubt, the foregoing does not apply to Licensee’s failure to obtain or maintain any licenses or regulatory approvals with respect to the sale, lease, placement or distribution of the Licensed Articles in any jurisdiction.

18. NOTICES

All notices required or permitted hereunder by either party to the other shall be in writing and shall be delivered personally, sent by certified or registered mail, return receipt requested, or by reputable overnight courier, postage or other delivery charges prepaid, to the addresses shown on the Summary or to such other address as either party may from time to time designate by notice as required hereby. Notices shall be deemed to have been duly given on the first to occur of either: (i) the date delivered personally; (ii) the date shown on the return receipt or on other evidence of delivery; or (iii) three (3) business days after being deposited in the mail if sent by certified or registered mail or the first (1st) business day after being delivered to a reputable overnight courier if sent by reputable overnight courier.

19. NO JOINT VENTURE

This Agreement does not and will not be deemed as establishing a relationship between the parties as partners or joint venturers, nor shall any similar relationship be deemed or construed to exist between them. Nothing herein shall be construed as constituting either party as the other’s agent or as authorizing either party to bind or incur financial or other obligations in the other’s name. The parties acknowledge and agree that the rights and powers retained by Licensor to approve the Licensed Articles and advertising, display and promotional material using the Licensed Properties or otherwise to approve of or inspect Licensee’s activities, all as herein provided, are retained because of the necessity of protecting Licensor’s copyrights, trademarks, properties and property rights generally, and specifically to conserve the good will and good name of Licensor’s company and of the Licensed Properties.

20. RESTRICTIONS ON ASSIGNMENT AND SUBLICENSING BY LICENSEE

20.1 This Agreement and all rights and duties hereunder are personal to Licensee and shall not be assigned, mortgaged, sublicensed or otherwise encumbered by Licensee or by operation of law, without the prior written consent of Licensor, to be granted or withheld in Licensor’s sole and absolute discretion, except as otherwise provided below in

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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Section 20.5 with respect to certain sublicenses and as provided in Section 20.2 with respect to certain proposed Constructive Assignments. For purposes of this Agreement, the terms “assigned” or “assignment” shall, in addition to the transfer of this Agreement or the rights or obligations hereunder (other than permitted sublicenses), whether voluntarily, involuntarily, by operation of law or otherwise, be deemed to include:

(i) a sale or other transfer by Licensee of all or substantially all of its assets;

(ii) the merger, amalgamation, consolidation or reorganization of Licensee into or with another corporation or other entity (other than an Affiliate of Licensee that is not a Competitor, as defined below), as a result of which Licensee is not the surviving corporation, provided that in the event of such a transaction with an Affiliate that is not a Competitor, then as of the effective date of the transaction, such Affiliate shall be deemed to be Licensee and shall be subject to the restrictions on assignment and provisions with respect to assignment of this Section 20 including without limitation, termination of this Agreement in the event that Licensor properly withholds its consent to such an assignment;

(iii) any transaction (including any of the foregoing transactions as well as any in which Licensee is the surviving corporation) which, whether by way of sale, gift or other transfer, results in an individual, entity or group (within the meaning of Section 13(d)(3) or 13(d)(5) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), acquiring, in the aggregate, more than a [*] ownership of the combined voting power of all outstanding voting stock of Licensee, provided however that if the individual, entity or group acquiring such ownership does not disclose under item 4 of Schedule 13D or any amended Schedule 13D filed pursuant to Section 13d of the 1934 Act (or comparable provision of any successor form), any plan or proposal relating to or that would result in (A) any extraordinary corporate transaction such as a merger, reorganization or liquidation involving the Licensee, (B) a sale or transfer of a material amount of assets of the Licensee, (C) a change in the then present board of directors or senior management of Licensee, (D) any material change in the Licensee’s business or corporate structure or (E) any action similar to those described in the foregoing clauses (A) – (D), then the acquisition of such percentage ownership of the combined voting power of all outstanding voting stock of Licensee shall not be deemed an assignment until such individual, entity or group acquires more than [*] of the combined voting power of all outstanding voting stock of Licensee, and provided further that the acquisition of voting stock of Licensee in the specified percentages by an Affiliate of Licensee (provided such Affiliate is not a Competitor) shall not be deemed an assignment, but in such event, then such Affiliate shall thereafter also be deemed to be included in the term “Licensee” for purposes of this Section 20 and shall be subject to the restrictions on assignment and provisions with

respect to assignment of this Section 20, including without limitation, termination of this Agreement in the event that Licensor properly withholds consent to such an assignment, or

(iv) the liquidation or dissolution of Licensee.

Any assignment under clauses (i), (ii) or (iii) of this Section 20.1 shall be considered a constructive assignment (“Constructive Assignment”). Licensee shall give written notice to Licensor within ten (10) business days after Licensee’s executive management becomes aware of: (a) the filing of any Schedule 13D with respect to Licensee, including any amended Schedule 13D, or (b) the acquisition in the aggregate by any individual, entity or group of more than [*] ownership of the combined voting power of all outstanding voting stock of Licensee (whether or not a Constructive Assignment) or more than [*] ownership of the combined voting power of all outstanding voting stock of Licensee. For purposes of this Section 20.1, “Licensee” shall be deemed to include WMS Industries Inc., and accordingly, without implied limitation, a Constructive Assignment with respect to WMS Industries Inc. shall be subject to the provisions of this Section 20, including, without limitation, Section 20.2 below.

20.2 In the event of any such proposed assignment covered by this Section 20, Licensee shall give written notice to Licensor requesting Licensor’s consent to such assignment. In connection with any such proposed assignment, Licensee shall provide to Licensor a statement as to whether the proposed assignment is a Constructive Assignment as well as information (to the extent such information is available to Licensee) reasonably necessary for Licensor to evaluate the proposed assignment, including, without limitation, with respect to the proposed assignee, its management, and its ownership, including its financial condition and business operations. Licensor shall provide notice of its consent to the proposed assignment or notice of its withholding of consent to such assignment within thirty (30) days of Licensee’s written notice requesting Licensor’s consent to such assignment, but in no event shall consent to be deemed to have been given by Licensor’s failure to give notice of its consent or withholding of consent within the required thirty (30) day time period.

In connection with a proposed Constructive Assignment, Licensor shall not unreasonably withhold its consent and, in the event that it withholds consent, shall provide Licensee with a written statement explaining the basis for withholding consent. In connection with any proposed assignment other than a Constructive Assignment, Licensor may withhold its consent to such proposed assignment in its sole and absolute discretion. In no event shall Licensor’s consent to a proposed Constructive Assignment be

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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conditioned upon a renegotiation of or change in the. material terms of this Agreement or additional consideration other than the warrant as set forth below.

In the event that Licensor withholds its consent to a Constructive Assignment, Licensee may, by written notice to Licensor given no later than thirty (30) days after receipt of Licensor’s notice withholding consent, terminate this Agreement. In the event that Licensee timely gives notice of such termination, then Licensee may proceed with the Constructive Assignment without being deemed to be in breach of this Agreement and this Agreement shall terminate effective as of the date of Licensee’s notice of termination, in which case: (a) any unpaid Advance Payments with due dates following the date of termination shall become immediately due and payable by Licensee to Licensor on the date of termination, and (b) the provisions of Section 14 of the Basic Terms (Disposal of Stock After Expiration; Continuation of Leases) shall apply, provided, however, the royalties earned on such placements pursuant to Section 14 shall be applied and off-set against the [*] Guarantee and Advance Payments, for the [*] in which such royalties are earned, including those paid as set forth immediately above (any such off-set royalties being referred to herein as “Post-Termination Offset Royalties”). For example, if the Agreement is terminated under this Section 20.2 in [*] and Licensee earns royalties during the sell-off period in [*], such royalties shall be offset against the [*] Guarantee for [*] and royalties earned in [*] shall be offset against the accelerated [*] Guarantee and Advance Payments for [*], that were previously paid or paid at the time of termination.

If such Constructive Assignment is to any entity other than a Competitor, Licensor shall be obligated to use its commercially reasonable efforts to relicense the Licensed Properties for rights contained within the scope of the License Grant for what would have been the remainder of the Term, subject to Licensor’s good faith business judgment, and Licensor shall pay to Licensee (as set forth below) amounts based on any and all guaranteed and/or earned royalties or license fees that Licensor or an Affiliate of Licensor recognizes (or the amortized portion thereof under generally accepted accounting principles as applied by Licensor) from such relicensing of the Licensed Properties for articles falling within the definition of the Licensed Articles for the period time that would have covered the remainder of the Term (“New Royalties”), subject to the limitations, deductions and recoupment set forth below, calculated [*] on a [*] basis with [*], for the period of time from the date of termination through what would have been the remainder of the Term. With respect to each such [*], including any partial [*] in which this Agreement is terminated, Licensor shall pay to Licensee (subject to deduction and recoupment of certain Licensor costs and expenses as set forth below) an amount equal to (a) the amount of such New Royalties recognized by Licensor for such [*] less (b) an amount equal to the average of the

amount of royalties paid by Licensee to Licensor in excess of the applicable [*] Guarantee in each of the [*] prior to the [*] in which the Agreement is terminated (including, if applicable, the calendar years prior to the Effective Date) (that is, take the difference of the amount of royalties paid versus the amount of the [*] Guarantee for the [*] before the [*] of termination, the difference of the amount of royalties versus the amount of the [*] Guarantee for the [*] before the [*] of termination, and the difference of the amount of royalties versus the amount of the [*] Guarantee for the [*] before the year of termination, add those [*] numbers together, and divide by [*], provided, that for the avoidance of doubt, it is agreed that if such three year average is a negative number, this shall not increase the amount payable to Licensee), provided that in no event shall such amount payable by Licensor in any [*] be greater than the amount paid by Licensee to Licensor under Section 20.2 above in [*] Guarantee Payments that would have been due for such [*] (less any Post-Termination Offset Royalties earned in such [*]), and subject to the deductions and recoupment as set forth below. Before making any such payments to Licensee under this Section 20.2, Licensor may first deduct and recoup from the payments otherwise payable to Licensee the documented costs and expenses Licensor or any of its Affiliates incurs in connection with relicensing and attempting to relicense such rights to the Licensed Properties, including costs and expenses in connection with identifying potential licensees, negotiating with potential licensees, entering into agreements with licensees, and to the extent greater than under this Agreement the costs and expenses of administering or carrying out its duties or enforcing its rights under such licenses (including reasonable allocation of the costs and expense of Licensor’s or its Affiliates’ own personnel), whether such costs and expenses were incurred in such [*] or in prior [*] and regardless of whether such costs and expenses relate to potential agreements for relicensing the Licensed Properties that do not materialize. For the avoidance of doubt, such deducted and recouped costs and expenses do not have to relate to the specific Licensed Property for which the New Royalties were received. All such payments to Licensee hereunder shall be made within thirty (30) days of the end of the calendar quarter which Licensor recognizes such New Royalties payments. Examples of the application of this provision are set forth in Exhibit 8.

