-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FaGPeKXzlFBu8qTkHQc/ixtLFSB0m8emM9mCcdL0xnVehk87aMvP2bUKJg11JWGc VAWNlzyunFslHBAPz3AXyg== 0000898822-03-001139.txt : 20031126 0000898822-03-001139.hdr.sgml : 20031126 20031126163528 ACCESSION NUMBER: 0000898822-03-001139 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20031126 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SCIENTIFIC GAMES CORP CENTRAL INDEX KEY: 0000750004 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 810422894 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-36154 FILM NUMBER: 031026976 BUSINESS ADDRESS: STREET 1: 750 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 3027374300 MAIL ADDRESS: STREET 1: 750 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: AUTOTOTE CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TOTE INC DATE OF NAME CHANGE: 19920317 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SCIENTIFIC GAMES CORP CENTRAL INDEX KEY: 0000750004 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 810422894 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 750 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 3027374300 MAIL ADDRESS: STREET 1: 750 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: AUTOTOTE CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TOTE INC DATE OF NAME CHANGE: 19920317 SC 13D 1 nov26scigames13d.txt SCHEDULE 13D FILED NOVEMBER 26, 2003 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) SCIENTIFIC GAMES CORPORATION - -------------------------------------------------------------------------------- (Name of Issuer) CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE - -------------------------------------------------------------------------------- (Title of Class of Securities) 0533223 10 1 - -------------------------------------------------------------------------------- (CUSIP Number) BARRY F. SCHWARTZ MAFCO HOLDINGS INC. 35 EAST 62ND STREET NEW YORK, NEW YORK 10021 (212) 572-8600 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) NOVEMBER 19, 2003 - -------------------------------------------------------------------------------- (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: [ ]. (Continued on following pages) (Page 1 of 10 Pages) ================================================================================ SCHEDULE 13D/A CUSIP NO. 0533223 10 1 PAGE 2 OF 10 PAGES ============================================================================== - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS MAFCO HOLDINGS INC. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY [_] - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS BK, WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 21,588,615 NUMBER OF ------------------------------------------------------------ 8 SHARES SHARED VOTING POWER -0- BENEFICIALLY ------------------------------------------------------------ 9 OWNED BY SOLE DISPOSITIVE POWER 21,588,615 EACH ------------------------------------------------------------ 10 REPORTING SHARED DISPOSITIVE POWER -0- PERSON WITH - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 21,588,615 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 26.2% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- SCHEDULE 13D/A CUSIP NO. 0533223 10 1 PAGE 3 OF 10 PAGES ============================================================================== - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS SGMS ACQUISITION CORPORATION - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY [_] - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS BK, WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 21,588,615 NUMBER OF ------------------------------------------------------------ 8 SHARES SHARED VOTING POWER -0- BENEFICIALLY ------------------------------------------------------------ 9 OWNED BY SOLE DISPOSITIVE POWER 21,588,615 EACH ------------------------------------------------------------ 10 REPORTING SHARED DISPOSITIVE POWER -0- PERSON WITH - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 21,588,615 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 26.2% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- ITEM 1: SECURITY AND ISSUER This Statement on Schedule 13D (this "Schedule") relates to the Class A common stock, par value $0.01 per share ("Common Stock"), of Scientific Games Corporation, a Delaware corporation (the "Issuer"). The principal executive offices of the Issuer are located at 750 Lexington Avenue, 25th Floor, New York, New York 10022. ITEM 2: IDENTITY AND BACKGROUND This statement is being filed by SGMS Acquisition Corporation ("SAC") and Mafco Holdings Inc. ("Mafco"), both of which are holding companies incorporated in Delaware. This statement is being filed with respect to shares of Common Stock that may be beneficially owned by SAC and Mafco. Ronald O. Perelman is the sole stockholder of Mafco, which is the sole stockholder of SAC. The business address of both SAC and Mafco is 35 East 62nd Street, New York, New York 10021. Schedule I attached hereto sets forth certain additional information with respect to the directors and executive officers of SAC and Mafco (the "Schedule I Persons") and is incorporated herein by reference. During the last five years neither SAC, Mafco nor any Schedule I Person has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. All of the Schedule I Persons are citizens of the United States of America. ITEM 3: SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION On November 19, 2003, SAC acquired the Purchased Shares (as defined in Item 6) from Cirmatica Gaming, S.A., a Spanish corporation ("Cirmatica"), pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement"), dated as of October 10, 2003, by and between Mafco and Cirmatica. As permitted under the Stock Purchase Agreement, Mafco designated SAC to purchase the Purchased Shares at the closing of the transaction contemplated by the Stock Purchase Agreement (the "Transaction"). As a consequence of such designation, Mafco has no direct ownership interest in the Purchased Shares. The aggregate purchase price for the Purchased Shares (the "Purchase Price") was approximately $199 million. SAC obtained $159 million of the Purchase Price from Mafco, which obtained such funds from its cash on hand, $15 million from the proceeds of a Term Note (the "Term Note") in favor of HSBC Bank USA ("HSBC") and $25 million pursuant to a Loan Agreement (the "Loan Agreement") by and between SAC and Bank of America, N.A. ("Bank of America"). The Term Note bears interest at a variable rate determined with reference to LIBOR and is repayable in full on December 1, 2005. Amounts borrowed pursuant to the Loan Agreement bear interest at a variable rate based on LIBOR and are repayable in full on November 19, 2004. In connection with the Term Note and the Loan Agreement, SAC pledged a portion of the Purchased Shares to each of HSBC and Bank of America. SAC's obligations under the Term Note and the Loan Agreement have been guaranteed by certain SAC affiliates. The foregoing descriptions of the Term Note and the Loan Agreement do not purport to be complete and are qualified in their entirety by reference to the complete text of each document, copies of each of which are filed as exhibits hereto and are incorporated herein by reference. ITEM 4: PURPOSE OF TRANSACTION SAC acquired the Purchased Shares (including the rights with respect thereto described in Item 6) for investment purposes. Except as described in this Schedule, none of SAC, Mafco nor any of the Schedule I Persons has any plans or proposals which relate to or would result in any of the actions or transactions specified in clauses (a) through (j) of Item 4 of Schedule 13D. Each of those persons reserves the right to acquire or dispose of securities of the Issuer, to exercise the rights described in Item 6, or to formulate other purposes, plans or proposals regarding the Issuer or its securities to the extent deemed advisable in light of general investment policies, market conditions and other factors. ITEM 5: INTEREST IN SECURITIES OF THE ISSUER SAC acquired 1,200,327 Series A Shares in the Transaction, an interest that is convertible into 21,588,615 shares of Common Stock, based on the current conversion rate of 17.9856 Common Shares for each Series A Share. According to the Issuer's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, there were, as of November 13, 2003, 60,631,082 shares of Common Stock issued and outstanding. Based on the foregoing, SAC has sole voting power and sole dispositive power over 26.25% of the Common Stock following the Transaction, assuming the conversion of all the Series A Shares it acquired. Because SAC is a wholly-owned subsidiary of Mafco, Mafco may be deemed to have beneficial ownership of those Series A Shares, and therefore of the Common Stock issuable upon their conversion. The Issuer has informed SAC that it granted each New Director (as defined in Item 6) options to purchase 50,000 shares of Common Stock upon the closing of the Transaction pursuant to the Issuer's existing director compensation practices. These options will vest over a four year period beginning on November 19, 2004. Except as described above and in Item 6, neither SAC nor any of the Schedule I Persons has effected any transaction with respect to the Common Stock during the past 60 days. ITEM 6: CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER STOCK PURCHASE AGREEMENT Pursuant to the Stock Purchase Agreement, Mafco agreed that it or its designee would acquire from Cirmatica 1,200,327 shares of Series A Convertible Preferred Stock, par value $1.00 per share, of the Issuer ("Series A Shares") and 1,097.664 shares of Series B Preferred Stock, par value $1.00 per share, of the Issuer ("Series B Shares") for the Purchase Price. The Series A Shares and Series B Shares acquired by SAC in the Transaction as Mafco's designee are referred to in this Schedule as the "Purchased Shares." Pursuant to the terms of the Stock Purchase Agreement, Cirmatica assigned to SAC all its rights and obligations under the Existing Agreements (as defined below) effective upon the closing of the Transaction. Pursuant to these agreements, SAC will have certain governance and other rights with respect to the Issuer as long as it holds its interest in the Purchased Shares (or in the Common Stock issuable upon conversion of its Series A Shares). LETTER AGREEMENT Simultaneously with the execution of the Stock Purchase Agreement, Mafco entered into a Letter Agreement with the Issuer (the "Letter Agreement"), which amends certain provisions of the Existing Agreements. The Letter Agreement includes a standstill provision that generally prohibits SAC and Mafco from acquiring beneficial ownership of more than 45% of the Common Stock until October 10, 2005 and from soliciting proxies with respect to the Issuer prior to October 10, 2004. The Letter Agreement also provides that SAC has the right to designate and have appointed a number of the Issuer's ten-person board of directors determined with reference to SAC's percentage ownership of the Issuer's Common Stock (including Series A Shares on an as-converted basis, but excluding certain shares that may be issued in the future). Under the Letter Agreement, the applicable ownership thresholds are generally as follows: 20% or more, four directors; 16%, three directors; 9%, two directors; and 4.6%, one director. WAIVER LETTER Pursuant to a letter from Mafco to the Issuer, dated October 30, 2003 (the "Waiver Letter"), Mafco agreed temporarily to waive the right to designate one of the four directors it or SAC would otherwise have the right to designate, and the Issuer agreed to use its best efforts to have one additional person named by Mafco elected to its board of directors. Accordingly, as a result of the Transaction, (i) SAC acquired the right to designate and have elected three directors, notwithstanding the fact that its ownership of Series A Shares would otherwise entitle it to exercise this right with respect to four directors, and (ii) the Issuer is obligated to name one additional person selected by Mafco to be included on the Company's slate of nominees for election as director at the Issuer's 2004 annual stockholders' meeting. The Waiver Letter will remain in effect through and including the Issuer's 2004 annual stockholders' meeting. Upon the closing of the Transaction, SAC elected Mr. Perelman, Howard Gittis and Barry F. Schwartz (the "New Directors") to the Issuer's board of directors to replace Michael Immordino, Rosario Bifulco and Antonio Belloni, who resigned effective upon the closing. Messers. Immordino, Bifulco and Belloni had served on the board as designees of Cirmatica. EXISTING AGREEMENTS AND CERTIFICATES OF DESIGNATION Pursuant to the Stock Purchase Agreement and the Letter Agreement, effective as of the closing of the Transaction, Cirmatica assigned to SAC all of its rights and obligations under the following agreements (collectively, the "Existing Agreements"): o The Stockholders' Agreement (the "Stockholders' Agreement"), dated as of September 6, 2000, by and among Cirmatica, The Oak Fund, a Cayman Islands exempted company ("Oak"), Peconic Fund Ltd., a Cayman Islands exempted company ("Peconic"), Ramius Securities, LLC, a Delaware limited liability company ("Ramius") and Olivetti International S.A., a Luxembourg corporation ("Olivetti"); o The Supplemental Stockholders' Agreement (the "Supplemental Stockholders' Agreement"), dated as of June 26, 2002, by and between Cirmatica and the Issuer; o The Voting Agreement (the "Voting Agreement"), dated as of September 6, 2000, by and among Cirmatica, Oak, Peconic and Olivetti; and o The Preferred Stock Purchase Agreement (the "Original Stock Purchase Agreement"), dated as of September 6, 2000, by and among Cirmatica, Oak, Peconic, Ramius, Olivetti and the Issuer. Set forth below is a summary of the significant terms of the Series A Certificate, Series B Certificate and the Existing Agreements as those documents apply to SAC. Series A Certificate Under the certificate of designations governing the Series A Shares (the "Series A Certificate"), the holders of Series A Shares, including SAC, receive cumulative dividends at the annual rate of 6% of the sum of (i) $100 per share (the "Liquidation Preference") and (ii) any unpaid dividends from the date of issuance of Series A Shares to the applicable dividend payment date. Dividends are payable in additional Series A Shares or, at the Issuer's option, in cash. The Letter Agreement provides that the Issuer will pay the dividend for the period ending on December 31, 2003 in additional Series A Shares. The Issuer, at its option, may redeem all but not less than all of the Series A Shares at a redemption price equal to 105% of the Liquidation Preference thereof, plus an amount equal to the unpaid dividends thereon, if the Current Market Price (as defined in the Series A Certificate) of the Common Stock exceeds $10.00 per share and the Issuer has filed a registration statement covering the shares of Common Stock underlying the Series A Shares that has been effective for at least 180 days. Each Series A Share is convertible, at the option of the holder, at any time (including upon the issuance of a notice of redemption) into a number of shares of Common Stock determined by dividing the Liquidation Preference of the Series A Share, plus any unpaid dividends thereon, by $5.56 (the "Conversion Price"), such Conversion Price to be adjusted in certain circumstances as provided for in the Series A Certificate. The Series A Shares will be mandatorily converted into Common Stock at the same conversion rate on September 6, 2005. In addition to their rights to designate members of the Issuer's board of directors, holders of Series A Shares are entitled to vote together with the holders of shares of Common Stock on an as-converted basis on all matters as to which holders of shares of Common Stock are entitled to vote. The Series A Certificate also requires the approval of a majority of the then outstanding Series A Shares to effect certain significant transactions. Stockholders' Agreement The Stockholders' Agreement provides for certain preemptive rights to enable each of the stockholders subject thereto (the "Holders"), including SAC, to maintain its percentage ownership interest in the Issuer, and provisions to ensure that the director designation and approval rights of the Holders will remain in place even after conversion of the Series A Shares into Common Stock, as long as the requisite percentages of Common Stock are retained by such Holders. In addition, under the Stockholders' Agreement, the Issuer has