In the event that Licensor withholds its consent to an assignment other than a Constructive Assignment, and Licensee makes such assignment, Licensor may terminate this Agreement in accordance with Section 12(e) of the Basic Terms. In the event that Licensor properly withholds its consent to a

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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Constructive Assignment, and Licensee makes such assignment or the Constructive Assignment continues in existence, and Licensee does not timely exercise its termination right as provided above in this Section 20.2, then Licensor may terminate this Agreement in accordance with Section 12(e) of the Basic Terms, provided that the applicable cure period set forth in Section 12(e) shall be ten (10) days.

20.3 Licensee expressly agrees Licensor’s withholding of its consent to a proposed assignment, including a Constructive Assignment, will not be deemed to be unreasonable if the proposed assignee (which for purposes of clause (iii) of Section 20.1 includes the individual, entity or group acquiring the specified ownership percentage) is a Competitor. For the avoidance of doubt, and notwithstanding the preceding sentence, the parties acknowledge and agree that Licensor may withhold its consent to any proposed assignment, other than a Constructive Assignment, in its sole and absolute discretion and therefore, any such withholding of consent to a proposed assignment, other than a Constructive Assignment, cannot be deemed to be unreasonable. For purposes of this provision “Competitor” shall mean, as of the date Licensee requests consent to the assignment (based upon the proposed assignee’s last financial statement for the most recently completed fiscal year:

(a) one of the [*] Toy or Game Companies (defined below) measured by revenues, or an Affiliate of a Toy or Game Company for which a disclosed line of business is the manufacturing, marketing, distribution, or wholesale sales of children’s toys or games that accounts for a minimum of [*] of the consolidated entity’s consolidated revenue or consolidated operating profits or meets the segment criteria set forth in Financial Accounting Standards Board Statement of Financial Accounting Standards No. 131 (“Disclosures about Segments of an Enterprise and Related Information”) (hereinafter FASB 131). “Toy or Game Company” shall mean an entity which has a disclosed line of business principally engaged in the manufacturing, marketing, distribution, or wholesale sales of children’s toys or games that accounts for a minimum of [*] of the entities’ consolidated revenue or consolidated operating profits or meets the segment criteria set forth in Financial Accounting Standards Board Statement of Financial Accounting Standards No. 131 (“Disclosures about Segments of an Enterprise and Related Information”).

(b) one of the [*] developers, [*] distributors or [*] producers of child or family oriented movies measured by revenues, or an Affiliate of a such entity for which a disclosed line of business is the development, distribution or production of child or family oriented movies that accounts for a minimum of [*] of the consolidated entity’s consolidated revenue or consolidated operating profits or meets the segment criteria set forth in FASB 131; provided, however, that Licensor has a disclosed line of business for the development, distribution or production of child or family oriented movies

that accounts for a minimum of [*] of the Licensor’s consolidated revenue or consolidated operating profits or meets the segment criteria set forth in FASB 131.

(c) one of the [*] developers, [*] distributors or [*] producers of child or family oriented television shows measured by revenues, or an Affiliate of a such entity for which a disclosed line of business is the development, distribution or production of child or family oriented television shows that accounts for a minimum of [*] of the consolidated entity’s consolidated revenue or consolidated operating profits or meets the segment criteria set forth in FASB 131; provided, however, that Licensor has a disclosed line of business for the development, distribution or production of child or family oriented television shows that accounts for a minimum of [*] of the Licensor’s consolidated revenue or consolidated operating profits or meets the segment criteria set forth in FASB 131.

The parties expressly agree that there may be other reasonable bases for Licensor to withhold consent to a proposed Constructive Assignment.

20.4 As additional consideration to induce Licensor to consent to any assignment of this Agreement that requires Licensor’s consent, Licensee shall provide to Licensor the New Warrant to purchase the common stock of WMS Industries, Inc. simultaneously with the execution of this Agreement. The New Warrant will vest, for the quantity of shares as set forth below, solely in the event that both Licensor timely delivers an unqualified written consent to such an assignment of this Agreement and the transaction described in such consent is consummated. In the event that the conditions precedent to the vesting of the New Warrant never occurs, such that the New Warrant never vests, the failure of the New Warrant to vest shall not be deemed a failure of consideration. The exercise price of such New Warrant shall be valued at the price of the common stock of WMS Industries, Inc. at the close of the market on the grant date of such New Warrant. In the event of a conflict between this Agreement and the New Warrant document, the New Warrant document shall control.

Number     Of Warrants	Year Consent Given
500,000	2009
500,000	2010
500,000	2011
475,000	2012
450,000	2013
425,000	2014
400,000	2015

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

19

375,000	2016
375,000	2017
375,000	2018
375,000	2019

20.5 Licensee shall not be entitled to sublicense any of its rights under this Agreement, without the written consent of Licensor as provided above, except that Licensee may enter into the following sublicense without the written consent of Licensor: (a) as set forth in Section 11 of the Summary, (b) for distribution of licensed content in the United Kingdom in Category B2-B4 machines under the UK Gambling Act of 2005, in which case Licensee shall give notice to Licensor of the sublicense and identifying the entity granted the sublicense and the sublicensed rights and obligations, or (c) in the event Licensee is not a manufacturer of the Licensed Articles, or wishes to use a third party to manufacture the Licensed Articles, Licensee may, subject to the provisions of Paragraph 7(c) , utilize a third-party manufacturer in connection with the manufacture and production of the Licensed Articles, provided that such engagement is in accordance with the conditions and requirements of Paragraph 7(c) above.

20.6 This Agreement will be binding upon Licensee’s permitted successors and assigns. In no event shall any sublicense agreement include the right to grant any further sublicenses.

21. Regulatory Compliance.

(a) Licensee and Licensor will cooperate in good faith and use their best efforts to comply with the requirements of all applicable gaming laws and gaming authorities having jurisdiction over Licensee and the exploitation of the Licensed Articles (each a “Gaming Authority”); provided, however, that nothing in this Section 21 shall require Licensor to seek to become licensed, approved or found suitable by any Gaming Authority. If a Gaming Authority prohibits or restricts the taking of any action, including the payment of monies, which prohibition or restriction frustrates the purpose of this Agreement, the parties will in good faith attempt to modify or amend this Agreement, or take other appropriate action, to obtain the approval of such Gaming Authority to permit payment by Licensee of the amounts due Licensor hereunder. If Licensee is prevented from paying Licensor royalty payments by a Gaming Authority, Licensee shall not be considered to be in breach of this Agreement so long as Licensee deposits such royalty payments into an escrow account established with a mutually agreeable escrow agent for the benefit of Licensor until payment is authorized by such Gaming Authority of otherwise distributed pursuant to an order of a court of competent jurisdiction. The funds deposited into the escrow account shall be invested as directed by Licensor, and be at Licensor’s risk.

(b) Upon request by Licensee, Licensor shall promptly provide all information reasonably requested by the Gaming

Compliance Committee of WMS Industries Inc. (the “Compliance Committee”), with respect to Licensor (including Licensor’s officers, directors, and controlling shareholders), its financial condition, litigation, indictments, criminal proceedings, and the like in which Licensor or its officers, directors, and controlling shareholders are or may have been involved, if any, in order for the Compliance Committee to determine that no such information would disclose any fact which would jeopardize, in any material manner, any gaming licenses or permits held by Licensee and/or its Affiliates with any Gaming Authority.

22. INTEGRATION

No waiver or modification of any of the terms of this Agreement shall be valid unless in writing and signed by the party to be charged. No waiver by either party of a breach or default hereunder, or a continuing breach or default, shall be deemed a waiver by such party of a subsequent breach or default of like or similar nature. Any approval or consent given by a party shall not constitute a waiver of any of such party’s rights or the other’s duties under any provision of this Agreement. Other than certain terms of the Pre-Existing Agreement as expressly provided herein, the amended warrant referenced in Section 5.1 of the Summary, the new warrant referenced in Section 5.2 of the Summary and the Side Letter agreement between the parties to be signed simultaneously herewith, there are no representations, promises, warranties, covenants or undertakings other than those contained in this Agreement, which represents the entire understanding of the parties. No person, firm, group or corporation, other than Licensee and Licensor, shall be deemed to have acquired any rights by reason of anything contained in this Agreement.

23. GOVERNING LAW

This Agreement shall be construed in accordance with the internal laws of the State of Rhode Island and applicable United States Federal Law. The parties agree that any dispute arising hereunder shall be subject to the exclusive jurisdiction of the courts of such State, including the United States District Court for the District of Rhode Island, and consent to the jurisdiction thereof.

24. HEADINGS

The paragraph and other headings in this Agreement are for reference purposes only and will not affect the meaning or interpretation of this Agreement.

25. SEVERABILITY

In the event that any provision(s) of this Agreement is adjudicated by a court of competent jurisdiction to be unlawful, unenforceable, invalid, and/or unconscionable, that provision(s) shall be deemed severed from this Agreement and shall not affect the validity or enforceability of the remaining

20

provisions hereof or this Agreement as a whole, unless the Agreement fails in its essential purpose.

26. SURVIVAL

The expiration or termination of this Agreement shall not affect those provisions that by the nature thereof are intended to survive any such expiration or termination, including, without limitation, provisions of Paragraphs 2, 4, 5, 6, 7(d) and (e), 11, 12(g), 13-16, 21-27, and 30 of the Basic Terms, as well as those in the Summary where appropriate or cross-referenced by the foregoing, including Sections 2, 5, 6, 7 (with respect to the obligation to make payments) and 13.

27. CONFIDENTIAL INFORMATION

Confidential or proprietary information contained in this Agreement (including, without limitation, the royalty rates and guarantee amounts) and the confidential or proprietary information of one party which may be disclosed to the other party hereunder or in the performance of this Agreement, shall be considered “Confidential Information” subject to the Mutual Confidential Information Agreement, by and between Licensor and Licensee, dated as of August 2, 2006 (as amended herein), and shall not be disclosed or used except as provided in said agreement, provided that such Confidential Information may be disclosed by a party or its representatives in connection with any action concerning compliance with or enforcement of this Agreement and the terms, provisions and obligations hereunder. The Mutual Confidential Information Agreement is amended by adding the following words “or by regulation or a gaming authority” immediately following “such disclosure is required by law or legal process” in paragraph 2.

28. PRESS RELEASE

Upon execution of this Agreement, Licensee may make a press release concerning this Agreement, and Licensor may make a press release concerning this Agreement. Each such press release shall be subject to the approval of the other party, which approval will not be unreasonably withheld or delayed. The parties agree to work together on scheduling the timing of the press releases, and the parties recognize the need for Licensee to issue its press release prior to or simultaneously with Licensor’s press release. In the event that Licensee needs to file and disclose this Agreement with the Securities and Exchange Commission, Licensee shall provide Licensor with an opportunity to comment on the proposed redaction of this Agreement and will consider Licensor’s input in good faith prior to filing this Agreement.

29. LICENSOR’S APPROVAL RIGHTS

As to the exercise by Licensor of its rights to approve the Licensed Articles and any material relating thereto pursuant to Paragraphs 7, 8 and 9 hereof, Licensor shall not unreasonably

withhold or delay such approval, and will take into account gaming industry regulations, standards and practices and the technical limitations of the applications involved.

30. LIABILITY

Neither party shall be liable for incidental, consequential, special or other indirect damages (including, without limitation, lost profits) arising out of or in connection with this Agreement, even if informed of the possibility thereof; provided, however, that the foregoing shall not be deemed to apply to a third-party claim for incidental, consequential, special or other indirect damages (including, without limitation, lost profits) covered by a party’s indemnification, defense and hold harmless obligations under Section 6 above.

-END-

21

EXHIBIT 1

HASBRO ROYALTY REPORTING FORM

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

EXHIBIT 2

Hasbro Global Business Ethics Principles

Hasbro, Inc., together with its subsidiaries and affiliates (“Hasbro”), strives to conduct its business in accordance with high ethical and business standards, and seeks to have its vendors, suppliers and licensees conduct themselves in the same manner. Hasbro has long recognized concerns about the quality and character of working conditions around the world, including the United States. We are continually striving to improve the working environment for those involved in the production of our toys and games. Hasbro wants its consumers to have confidence that products manufactured by Hasbro, or its vendors, suppliers and licensees, are produced in accordance with the principles set forth herein and are not made under inhumane or exploitative conditions. Implementation of the Global Business Ethics Principles enables Hasbro to ensure that manufacturing facilities involved in the production of Hasbro products (“Facilities”) understand and adhere to Hasbro’s requirements in this area. Participation in this program and adherence to these principles is mandatory for all Facilities.

1. Forced Labor - There will not be any use of forced, prison or indentured labor in the production of Hasbro products*. All employment, including overtime, shall be on a voluntary basis.

2. Child Labor - The use of child labor is prohibited. No person shall be employed in a factory that produces or manufactures any Hasbro product at an age younger than sixteen**, or younger than the age for completing compulsory education in the country of manufacture where such age is higher.

3. Working Hours and Compensation - Facilities must comply with all applicable national and local wage and hour laws, including minimum wage laws, or shall be consistent with the prevailing industry wage standards, if higher. Employee benefits shall be provided in accordance with national and local requirements. Normal working hours should not exceed forty-eight (48) hours/week with one day off in every seven-day period. Overtime work in necessary business circumstances shall be conducted in such a way as to adequately compensate workers for all work performed beyond the normal working hour standard.

4. Health and Safety - Facilities shall ensure that all employees have a healthy and safe environment, including in dormitories, where provided. Hasbro expects all Facilities to promote an awareness of health and safety issues to their employees including issues surrounding fire prevention, emergency evacuation, proper use of safety equipment, basic first-aid and the proper use and disposal of hazardous waste materials.

5. Abuse; Discrimination - Facility employees shall be treated with dignity and respect. No employee shall be subject to abuse, cruel or unusual disciplinary practices or discrimination in employment or hiring on the grounds of race, religion, origin, political affiliation, sexual preference, age or gender.

6. Communication of Principles - Facilities will communicate these principles to employees in an appropriate oral and written fashion and will undertake efforts to educate employees about these principles on a periodic basis.

7. Acceptance of Advantages - Hasbro will not tolerate Facilities who do not conduct business in an ethical and proper manner or who use bribes, kickbacks or provide gifts, favors, or services to gain a competitive advantage with Hasbro.

8. Environmental Impact - Hasbro maintains a commitment to sound environmental programs and practices and encourages the reduction and recycling of waste. Facilities must comply with all applicable laws relating to the environment and dispose of toxic materials in a controlled and safe manner. To that end, Hasbro seeks to conduct business with Facilities who are equally dedicated to pursuing continuous efforts to improve the compatibility of its operations with the environment.

9. Freedom of Association - Hasbro recognizes all employees’ right to choose [or not] to affiliate with legally sanctioned organizations or associations without unlawful interference.

10. Monitoring - Hasbro shall have the right to conduct periodic on-site visits of working and living conditions, including audits of production records and practices and of wage, hour and payroll information maintained by Facilities, to review and ensure compliance with these principles. Although Hasbro retains its rights to terminate its relationship with a vendor, supplier or licensee facility in violation of these principles, Hasbro will endeavor to work with Facilities to promptly address any problems discovered in the course of its review or audit. Hasbro will require the implementation of an acceptable written corrective action plan for any problems found during an audit. Failure to address items in the corrective action plan may also result in termination of the business relationship.

11. Certification - Hasbro will require a written statement from Facilities of compliance with these principles.

12. Compliance with Applicable Laws - Facilities will comply with the national laws of the country in which they are conducting business, any local laws, regulations or standards applicable to their business and the industry standards which have been established in their location; provided, however, in the event of any conflict between the provisions of any of the preceding laws, regulations, or standards and the provisions of this document, then the provision containing the higher standards shall prevail.

Hasbro, as a member of the Toy Industries of America, strongly supports and endorses the industry efforts to improve factory working conditions. While Hasbro will retain the right to conduct its own audits, participation in the ICTI CARE program, including regular audits by an approved audit company will generally be sufficient. The ICTI CARE audit documentation and guidance materials can be found on the ICTI CARE website.

Brian Goldner	Al Verrecchia
Chief Executive Officer	Chairman of the Board

June 2008

* Rehabilitation programs may be assessed by Hasbro on a case-by-case basis.

** Workers under sixteen may be considered on a case-by-case basis when hired in accord with International Labor Organization (ILO) Convention 138.

EXHIBIT 3-1

United States:

All applicable laws, rules, and regulations of the United States including (but not limited to), to the extent applicable to the Licensed Articles: The Federal Hazardous Substances Act; The Federal Food, Drug, and Cosmetic Act; the Flammable Fabrics Act; ASTM F963-07, Standard Consumer Safety Specification on Toy Safety; and all other applicable state and local laws and regulations.

Canada:

All applicable laws, rules, and regulations of Canada including (but not limited to):

• Canadian Federal Hazardous Product Act

• Canadian Federal Food, Drug, and Cosmetics Act

• Canadian Federal Packaging and Labeling Act

• Canadian Provincial Stuffed Article Act

And all associated Canadian Federal/Provincial statutes and regulations.

Rest of the Territory:

All applicable laws, rules, and regulations of the applicable jurisdictions of such Territory.

EXHIBIT 3-2

Licensee’s safety testing with respect to the Licensed Articles is in accordance with IEC (International Electronic Commission) standard 60335. Licensee is self certified through CSA (Canadian Safety Association) to conduct our safety testing. Safety test reports are submitted to CSA for final approval and issuing of certificate of compliance.

EXHIBITS 4-1 and 4-2

[THIS PAGE IS INTENTIONALLY LEFT BLANK]

MEMORANDUM OF EXCLUSIVE LICENSE

THIS MEMORANDUM OF EXCLUSIVE LICENSE is made as of this 12^th day of June, 2009, by and between HASBRO, INC. and HASBRO INTERNATIONAL, INC., (collectively “HASBRO”) with offices at 1027 Newport Avenue, Pawtucket, Rhode Island 02862-1059 and WMS GAMING INC., (“WMS”) with offices at 800 South Northpoint Blvd., Waukegan, IL 60085.

WHEREAS, Hasbro and WMS have entered into that certain Gaming Device License Agreement of even date herewith (the “License Agreement”), with respect to the development, manufacture, sale, lease, placement, marketing, distribution and other exploitation of MONOPOLY, BATTLESHIP, CLUE (CLUEDO), YAHTZEE, and [*] board game themed Gaming Devices (such terms and all other capitalized terms used as defined terms and not otherwise defined herein shall have the meanings ascribed thereto in the License Agreement);

NOW THEREFORE, pursuant to the terms of the License Agreement, and incorporating and subject to all of the terms, definitions and provisions thereof, for good and valuable consideration, Hasbro and WMS have agreed to execute this Memorandum of Exclusive License, and hereby agree as follows:

LICENSE

Pursuant to the terms of the License Agreement, Hasbro grants to Licensee the worldwide (other than as expressly set forth in the License Agreement), exclusive (as provided in the License Agreement) license to utilize the Licensed Properties solely upon and in connection with the design, development, manufacture, sale, lease, placement, marketing, advertising, promoting and distribution of the Licensed Articles in legal gaming establishments, including Gaming Devices and associated equipment, including, without limitation, the exclusive (as provided in the License Agreement) right to use the copyrights owned by Hasbro and enumerated on Schedule A attached hereto and made a part hereof, to make derivative works, in connection with the promotion, sale and other exploitation of Licensed Articles, including Gaming Devices and associated equipment, all subject to the terms and conditions of the License Agreement and provided that the term with respect to the [*] property shall begin on [*].