agreed to effect "demand" registrations at any time upon the request of the Holders, including registrations made on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"), or for an offering on a delayed or continuous basis pursuant to Rule 415 under the Securities Act. There is no limit on the number of "demand" registrations or Form S-3 registrations that may be requested. The Stockholders' Agreement further provides that, subject to certain limitations, the Holders may include their registrable securities in any registration of stock by the Issuer under the Securities Act. Series B Certificate and the Supplemental Stockholders' Agreement The certificate of designations governing the Series B Shares (the "Series B Certificate") and Supplemental Stockholders' Agreement contain certain director designation provisions that have been largely superceded by those included in the Letter Agreement and described above. The Series B Certificate provides that the Series B Shares will not carry any dividend, conversion or voting rights, except that the Issuer must have the consent of the holders of shares of Series B Shares that own more than 50% of the then outstanding Series B Shares to effect any amendment, alteration or repeal of any provision of the Series B Certificate. The Series B Certificate and Supplemental Stockholders' Agreement contain a number of provisions that have the effect of preventing any Series B Shares from being held or transferred independently of Series A Shares. Original Stock Purchase Agreement Pursuant to the Original Stock Purchase Agreement, the Issuer made certain customary representations and warranties relating to, among other things, the Series A Shares and the condition of the Issuer's business. Most of these representations and warranties subsequently expired, but some provisions, including representations regarding the valid issuance of the Series A Shares and associated indemnification rights, continue in effect. The foregoing descriptions of the Stock Purchase Agreement, the Letter Agreement, the Waiver Letter, the Existing Agreements, the Series A Certificate and the Series B Certificate do not purport to be complete and are qualified in their entirety by reference to the complete text of each document, copies of each of which are filed as exhibits hereto and are incorporated herein by reference. Except as set forth in this Schedule 13D, neither SAC nor any of the Schedule I Persons has any contracts, arrangements, understandings or relationships (legal or otherwise) with any person with respect of any securities of the Issuer, including but not limited to, transfer or voting of any of the securities of the Issuer, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, of the giving or withholding of proxies, or a pledge or contingency the occurrence of which would give another person voting or investment power over the securities of the Issuer. ITEM 7: MATERIAL TO BE FILED AS EXHIBITS See the Index of Exhibits. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated as of: November 26, 2003 MAFCO HOLDINGS INC. By: /s/ Barry F. Schwartz -------------------------------------------- Name: Barry F. Schwartz Title: Executive Vice President and General Counsel SGMS ACQUISITION CORPORATION By: /s/ Barry F. Schwartz -------------------------------------------- Name: Barry F. Schwartz Title: Executive Vice President, Secretary, Treasurer and General Counsel SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF MAFCO HOLDINGS INC. AND SGMS ACQUISITION CORPORATION The name, business address, present principal occupation or employment, and the name, principal business and address of any corporation or other organization in which such employment is conducted, of each of the directors and executive officers of Mafco Holdings Inc. and SGMS Acquisition Corporation are set forth below. The business address of each person listed below is 35 East 62nd Street, New York, New York 10021. Mafco Holdings Inc. Ronald O. Perelman Director, Chairman and Chief Executive Officer of Mafco Holdings Inc. Donald G. Drapkin Director and Vice Chairman of Mafco Holdings Inc. Howard Gittis Director and Vice Chairman of Mafco Holdings Inc. Barry F. Schwartz Executive Vice President and General Counsel of Mafco Holdings Inc. Todd J. Slotkin Executive Vice President and Chief Financial Officer of Mafco Holdings Inc. SGMS Acquisition Corporation Ronald O. Perelman See above Barry F. Schwartz See above INDEX OF EXHIBITS EXHIBIT NUMBER TITLE 1. Joint Filing Agreement, dated as of November 26, 2003, by and between SGMS Acquisition Corporation and Mafco Holdings Inc. 2. Stock Purchase Agreement, dated as of October 10, 2003, by and between Cirmatica Gaming, S.A. and Mafco Holdings Inc. 3. Letter Agreement, dated as of October 10, 2003, by and between Mafco Holdings Inc. and Scientific Games Corporation. 4. Waiver letter, dated as of October 30, 2003, by and between Mafco Holdings Inc. and Scientific Games Corporation. 5. Certificate of Designations of Series A Convertible Preferred Stock of Scientific Games Corporation (f/k/a Autotote Corporation) (incorporated by reference to Exhibit 3.3 to the 10-Q Quarterly Report of Scientific Games Corporation filed on September 14, 2000). 6. Stockholders' Agreement, dated September 6, 2000, by and among Cirmatica Gaming, S.A., The Oak Fund, Peconic Fund Ltd., Ramius Securities, LLC, Olivetti International S.A. and Scientific Games Corporation (f/k/a Autotote Corporation) (incorporated by reference to Exhibit 10.38 to the 10-Q Quarterly Report of Scientific Games Corporation filed on September 14, 2000). 7. Certificate of Designations of Series B Preferred Stock of Scientific Games Corporation (incorporated by reference to Exhibit 4.1 to the 10-Q Quarterly Report of Scientific Games Corporation filed on August 14, 2002). 8. Supplemental Stockholders' Agreement, dated as of June 26, 2002, by and between Scientific Games Corporation and Cirmatica Gaming, S.A. (incorporated by reference to Exhibit 4.2 to the 10-Q Quarterly Report of Scientific Games Corporation filed on August 14, 2002). 9. Voting Agreement, dated September 6, 2000, by and among Olivetti International S.A., Cirmatica Gaming S.A., The Oak Fund and Peconic Fund Ltd. (incorporated by reference to Exhibit 5 of the Schedule 13D filed by Cirmatica Gaming, S.A., Lottomatica S.p.A., Ramius Securities, LLC, Peconic Fund, Ltd., Ramius Capital Group, LLC, C4S & Co., LLC, The Oak Fund, Olivetti International S.A. and Olivetti S.p.A., filed on September 15, 2000). 10. Preferred Stock Purchase Agreement, dated September 6, 2000, by and among Scientific Games Corporation (f/k/a Autotote Corporation), Olivetti International S.A., Cirmatica Gaming S.A., Ramius Securities, LLC, The Oak Fund and Peconic Fund Ltd. (incorporated by reference to Exhibit 2 of the Schedule 13D filed by Cirmatica Gaming, S.A., Lottomatica S.p.A., Ramius Securities, LLC, Peconic Fund, Ltd., Ramius Capital Group, LLC, C4S & Co., LLC, The Oak Fund, Olivetti International S.A. and Olivetti S.p.A., filed on September 15, 2000). 11. Loan Agreement, dated as of November 19, 2003, by and between Bank of America, N.A. and SGMS Acquisition Corporation. 12. Term Note, dated as of November 19, 2003, by SGMS Acquisition Corporation in favor of HSBC Bank USA. EXHIBIT 1 JOINT FILING AGREEMENT The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to such statement shall be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. This agreement may be included as an exhibit to such joint filing. Dated: November 26, 2003 MAFCO HOLDINGS INC. By: /s/ Barry F. Schwartz -------------------------------------------- Name: Barry F. Schwartz Title: Executive Vice President and General Counsel SGMS ACQUISITION CORPORATION By: /s/ Barry F. Schwartz -------------------------------------------- Name: Barry F. Schwartz Title: Executive Vice President, Secretary, Treasurer and General Counsel EX-99 3 nov26scigamesex2to13d.txt EXHIBIT 2 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of October 10, 2003, between Mafco Holdings Inc., a Delaware corporation ("Buyer"), and Cirmatica Gaming, S.A., a Spanish corporation ("Seller"). WHEREAS, Seller currently owns 1,200,327 shares of Series A Convertible Preferred Stock, par value $1.00 (the "Series A Shares") of Scientific Games Corporation, a Delaware corporation (the "Company"), and 1,097.664 shares of Series B Preferred Stock, par value $1.00, of the Company (the "Series B Shares" and, together with the Series A Shares, the "Shares")); WHEREAS, (i) Seller, the Company and certain other parties have previously entered into a Preferred Stock Purchase Agreement, dated as of September 6, 2000, that provided for the purchase of, and certain continuing rights and obligations of the parties with respect to, the Series A Shares (the "Original Purchase Agreement"), (ii) Seller, the Company and certain other parties have previously entered into a Stockholders' Agreement dated as of September 6, 2000 (the "Original Stockholders' Agreement"), and Seller and the Company have previously entered into a Supplemental Stockholders' Agreement, dated as of June 26, 2002 (the "Supplemental Stockholders' Agreement," and, together with the Original Stockholders' Agreement, the "Stockholders' Agreement"), that provide for certain continuing rights and obligations of the parties with respect to the Shares, and (iii) Seller and certain other parties have previously entered into a Voting Agreement dated as of September 6, 2000 (the "Voting Agreement" and, together with the Original Purchase Agreement and the Stockholders' Agreement, the "Existing Agreements"), that provides for certain voting rights of Seller with respect to the Series A Shares; WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, (i) the Shares and (ii) such additional Series A Shares which accrue, are paid or payable on, or received or receivable with respect to, the Shares following September 30, 2003 until the Closing Date (the "Dividend Shares" and, collectively with the Shares, the "Securities"); and WHEREAS, the Board of Directors of the Company has approved the purchase by Buyer from Seller of the Securities, upon the terms hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending to be legally bound, the parties hereto agree as follows: ARTICLE I. THE PURCHASE Section 1.1 Purchase and Sale of the Securities. Upon the terms and subject to the conditions herein, Seller agrees to sell, transfer, assign and convey to Buyer, and Buyer agrees to purchase from Seller, on the Closing Date (as defined in Section 2.1), the Securities for the Purchase Price (as defined in Section 1.2). Section 1.2 Purchase Price. (a) Purchase Price. The "Purchase Price" shall be equal to the sum of (i) $1,098 and (ii) the product of (x) the number of Securities owned by Seller on the Closing Date, exclusive of all Series B Shares, (y) 17.9856 and (z) the Common Share Price. (b) Common Share Price. The "Common Share Price" shall be equal to the greater of (i) $9.00 or (ii) 75% of the arithmetic average (rounded to the nearest 1/10,000) of the daily volume-weighted average prices of the Company's Class A common stock (the "Common Stock"), on the NASDAQ National Market, calculated as of 4:00 p.m. Eastern Time and as reported by Bloomberg, L.P. or such other source as the parties hereto shall agree upon in writing, for the 30 consecutive trading days immediately preceding the trading day before the Closing Date (the "Valuation Period"); provided that the amount in this clause (ii) shall not exceed $9.15. ARTICLE II. CLOSING; CONDITIONS Section 2.1 Closing. The closing of the purchase and sale of the Securities (the "Closing") shall be held at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, as soon as practicable, but in no event later than 3 business days after the conditions described in Section 2.2 are satisfied (or waived by the parties entitled to waive them) or at such other time or place as may be mutually agreed to by the parties hereto. The actual date on which the Closing shall occur is herein referred to as the "Closing Date." At the Closing, (i) Buyer shall deliver to Seller, by wire transfer to a bank account designated by Seller to Buyer not later than the close of business on the second business day immediately preceding the Closing Date, immediately available funds in an amount equal to the Purchase Price and (ii) Seller shall deliver to Buyer or Buyer's designee certificates representing the Securities, duly endorsed in blank or accompanied by stock powers duly endorsed in blank. Buyer shall pay all stock transfer and documentary stamps, if any, arising under the laws of any U.S. jurisdiction and Seller shall pay all stock transfer and documentary stamps, if any, arising under the laws of any European jurisdiction. Section 2.2 Conditions to Closing. (a) Buyer's Obligations. The obligations of Buyer to purchase the Securities and to pay the Purchase Price are subject to the satisfaction prior to or at the Closing (or the waiver of same by Buyer) of each of the following conditions precedent: (i) Each of the representations and warranties made by Seller in Section 3.1 shall have been true and correct when made and shall be true and correct at the Closing Date as though each such representation and warranty were made on and as of the Closing Date immediately prior to the Closing. (ii) Seller shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be performed or complied with by it at or prior to the Closing. (iii) Seller shall have delivered to Buyer a certificate dated the Closing Date and signed by one of its duly authorized officers confirming the matters referred to in subsections (i) and (ii) of this Section 2.2(a). (iv) Seller shall have delivered to Buyer an Assignment in the form attached hereto as Annex A assigning to Buyer all of Seller's rights and obligations under the Existing Agreements and a Release in the form attached hereto as Annex B for the benefit of Buyer and the other parties indicated therein. (v) No temporary restraining order, preliminary or permanent injunction or other order issued by a court of competent jurisdiction or other legal restraint or legal prohibition (except for the extensions and approvals referenced in Sections 2 and 3 of Annex C attached hereto and any other orders, extensions, approvals or other forms of consent that Buyer is required to obtain from any gaming authority in order to consummate the transactions contemplated hereby (the "Gaming Approvals")) preventing the consummation of the Closing shall be in effect. (vi) The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") applicable to the transactions contemplated hereby shall have expired or been terminated and either (x) the Gaming Approvals shall have been received or (y) 11.59 p.m. on December 5, 2003 shall have passed (it being understood that after 11.59 p.m. on December 5, 2003, Buyer's obligation to close the transactions contemplated hereby shall not be conditioned upon receipt of the Gaming Approvals). (b) Seller's Obligations. The obligations of Seller to sell, transfer, assign and convey the Securities to Buyer are subject to the satisfaction prior to or at the Closing (or waiver by Seller) of each of the following conditions: (i) Each of the representations and warranties made by Buyer in Section 3.2 shall have been true and correct when made and shall be true and correct on the Closing Date as though each such representation and warranty were made on and as of the Closing Date immediately prior to the Closing. (ii) Buyer shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be performed or complied with by it at or before the Closing. (iii) Buyer shall have delivered to Seller a certificate dated the Closing Date and signed by one of its duly authorized officers confirming the matters referred to in subsections (i) and (ii) of this Section 2.2(b). (iv) No temporary restraining order, preliminary or permanent injunction or other order issued by a court of competent jurisdiction or other legal restraint or legal prohibition (except for the Gaming Approvals) preventing the consummation of the Closing shall be in effect. (v) A Release in the form set forth on Annex D shall have been delivered to Seller for the benefit of Seller and the other parties indicated therein. (vi) The waiting period under the HSR Act applicable to the transactions contemplated hereby shall have expired or been terminated. (vii) The Company shall have delivered to Seller the Release required by the letter agreement between the Company and Seller of even date herewith. ARTICLE III. REPRESENTATION AND WARRANTIES Section 3.1 Representations and Warranties of