TERM

The initial term of the License Agreement shall run through December 31, 2016 unless earlier terminated as provided in the License Agreement. The term may be renewed for an additional three-year period, provided that certain conditions set forth in the License Agreement are satisfied, or unless earlier terminated as provided in the License Agreement.

This Memorandum of Exclusive License is not intended to and shall not modify, amend, supplement, waive or release any of the covenants, agreements, terms and provisions of the License Agreement.

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

This Memorandum of Exclusive License has been duly authorized and executed as of this 12^th day of June 2009.

AGREED TO AND ACCEPTED BY:
HASBRO, INC.	WMS GAMING INC.
By:	By:
Date:	Date:
HASBRO INTERNATIONAL, INC.
By:
Date:

SCHEDULE A

TO MEMORANDUM OF EXCLUSIVE LICENSE

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

MEMORANDUM OF TERMINATION OF EXCLUSIVE LICENSE

THIS MEMORANDUM OF TERMINATION OF EXCLUSIVE LICENSE is by and between HASBRO, INC. and HASBRO INTERNATIONAL, INC., (collectively “HASBRO”) with offices at 1027 Newport Avenue, Pawtucket, Rhode Island 02862-1059 and WMS GAMING INC., (“WMS”) with offices at 800 South Northpoint Blvd., Waukegan, IL 60085.

WHEREAS, Hasbro and WMS had entered into that certain Gaming Device License Agreement dated June 12, 2009 (the “License Agreement”), with respect to the development, manufacture, sale, lease, placement, marketing, distribution and other exploitation of MONOPOLY, BATTLESHIP, CLUE (CLUEDO), YAHTZEE, and [*] board game themed Gaming Devices (such terms and all other capitalized terms used as defined terms and not otherwise defined herein shall have the meanings ascribed thereto in the License Agreement);

NOW THEREFORE, pursuant to the terms of the License Agreement, and incorporating and subject to all of the terms, definitions and provisions thereof, Hasbro and WMS have agreed that upon the proper termination or expiration of the exclusive License Agreement they shall date and execute this Memorandum of Termination of Exclusive License, which may then be filed by Hasbro in the United States Copyright Office.

IT IS HEREBY AGREED, that pursuant to the terms of the License Agreement, the license granted to WMS as provided therein to utilize the Licensed Properties upon and in connection with the design, development, manufacture, sale, lease, placement, marketing, advertising, promoting and distribution of the Licensed Articles in legal gaming establishments, has been properly terminated or has otherwise expired effective of as              [insert date].

AGREED TO AND ACCEPTED BY:

HASBRO, INC.	WMS GAMING INC.
By:	By:
Date:	Date:
HASBRO INTERNATIONAL, INC.
By:
Date:

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

EXHIBIT 5

Worldwide Trademark Registrations

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

EXHIBIT 6

United States Copyright Registrations

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

EXHIBIT 7

Flat Fee Schedule

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

EXHIBIT 8

[*]

* Information has been omitted from this document and filed separately with the Securities and Exchange Commission under a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

EXHIBIT 9

FORM OF AMENDMENT TO EXISTING WARRANT

THE WARRANT AMENDED BY THIS WARRANT MODIFICATION AGREEMENT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF SUCH WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.

WMS INDUSTRIES INC.

COMMON STOCK PURCHASE WARRANT MODIFICATION AGREEMENT

This Common Stock Purchase Warrant Modification Agreement (this “Agreement”) modifies the terms of that certain Common Stock Purchase Warrant issued by WMS Industries Inc., a Delaware corporation (the “Company”), to HASBRO, INC. (“Hasbro” or the “Warrantholder”) effective September 15, 2003 (the “Warrant”). Capitalized terms used in this Agreement and not defined herein have the meanings set forth in the Warrant. In consideration of the mutual covenants and representations contained herein and other good and valuable consideration, each of the Company and Hasbro agrees to the following modifications to the Warrant:

1. Expiration Date. The first paragraph of the Warrant is amended to delete the phrase “on September 14, 2013 (the “Expiration Date”)” and substitute in place thereof “on the Expiration Date (as defined below)” and to add the following sentence at the end of such paragraph:

“Expiration Date” means December 31, 2018 or, solely in the event that the term of that certain Gaming Device License Agreement dated as of April 1, 2009 between Hasbro and Hasbro International, Inc., as licensor, and WMS Gaming Inc., as licensee, is extended for the Extension Term (as defined in such Gaming Device License Agreement), December 31, 2021.

2. Vesting of the Warrant. Section 1.1 of the Warrant is deleted in its entirety and replaced with the following:

Vesting. The Warrant shall vest with respect to 20% of the Warrant Shares per year commencing January 1, 2007 and continuing on each anniversary of January 1, 2007 until fully vested.

3. Representations and Warranties. Each of Hasbro and the Company, severally and not jointly, hereby represents and warrants solely with respect to itself as follows:

3.1. This Agreement has been duly authorized and executed by it and is a valid and binding obligation, respectively, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors’ rights.

3.2. The execution, delivery and/or performance by it of this Agreement shall not, by the lapse of time, the giving of notice or otherwise, constitute a violation of any applicable law or a breach of any provision contained in such party’s Certificate of Incorporation or Bylaws (each as amended, restated or otherwise modified through the date hereof) or contained in any agreement, instrument or document to which it is a party or by which it is bound.

3.3. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the valid execution or performance of any of its obligations hereunder.

4. Miscellaneous.

4.1. Entire Agreement. This Agreement and the Warrant constitute the entire agreement between the Company and the Warrantholder with respect to the subject matter hereof and thereof.

4.2. Binding Effects; Benefits. This Agreement shall inure to the benefit of and shall be binding upon the Company and the Warrantholder and their respective heirs, legal representatives, successors and assigns. Nothing in this Agreement, expressed or implied, is intended to or shall confer on any person other than the Company and the Warrantholder, or their respective heirs, legal representatives, successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

4.3. Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be a part of this Agreement or to affect the meaning of interpretation of this Agreement.

4.4. No Further Modifications. Except as expressly set forth in this Agreement, the terms of the Warrant remain in full force and effect in accordance with their terms.

4.5. Further Assurances. Each of the Company and the Warrantholder shall do and perform all such further acts and things and execute and deliver all such other certificates, instruments and documents as the Company or the Warrantholder may, at any time and from time to time, reasonably request in connection with the performance of any of the provisions of this Agreement.

IN WITNESS WHEREOF, each of the Company and Hasbro has caused this Agreement to be signed by its duly authorized officer.

WMS INDUSTRIES INC.
By:
Name:	Orrin J. Edidin
Title:	President

HASBRO, INC.

By:

Name:

Title:

Dated: June     , 2009

EXHIBIT 10

FORM OF NEW WARRANT

THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.

WMS INDUSTRIES INC.

COMMON STOCK PURCHASE WARRANT

This certifies that, for good and valuable consideration, WMS Industries Inc., a Delaware corporation (the “Company”), grants to HASBRO, INC. (“Hasbro” or the “Warrantholder”), the right to subscribe for and purchase from the Company the number of validly issued, fully paid and nonassessable shares (the “Warrant Shares”) of the Company’s Common Stock, par value $0.50 per share (the “Common Stock”) determined pursuant to the schedule set forth in Section 1 below, at the purchase price per share of $[TBD] (the “Exercise Price”), from time to time after vesting of the Warrant pursuant to Section 1 below and before 5:00 PM Eastern Standard Time on the Expiration Date (as defined below), all subject to the terms, conditions and adjustments herein set forth. “Expiration Date” means December 31, 2018 or, solely in the event that the term of that certain Gaming Device License Agreement dated as of April 1, 2009 between Hasbro and WMS Gaming Inc. (the “License Agreement”) is extended for the Extension Term (as defined in the License Agreement), December 31, 2021.

1. Duration and Exercise of Warrant; Limitation on Exercise; Payment of Taxes.

1.1. Warrant Shares. The number of Warrant Shares, if any, purchasable under this Warrant shall be determined based on the date by which Hasbro executes and delivers to the Company an unqualified written consent to an assignment of the License Agreement (including, without limitation, “assignment” or “Constructive Assignment” (as such terms are defined in section 20.1¹ of the Basic Terms of such Agreement)) (an “Assignment”), if such consent is requested by the Company and timely delivered by Hasbro as follows:

Date of Delivery of Hasbro Consent to Assignment Number of Warrant Shares

¹ To be confirmed based on execution copy of License Agreement.

On or before December 31, 2011	500,000
After December 31, 2011 but on or before December 31, 2012	475,000
After December 31, 2012 but on or before December 31, 2013	450,000
After December 31, 2013 but on or before December 31, 2014	425,000
After December 31, 2014 but on or before December 31, 2015	400,000
After December 31, 2015 but prior to the Expiration Date	375,000

1.1. Vesting. The Warrant shall vest with respect to the number of Warrant Shares determined pursuant to Section 1.1 solely upon the consummation of an Assignment for which Hasbro has executed and delivered an unqualified written consent.

1.2. Duration and Exercise of Warrant. Subject to the terms and conditions set forth herein, the Warrant may be exercised, in whole or in part, by the Warrantholder by:

1.2.1. the delivery of this Warrant to the Company, with a duly executed Exercise Form attached as Exhibit A hereto specifying the number of vested Warrant Shares to be purchased, prior to the Expiration Date; and

1.2.2. the delivery of payment to the Company, for the account of the Company, by cash, by wire transfer of immediately available funds or by certified or bank cashier’s check, of the Exercise Price for the number of vested Warrant Shares specified in the Exercise Form in lawful money of the United States of America. The Company agrees that such Warrant Shares shall be deemed to be issued to the Warrantholder as the record holder of such Warrant Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for the Warrant Shares as aforesaid.

1.3. Conversion of Warrant.

1.3.1. Right to Convert. In addition to, and without limiting, the other rights of the Warrantholder hereunder, the Warrantholder shall have the right (the “Conversion Right”) to convert this Warrant or any part hereof into Warrant Shares at any time and from time to time to the extent that this Warrant has vested and prior to the Expiration Date. Upon exercise of the Conversion Right, the Company shall deliver to the Warrantholder, without payment by

the Warrantholder of any Exercise Price or any cash or other consideration, that number of Warrant Shares computed using the following formula:

X=	Y (A-B)
	A

Where:	X=	The number of Warrant Shares to be issued to the Warrantholder
	Y=	The number of Warrant Shares purchasable pursuant to this Warrant or such lesser number of Warrant Shares as may be selected by the Warrantholder
	A=	The Fair Market Value (as defined in Section 6.1.6) of one Warrant Share as of the Conversion Date
	B=	The Exercise Price

1.3.2. Method of Conversion. The Conversion Right may be exercised by the Warrantholder by the surrender of this Warrant to the Company, together with a written statement (the “Conversion Statement”) in the form of Exhibit A hereto specifying that the Warrantholder intends to exercise the Conversion Right and indicating the number of Warrant Shares that are the subject of such exercise of the Conversion Right. Such conversion shall be effective upon the Company’s receipt of this Warrant, together with the Conversion Statement, or on such later date as is specified in the Conversion Statement (the “Conversion Date”) and, at the Warrantholder’s election, may be made contingent upon the closing of the consummation of the sale of Common Stock pursuant to a Registration Statement (as defined in Section 8.1 below). Certificates for the Warrant Shares so acquired shall be delivered to the Warrantholder within a reasonable time, not exceeding three (3) Business Days after the Conversion Date. A “Business Day” is a day other than Saturday, Sunday or a day on which national banks are authorized by law to close in the State of Illinois.

1.4. Warrant Shares Certificate. A stock certificate or certificates for the Warrant Shares specified in the Exercise Form shall be delivered to the Warrantholder within three (3) Business Days after receipt of the Exercise Form and receipt of payment of the exercise price. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the stock certificate or certificates, deliver to the Warrantholder a new Warrant evidencing the rights to purchase the remaining Warrant Shares, which new Warrant shall in all other respects be identical to this Warrant.

1.5. Payment of Taxes. The issuance of certificates for Warrant Shares shall be made without charge to the Warrantholder for any stock transfer or other issuance tax or other incidental expense of issuance; provided, however, that the Warrantholder shall be required to pay any and all taxes which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Warrantholder as reflected upon the books of the Company.

2. Warrantholder Representations and Warranties; Restrictions on Transfer; Restrictive Legends.

2.1. The Warrantholder represents and warrants that:

2.1.1. The Warrantholder (i) is acquiring this Warrant, and (ii) upon exercise of this Warrant will acquire the Warrant Shares (this Warrant and the Warrant Shares collectively are referred to herein as the “Securities”) for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the 1933 Act.

2.1.2. The Warrantholder is an “accredited investor” as that term is defined in Rule 501(a)(3) of Regulation D under the 1933 Act.

2.1.3. The Warrantholder understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Warrantholder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Warrantholder set forth herein in order to determine the availability of such exemptions and the eligibility of the Warrantholder to acquire the Securities.

2.1.4. The Warrantholder has been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities that have been requested by the Warrantholder.

2.1.5. The Warrantholder understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

2.1.6. The Warrantholder understands that (i) the Securities have not been and are, except as provided in Section 8 hereof, not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned, pledged or transferred or otherwise disposed of unless (A) subsequently registered thereunder, (B) the Warrantholder shall have delivered to the Company an opinion of counsel, in form and substance reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Warrantholder provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act (or a successor rule thereto) (“Rule 144”); and (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the Securities and Exchange Commission (the “Commission”) thereunder.

2.1.7. The Warrantholder shall not sell, assign or otherwise transfer, pledge or hypothecate all or part of this Warrant without the prior written consent of the Company; provided that (x) any such sale, assignment or other transfer by the Warrantholder of

the Warrant in its entirety to an entity owned or controlled by the Warrantholder (but only for so long as it remains so owned or controlled and such entity agrees (i) to be bound by the terms and conditions of this Warrant pursuant to an agreement reasonably acceptable to the Company (an “Assumption Agreement”) and (ii) to transfer this Warrant back to the Warrantholder if it ceases to be owned or controlled by the Warrantholder), and (y) any such sale, assignment or other transfer by the Warrantholder of the Warrant in its entirety to the successor to the Warrantholder or substantially all of Warrantholder’s assets or business in connection with (i) the merger, consolidation or reorganization of the Warrantholder or (ii) the sale, assignment, transfer or other disposition of all or substantially all of the Warrantholder’s assets or business in one or more related transactions, provided that any transferee described in this clause (y) executes an Assumption Agreement, may be effected without any such consent.

2.1.8. Except as otherwise agreed to by the Company, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form:

THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.

Except as otherwise agreed to by the Company, each stock certificate for Warrant Shares issued upon the exercise of any Warrant and each stock certificate issued upon the direct or indirect transfer of any such Warrant Shares shall be stamped or otherwise imprinted with a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.

2.1.9. Except with respect to the restrictions set forth in Section 2.1.7 above, the restrictions imposed under this Section 2 upon the transferability of the Warrant and the shares of Common Stock acquired upon the exercise of this Warrant shall cease when (i) the Warrant Shares have been sold pursuant to a registration statement that is effective under the 1933 Act, (ii) the Company is presented with an opinion of counsel reasonably satisfactory to the Company that such restrictions are no longer required in order to insure compliance with the

1933 Act or with a Commission “no-action” letter stating that future transfers of such securities by the transferor or the contemplated transferee would be exempt from registration under the 1933 Act, or (iii) such securities may be transferred by the holder in accordance with Rule 144 without the holder being deemed an underwriter of such securities within the meaning of Section 2(a)(11) of the 1933 Act. When such restrictions terminate, the Company shall, or shall instruct its transfer agent to, promptly, and without expense to the holder issue new securities in the name of the holder not bearing the legends required under this Section 2.

2.1.10. At the Warrantholder’s option, this Warrant may be exchanged for one or more other Warrants representing the right to purchase a like aggregate number of shares of Common Stock upon surrender of such Warrant(s) to the Company as is represented by this Warrant; provided, however, that this Warrant shall not be exchanged for other Warrants unless each such new Warrant represents the right to purchase at least 50,000 shares of Common Stock. Whenever this Warrant is so surrendered to the Company for exchange, the Company shall execute and deliver the Warrants which the Warrantholder is entitled to receive. All Warrants issued upon any registration of transfer or exchange of Warrants shall be the valid obligations of the Company, evidencing the same rights, and entitled to the same benefits, as the Warrants surrendered upon such registration of transfer or exchange. No service charge shall be made for any exchange of this Warrant.

3. Company Representations and Warranties.

The Company hereby represents and warrants as follows:

3.1. All Warrant Shares that are issued upon the exercise of this Warrant will, upon issuance, be validly issued, fully paid, and nonassessable, not subject to any preemptive rights, and free from all taxes, liens, security interests, charges, and other encumbrances with respect to the issue thereof, other than taxes with respect to any transfer occurring contemporaneously with such issue.

3.2. During the period within which this Warrant may be exercised, the Company will at all times have authorized and reserved, and keep available free from preemptive rights, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant.

3.3. This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors’ rights.

3.4. The execution, delivery and/or performance by the Company of this Warrant shall not, by the lapse of time, the giving of notice or otherwise, constitute a violation of any applicable law or a breach of any provision contained in the Company’s Certificate of Incorporation (as amended, restated or otherwise modified) or Bylaws (as amended, restated or otherwise modified) or contained in any agreement, instrument or document to which the Company is a party or by which it is bound.

3.5. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the valid issuance of the

Warrant or for the performance of any of the Company’s obligations hereunder, except in connection with listing of the Warrant Shares on the New York Stock Exchange, which listing will be effected in accordance with the rules and regulations of the New York Stock Exchange and in connection with the registration of the Warrant Shares under the 1933 Act as provided in Section 8.

3.6. The Company, at its expense, will take all such action as may be necessary to assure that the Common Stock issuable upon the exercise of this Warrant may be so issued without violation of any applicable law or regulation, or of any requirements of any domestic securities exchange or automated quotation system upon which any capital stock of the Company may be listed or quoted, as the case may be. Such action by the Company may include, but not be limited to, causing such shares to be duly registered or approved, listed or quoted on relevant domestic securities exchanges or automated quotation systems.

4. Loss or Destruction of Warrant.

Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of such indemnification as the Company may require, and, in the case of such mutilation, upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor.

5. Ownership of Warrant.

The Company may deem and treat the person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing thereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary.

6. Certain Adjustments.

6.1. The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment as follows:

6.1.1. Stock Dividends, etc. If at any time after the date of the issuance of this Warrant (i) the Company shall fix a record date for the issuance of any stock dividend payable in shares of Common Stock or (ii) the number of shares of Common Stock shall have been increased by a subdivision or split-up of shares of Common Stock, then, on the record date fixed for the determination of holders of Common Stock entitled to receive such dividend or immediately after the effective date of such subdivision or split up, as the case may be, the number of shares to be delivered upon exercise of this Warrant will be increased so that the Warrantholder will be entitled to receive the number of shares of Common Stock that such Warrantholder would have owned immediately following such action had this Warrant been exercised in full immediately prior thereto, and the Exercise Price will be adjusted as provided below in Section 6.1.5.

6.1.2. Combination of Stock. If the number of shares of Common Stock outstanding at any time after the date of the issuance of this Warrant shall have been decreased by a combination of the outstanding shares of Common Stock, then, immediately after the

effective date of such combination, the number of shares of Common Stock to be delivered upon exercise of this Warrant will be decreased so that the Warrantholder thereafter will be entitled to receive the number of shares of Common Stock that such Warrantholder would have owned immediately following such action had this Warrant been exercised in full immediately prior thereto, and the Exercise Price will be adjusted as provided below in Section 6.1.5.

6.1.3. Reorganization, Merger, etc. If any capital reorganization of the Company, any recapitalization or reclassification of the Common Stock, any consolidation of the Company with or merger of the Company with or into any other person, or any sale or lease or other transfer of all or substantially all of the assets of the Company to any other person (each, a “Transaction”), shall be effected in such a way that the holders of Common Stock shall be entitled to receive stock, other securities or assets (whether such stock, other securities or assets are issued or distributed by the Company or another person) with respect to or in exchange for Common Stock, then, upon exercise of this Warrant, the Warrantholder shall have the right to receive the kind and amount of stock, other securities or assets receivable upon such Transaction by a holder of the number of shares of Common Stock that such Warrantholder would have been entitled to receive upon exercise of this Warrant had this Warrant been exercised in full immediately before such Transaction. This section shall apply to successive reorganizations, reclassifications, recapitalizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant.