Seller. Seller hereby represents and warrants to Buyer as follows: (a) Corporate Existence. Seller is a corporation duly organized, validly existing and in good standing under the laws of Spain. (b) Authorization; Enforcement. Seller has full corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement in accordance with its terms. Seller has taken all necessary corporate action to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement is a valid and legally binding obligation of Seller, enforceable in accordance with its terms. (c) No Conflicts. The execution and delivery by Seller of this Agreement do not, and, assuming receipt of the extensions and approvals listed on Annex C hereto (the "Approvals"), the performance by Seller of its obligations under this Agreement and the consummation by Seller of the transactions contemplated hereby will not, conflict with, result in any violation of, or constitute a default (with or without notice or lapse of time, or both) or give any person the right to exercise any remedy under, any organizational document of Seller or any mortgage, indenture, lease or other agreement or instrument to which Seller is a party, or any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation having application to Seller or any of its subsidiaries or any of their respective properties or assets, except for such conflicts which would not (i) have a material adverse effect on the ability of Seller to enter into and perform its obligations under this Agreement or (ii) result in any Lien (as that term is defined in Section 3.1(e) below) with respect to any Securities. (d) No Consents or Approvals. Other than the Approvals, and assuming the truth and completeness of the representations and warranties of Buyer contained in Section 3.2 hereof, no consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental or quasi-governmental authority or instrumentality, domestic or foreign, is required to be obtained or made by Seller in connection with the execution and delivery of this Agreement by Seller or the consummation by Seller of the transactions contemplated hereby, other than (i) such filings under the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder (the "Exchange Act"), as may be required in connection with this Agreement and the consummation of the transactions contemplated hereby, (ii) certain filings with State regulatory authorities that Seller, its affiliates and representatives are required to make after the consummation by Seller of the transactions contemplated hereby, (iii) certain filings with European antitrust authorities, and (iv) consents the failure of which to obtain would not have a material adverse effect on the ability of Seller to enter into and perform its obligations under this Agreement. (e) Ownership. (i) Seller has valid, legal, beneficial and record title to 1,200,327 Series A Shares and to 1,097.664 Series B Shares, and, following valid authorization and issuance to it of any additional Dividend Shares, will have valid, legal, beneficial and record title to such Dividend Shares, and (ii) upon the Closing Buyer will have or will be entitled to have valid, legal, beneficial and record title to all of the Securities, in each case free and clear of any liens, charges, encumbrances, security interests, pledges, options, rights, voting proxies, other voting arrangements, agreements to sell, assign or transfer or other claims whatsoever (collectively, "Liens"), other than under this Agreement, the Stockholders' Agreement, the Voting Agreement and the Certificates of Designation governing the Series A Shares and Series B Shares. To Seller's knowledge, Seller is not in breach of any of the Existing Agreements. (f) Possession of Adequate Knowledge. Seller possesses such information concerning the Company and its business as it deems necessary in order to evaluate the merits of the transactions contemplated by this Agreement and is not relying on any representation or warranty in this regard by Buyer. (g) Advisers' Fees. There is no investment banker, broker, finder or other intermediary who might be entitled to any fee or commission upon consummation of the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller. Section 3.2 Representations and Warranties of Buyer. Buyer hereby represents and warrants to Seller as follows: (a) Corporate Existence. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) Authorization; Enforcement. Buyer has full corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement in accordance with its terms. Buyer has taken all necessary corporate action to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement is a valid and legally binding obligation of Buyer, enforceable in accordance with its terms (assuming due authorization, execution and delivery hereof by the Company and Seller). (c) No Conflicts. The execution and delivery by Buyer of this Agreement do not, and, assuming receipt of the Approvals, the performance by Buyer of its obligations under this Agreement and the consummation by Buyer of the transactions contemplated hereby will not, conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) or give any person the right to exercise any remedy under, any provision of the Certificate of Incorporation or By-laws of Buyer or any mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Buyer or any of its subsidiaries or any of their properties or assets, except for such conflicts which would not have a material adverse effect on the ability of Buyer to enter into and perform its obligations under this Agreement. (d) No Consents or Approvals. Other than the Approvals, and assuming the truth and completeness of the representations and warranties of Seller contained in Section 3.1 hereof, no consent, approval, order or authorization of, or registration, declaration or filing with any court, administrative agency or commission or other governmental or quasi-governmental authority or instrumentality, domestic or foreign, is required to be obtained or made by Buyer in connection with the execution and delivery of this Agreement by Buyer or the consummation by Buyer of the transactions contemplated hereby other than (i) such filings under the Exchange Act as may be required in connection with this Agreement and the consummation of the transactions contemplated hereby, (ii) certain filings with State regulatory authorities that Buyer, its affiliates and representatives are required to make after the consummation by Buyer of the transactions contemplated hereby, (iii) certain filings with European antitrust authorities, and (iv) consents the failure of which to obtain would not have a material adverse effect on the ability of Buyer to enter into and perform its obligations under this Agreement. (e) No Reliance on Seller Representations. Buyer has relied on publicly available information concerning the Company and its business, and on its own due diligence investigations, in order to evaluate the merits of the transactions contemplated by this Agreement, and is not relying on any representation or warranty by Seller or any of its affiliates (other than the Company or its subsidiaries) regarding the Company or its business. (f) Advisers' Fees. There is no investment banker, broker, finder or other intermediary who might be entitled to any fee or commission upon consummation of the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer. (g) No Finance Condition. Buyer has access to and will have at the Closing sufficient funds to consummate the transactions contemplated by this Agreement and the availability of such funds is not subject to any conditions. (h) No Overlaps. Neither Buyer nor any Buyer Affiliate has any rights in any entity that would be required to be disclosed as part of a Hart-Scott-Rodino pre-merger notification which entity has any activities that would fall under the same North American Industry Classification System ("NAICS") 6 digit industry code as the Company, assuming that the Company is involved only in those activities identified by NAICS code on Annex E. For purposes hereof, "Affiliate" means any entity controlling, controlled by or under common control with Buyer. (i) No Distribution or Resale. Buyer represents that it is purchasing the Securities for its own account and not with a view to the distribution or resale thereof. Buyer understands that the Securities have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law. ARTICLE IV. COVENANTS Section 4.1 No Transfers, Conversions or Redemptions. Seller agrees that it shall not, prior to the Closing, directly or indirectly, (i) sell, assign, transfer or convey, or otherwise propose, offer or agree to sell, assign, transfer or convey, any interest in any Securities (other than pursuant to this Agreement), (ii) convert any Securities into shares of Common Stock or (iii) grant or suffer to exist any Lien on any Securities owned by it (other than the Liens created by this Agreement and the Stockholders' Agreement). Section 4.2 Resignation of Seller Designees. Seller agrees that it shall cause each director of the Company who was designated by Seller to be elected to such directorship pursuant to the Stockholders' Agreement other than Peter Cohen (a "Seller Designee"), serving as a director of the Company on the Closing Date to resign immediately from such directorship, and to cooperate reasonably, if necessary and to the extent such Seller Designees are so empowered, so as to allow Buyer's nominees to fill the vacancies thereby created, in each case effective as of the Closing. Section 4.3 Assignment; Mutual Releases. At or prior to the Closing, (a) Seller will take, or cause to be taken, all actions necessary or advisable to cause the condition set forth in Section 2.2(a)(iv) to be satisfied, (b) Seller will deliver to Buyer a release in the form of Annex B hereto, and (c) Buyer will deliver to Seller a release in the form of Annex D hereto. Section 4.4 Voting Rights. Between the date hereof and the Closing Date, except with the prior written consent of Buyer, Seller will (i) not enter into any agreement or understanding, or waive any rights, with respect to the Securities, (ii) vote the Securities so as to prevent the Company from taking any of the actions set forth in Section 6(c) of the Certificate of Designations governing the Series A Preferred or Section 6(b) of the Certificate of Designations governing the Series B Preferred, (iii) not agree to any amendment of any of the Existing Agreements, and (iv) not take any other action in its capacity as holder of the Securities that would reasonably be expected to adversely affect the consummation of the transactions contemplated hereby, the rights of Buyer (including as a holder of the Securities) or the value of the Company or the Securities; provided, however, that nothing herein shall prevent the Seller Designees from exercising their fiduciary duties as directors of the Company. It is acknowledged and agreed that Seller is contemporaneously herewith entering into a letter agreement with the Company in the form attached hereto at Exhibit I, which includes certain consents, including Seller's consent to the issuance of up to 10,000,000 new Common Shares (or securities convertible thereinto or convertible therefor) and a waiver of Seller's preemptive rights with respect to such issuance, and Buyer agrees to such consents and waivers. Section 4.5 Director Indemnification and Exculpation. For a period of not less than six (6) years after the Closing Date, Buyer shall, and Buyer shall cause any affiliates of Buyer that become holders of the Securities (or any other shares of capital stock of the Company) to, vote the Securities (and any other shares of capital stock of the Company that Buyer or such affiliate of Buyer may acquire) so as to prevent a change adverse to the Seller Designees in the Company's existing indemnification and exculpation provisions with respect to present and former directors of the Company for losses, claims, damages, expenses and liabilities arising out of actions or omissions or alleged actions or omissions occurring at or prior to the Closing Date. Section 4.6 Certain Tax Matters. Prior to the Closing, Seller shall (x) cause the Company to deliver to Buyer an affidavit, in form and substance reasonably acceptable to Buyer, duly executed and acknowledged, certifying facts that would exempt the transactions contemplated hereby from the provisions of the Foreign Investment in Real Property Tax Act of 1980 (a "FIRPTA Certificate") and (y) deliver to Buyer a duly executed IRS Form W-8BEN (a "Form W-8"); provided, however, that notwithstanding anything to the contrary contained herein, if Seller fails to cause the Company to provide a FIRPTA Certificate or fails to provide a Form W-8, (A) Buyer shall be entitled to withhold from the Purchase Price any amounts required to be withheld pursuant to applicable law and (B) to the extent any amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller. Section 4.7 No Manipulation. During the Valuation Period, neither Seller nor Buyer shall, directly or indirectly through its affiliates (which term shall not be deemed to include the Company for this purpose), agents or representatives, purchase or sell any Common Stock or any other security or instrument exercisable, convertible or exchangeable into Common Stock (or any interest in Common Stock or any other security or instrument exercisable, convertible or exchangeable into Common Stock), or take any other action with the primary intention or effect of affecting the Purchase Price. Section 4.8 Approvals. (a) Within ten (10) business days of the execution of this Agreement, Buyer will, and will cause its representatives to, have substantially completed all filings required by governmental or quasi-governmental authorities and have executed substantially all documents, certifications, forms, etc., required by governmental or quasi-governmental authorities in order to obtain the Approvals, in each case to the extent capable of being filed or executed as of right within such ten (10) business day period pursuant to applicable statutes, rules and regulations and not dependent on the cooperation of parties not within Buyer's control. Buyer shall notify Seller in writing by telecopy of the satisfaction of the foregoing requirement within such ten (10) business day period. (b) Buyer shall provide Seller with prompt notice of any material requests or inquiries made of Buyer by governmental or quasi-governmental authorities related in any way to such approvals, including copies of any written request or inquiry served upon them by any governmental or quasi-governmental authority (subject to redaction of confidential information). Between the date hereof and the Closing Date, Buyer will use its reasonable best efforts to obtain the Approvals as promptly as practicable, and Seller will provide reasonable cooperation to Buyer with respect to same. The parties agree promptly to notify each other of all material developments of which they become aware with respect to the foregoing. Section 4.9 No Acquisitions. From the date hereof until the date the waiting period under the HSR Act applicable to the transactions contemplated hereby shall have expired or been terminated, Buyer shall not, and shall cause its Affiliates not to, enter into or consummate any acquisition, investment or other transaction which would be reasonably likely to have an adverse effect on the waiting period under the HSR Act applicable to the transactions contemplated hereby expiring or terminating by December 5, 2003. ARTICLE V. TERMINATION Section 5.1 Termination. (a) This Agreement may be terminated at any time prior to the Closing: (i) by Buyer, by notice to Seller, if Seller has materially breached any of its agreements or obligations hereunder; (ii) by Seller, by notice to Buyer, if Buyer fails to satisfy its obligations under Section 4.8(a); (iii) by Seller, by notice to Buyer, if (x) Buyer has materially breached any of its agreements or obligations hereunder or (y) at any time after 11.59 p.m. on December 5, 2003, the New Jersey Casino Control Commission, the West Virginia State Lottery Commission or any other regulatory authority shall have publicly announced that it will not grant an approval or extension required by such authority in connection with the transactions contemplated hereby; (iv) by Seller, by notice to Buyer within five business days (which are not public holidays in New York or Italy) of December 5, 2003, if the Closing shall not have occurred by 11.59 p.m. on December 5, 2003 other than as a result of (i) a breach of a representation or warranty, or covenant or obligation of Seller contained in this Agreement or (ii) the conditions set forth in Section 2.2(a)(vi) and Section 2.2(b)(vi) not being satisfied without a breach by Buyer of its covenants and obligations set forth in Section 4.9; or (v) by Seller, by notice to Buyer, if the Closing shall not have occurred by December 5, 2003 as a result of the conditions set forth in Section 2.2(a)(vi) and Section 2.2(b)(vi) not being satisfied without a breach by Buyer of its covenants and obligations set forth in Section 4.9. (b) Consequences of Termination. In the event of the termination of this Agreement pursuant to Section 5.1(a), this Agreement shall thereafter cease to be of any force or effect, except to the extent that this Section 5.1(b), Section 5.1(c) and Article VI (other than Sections 6.3, 6.5, 6.13 and 6.14) shall survive such termination, and thereafter no party hereto shall have any liability to any other party hereto or its stockholders or directors or officers in respect thereof; provided, however, that this sentence shall not relieve a party from liability for any breach of this Agreement or any liability pursuant to Section 5.1(c), including without limitation any breach of Section 4.9. (c) Indemnification. The representations and warranties in this Agreement and in any certificate delivered pursuant hereto shall survive the Closing. Each party agrees to indemnify, defend and hold harmless the other party, such other party's affiliates and their respective directors, officers, employees, successors, assigns, agents and representatives, from and against all losses, liabilities, damages, deficiencies, demands, claims, actions, judgments or causes of action, assessments, costs or expenses (including, without limitation, interest, penalties and reasonable attorneys' fees, disbursements and related charges) based upon, arising out of or otherwise in respect of any inaccuracy in or any breach of any representation, warranty, covenant or agreement of the indemnifying party contained in this Agreement or in any certificate delivered pursuant hereto. In the event this Agreement is terminated pursuant to clauses (ii), (iii) or (iv) of Section 5.1, then Buyer shall pay to Seller a termination payment equal to the sum of (i) an amount equal to all damages to which Seller is entitled at law or in equity as a result of the termination of this Agreement (without deduction or offset for the amount to which Seller is entitled pursuant to the following clause (ii)) and (ii) five million dollars ($5,000,000) (the "Termination Payment"). For the avoidance of doubt, in the event this Agreement is terminated pursuant to clauses (ii), (iii) or (iv) of Section 5.1, Seller shall not be entitled to receive any amounts from Buyer pursuant to this Section 5.1(c) in excess of the Termination Payment. ARTICLE VI. FURTHER AGREEMENTS Section 6.1 Assignment. This Agreement and the rights hereunder shall not be assignable or transferable by either party without the prior written consent of the other party hereto, except that Buyer shall be entitled to assign its rights hereunder to any one or more of its affiliates; provided that Buyer shall not thereby be relieved of any of its obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. Section 6.2 Fees and Expenses. All fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby ("Expenses") shall be paid by the party incurring such Expenses. Section 6.3 Publicity. Between the date hereof and the Closing Date, the parties agree to consult with each other and to coordinate the issuance of any press release or similar public announcement or communication relating to the execution or performance of this Agreement or to the transactions contemplated hereby. Section 6.4 Amendments. No amendment to this Agreement shall be effective unless it shall be in writing and signed by each of the parties hereto. Section 6.5 Cooperation. Subject to the terms and conditions of this Agreement, Seller and Buyer agree to use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective, as soon as reasonably practicable, the terms of this Agreement and the transactions contemplated hereby. Section 6.6 Notices. Any notice, demand, election, request, consent or the communication required or permitted to be given hereunder shall be in writing and shall be effective (a) when personally delivered or delivered by telecopy on a business day during normal business hours at the address or number designated below or (b) on the business day following the date of mailing by overnight courier, fully prepaid, addressed to such address, whichever shall first occur. The addressed for such communications shall be: If to Buyer: Mafco Holdings Inc. 35 East 62nd Street New York, New York 10021 Telecopy: (212) 572-5056 Attention: Barry F. Schwartz with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Telecopy: (212) 403-2000 Attention: Adam O. Emmerich Trevor S. Norwitz If to Seller: Cirmatica Gaming, S.A. Rambla De Catalunya 16, 4(degree), 2a Barcelona, Spain Telecopy: (01139) 02 621 3241 Attention: Jaime Hernandez Guillem with a copy to: Latham & Watkins 99 Bishopsgate London EC2M 3XF United Kingdom Telecopy: (01144) 20 7374 4460 Attention: Michael S. Immordino Any party hereto may from time to time change its address for notices under this Section 6.6 by giving notice of such changed address to the other parties hereto. Section 6.7 Submission to Jurisdiction; Consent to Service of Process. With respect to any claim arising out of this Agreement, Seller and Buyer each irrevocably submits to the exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City and the Company and agrees that any disputes that may arise out of this Agreement shall be litigated in such Courts, Seller and Buyer each irrevocably waives any objection which it may have at any time to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any such court, irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum and further irrevocably waives the right to object, with respect to such suit, action or proceeding brought in any such court, that such court does not have jurisdiction over such party. Seller and Buyer each agrees that service of process upon it in any such suit, action or proceeding shall be deemed in every respect effective service of process upon it if given in the manner set forth in Section 6.6. Seller and Buyer each waives the right to a trial by jury in connection with ay dispute arising out of this letter agreement. Section 6.8 Interpretation. The headings contained in this Agreement are for convenience only and shall not be deemed to limit or affect in any way the meaning or interpretation of this Agreement. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. Section 6.9 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. Section 6.10 Entire Agreement. This Agreement, together with the Existing Agreements, contains the entire agreement and understanding between the parties hereto with respect to the matters covered hereby and supersedes all prior agreements and understandings relating thereto. Section 6.11 Severability. If any term, provision, covenant or restriction of this Agreement or the application of any such provision to any person or circumstance shall be held invalid, illegal, void or unenforceable in any respect by a court of competent jurisdiction, the remaining terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect, unless such invalidity, illegality, voidness or unenforceability would substantially impair the benefits of such remaining provisions of any party hereto. Section 6.12 Waivers. No waiver by any party of any default with respect to any provision, condition or requirement hereof shall be deemed to be a continuing waiver in the future thereof or a waiver of any other provision, condition or requirement hereof; nor shall any delay or omission of any party or exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. Section 6.13 Specific Enforcement. Seller and Buyer acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which they may be entitled by law or equity. Section 6.14 Third Party Beneficiaries. The Releases provided for in Section 4.3 of this Agreement are also for the benefit of and are intended to confer third party beneficiary rights in favor of the Covered Persons (as defined in such Releases in the forms attached hereto). Section 6.15 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICTS OF INTERESTS RULES OF SUCH STATE). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. MAFCO HOLDINGS INC. By: /s/ Barry F. Schwartz ------------------------------------- Name: Barry F. Schwartz Title: Executive Vice President and General Counsel CIRMATICA GAMING, S.A. By: /s/ Rosario Bifulco ------------------------------------- Name: Rosario Bifulco Title: Director EX-99 4 nov26scigamesex3to13d.txt EXHIBIT 3 MAFCO HOLDINGS INC. 35 East 62nd Street, New York, New York 10021 October 10, 2003 Scientific Games Corporation 750 Lexington Avenue, 25th Floor New York, New York 10022 Attention: Mr. Lorne A. Weil Ladies and Gentlemen: Reference is made to that certain Stock Purchase Agreement (the "STOCK PURCHASE AGREEMENT") we are entering into contemporaneously with this letter agreement with Cirmatica Gaming, S.A., a Spanish corporation ("SELLER"), which provides for the purchase, upon the terms and conditions set forth therein, by Mafco Holdings Inc., a Delaware corporation, or one of its affiliates ("BUYER"), of all the Securities owned by Seller, and the assignment to Buyer of all of Seller's rights under the Existing Agreements. All capitalized terms used herein without definition shall have the meanings ascribed to them in the Stock Purchase Agreement. You and we acknowledge and agree, for good and adequate consideration, the sufficiency of which is hereby acknowledged, as follows: (a) COMPANY REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants to Buyer, as of the date hereof and as of the Closing Date, as follows: (i) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has full corporate power and authority to execute and deliver this letter and to perform its obligations under this letter in accordance with its terms. The Company has taken all necessary corporate action to authorize the execution and delivery of this letter and the consummation of the transactions contemplated hereby and to approve such transactions and the transactions contemplated by the Stock Purchase Agreement for the purposes of Section 203 of the Delaware General Corporate Law. This letter is a valid and legally binding obligation of the Company, enforceable in accordance with its terms (assuming due authorization, execution and delivery hereof by Buyer). (ii) The execution and delivery of this letter and the Stock Purchase Agreement do not, and, assuming receipt of the Approvals, the consummation of the transactions contemplated by this letter and the Stock Purchase Agreement will not, conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) or give any person the right to exercise any remedy under, (i) any provision of the Certificate of Incorporation or Bylaws of the Company or (ii) any material mortgage, indenture, lease or other material agreement or instrument to which the Company or any of its subsidiaries is a party, or (iii) any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its subsidiaries or any of their properties or assets, except (in this clause (iii)) for such conflicts, violations, defaults or rights as would not have a material adverse effect on the Company. (iii) Other than the Approvals , order or authorization of, or registration, declaration or filing with any court, administrative agency or commission or other governmental or quasi-governmental authority or instrumentality, domestic or foreign, is required to be obtained or made by the Company in connection with the execution and delivery of this letter by the Company or the performance of its obligations hereunder or the execution, delivery or consummation of the transactions contemplated by the Stock Purchase Agreement, except where the failure to obtain or make would not have a material adverse effect on the Company. (iv) The dividend payable on the Series A Shares on September 30, 2003 was paid in additional Series A Shares in accordance with the terms of the Series A Certificate of Designations (as defined below) and the dividend payable on the Series A Shares on December 30, 2003 will be paid in additional Series A Shares in accordance with the terms of the Series A Certificate of Designations. (b) BUYER REPRESENTATIONS AND WARRANTIES. Buyer hereby represents and warrants to the Company, as of the date hereof and as of the Closing Date, as follows: (v) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has full corporate power and authority to execute and deliver this letter and to perform its obligations under this letter in accordance with its terms. Buyer has taken all necessary corporate action to authorize the execution and delivery of this letter and the consummation of the transactions contemplated hereby. This letter is a valid and legally binding obligation of Buyer, enforceable in accordance with its terms (assuming due authorization, execution and delivery hereof by the Company). (vi) The execution and delivery of this letter and the Stock Purchase Agreement do not, and, assuming receipt of the Approvals, the consummation of the transactions contemplated by this letter and the Stock Purchase Agreement will not, conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) or give any person the right to exercise any remedy under, (i) any provision of the Certificate of 2 Incorporation or Bylaws of Buyer or (ii) any material mortgage, indenture, lease or other material agreement or instrument to which Buyer or any of its subsidiaries is a party, or (iii) any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Buyer or any of its subsidiaries or any of their properties or assets, except (in this clause (iii)) for such conflicts, violations, defaults or rights as would not have a material adverse effect on the Buyer. (vii) Other than the Approvals, no consent, approval, order or authorization of, or registration, declaration or filing with any court, administrative agency or commission or other governmental or quasi-governmental authority or instrumentality, domestic or foreign, is required to be obtained or made by Buyer in connection with the execution and delivery of this letter by Buyer or the performance of its obligations hereunder or the execution, delivery or consummation of the transactions contemplated by the Stock Purchase Agreement. (c) RELIANCE ON PUBLIC INFORMATION; NO OTHER REPRESENTATIONS OR WARRANTIES. The Company agrees and acknowledges that Buyer has entered into the Stock Purchase Agreement in reliance upon publicly available information regarding the Company and its business, and that Buyer shall have no lesser or greater rights under the Exchange Act with respect to such information than other purchasers of the Company's securities. Buyer agrees and acknowledges that (i) the Company is not making, and Buyer is not relying on, any representations or warranties of the Company except as set forth in this letter agreement and (ii) Buyer has had the opportunity to discuss the Company's business with the Company's representatives and had access to such Company facilities, books and records as it has requested. (d) CONTINUATION OF RIGHTS. The Company agrees and acknowledges that, following the consummation of the transactions contemplated by the Stock Purchase Agreement and Buyer's execution and delivery of a notice substantially in the form attached as Annex I hereto, Buyer will possess all of the rights of Seller as of the date hereof vis a vis the Company under the Existing Agreements and the Securities (subject to the obligations under the Existing Agreements), and that such rights shall include, without limitation, the right to elect four members of the Company's board of directors. For the avoidance of doubt, the Company confirms that no transactions have been, or will be prior to or after Closing, effected, approved or authorized by the Company that would have the effect of modifying, limiting or restricting the aforementioned rights in any way, without the prior written consent of Buyer; PROVIDED that Buyer acknowledges that Seller has consented to the registration and issuance of securities pursuant to a letter agreement which is attached here to as Annex II (the "CONSENTS") (it being understood that the grant of options on one million shares of Common Stock to Mr. Weil is included within the stock option plans previously consented to by Seller or in respect of which no