6.1.4. Carryover. Notwithstanding any other provision of this Section 6.1, no adjustment shall be made to the number of shares of Common Stock to be delivered to the Warrantholder (or to the Exercise Price) if such adjustment represents less than 1% of the number of shares to be so delivered, but any lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to 1% or more of the number of shares to be so delivered.

6.1.5. Exercise Price Adjustment. Whenever the number of Warrant Shares purchasable upon the exercise of this Warrant is adjusted as provided in this Section 6, the Exercise Price payable upon the exercise of this Warrant shall be adjusted by multiplying such Exercise Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of Warrant Shares purchasable upon the exercise of the Warrant immediately prior to such adjustment, and of which the denominator shall be the number of Warrant Shares purchasable immediately thereafter.

6.1.6. Antidilution Provisions.

(a) Definitions. For purposes of this Section 6.1.6 the following definitions shall apply:

“Common Stock Equivalents” shall mean Convertible Securities and rights entitling the holder thereof to receive directly, or indirectly, additional shares of Common Stock without the payment of any consideration by such holder for such additional shares of Common Stock or Common Stock Equivalents.

“Common Stock Outstanding” shall mean the aggregate of all Common Stock outstanding and all Common Stock issuable upon conversion of all outstanding Convertible Securities and exercise of all options.

“Convertible Securities” means evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for, with or without payment of additional consideration, shares of Common Stock, either immediately or upon the arrival of a specified date or the happening of a specified event or both.

“Current Exercise Price” shall mean the Exercise Price immediately before the occurrence of any event, which, pursuant to Section 6.1.6, causes an adjustment to the Exercise Price.

“Fair Market Value” means with respect to a share of Common Stock at any date:

(i) If shares of Common Stock are being sold pursuant to a public offering under an effective registration statement under the 1933 Act which has been declared effective by the Commission and Fair Market Value is being determined as of the closing of the public offering, the “per share price to public” specified for such shares in the final prospectus for such public offering;

(ii) If shares of Common Stock are then listed or admitted to trading on any national securities exchange or traded on any national market system and Fair Market Value is not being determined as of the date described in clause (i) of this definition, the closing price for the trading day immediately preceding such date;

(iii) If no shares of Common Stock are then listed or admitted to trading on any national securities exchange or traded on any national market system or being offered to the public pursuant to a registration described in clause (i) of this definition, the average of the reported closing bid and asked prices thereof on such date in the over-the-counter market as published by Pink OTC Markets Inc. or any similar successor organization, and as reported by any member firm of the New York Stock Exchange selected by the Company and reasonably acceptable to the Warrantholder;

(iv) If no shares of Common Stock are then listed or admitted to trading on any national exchange or traded on any national market system, if no closing bid and asked prices thereof are then so quoted or published in the over-the-counter market and if no such shares are being offered to the public pursuant to a registration described in clause (i) of this definition, the fair value of a share of Common Stock shall be as determined by an investment bank selected by Company with the approval of the Warrantholder (which approval shall not be unreasonably withheld or delayed), the costs of such investment bank to be paid by the Company.

(b) Adjustments to Exercise Price. The Exercise Price in effect from time to time shall be subject to adjustment in certain cases as follows:

(i) In case the Company shall at any time after the issue date of this Warrant issue or sell any Common Stock or Common Stock Equivalent without consideration, or for a consideration per share less than the then Fair Market Value, then, and thereafter successively upon each such issuance or sale, the Current Exercise Price shall simultaneously with such issuance or sale be adjusted to an Exercise Price (calculated to the nearest cent) determined by multiplying the Current Exercise Price in effect immediately prior to such issuance or sale by a fraction, the numerator of which shall be the number of shares of Common Stock Outstanding on such date of sale or issuance plus the number of shares of Common Stock which the aggregate consideration received for the issuance or sale of such additional shares would purchase at the Fair Market Value and the denominator of which shall be the number of shares of Common Stock Outstanding immediately after the issuance or sale.

For the purposes of this subsection, the following provisions shall also be applicable:

(A) Cash Consideration. In case of the issuance or sale of additional Common Stock or Common Stock Equivalents for cash, the consideration received by the Company therefor shall be deemed to be the amount of cash received by the Company for such shares (or, if such shares are offered by the Company for subscription, the subscription price, or, if such shares are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price), without deducting therefrom any compensation or discount paid or allowed to underwriters or dealers or others performing similar services or for any expenses incurred in connection therewith.

(B) Non-Cash Consideration. In case of the issuance (otherwise than upon conversion or exchange of Convertible Securities) or sale of additional Common Stock, options or Convertible Securities for a consideration other than cash or a consideration, a part of which shall be other than cash, the fair value of such consideration as determined by the board of directors of the Company in the good faith exercise of its business judgment, irrespective of the accounting treatment thereof, shall be deemed to be the value, for purposes of this section, of the consideration other than cash received by the Company for such securities.

(C) Options and Convertible Securities. In case the Company shall in any manner issue or grant any options or any Convertible Securities, the total maximum number of shares of Common Stock issuable upon the exercise of such options or upon conversion or exchange of the total maximum amount of such Convertible Securities at the time such Convertible Securities first become convertible or exchangeable shall (as of the date of issue or grant of such options or, in the case of the issue or sale of Convertible Securities other than where the same are issuable upon the exercise of options, as of the date of such issue or sale) be deemed to be issued and to be outstanding for the purpose of this section and to have been issued for the sum of the amount (if any) paid for such options or Convertible Securities and the minimum amount (if any) payable upon the exercise of such options or upon conversion or exchange of such Convertible Securities at the time such Convertible Securities first become convertible or exchangeable; provided that, subject to the provisions of subsection (D) below, no adjustment or further adjustment of the Exercise Price shall be made upon the actual issuance of (a) any such Common Stock or Convertible Securities or upon the conversion or exchange of any such Convertible Securities or the exercise of such options or (b) any Common Stock issued or sold pursuant to conversion of any Convertible Securities or exercise of any Options to the extent outstanding on the date of issue of this Warrant.

(D) Change in Option Price or Conversion Rate. If the exercise price provided for in any option referred to in subsection (C) above, or the rate at which any Convertible Securities referred to in subsection (C) are convertible into or exchangeable for shares of Common Stock shall change at any time (other than under or by reason of provisions designed to protect against dilution), the Current Exercise Price in effect at the time of such event shall forthwith be readjusted to the Exercise Price that would have been in effect at such time had such options or Convertible Securities still outstanding provided for such changed exercise price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. If the exercise price provided for in any such option referred to in subsection (C), or the additional consideration (if any) payable upon the conversion or exchange of any Convertible Securities referred to in subsection (C), or the rate at which any Convertible Securities referred to in subsection (C) are convertible into or exchangeable for shares of Common Stock, shall be reduced at any time under or by reason of provisions with respect thereto designed to protect against dilution and such reduction would trigger an adjustment under this section, then in case of the delivery of shares of Common Stock upon the exercise of any such option or upon conversion or exchange of any such Convertible Security, the Current Exercise Price then in effect hereunder shall, upon issuance of such shares of Common Stock, be adjusted to such amount as would have obtained had such option or Convertible Security never been issued and had adjustments been made only upon the issuance of the shares of Common Stock actually delivered and for the consideration actually received for such option or Convertible Security and the Common Stock.

(E) Termination of Option or Conversion Rights. In the event of the termination or expiration of any right to purchase Common Stock under any option or of any right to convert or exchange Convertible Securities, the Current Exercise Price shall, upon such termination, be changed to the Exercise Price that would have been in effect at the time of such expiration or termination had such Option or Convertible Security, to the extent outstanding immediately prior to such expiration or termination, never been issued, and the shares of Common Stock issuable thereunder shall no longer be deemed to be Common Stock Outstanding.

(F) Notwithstanding anything to the contrary set forth above, no adjustment pursuant to this Section 6.1.6 shall be made for the issuance of Common Stock or Common Stock Equivalents to employees, directors or consultants of the Company with the approval of, or pursuant to a plan approved by, the Board of Directors of the Company; provided, however, that for purposes of this Warrant, “consultant” shall mean individuals who are natural persons and provide bona fide services to the Company or its subsidiaries that are not in connection with the offer or sale of the Company’s securities in a capital raising transaction and do not relate to the promotion or maintenance of a market for the Company’s securities.

6.2. Notice of Adjustments. Whenever the number of Warrant Shares or the Exercise Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first class, postage prepaid, to the Warrantholder, notice of such adjustment or adjustments setting forth in reasonable detail the number of Warrant Shares and the Exercise Price of such Warrant Shares after such adjustment, a brief statement of the facts requiring such adjustment, and the computation by which such adjustment was made.

6.3. Extraordinary Corporate Events. If the Company, after the date hereof, proposes to effect (i) any transaction described in Sections 6.1.1, 6.1.2 or 6.1.3 hereof, or (ii) a liquidation, dissolution or winding up of the Company or (iii) any payment of a dividend or distribution with respect to the Common Stock (other than a cash dividend or distribution), then, in each such case, the Company shall mail to the Warrantholder a notice describing such proposed action and specifying the date on which the Company’s books shall close, or a record shall be taken, for determining the holders of Common Stock entitled to participate in such action, or the date on which such reorganization, reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up shall take place or commence, as the case may be, and the date as of which it is expected that holders of Common Stock of record shall be entitled to receive securities and/or other property deliverable upon such action, if any such date is to be fixed. Such notice shall be mailed to the Warrantholder at least ten days prior to the record date for any such action. The failure to give notice required by this Section 6.3 or any defect therein shall be a breach of this Warrant but shall not affect the legality or validity of the action taken by the Company or the vote upon any such action. Unless specifically required by this Section 6, the Exercise Price, the number of shares covered by each Warrant and the number of Warrants outstanding shall not be subject to adjustment as a result of the Company being required to give notice pursuant to this Section 6.3.

6.4. No Impairment. The Company shall not, by amendment of the Charter or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment.