consent was required), which include a consent to the issuance by the Company of shares of Common Stock (and/or securities convertible into, or exercisable for, Common Stock), such number of shares of Common Stock so issued (or issuable upon conversion or exercise of such other securities) not to exceed 10 million shares of Common Stock (such number subject to equitable adjustment in the event of stock splits or combinations) (the "TEN MILLION SHARES CONSENT"). Notwithstanding the immediately preceding sentence, the Company shall not, prior to the closing under the Stock Purchase 3 Agreement, include shares of Common Stock issuable upon conversion of the Series A Shares in a registration statement filed with the Securities and Exchange Commission. The Company will not assert any breach by Seller of any Existing Agreement as a basis for affecting the rights of Buyer under the Existing Agreements. Seller and Buyer agree that Buyer shall have the preemptive rights provided for in Section 3(b) of the Stockholders' Agreement with respect to issuances contemplated by the Ten Million Shares Consent, and Buyer agrees that such preemptive rights shall be provided in a manner that does not unduly interfere with the Company's ability to effectuate financings contemplated by the Ten Million Shares Consent; PROVIDED that Buyer shall continue to have the protection against dilution of its interest in the Company contemplated by such Section 3(b). (e) BOARD OF DIRECTORS. (i) At Closing, the Company shall take all actions necessary and appropriate to cause each of the three persons nominated by Buyer to be a director of the Company (in addition to Peter Cohen) to fill the vacancies created by the resignations of Seller's designees, effective as of the Closing. (ii) The Company and Buyer agree that, notwithstanding the provisions of Section 4(b) of the Stockholders' Agreement, Buyer shall have the right to designate and have elected and appointed: (A) four (4) directors, provided that Buyer beneficially owns in the aggregate shares of Common Stock plus shares of Preferred Stock having the right to convert into a number of shares of Common Stock that equals or exceeds twenty percent (20%) of (x) the number of shares of Common Stock outstanding plus (y) the number of shares of Common Stock into which or for which all outstanding securities of the Company convertible into or exercisable or exchangeable for Common Stock may be converted, exercised or exchanged, minus (z) the aggregate number of shares of Common Stock and shares underlying other securities convertible into or exercisable or exchangeable for Common Stock issued pursuant to the Ten Million Shares Consent (such amount including (x), (y) and (z), the "ADJUSTED FULLY DILUTED SHARE AMOUNT"); (B) three (3) directors, provided, that Buyer beneficially owns in the aggregate shares of Common Stock plus shares of Preferred Stock having the right to convert into a number of shares of Common Stock that equals or exceeds sixteen percent (16%) of the Adjusted Fully Diluted Share Amount; (C) two (2) directors, provided, that Buyer beneficially owns in the aggregate shares of Common Stock plus shares of Preferred Stock having the right to convert into a number of shares of Common Stock that equals or exceeds nine percent (9%) of the Adjusted Fully Diluted Share Amount; and (D) one (1) director, provided, that Buyer beneficially owns in the aggregate shares of Common Stock plus shares of Preferred Stock having the right to convert into a number of shares of Common Stock that equals or exceeds four and six-tenths percent (4.6%) of the Adjusted Fully Diluted Share Amount. The intention of the immediately preceding sentence is that the directors designated pursuant to Section 4(b) of the Stockholders' Agreement, Section 5(d) of the Series A Certificate of Designations and Section 6(c) of the Certificate of Designations governing the Series B Preferred shall include the individuals designated pursuant to this Section (e)(ii) and shall in any event not exceed the number of directors to be designated pursuant to this Section (e)(ii), The Company and Buyer further agree that, notwithstanding the provisions of Section 4(b)(iv) of the Stockholders' Agreement but subject to applicable law, Buyer's rights to select and designate directors (including replacement directors) shall not be restricted as long as Buyer is entitled to designate at least one but not more than two directors pursuant to this Agreement. The Company will, and Buyer will cooperate to, take any further steps that are necessary or appropriate to fully implement the foregoing provisions. 4 (f) EXPENSES. At the Closing, the Company shall pay to Buyer an amount in cash equal to the expenses incurred by Buyer in connection with the Stock Purchase Agreement and the transactions contemplated thereby, up to a maximum of $1,000,000. (g) APPROVALS. Between the date hereof and the Closing, each of Buyer and the Company will use its reasonable best efforts to obtain, and will cooperate with each other in obtaining, as promptly as practicable and in any event prior to the Closing, the Approvals and all other governmental and regulatory approvals required with respect to the transactions contemplated by the Stock Purchase Agreement (including consents from governmental or quasi-governmental authorities pursuant to lottery or gaming agreements with such authorities). Each of us agrees to make all required filings, and to execute all required documents, certifications, forms, etc., and to provide the other with notice of any requests or inquiries made by governmental or quasi-governmental authorities relating to such approvals and consents, including copies of any written request or inquiry received from any governmental or quasi-governmental authority. Buyer shall not waive the closing conditions set forth in Section 2.2(a)(v) and (vi) of the Stock Purchase Agreement nor shall it consent to amend such conditions. (h) NO MANIPULATION. During the Valuation Period, the Company shall not, directly or indirectly through its affiliates, agents or representatives, purchase any Common Stock (or any interest in Common Stock), other than transactions in the ordinary course, required by law or pursuant to preexisting obligations, such as purchases to satisfy stock option issuances. (i) PRECLOSING RESTRICTIONS. Between the date hereof and the Closing, except with the prior written consent of Buyer, the Company will not (i) redeem or otherwise acquire, or offer to redeem or otherwise acquire, any Securities, (ii) except for the matters contemplated by the Consents, take any of the actions set forth in Section 6(c) of the Certificate of Designations governing the Series A Preferred (the "SERIES A CERTIFICATE OF DESIGNATIONS") or Section 6(b) of the Certificate of Designations governing the Series B Preferred or (iii) amend, or permit the amendment of, any of the Existing Agreements to which it is a party. (j) PUBLICITY. Between the date hereof and the Closing, each of the Company and Buyer agree to consult with each other and to coordinate the issuance of any press release or similar public announcement or communication relating to the execution or performance of this letter or the Stock Purchase Agreement or the transactions contemplated hereby or thereby. Notwithstanding the foregoing, neither party shall be restrained, after consultation with the other party, from making such disclosure as it shall be advised by counsel that it is required to make by law or regulation or by the rules of any stock exchange or NASDAQ. (k) INDEMNIFICATION. The representations and warranties and agreements set forth in this letter shall survive the Closing. The Company agrees to indemnify, defend and hold harmless Buyer, its affiliates and its directors, officers, employees, successors, assigns, agents and representatives, from and against all losses, liabilities, damages, deficiencies, demands, claims, actions, judgments or causes of action, assessments, costs or expenses (including, without limitation, interest, penalties and reasonable attorneys' fees, disbursements and related charges) based upon, arising out of or otherwise in respect of any inaccuracy in or any breach of any representation, warranty, covenant or agreement of the Company contained in this letter. Buyer agrees to 5 indemnify, defend and hold harmless the Company, its affiliates and its directors, officers, employees, successors, assigns, agents and representatives, from and against all losses, liabilities, damages, deficiencies, demands, claims, actions, judgments or causes of action, assessments, costs or expenses (including, without limitation, interest, penalties and reasonable attorneys' fees, disbursements and related charges) based upon, arising out of or otherwise in respect of any inaccuracy in or any breach of any representation, warranty, covenant or agreement of Buyer contained in this letter. (l) STANDSTILL. The provisions of Section 4(a) (Standstill) of the Stockholders Agreement shall continue to apply to Buyer with the changes set forth in the immediately following sentence, and shall supercede the provisions of the tenth paragraph of the confidentiality agreement dated as of September 8, 2003 between us (which shall have no further force or effect). Buyer agrees that Section 4(a) of the Stockholders Agreement shall be amended so that (A) the words "(A) for four years from the closing of the merger of a wholly owned Subsidiary of the Company with and into Scientific Games Holding Corp. (the "Merger")" shall be deleted and replaced with the words "(A) prior to October 10, 2005" and (B) the words "(B) for three years from the closing of the Merger" shall be deleted and replaced with the words "(B) prior to October 10, 2004"; PROVIDED that Buyer shall not be responsible for compliance by any Stockholder (as defined in the Stockholders Agreement) that is not affiliated with Buyer with such amended provisions. This letter may be executed in two counterparts, all of which taken together shall constitute one instrument. No amendment to this letter shall be effective unless it is in writing and signed by each of the parties hereto. Notices delivered with respect to this letter shall be in writing and shall be effective when personally delivered or delivered by telecopy at the appropriate address or number designated below. Buyer and the Company will cooperate and take all reasonable actions to ensure that Buyer's acquisition of the Securities pursuant to the Stock Purchase Agreement will not result in the loss of the Company's licenses or approvals to do business in New Jersey or West Virginia. This letter agreement will terminate on the earlier of (x) such date on which the Stock Purchase Agreement shall terminate, or (y) April 1, 2004, provided that clauses (j) and (k) shall survive any such termination. If any provision of this letter shall be held illegal, void or unenforceable in any respect by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect, and the parties hereto agree to take all actions necessary to give the fullest possible effect to the intentions of the parties with respect to the illegal, void or unenforceable provision. This letter shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within the State of New York (without regard to the conflicts of interests rules of such State). Any dispute arising out of this letter shall be submitted to the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City. Each party waives the right to a trial by jury in connection with any such dispute. 6 Very truly yours, MAFCO HOLDINGS INC. By: /s/ Barry F. Schwartz ---------------------------------------- Barry F. Schwartz Executive Vice President and General Counsel Address: 35 East 62nd Street, New York, New York 10021 Telecopy: (212) 572-5056 Attention: Barry F. Schwartz Agreed and accepted as of the date first written above: SCIENTIFIC GAMES CORPORATION By: /s/ Martin E. Schloss ------------------------------- Name: Martin E. Schloss Title: Vice President Address: 750 Lexington Avenue, 25th Floor New York, New York 10022 Telecopy: (212) 754-2372 Attention: Secretary and General Counsel 7 EX-99 5 nov26scigamesex4to13d.txt EXHIBIT 4 MAFCO HOLDINGS INC. 35 East 62nd Street, New York, New York 10021 October 30, 2003 Scientific Games Corporation 750 Lexington Avenue, 25th Floor New York, New York 10022 Attention: Mr. Lorne A. Weil Ladies and Gentlemen: We refer to that certain Letter Agreement (the "Letter Agreement"), dated as of October 10, 2003, by and between Mafco Holdings Inc., a Delaware corporation ("Buyer") and Scientific Games Corporation, a Delaware corporation (the "Company"). All capitalized terms used herein without definition have the meanings ascribed to them in the Letter Agreement. Buyer hereby agrees that, through and including the Company's annual meeting in 2004 and the election of directors at such meeting, and provided Buyer would otherwise have the right to designate and have elected and appointed four directors of the Company pursuant to paragraph (e)(ii) of the Letter Agreement, Buyer shall waive this right with respect to one, but not more than one, of such four directors; provided that, during the period in which such waiver is in effect, the Company agrees to recommend to the nominating committee of its board of directors, and to use its best efforts to have elected as director, in addition to Buyer's three remaining designees, Peter Cohen; provided further, however, that if (i) Buyer would not be obligated to include Peter Cohen as a Stockholders' Designee (as defined in the Voting Agreement) pursuant to Section 2(a) of the Voting Agreement, (ii) Peter Cohen is otherwise unable or unwilling to serve as director, or (iii) the Stockholders (as defined in the Voting Agreement) require that Peter Cohen be included as one of the three Stockholders' Designees, then the Company agrees to recommend to the nominating committee, and to use its best efforts to have elected as director, one person recommended by Buyer. Each of the Company and Buyer will use its best efforts to take, or cause to be taken, all action, and do, or cause to be done, all things necessary or advisable under applicable law to effectuate the terms of this letter agreement. This letter may be executed in counterparts whereupon it shall constitute a binding agreement between us, governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within the State of New York (without regard to the conflicts of interests rules of such State). The performance of the parties hereto shall be subject to the requirements of the laws of the State of New York and all other applicable laws. Any dispute arising out of this letter shall be submitted to the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City. Each party waives the right to a trial by jury in connection with any such dispute. This letter may only be amended by a writing signed by both parties hereto. Very truly yours, MAFCO HOLDINGS INC. By: /s/ Barry F. Schwartz ------------------------------------------------ Barry F. Schwartz Executive Vice President and General Counsel Agreed and accepted as of the date first written above: SCIENTIFIC GAMES CORPORATION By: /s/ Martin E. Schloss ------------------------------ Name: Martin E. Schloss Title: Vice President Cirmatica Gaming, S.A., a Spanish corporation ("Cirmatica"), hereby waives its right with respect to the election of one, but not more than one, of the four directors which it is entitled to elect, on the same terms and subject to the same conditions as the waiver being given by Buyer above; provided that such waiver shall be terminable upon any termination of the Stock Purchase Agreement, dated October 10, 2003, between Buyer and Cirmatica. > Agreed and accepted as of the date first written above: CIRMATICA GAMING S.A. By: /s/ Antonio Pisanelli ------------------------------ Name: Antonio Pisanelli Title: Chairman EX-99 6 nov26scigamesex11to13d.txt EXHIBIT 11 LOAN AGREEMENT between BANK OF AMERICA, N.A., as the Bank and SGMS ACQUISITION CORPORATION, ss the Borrower Dated: As of November 19, 2003 TABLE OF CONTENTS ----------------- Page I. DEFINITIONS AND REFERENCE TERMS...................................1 A. Adjusted LIBOR...................................................1 B. Advance Limit....................................................1 C. Advance Rate.....................................................1 D. Affiliate........................................................2 E. Applicable Margin................................................2 F. Borrower's Address...............................................2 G. Business Day.....................................................2 H. Certificate of Designations......................................2 I. Change of Control................................................2 J. Closing Date.....................................................2 K. Collateral.......................................................2 L. Convertible Securities...........................................2 M. Distribution.....................................................3 N. Event of Default.................................................3 O. Governmental Authority...........................................3 P. Guaranties.......................................................3 Q. Guarantors.......................................................3 R. Interest Period..................................................3 S. Loan Document....................................................4 T. Loan.............................................................4 U. Mafco............................................................4 V. Margin Maintenance Certificate...................................4 W. Margin Maintenance Limit.........................................4 X. Margin Rate......................................................4 Y. Maturity Date....................................................4 Z. Note.............................................................4 AA. Obligations......................................................4 BB. Other Collateral.................................................4 CC. Other Collateral Value...........................................5 DD. Person...........................................................5 EE. Pledge Agreements................................................5 FF. Perelman.........................................................5 GG. Permitted Indebtedness...........................................5 HH. Price Requirement................................................5 II. Prime Rate.......................................................5 JJ. Purchased Securities Collateral..................................5 KK. Purchased Securities Collateral Value............................5 LL. Purchased Securities Conversion Amount...........................6 MM. Purchased Securities Issuer......................................6 NN. Purchased Securities Issuer Acknowledgment.......................6 OO. Purchased Securities Pledge Agreement............................6 i PP. Registrable Securities...........................................6 QQ. Registration Statement...........................................6 RR. Relevant Per Share Price.........................................6 SS. Rule 144.........................................................6 TT. SEC..............................................................6 UU. Securities Act...................................................7 VV. Seller...........................................................7 WW. Stock Purchase Agreement.........................................7 XX. Stock Purchase Documents.........................................7 YY. Stockholders Agreement...........................................7 ZZ. Termination Date.................................................7 AAA. Trading Securities...............................................7 II. LOAN..............................................................7 A. Making the Loan..................................................7 B. Interest Rate....................................................8 C. Repayment........................................................8 D. Optional Prepayment..............................................8 E. Mandatory Prepayment.............................................8 F. Evidence of Credit Extensions....................................9 G. Payment..........................................................9 H. Computations of Interest; Business Day..........................10 I. Increased Costs, Etc............................................10 J. Illegality......................................................11 K. Funding Losses..................................................11 L. Unavailability..................................................12 M. Use of Proceeds.................................................12 N. Fee.............................................................12 III. CONDITIONS PRECEDENT.............................................12 A. Conditions to the Loan..........................................12 B. Additional Conditions to the Loan...............................14 IV. REPRESENTATIONS AND WARRANTIES...................................14 A. Organization and Qualification..................................14 B. Authority and Compliance........................................14 C. Binding Agreement...............................................15 D. Litigation......................................................15 E. No Conflicting Laws or Agreements...............................15 F. Ownership of Property...........................................16 G. Capitalization..................................................16 H. Compliance with Laws............................................16 I. Taxes...........................................................16 J. Financial Information...........................................16 K. Accuracy of Information.........................................16 L. The Issuer......................................................16 M. Stock Purchase Documents........................................17 ii N. Event of Default................................................17 O. Use of Proceeds.................................................17 P. Investment Company Act..........................................17 Q. Special Purpose Entity..........................................17 R. Continuation of Representations and Warranties..................18 S. Registrable Securities; Collateral..............................18 V. AFFIRMATIVE COVENANTS............................................18 A. Financial Statements and Other Information......................18 B. Adverse Conditions or Events....................................19 C. Existence.......................................................19 D. Compliance with Laws............................................19 E. Taxes and Other Obligations.....................................19 F. Intentionally Deleted...........................................19 G. Registrable Securities..........................................19 H. Representations and Warranties..................................20 I. Regulation U....................................................21 VI. NEGATIVE COVENANTS...............................................21 A. Disposition of Property.........................................21 B. Liens and Encumbrances..........................................21 C. Indebtedness....................................................21 D. Mergers.........................................................21 E. Acquisitions....................................................21 F. Transactions with Affiliates....................................21 G. Loans and Investments...........................................22 H. Distributions...................................................22 I. Business........................................................22 J. Stock Purchase Documents........................................22 K. Change of Control...............................................22 VII. REMEDIES UPON DEFAULT............................................22 VIII. NOTICES..........................................................22 IX. COSTS, EXPENSES AND ATTORNEYS' FEES..............................23 X. MISCELLANEOUS....................................................24 A. Cumulative Rights and No Waiver.................................24 B. Applicable Law; Venue and Jurisdiction..........................24 C. Amendment.......................................................24 D. Documents.......................................................24 E. Partial Invalidity..............................................24 F. Indemnification.................................................25 G. Survivability...................................................25 XI. ARBITRATION......................................................25 iii A. SPECIAL RULES...................................................25 B. RESERVATION OF RIGHTS...........................................26 XII. WAIVER OF CONSEQUENTIAL DAMAGES..................................26 XIII. WAIVER OF RIGHT TO JURY TRIAL....................................26 XIV. NO ORAL AGREEMENT................................................27 iv LOAN AGREEMENT This Loan Agreement (the "Agreement"), dated as of November 19, 2003, by and between BANK OF AMERICA, N.A., a national banking association (the "Bank"), and SGMS ACQUISITION CORPORATION, a Delaware corporation (the "Borrower"). The Borrower has requested that the Bank finance part of the purchase price of the Convertible Securities (as defined below) being acquired by the Borrower. The Bank has agreed to extend financing for part of the purchase price of such Convertible Securities subject to the terms and conditions set forth in this Agreement. In consideration of the Loan described below and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the Bank and the Borrower agree as follows: I. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms defined herein, the following terms shall have the meaning set forth with respect thereto: A. ADJUSTED LIBOR. Adjusted LIBOR means, with respect to any Interest Period, (i) the rate of interest per annum (rounded upward, if necessary, to the next higher 1/16th of one percent) determined by the Bank, in accordance with its customary general practice from time to time, to be the rate equal to the London Interbank Offered Rate (expressed as a percentage) for dollar deposits as would be quoted by the Bank for 11:00 a.m. London time, or as soon thereafter as practicable, on the second Business Day immediately preceding the first day of such Interest Period, for a term comparable to such Interest Period and (ii) as adjusted from time to time in the Bank's sole discretion for then applicable reserve requirements, deposit insurance assessment rates and other regulatory costs. B. ADVANCE LIMIT. Advance Limit means, at any date, the sum of (i) the product of (A) the Purchased Securities Collateral Value, and (B) the then applicable Advance Rate; and (ii) the product of (A) the Other Collateral Value, and (B) the then applicable Advance Rate, all as calculated in the sole discretion of the Bank. C. ADVANCE RATE. Advance Rate means, at any date, (i) in the case of the Purchased Securities Collateral, (A) during such times, if any, that the Price Requirement is satisfied, fifty percent (50%), and (B) during such times, if any, that the Price Requirement is not satisfied, zero percent (0%); and (ii) in the case of the Other Collateral, if any, a percentage to be determined and adjusted at the sole discretion of the Bank from time to time. D. AFFILIATE. Affiliate means, as to any Person (the "relevant Person"), any other Person that, directly or indirectly, controls, is controlled by or is under common control with the relevant Person, or is an officer or director of the relevant Person. The term "control" (including the terms "controlled by" or "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. E. APPLICABLE MARGIN. Applicable Margin means 1.85% per annum. F. BORROWER'S ADDRESS. Borrower's Address means c/o Mafco Holdings Inc., 35 East 62nd Street, New York, New York 10021. G. BUSINESS DAY. Business Day means any day other than a Saturday, Sunday or other day on which commercial banks in New York City, New York, or in Charlotte, North Carolina, are authorized or required by law to close; provided that in the case of matters pertaining to the Adjusted LIBOR Rate, such day is also a day on which dealings between banks are carried on in U.S. dollar deposits in the London interbank market. H. CERTIFICATE OF DESIGNATIONS. Certificate of Designations means the Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of the Purchased Securities Issuer, dated as of September 6, 2000, as in effect on the Closing Date and filed with the Secretary of State of the State of Delaware. I. CHANGE OF CONTROL. Change of Control means if Perelman shall at any time fail to own and control, directly or indirectly, (i) one hundred percent (100%) of the issued and outstanding capital stock of all classes of the Borrower, or (ii) one hundred percent (100%) of the issued and outstanding capital stock of all classes of the Mafco. J. CLOSING DATE. Closing Date means the date on which the conditions set forth in Section III A. are satisfied. K. COLLATERAL. Collateral means, collectively, (i) the Purchased Securities Collateral, (ii) any Other Collateral and (iii) all other property described as collateral security for the Obligations in any Loan Document, including, without limitation, the Pledge Agreements. L. CONVERTIBLE SECURITIES. Convertible Securities means the "Series A Convertible Preferred Stock" of the Purchased Securities Issuer established pursuant to the Certificates of Designation. Neither Trading Securities nor the Series B Preferred Stock of the Purchased Securities Issuer constitute Convertible Securities. 2 M. DISTRIBUTION. Distribution means (i) any dividend or other distribution on the capital stock or other equity interests of the Borrower; and (ii) any redemption, repurchase, defeasance or acquisition of the capital stock or other equity interests of the Borrower or of warrants, rights or other options to purchase such capital stock or other equity interest. N. EVENT OF DEFAULT. Event of Default has the meaning specified in the Note. O. GOVERNMENTAL AUTHORITY. Governmental Authority means any nation or government, any federal, state, city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. P. GUARANTIES. Guaranties means, collectively, the Continuing and Unconditional Guaranties of the Guarantors, dated as of the date hereof, and such other guaranties hereafter executed by any Guarantor in respect of the all or any part of the Obligations, and as such agreements may be amended, restated, modified, extended or replaced from time to time. Q. GUARANTORS. Guarantors means, collectively, (i) Perelman, (ii) Mafco, (iii) GSB Guarantor Corp., a Delaware corporation, and (iv) all other guarantors of the Obligations identified in any Loan Document. R. INTEREST PERIOD. Interest Period means each one month period during which interest on the Loan shall be calculated by reference to Adjusted LIBOR, determined as of the second Business Day before the commencement of that Interest Period; PROVIDED, HOWEVER, that: (i) the initial Interest Period shall commence on the date on which the Loan is made and end on the day which numerically corresponds to such date one month thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month); (ii) each subsequent Interest Period shall commence on the last day of the immediately preceding Interest Period and end on the day which numerically corresponds to such date one month thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month); and (iii) any Interest Period which would otherwise extend beyond the Termination Date shall end on the Termination Date. 3 S. LOAN DOCUMENT. Loan Document means any of this Agreement, the Note, the Pledge Agreements, the Guaranty Agreements, the Purchased Securities Issuer Acknowledgment and all other instruments, agreements and other documents executed and delivered pursuant hereto or thereto, in each case, as amended, restated, modified, extended or replaced from time to time. T. LOAN. Loan mean the term loan made by the Bank to the Borrower pursuant to Section II of this Agreement. U. MAFCO. Mafco means Mafco Holdings Inc., a Delaware corporation. V. MARGIN MAINTENANCE CERTIFICATE. Margin Maintenance Certificate means the certification of the Borrower, in the form of EXHIBIT A hereto. W. MARGIN MAINTENANCE LIMIT. Margin Maintenance Limit means, at any date, the sum of (i) the product of (A) the Purchased Securities Collateral Value, and (B) the then applicable Margin Rate; and (ii) the product of (A) the Other Collateral Value, if any, and (B) the then applicable Margin Rate, all as calculated in the sole discretion of the Bank. X. MARGIN RATE. Margin Rate means, at any date, (i) in the case of the Purchased Securities Collateral, (A) during such times, if any, that the Price Requirement is satisfied, fifty-five percent (55%), and (B) during such times, if any, that the Price Requirement is not satisfied, zero