7. Fractional Shares. No fractional shares of Common Stock or scrip shall be issued to the Warrantholder in connection with the exercise or conversion of this Warrant. Instead of any fractional shares of Common Stock that would otherwise be issuable to the Warrantholder, the Company will pay to the Warrantholder a cash adjustment in respect of such fractional interest in an amount equal to the product of such fractional interest and the Exercise Price paid by the Warrantholder for its Warrant Shares upon such exercise.

8. Piggyback Registration Rights.

8.1. Registration Statements. If at any time the Company proposes to register for its own account any of its Common Stock under the 1933 Act by registration on any form other than Form S-4 or S-8 (even if other stockholders will participate in such registration), it shall each such time give written notice to the Warrantholder of its intention to do so at least 10 Business Days prior to the initial filing of a registration statement or statements or similar documents (the “Registration Statement”) for such registration. Upon the written request of the Warrantholder, made within 5 Business Days after the receipt of any such notice (which request shall specify the Warrant Shares intended to be disposed of by the Warrantholder and the intended method of disposition), the Company shall use its reasonable best efforts to effect the registration under the 1933 Act of all the Warrant Shares that the Company has been so requested to register by the Warrantholder to the extent required to permit the disposition of such Warrant Shares in accordance with the intended methods of disposition thereof described as

aforesaid; provided, however, that, in the case of an underwritten offering, prior to the effective date of the registration statement filed in connection with such registration, immediately upon notification to the Company from the managing underwriter of the price at which such securities are to be sold, if such price is below the price which the Warrantholder shall have indicated to be acceptable to the Warrantholder, the Company shall so advise the Warrantholder of such price, and the Warrantholder shall then have the right to withdraw its request to have its Warrant Shares included in such registration statement; provided further, that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to the Warrantholder and the Company shall be relieved of its obligation to register any Warrant Shares in connection with such registration (but not from any obligation of the Company to pay the registration expenses in connection therewith). The obligations of the Company to effect a registration pursuant to this Section 8.1 shall continue until all of the Warrant Shares have been sold by the holder or could immediately be sold pursuant to Rule 144 without the holder being deemed an underwriter of such securities within the meaning of Section 2(a)(11) of the 1933 Act.

8.2. Underwriter Holdback. If the managing underwriter of any underwritten offering under this Section 8 shall inform the Company by letter that, in its opinion, the number of Warrant Shares requested to be included in such registration would adversely affect such offering, and the Company has so advised the Warrantholder in writing, then the Company will include in such registration, to the extent of the number that the Company is so advised can be sold in (or during the time of) such offering, first, all securities proposed by the Company to be sold for its own account, second, any holders with contractual rights senior to the Warrantholder, third, the Warrant Shares requested to be included in such registration pursuant to this Warrant and, fourth, all other securities proposed to be registered.

8.3. Obligations of the Company. In connection with the registration of the Warrant Shares as contemplated by this Section 8 the Company shall:

8.3.1. Following receipt of a written request from the Warrantholder under Section 8.1 to register Warrant Shares with the Commission, prepare and file a Registration Statement with respect to the securities to be sold by the Company together with the Warrant Shares to be sold by the Warrantholder, and thereafter use its reasonable commercial efforts to cause the Registration Statement to become effective as soon as practicable, which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein), in each case, shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading:

8.3.2. Prepare and file with the Commission such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective and to comply with the provisions of the 1933 Act with respect to the disposition of all Warrant Shares covered by the Registration Statement until the earlier to occur of (i) such time as all of such Warrant Shares have been disposed of in accordance with the intended methods of disposition by the Warrantholder as set forth in the Registration Statement

and (ii) the expiration of one year from the date the registration statement is declared effective by the Commission;

8.3.3. Furnish to the Warrantholder (without charge to the Warrantholder) such number of copies of a prospectus, including a preliminary prospectus and all amendments and supplements thereto and such other documents, as the Warrantholder may reasonably request in order to facilitate the disposition of the Warrant Shares; the Company consents to the use of the prospectus and any amendment or supplement thereto by the Warrantholder in connection with the offering and the sale of the Warrant Shares covered by the prospectus or any amendment or supplement thereto;

8.3.4. Use its reasonable commercial efforts to (a) register and qualify the Warrant Shares covered by the Registration Statement under such securities or Blue Sky laws of such jurisdictions as the Warrantholder reasonably requests, (b) prepare and file in those jurisdictions all required amendments (including post-effective amendments) and supplements, (c) take such other reasonable actions as may be necessary to maintain such registrations and qualifications in effect at all times the Registration Statement is in effect and (d) take all other reasonable actions necessary or advisable to enable the disposition of such securities in all such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 8.3.4.

8.3.5. In the event of an underwritten offering, enter into and perform its obligations under an underwriting agreement with the managing underwriter of such offering, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, and in the case of any non-underwritten offering, provide to broker-dealers participating in any distribution of Warrant Shares reasonable indemnification.

8.3.6. Promptly (and in any event within two Business Days) notify the Warrantholder of the happening of any event of which the Company has knowledge, as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances then existing, not misleading, and use its reasonable commercial efforts to prepare promptly a supplement or amendment to the Registration Statement to correct such untrue statement or omission, and deliver a number of copies of such supplement or amendment to the Warrantholder as such Warrantholder may reasonably request;

8.3.7. Promptly (and in any event within two Business Days) notify the Warrantholder (and, in the event of an underwritten offering, the managing underwriters) of the issuance by the Commission of any stop order or other suspension of effectiveness of the Registration Statement, and use its reasonable commercial efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement;

8.3.8. Make available for inspection by the Warrantholder, any underwriter participating in any disposition pursuant to the Registration Statement, and any attorney, accountant, or other agent retained by the Warrantholder or underwriter (collectively, the “Inspectors”), all pertinent financial and other records, pertinent corporate documents and

properties of the Company, as shall be reasonably necessary to enable each Inspector to exercise its due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with the Registration Statement;

8.3.9. Use its reasonable commercial efforts either to (a) cause all the Warrant Shares covered by the Registration Statement to be listed on a national securities exchange and on each additional national securities exchange on which similar securities issued by the Company are then listed, if any, if the listing of such Warrant Shares is then permitted under the rules of such exchange or, (b) if similar securities issued by the Company are not then listed on a national securities exchange, cause all the Warrant Shares covered by the Registration Statement to be listed or included for trading on the exchange or quotation system on which similar securities issued by the Company are then listed or traded;

8.3.10. Promptly (and in any event within two Business Days) notify the Warrantholder when the prospectus or any prospectus supplement or post-effective amendment has been filed, and with respect to the Registration Statement or any post-effective amendment thereto, when the same has become effective; and

8.3.11. Use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, to the extent required, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act.

8.4. Obligations of the Warrantholder. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Warrant that the Warrantholder shall comply with its obligations under this Warrant, including this Section 8.4.

8.4.1. The Warrantholder shall furnish to the Company such information regarding itself, the Warrant Shares and the intended method of disposition of the Warrant Shares as shall be reasonably required to effect the registration of the Warrant Shares and shall execute such documents and agreements in connection with such registration as the Company may reasonably request, all in a timely manner so as to enable the Company to comply with its obligations hereunder. Concurrent with the notice delivered pursuant to Section 8.1 above, the Company shall notify the Warrantholder of the information the Company requires from the Warrantholder (the “Requested Information”) if the Warrantholder elects to have any of its Warrant Shares included in the Registration Statement. If within 5 Business Days of the notice delivered by the Company pursuant to Section 8.1 above, the Company has not received the Requested Information from the Warrantholder and the Company has properly notified the Warrantholder in accordance with the preceding sentence, then the Company may file the Registration Statement without including Warrant Shares.

8.4.2. The Warrantholder, by its acceptance of the Warrant Shares, agrees to cooperate with any reasonable request made by the Company in connection with the preparation and filing of any registration statement hereunder which includes the Warrant Shares.

8.4.3. In the event of an underwritten offering, the Warrantholder agrees to enter into and perform its obligations under any underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the managing underwriter of such offering and take such other actions as are reasonable required in order to expedite or facilitate the disposition of the Warrant Shares.

8.4.4. The Warrantholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 8.3.6, the Warrantholder will immediately discontinue disposition of Warrant Shares pursuant to the Registration Statement covering such Warrant Shares until the Warrantholder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 8.3.6 and, if so directed by the Company, the Warrantholder shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of such destruction ) all copies, other than permanent file copies then in the Warrantholder’s possession, of the prospectus covering Warrant Shares at the time of receipt of such notice; and

8.4.5. The Warrantholder may not participate in any underwritten registration hereunder unless the Warrantholder (a) agrees to sell such Warrant Shares on the basis provided in any underwriting arrangements, (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and (c) agrees to pay the Warrantholder’s pro rata portion of all underwriting discounts and commissions.

8.5. Expenses of Registration. All expenses (other than underwriting discounts and commissions and fees and disbursements of any counsel retained by the Warrantholder) incurred in connection with registration, filings or qualifications pursuant to Section 8 including, without limitation, all registration, listing, filing and qualification fees, printers and accounting fees, and the fees and disbursements of counsel for the Company shall be borne by the Company.

8.6. Indemnification. In the event any Warrant Shares are included in a Registration Statement under this Agreement:

8.6.1. To the extent permitted by law, the Company shall indemnify and hold harmless the Warrantholder, each person, if any, who controls the Warrantholder, any underwriter (as defined in the 1933 Act) for the Warrantholder, and each person, if any, who controls any such underwriter within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (each, an “Indemnified Holder”), against any losses, claims, damages, expenses, liabilities (joint or several) (collectively, “Claims”) to which any of them may become subject under the 1933 Act, the Exchange Act or otherwise, insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any of the following statements, omissions of violations (collectively a “Violation”): (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any post-effective amendment thereof, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (b) untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the pricing prospectus, the final prospectus or any “issuer free writing prospectus” or any “issuer information” within the meaning of Rule

433 promulgated under the 1933 Act (as amended or supplemented if the Company files any amendment thereof or supplement thereto with the Commission), or the omission or alleged omission to state therein a material fact required to be stated therein, or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, or (c) any violation or alleged violation by the Company of the 1933 Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the 1933 Act, the Exchange Act, or any state securities law. Subject to the restrictions set forth in Section 8.6.3, with respect to the number of legal counsel, the Company shall reimburse Warrantholder and each such underwriter or controlling person, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim, whether or not such claim, investigation or proceeding is brought or initiated by the Company or a third party. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 8.6(x) shall not apply to a Claim arising out of or based upon a Violation which occurs solely in reliance upon and in conformity with information furnished in writing to the Company by any Indemnified Holder expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; and (y) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld.