percent (0%); and (ii) in the case of Other Collateral, if any, a percentage to be determined and adjusted at the sole discretion of the Bank from time to time. Y. MATURITY DATE. Maturity Date means November 19, 2004. Z. NOTE. Note means the promissory note of the Borrower, dated as of the date hereof, evidencing the Obligations of the Borrower with respect to the Loan and delivered to the Bank, as such promissory note may be amended, restated, modified or extended from time to time, and any promissory note or notes issued in exchange or replacement thereof. AA. OBLIGATIONS. Obligations means (i) the obligations of the Borrower to pay, as and when due and payable (by mandatory prepayment, by scheduled maturity or otherwise), all amounts from time to time owing by it pursuant to any Loan Document, whether for principal, interest, fees or otherwise and (ii) the obligations of the Borrower to perform or observe all of Borrower's other obligations from time to time existing under any Loan Document. BB. OTHER COLLATERAL. Other Collateral means property satisfactory to the Bank, other than the Purchased Securities Collateral, which property shall be provided by the Borrower as collateral security for all of the Obligations pursuant to Section II E.1., Section II E.2. or Section III B.3. and described in a Pledge Agreement at the time such property has been pledged to and accepted by the Bank. 4 CC. OTHER COLLATERAL VALUE. Other Collateral Value means the value of any Other Collateral, as determined and adjusted at the sole discretion of the Bank from time to time. DD. PERSON. Person means any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, joint venture, or Governmental Authority. EE. PLEDGE AGREEMENTS. Pledge Agreements means the Purchased Securities Pledge Agreement and such other pledge or security agreements or mortgages or deeds of trust hereafter executed by the Borrower or any other Person pursuant to which the Borrower or such other Person pledges to the Bank any Collateral as collateral security for all the Obligations, and as such agreements may be amended, restated, modified, extended or replaced from time to time. FF. PERELMAN. Perelman means Ronald O. Perelman. GG. PERMITTED INDEBTEDNESS. Permitted Indebtedness means financing (in addition to the Loan) in a principal amount not to exceed Forty Million Dollars ($40,000,000) in the aggregate for the purpose of financing part of the purchase price of the Convertible Securities that do not constitute part of the Purchased Securities Collateral, and, subject to the foregoing limitations, any extension, renewal, refinancing or replacement of such additional financing. HH. PRICE REQUIREMENT. Price Requirement means, at any date, that the Relevant Per Share Price is not less than Seven Dollars ($7.00) (as adjusted for stock splits occurring after the Closing Date). II. PRIME RATE. Prime Rate means the fluctuating rate of interest established by the Bank from time to time, at its discretion, whether or not such rate shall be otherwise published. The Prime Rate is established by the Bank as an index and may or may not at any time be the best or lowest rate charged by the Bank on any loan. To the extent to the Loan or any other amount under the Loan Documents bear interest at the Prime Rate, the floating interest rate shall be adjusted automatically with respect to each such amount as and when the Prime Rate shall change. JJ. PURCHASED SECURITIES COLLATERAL. Purchased Securities Collateral means the Convertible Securities and the Series B Preferred Stock of the Purchased Securities Issuer described on EXHIBIT A to the Pledge Agreement and pledged by the Borrower to the Bank pursuant to the Pledge Agreement, together with the Trading Securities, if any, resulting from the conversion of such Convertible Securities. KK. PURCHASED SECURITIES COLLATERAL VALUE. Purchased Securities Collateral Value means, at any date, the sum of (i) for that portion of the Purchased Securities Collateral that constitutes Convertible Securities, the product of (A) the Relevant Per Share Price at the close of trading on the immediately preceding Business Day, and (B) the Purchased Securities Conversion Amount; and (ii) for that portion, if any, of Purchased Securities Collateral that constitutes Trading Securities, the 5 product of (A) the Relevant Per Share Price at the close of trading on the immediately preceding Business Day, and (B) the number of shares of such Trading Securities. LL. PURCHASED SECURITIES CONVERSION AMOUNT. Purchased Securities Conversion Amount means, at any date, the product of (i) the Conversion Rate (as defined in the Certificate of Designations), and (ii) the number of shares of Convertible Securities comprising part of the Purchased Securities Collateral. MM. PURCHASED SECURITIES ISSUER. Purchased Securities Issuer means Scientific Games Corporation (f/k/a Autotote Corporation), a Delaware corporation. NN. PURCHASED SECURITIES ISSUER ACKNOWLEDGMENT. Purchased Securities Issuer Acknowledgment means the Purchased Securities Issuer Acknowledgment of the Issuer, in the form of EXHIBIT B hereto. OO. PURCHASED SECURITIES PLEDGE AGREEMENT. Pledge Agreement means the Pledge Agreement of the Borrower pursuant to which the Borrower pledges to the Bank the property described therein, including, without limitation, the Purchased Securities Collateral listed and described on EXHIBIT A thereto, as collateral security for all the Obligations, and as such Pledge Agreement may be amended, restated, modified, extended or replaced from time to time. PP. REGISTRABLE SECURITIES. Registrable Securities means (i) the shares of the Trading Securities issued or issuable upon conversion of the Convertible Securities being acquired by the Purchaser, and (ii) any other shares of capital stock of the Purchased Securities Issuer issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares described in the preceding clause (i). QQ. REGISTRATION STATEMENT. Registration Statement shall mean any registration statement or comparable document under the Securities Act through which a public sale or disposition of the Registrable Securities may be registered on the appropriate form pursuant to the Securities Act and all amendments and supplements thereto, including post-effective amendments, in each case including the prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein. RR. RELEVANT PER SHARE PRICE. Relevant Per Share Price means the per share price of the Trading Securities on the trading exchange or stock market for the Trading Securities, as reported by THE WALL STREET JOURNAL or any successor publication. SS. RULE 144. Rule 144 means Rule 144 (or a successor rule) under the Securities Act. TT. SEC. SEC means the United States Securities and Exchange Commission. 6 UU. SECURITIES ACT. Securities Act means the Securities Act of 1933, as amended. VV. SELLER. Seller means Cirmatica Gaming, S.A., a Spanish corporation. WW. STOCK PURCHASE AGREEMENT. Stock Purchase Agreement means the Stock Purchase Agreement, dated as of October 10, 2003, between Mafco and the Seller. XX. STOCK PURCHASE DOCUMENTS. Stock Purchase Documents means the Certificate of Designations and the Stock Purchase Agreement, together with each other agreement, instrument and document executed in connection therewith or related thereto (including, without limitation, the Existing Agreements (as defined in the Stock Purchase Agreement)), including all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any, and all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof. YY. STOCKHOLDERS AGREEMENT. Stockholders' Agreement means the Stockholders' Agreement, dated as of September 6, 2000, among the Seller, The Oak Fund, Peconic Fund Ltd., Ramius Securities, LLC, Olivetti International S.A., and the Purchased Securities Issuer, as supplemented by the Supplemental Stockholders' Agreement, dated as of June 26, 2002, between the Seller and the Purchased Securities Issuer, as further supplemented by the Letter Agreement, dated as of October 10, 2003, between the Purchased Securities Issuer and Mafco. ZZ. TERMINATION DATE. Termination Date means the earlier of (i) the Maturity Date and (ii) the date on which the Loan is accelerated following an Event of Default. AAA. TRADING SECURITIES. Trading Securities means the Class A common stock of the Purchased Securities Issuer. Convertible Securities do not constitute Trading Securities until lawfully converted in accordance with the Certificate of Designation. The Series B Preferred Stock of the Purchased Securities Issuer does not constitute Trading Securities. All accounting terms not specifically defined or specified herein shall have the meanings attributed to such terms under U.S. generally accepted accounting principles ("GAAP"), as in effect from time to time, consistently applied. II. LOAN. A. MAKING THE LOAN. The Bank hereby agrees, on the terms and conditions hereinafter set forth, to make the Loan to the Borrower in a principal amount equal to the lesser of (i) Twenty-Five Million Dollars ($25,000,000), and (ii) the Advance Limit. The Borrower shall make a request for the Loan in writing (a "Notice of Borrowing"), which Notice of Borrowing shall specify the proposed amount of the Loan and the requested funding date (which shall be a Business Day), together with 7 disbursement instructions. On the funding date specified in the Notice of Borrowing and upon fulfillment of the applicable terms and conditions set forth in Article III hereof, the Bank will make the proceeds of the Loan available to the Borrower in accordance with the disbursement instructions contained in the Notice of Borrowing, not later than 5:00 P.M. (Eastern time) on such date; PROVIDED, HOWEVER, if the funding date specified in the Notice of Borrowing is the Closing Date and the closing shall not have occurred prior to 2:00 P.M. (Eastern time) on such date, the Bank will, subject to the fulfillment of the applicable terms and conditions set forth in Article III hereof (other than delivery of a new Notice of Borrowing), make the proceeds of the Loan available to the Borrower in accordance with such disbursement instructions, not later than 5:00 P.M. (Eastern time) on the first Business Day following the Closing Date. Once the Loan is made pursuant to this Section II A., the Borrower may prepay the Loan in whole or in part pursuant to this Article II, but the Borrower may not reborrow the Loan in whole or in part once prepaid or repaid. B. INTEREST RATE. The outstanding principal balance of the Loan will bear interest at a rate per annum equal at all times during each Interest Period to the sum of (i) Adjusted LIBOR for such Interest Period, plus (ii) the Applicable Margin; PROVIDED, HOWEVER, that after the occurrence and during the continuance of an Event of Default, the principal of and interest on the Loan and any other amounts owing hereunder or under the other Loan Documents shall bear interest at a rate per annum equal to the Prime Rate plus 4%. Absent the existence of an Event of Default, on the last day of each Interest Period for the Loan, the Loan shall be continued for a subsequent Interest Period. C. REPAYMENT. The Borrower will pay all accrued interest on the Loan quarterly on the first Business Day of each calendar quarter commencing with the calendar quarter beginning on January 1, 2004. The Borrower will repay the entire unpaid principal amount of the Loan and all accrued and unpaid interest thereon in full on the Termination Date. D. OPTIONAL PREPAYMENT. The Borrower may, subject to the provisions of Section II K., prepay the Loan in whole at any time or in part from time to time, without penalty or premium, each such prepayment to be accompanied by the payment of accrued interest to the date of such prepayment on the amount prepaid; PROVIDED, HOWEVER, that (i) each partial prepayment shall be in a principal amount equal to $100,000 or an integral multiple thereof and (ii) the Borrower shall give the Bank irrevocable written notice at least one (1) Business Day prior to the date of the prepayment of the Loan. Each notice of prepayment shall be irrevocable and shall specify the date and the amount of the prepayment. E. MANDATORY PREPAYMENT. 1. If at any time the Bank, with the advice of counsel, determines that the transactions contemplated by this Agreement or any of the other Loan Documents violate any provision of Regulations T, U or X of the Federal Reserve Board, the Borrower will, upon three (3) Business Days' written notice from the Bank, either 8 (i) prepay the Loan by an amount sufficient such that, after such prepayment, the transactions contemplated by the Loan Documents will not violate any provision of Regulations T, U or X of the Federal Reserve Board (as determined by the Bank in its sole discretion), or (ii) provide for a grant to the Bank, as collateral security for the Obligations, a perfected, first priority security interest in, and lien or mortgage on, Other Collateral that is in such amounts and having such market values, liquidity, volatility, marketability, concentration and other characteristics as the Bank may, in its sole discretion, determine to be sufficient to cause, after the grant of such additional security interest, the transactions contemplated by the Loan Documents not to violate any provision of Regulations T, U or X of the Federal Reserve Board. In connection with such grant, the Borrower will execute and deliver (or cause to be executed and delivered) a Pledge Agreement, in form and substance satisfactory to the Bank, and such agreements, financing statements, instruments, assignments, legal opinions and other documents that are, in the opinion of the Bank, necessary or advisable to grant and perfect a first priority security interest, lien or mortgage in favor of the Bank in such Other Collateral. 2. If at any time the Bank determines that the outstanding principal amount of the Loan equals or exceeds an amount equal to the Margin Maintenance Limit, the Borrower will, upon two (2) Business Days' written notice from the Bank, either (i) prepay the Loan by an amount such that, after such prepayment, the outstanding principal amount of the Loan does not exceed an amount equal to the Advance Limit or (ii) pledge to the Bank, as collateral security for the Obligations, a perfected, first priority security interest in, and lien or mortgage on, Other Collateral that is in such amounts and having such market values, liquidity, volatility, marketability, concentration and other characteristics as the Bank may, in its sole discretion, determine to be sufficient to cause, after the grant of such additional security interest, the outstanding principal amount of the Loan not to exceed an amount equal to the Advance Limit. In connection with such grant, the Borrower will execute and deliver (or cause to be executed and delivered) a Pledge Agreement, in form and substance satisfactory to the Bank, and such agreements, financing statements, instruments, assignments, legal opinions and other documents that are, in the opinion of the Bank, necessary or advisable to grant and perfect a first priority security interest, lien or mortgage in favor of the Bank in such Other Collateral. F. EVIDENCE OF CREDIT EXTENSIONS. The Loan shall be evidenced by the Note. The Bank shall record advances and principal payments thereof, in its records, which shall be conclusive absent demonstrable error. Notwithstanding the foregoing, the failure to make or an error in making a notation with respect to the Loan or any payment shall not limit or otherwise affect the Obligations of the Borrower hereunder or under the Note. G. PAYMENT. Payment of principal, interest and any other sums due under this Agreement, the Note or any other Loan Document shall be made without set-off or counterclaim in United States dollars and in immediately available funds on the day such payment is due not later than 12:00 noon New York time. All sums received after such time shall be deemed received on the next Business Day, and 9 principal payments or sums (other than interest) due hereunder shall bear interest for an additional day or days, as applicable. All payments shall be made to the Bank in accordance with the Bank's written instructions. H. COMPUTATIONS OF INTEREST; BUSINESS DAY. All computations of interest under this Agreement and the Note shall be made on the basis of a year of three hundred and sixty (360) days and actual days elapsed. Interest shall accrue daily on the outstanding principal balance of the Loan from and including the date the Loan is made by the Bank to but excluding the date on which the Loan is repaid. Payment of all amounts due hereunder shall be made on a Business Day. Any payment due on a day that is not a Business Day shall be made on the next Business Day unless the next Business Day would fall in the next calendar month, in which case such payment shall be made on the Business Day immediately preceding the due date. I. INCREASED COSTS, ETC. If, after the date of this Agreement, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any (x) change in the basis of taxation of payments to the Bank of the principal of or interest on the Loan (excluding changes in the rate of tax payable on the Bank's overall income and bank franchise taxes) or (y) imposition or change in any reserve or similar requirement, and the result of any of the foregoing is an increase in the cost to the Bank of agreeing to make or making, funding or maintaining the Loan, then the Borrower shall from time to time, upon demand by the Bank, pay to the Bank an additional amount sufficient to compensate the Bank for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower by the Bank, shall be conclusive and binding for all purposes, absent demonstrable error. 