8.6.2. In connection with any Registration Statement in which the Warrantholder is participating, the Warrantholder agrees to indemnify and hold harmless, to the same extent and in the same manner set forth in Section 8.6.1, the Company, each of its directors, each of its officers who sign the Registration Statement, each person, if any, who controls the Company within the meaning of the 1933 Act or the Exchange Act, any underwriter and any other stockholder selling securities pursuant to the Registration Statement or any of its directors or officers or any person who controls such stockholder or underwriter (collectively and together with an Indemnified Holder, an “Indemnified Party”), against any Claim to which any of them may become subject, under the 1933 Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs solely in reliance upon and in conformity with written information furnished to the Company by the Warrantholder expressly for use in connection with such Registration Statement; and the Warrantholder will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 8.6.2. shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Warrantholder, which consent shall not be unreasonably withheld.

8.6.3. Promptly after receipt by an Indemnified Party under Section 8.6 of notice of the commencement of any action (including any governmental action), such Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under Section 8.6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel satisfactory to the Indemnified Parties; provided, however, that an Indemnified Party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of

counsel for the Indemnified Party, representation of such Indemnified Party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Party and any other party represented by such counsel in such proceeding. The Company shall pay for only one legal counsel for the Warrantholder. The failure by an Indemnified Party to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Party under Section 8.6, except to the extent that such failure to notify results in the forfeiture by the indemnifying party or substantive rights or defenses. The indemnification required by Section 8.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable.

8.7. Contribution. To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 8.6 to the fullest extent permitted by law.

8.8. Transfer Of Registration Rights. The right to sell Warrant Shares pursuant to the Registration Statement described herein will automatically be assigned to each transferee of the Warrant or Warrant Shares permitted under the terms of this Warrant. In the event that it is necessary, in order to permit a Warrantholder to sell Warrant Shares pursuant to the Registration Statement, to supplement or amend the Registration Statement to name such Warrantholder, such Warrantholder shall upon written notice to the Company, be entitled to have the Company make such amendment or supplement as soon as reasonably practicable.

9. Miscellaneous.

9.1. Entire Agreement. This Warrant constitutes the entire agreement between the Company and the Warrantholder with respect to the subject matter hereof.

9.2. Binding Effects; Benefits. This Warrant shall inure to the benefit of and shall be binding upon the Company and the Warrantholder and their respective heirs, legal representatives, successors and assigns. Nothing in this Warrant, expressed or implied, is intended to or shall confer on any person other than the Company and the Warrantholder, or their respective heirs, legal representatives, successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Warrant. Except as otherwise set forth herein, this Warrant may not be assigned, sold, pledged, transferred or otherwise disposed of by the Warrantholder without the prior written consent of the Company.

9.3. Section and Other Headings. The section and other headings contained in this Warrant are for reference purposes only and shall not be deemed to be a part of this Warrant or to affect the meaning of interpretation of this Warrant.

9.4. Pronouns. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

9.5. Further Assurances. Each of the Company and the Warrantholder shall do and perform all such further acts and things and execute and deliver all such other certificates,

instruments and documents as the Company or the Warrantholder may, at any time and from time to time, reasonably request in connection with the performance of any of the provisions of this Warrant.

9.6. Notices. All notices and other communications required or permitted to be given under this Warrant shall be in writing and shall be deemed to have been duly given if delivered personally or sent by United States mail or overnight courier, postage prepaid, to the parties hereto at the following addresses or to such other address as any party hereto shall hereafter specify by notice to the other party hereto:

(a) if to the Company, addressed to:

WMS Industries Inc.

800 S. Northpoint Blvd.

Waukegan, IL 60085

Attention: Executive Vice President and Chief Financial Officer

With a copy to:

WMS Industries Inc.

800 S. Northpoint Blvd.

Waukegan, IL 60085

Attention: Vice President, General Counsel and Secretary

(b) if to the Warrantholder, addressed to:

Hasbro, Inc.

1011 Newport Avenue

Pawtucket, RI 02862

Attn: General Counsel

With a copy to:

Hasbro, Inc.

1011 Newport Avenue

Pawtucket, RI 02862

Attn: President, Hasbro Properties Group

Except as otherwise provided herein, all such notices and communications shall be deemed to have been received on the date of delivery thereof, if delivered personally, on the next Business Day if sent by overnight courier, or on the third Business Day after the mailing thereof if sent by U.S. mail.

9.7. Separability. Any term or provision of this Warrant which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the terms and provisions of this Warrant or affecting the validity or enforceability of any of the terms or provisions of this Warrant in any other jurisdiction.

9.8. Governing Law. This Warrant shall be deemed to be a contract made under the laws of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to such agreements made and to be performed entirely within such State.

9.9. No Rights or Liabilities as Stockholder. Nothing contained in this Warrant shall be determined as conferring upon the Warrantholder any rights as a stockholder of the Company or as imposing any liabilities on the Warrantholder to purchase any securities whether such liabilities are asserted by the Company or by creditors or stockholders of the Company or otherwise.

IN WITNESS WHEREOF, each of the Company and Hasbro has caused this Warrant to be signed by its duly authorized officer.

WMS INDUSTRIES INC.
By:
Name:	Orrin J. Edidin
Title:	President
HASBRO, INC.
By:
Name:
Title:

Dated: June    , 2009

Exhibit A

EXERCISE AND CONVERSION FORM

(To be executed upon exercise or conversion of this Warrant)

Exercise. The undersigned hereby irrevocably elects to exercise its right to purchase                     of the Warrant Shares pursuant to Section 1.2 of the Warrant and herewith tenders payment for such Warrant Shares to the order of WMS Industries Inc. in the amount of $                    .

Conversion. The undersigned hereby irrevocably elects to exercise its Conversion Right with respect to                     Warrant Shares pursuant to Section 1.3 of the Warrant.

The undersigned requests that a certificate for the Warrant Shares deliverable to the undersigned upon exercise or conversion, as applicable, be registered in the name of                     and that such certificates be delivered to                     whose address is                     .

Dated:                             

Signature
	(Print Name)
	(Street Address)
	(City)            (State)                    (Zip Code)

Signed in the Presence of:

EX-21

EXHIBIT 21

SUBSIDIARIES OF WMS INDUSTRIES INC.

The following is a list of all direct and indirect subsidiaries of the Company and their jurisdictions of incorporation as of June 30, 2009. The name of each indirect subsidiary is indented under the name of its parent company.

Subsidiary	Jurisdiction of Incorporation/Formation
WMS Gaming Inc.	Delaware
WMS Gaming (Canada) Ltd.	New Brunswick, Canada
WMS Gaming International, S.L.	Spain
WMS Gaming Australia PTY Ltd.	Australia
WMS Gaming Africa (Pty) Ltd.	South Africa
WMS Gaming (UK) Limited	United Kingdom
WMS Gaming Slovakia, s.r.o.	Slovakia
WMSGaming Mexico, S. de R.L. de C.V.	Mexico
Lenc-Smith Inc.	Delaware
Williams Electronics Games, Inc.	Delaware
WMS Finance Inc.	Delaware
WMS International Holdings Inc.	Delaware
Orion Financement Company B.V.	Netherlands
Orion Real Estate B.V.	Netherlands
Orion Assembly B.V.	Netherlands
Mercur Holland B.V.	Netherlands
Orion Gaming B.V.	Netherlands
WMS Gaming Services Europe, S.L.	Spain
Systems in Progress Holding GmbH	Austria
WMS Asia Holdings Inc.	Delaware
WMS International (Macau) Limited	Macau
WMS Alderney 1 Limited	Alderney
WMS Alderney 2 Ltd.	Alderney
WMS Marketing UK Ltd.	United Kingdom

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements and related Prospectuses of WMS Industries Inc.:

(1) Registration Statement No. 333-57585 on Form S-8 filed June 24, 1998,

(2) Registration Statement No. 333-46726 on Form S-8 filed September 27, 2000,

(3) Registration Statement No. 333-55574 on Form S-8 filed February 14, 2001,

(4) Registration Statement No. 333-101538 on Form S-8 filed November 27, 2002,

(5) Registration Statement No. 333-107321 on Form S-3 filed July 25, 2003,

(6) Registration Statement No. 333-121199 on Form S-8 filed December 13, 2004,

(7) Registration Statement No. 333-121766 on Form S-8 filed December 30, 2004,

(8) Registration Statement No. 333-139425 on Form S-8 filed December 15, 2006, and

(9) Registration Statement No. 333-158919 on Form S-8 filed April 30, 2009

of our reports dated August 27, 2009, with respect to the consolidated financial statements and schedule of WMS Industries Inc. and the effectiveness of internal control over financial reporting of WMS Industries Inc., included in this Annual Report (Form 10-K) for the year ended June 30, 2009.

/s/ ERNST & YOUNG LLP

Chicago, Illinois

August 27, 2009

EX-31

EXHIBIT 31

CERTIFICATIONS

I, Brian R. Gamache, Chief Executive Officer of WMS Industries Inc., certify that:

1. I have reviewed this annual report on Form 10-K of WMS Industries Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 27, 2009

/s/    Brian R. Gamache

Brian R. Gamache

Chief Executive Officer

I, Scott D. Schweinfurth, Chief Financial Officer of WMS Industries Inc., certify that:

1. I have reviewed this annual report on Form 10-K of WMS Industries Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 27, 2009

/s/    Scott D. Schweinfurth

Scott D. Schweinfurth

Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U. S. C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of the WMS Industries, Inc. (“the Company”) on Form 10-K for the year ending June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (“the Report”), I, Brian R. Gamache, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    Brian R. Gamache

Brian R. Gamache

Chief Executive Officer

August 27, 2009

CERTIFICATION PURSUANT TO

18 U. S. C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of the WMS Industries, Inc. (“the Company”) on Form 10-K for the year ending June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (“the Report”), I, Scott D. Schweinfurth, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    Scott D. Schweinfurth

Scott D. Schweinfurth

Chief Financial Officer

August 27, 2009