1. If the Bank determines that compliance with any law or regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and that the amount of such capital is increased by or based upon the existence of the Loan, then the Borrower shall, upon demand by the Bank, pay to the Bank an additional amount sufficient to compensate the Bank or such corporation in the light of such circumstances, to the extent that the Bank reasonably determines such increase in capital to be allocable to the existence of the Loan. A certificate as to such amounts, submitted to the Borrower by the Bank, shall be conclusive and binding for all purposes, absent demonstrable error. 2. Prior to making any demand for compensation under this Section II I., (i) the Bank will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to file any certificate or document reasonably requested by the Borrower or to change the jurisdiction of its lending office if the making of such a filing or change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the judgment of the Bank, be otherwise disadvantageous to the Bank, and (ii) the Bank will permit the 10 Borrower to prepay all or any part of the Loan, together with interest to the date of payment, provided that nothing herein shall relieve the Borrower from its obligation to compensate the Bank for increased costs or reduced return incurred prior to the taking of the actions contemplated by clauses (i) and (ii) above. J. ILLEGALITY. If, after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in an existing law, rule or regulation, or any change in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive (whether or not having the force of law) of any such Governmental Authority, makes it unlawful or impossible for the Bank to maintain or fund the Loan at an interest rate based on Adjusted LIBOR, the Bank shall forthwith give notice thereof to the Borrower, whereupon the obligation of the Bank to maintain or fund the Loan at a rate based on Adjusted LIBOR shall be suspended until the Bank notifies the Borrower that the circumstances giving rise to such suspension no longer exist. The Bank will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to file any certificate or document requested by the Borrower if the making of such a filing would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the judgment of the Bank, be otherwise disadvantageous to the Bank. If the Bank makes a reasoned determination that it may not lawfully continue to maintain or fund the Loan at a rate based on Adjusted LIBOR and so specifies in such notice, then effective on the date specified in such notice, the Loan shall bear interest at the Prime Rate. K. FUNDING LOSSES. The Borrower agrees to reimburse the Bank and to hold the Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of: (i) the failure of the Borrower to make any payment or required prepayment of principal of the Loan (including payments made after any acceleration thereof); (ii) the failure of the Borrower to make any prepayment permitted hereunder after giving notice thereof; (iii) the repayment of all or any portion of the Loan bearing interest at a rate based on Adjusted LIBOR on a day which is not the last day of an Interest Period (whether at maturity, due to acceleration or otherwise); or (iv) the failure for any reason (other than a wrongful default by the Bank) of the Borrower to borrow the Loan after notice has been given to the Bank in accordance with Section II A. hereof (whether or not such notice is withdrawn). 11 including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain the Loan hereunder at a rate based on Adjusted LIBOR or from fees payable to terminate the deposits from which such funds were obtained. Solely for purposes of calculating amounts payable by the Borrower to the Bank under this section, to the extent that all or any portion of the Loan bears interest at a rate based on Adjusted LIBOR (and each related reserve, special deposit or similar requirement), the Loan or such portion thereof shall be conclusively deemed to have been funded by a matching deposit in dollars in the interbank Eurodollar market for a comparable amount and for the respective Interest Period, whether or not the Loan or such portion was in fact so funded. L. UNAVAILABILITY. If the Bank determines that for any reason adequate and reasonable means do not exist for ascertaining Adjusted LIBOR for any Interest Period, the Bank will forthwith give notice of such determination to the Borrower. Commencing at the end of each Interest Period then in effect, the Loan shall bear interest at the Prime Rate (rather than at a rate based on Adjusted LIBOR) until the Bank revokes such notice in writing. M. USE OF PROCEEDS. All of the proceeds of the Loan will be used by the Borrower solely to finance (i) part of the purchase price of the Convertible Securities being acquired by the Borrower, (ii) the Commitment Fee and (iii) transaction expenses in connection with the Loan. N. FEE. At closing, the Borrower will pay to the Bank a non-refundable commitment fee of Two Hundred Fifty Thousand Dollars ($250,000) (the "Commitment Fee"), which Commitment Fee will be fully-earned by the Bank on the Closing Date. III. CONDITIONS PRECEDENT. A. CONDITIONS TO THE LOAN. The obligation of the Bank to make the Loan under this Agreement is subject to the condition precedent that the Bank shall have received on or prior to the Closing Date the following (in the case of agreements, instruments and documents, each duly executed and in form and substance satisfactory to the Bank and its counsel and, unless indicated otherwise, dated the Closing Date): 1. AGREEMENT. This Agreement, duly executed by the Borrower. 2. NOTE. The Note, duly executed by the Borrower. 3. GUARANTIES. The Guaranties, each duly executed by the appropriate Guarantor. 4. PLEDGE AGREEMENT, ETC. The Pledge Agreement, duly executed by the Borrower. 12 5. PURCHASED SECURITIES ISSUER ACKNOWLEDGEMENT. The Purchased Securities Issuer Acknowledgement, duly executed by the Purchased Securities Issuer. 6. STOCK CERTIFICATES, ETC. Original certificates representing the Purchased Securities Collateral together with an undated stock or note power for each such certificate, duly executed in blank by the Borrower (or, if any item of Purchased Securities Collateral is uncertificated, confirmation and evidence that appropriate book entries have been made in the relevant books and records of a securities intermediary under applicable law). 7. STOCK PURCHASE DOCUMENTS. True, correct and complete copies of (i) the Certificate of Designations; (ii) the Stock Purchase Documents, duly executed by the Borrower, the Seller, the Purchased Securities Issuer or such other Persons, as appropriate; (iii) a counterpart of the Stockholders Agreement, duly executed by the Borrower; and (iv) a written request pursuant to Section 5(c) of the Stockholders Agreement for the Purchased Securities Issuer to effect a registration on Form S-3, duly executed by the Borrower and acknowledged by signature of the Purchased Securities Issuer. The representations and warranties contained in the Stock Purchase Documents shall be true and correct in all material respects. The transactions contemplated by the Stock Purchase Documents shall have been (or shall simultaneously be) consummated in all material respects in accordance with the Stock Purchase Documents. 8. PAYMENTS AT CLOSING. The Borrower shall have paid (i) to the Bank, the Commitment Fee, and (ii) to Blank Rome LLP, counsel to the Bank, its fees, disbursements and other charges in connection with the preparation, negotiation, execution and delivery of the Loan Documents. 9. FINANCING STATEMENTS. Uniform Commercial Code financing statements and other notices and other documents and instruments, duly executed by the Borrower, each ready for filing in such office or offices as may be necessary or, in the opinion of the Bank, desirable to perfect the security interests of the Bank in the Purchased Securities Collateral. 10. LIEN REPORTS. A current search report from the Borrower's and each entity Guarantor's state of incorporation showing no Uniform Commercial Code filings, judgments or federal or state tax liens to be of record. 11. OPINION OF COUNSEL. One or more opinion letters, dated the Closing Date, of counsel to the Borrower and the Guarantors as to such matters as the Bank may require. 12. INTENTIONALLY DELETED. 13. OTHER DOCUMENTS. All other promissory notes, loan agreements, security agreements, financing statements, assignments, guaranties, corporate resolutions, appraisals and other documents and instruments that are, in the opinion of the Bank, necessary in connection with the Loan. 13 14. OTHER INFORMATION. Such other financial or other information as the Bank may reasonably require. B. ADDITIONAL CONDITIONS TO THE LOAN. Without limiting the foregoing, the obligation of the Bank to make the Loan is further subject to the conditions precedent that: 1. The following statements shall be true, and the acceptance of the proceeds of the Loan by the Borrower shall be deemed to be a representation and warranty of the Borrower on the date of the Loan that, (i) the representations and warranties contained in Article IV of this Agreement and in each other Loan Document and certificate or other writing delivered by or on behalf of the Borrower to the Bank pursuant hereto on or prior to the date of the Loan are true, correct and complete on and as of such date as though made on and as of such date; (ii) no Event of Default (or event which after the giving of notice, the passage of time, or both, would become an Event of Default) has occurred and is continuing or would result from the making of the Loan to be made on such date; and (iii) no material adverse change in the financial condition, properties or prospects of the Borrower or any other Person liable for repayment of the Loan shall have occurred and be continuing on such date; 2. The Bank shall have received a Notice of Borrowing in accordance with Section II A. with respect to the Loan, and a Margin Maintenance Certificate in accordance with Section V A.1.; and 3. The Borrower shall have executed and delivered to the Bank a Pledge Agreement, in form and substance satisfactory to the Bank, with respect to any Collateral to be purchased by the Borrower with the proceeds of the Loan, together with such other agreements, financing statements, instruments, assignments, legal opinions and other documents that are, in the opinion of the Bank, necessary or advisable to grant and perfect a first priority security interest, lien or mortgage in favor of the Bank in such property upon its acquisition by the Borrower. IV. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and warrants to the Bank as follows: A. ORGANIZATION AND QUALIFICATION. Borrower is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Delaware (which state is the only jurisdiction in which the Borrower is incorporated), with the requisite corporate power and authority to consummate the transaction contemplated by the Stock Purchase Documents and the Loan Documents, to own and use its property and to carry on its business as currently conducted. The exact legal name of the Borrower is as set forth in the preamble to this Agreement and the Borrower's organizational identification number issued by the State of Delaware is 3715639. B. AUTHORITY AND COMPLIANCE. 1. The Borrower has full power and authority to execute and deliver the Loan Documents to which it is a party and to incur and perform 14 the obligations provided for herein and therein. The execution and delivery of and performance under this Agreement, the Note and the other Loan Documents by the Borrower have been duly authorized by all necessary action on the part of the Borrower and no further action is required by the Borrower. The Borrower is not in violation of any of the provisions of its respective certificate of incorporation, by-laws or other charter documents. 2. The execution, delivery and performance of this Agreement, the Note and the other Loan Documents by the Borrower and the consummation by the Borrower of the transactions contemplated thereby and by the Stock Purchase Documents do not and will not (i) conflict with or violate any provision of its certificate of incorporation, bylaws or other charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in a loss of contractual benefits under any agreement, credit facility, indenture or instrument to which the Borrower is party or by which any property of the Borrower is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any Governmental Authority to which the Borrower is subject or by which any property of the Borrower is bound or affected. 3. No consent or approval of any Governmental Authority or other third party is or will be required as a condition to the enforceability of any Loan Document or Stock Purchase Document (other than, in the case of the Stock Purchase Documents, those consents and approvals which have heretofore been obtained), and the Borrower is and will be in compliance in all material respects with all laws and regulatory requirements to which the Borrower is subject. C. BINDING AGREEMENT. This Agreement and the other Loan Documents executed and delivered by the Borrower and to be executed and delivered by the Borrower to the Bank are or shall be (on the date of their execution and thereafter) duly executed and delivered by the Borrower and are and shall be (on the date of their execution and thereafter) enforceable against the Borrower in accordance with their terms except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally or by general equitable principles (whether in a suit, at law or in equity). D. LITIGATION. There is no litigation or proceeding involving the Borrower pending or, to the knowledge of the Borrower, threatened before any court, tribunal or Governmental Authority, which may in any way materially adversely affect the financial condition, operations or prospects of the Borrower. E. NO CONFLICTING LAWS OR AGREEMENTS. There is no law, rule, regulation (including, without limitation, Regulations T, U or X of the Federal Reserve Board) or order pertaining to the Borrower and no provision of any agreement, mortgage or contract binding on the Borrower or affecting the Borrower's property, which would conflict with, be breached by, be in default or in any way prevent, the execution, delivery or carrying out of the terms of this Agreement and the other Loan Documents. Without 15 limiting the generality of the foregoing, the Borrower further represents and warrants to the Bank that, as of the Closing Date and, if different, the actual funding date of the Loan, the Convertible Securities do not constitute "margin stock" within the meaning of Regulation U of the Federal Reserve Board. F. OWNERSHIP OF PROPERTY. The Borrower has good and transferable title to all of the Purchased Securities Collateral, the other Collateral, if applicable, and the Borrower's other property, free and clear of all liens and encumbrances, except liens granted to the Bank on the Collateral and liens granted to the holders of the Permitted Indebtedness on Convertible Securities that do not constitute part of the Collateral. G. CAPITALIZATION. As of the Closing Date, one hundred percent of the issued and outstanding capital stock of all classes of the Borrower is directly owned and controlled by Mafco, and one hundred percent of the issued and outstanding capital stock of all classes of Mafco is owned and controlled, directly or indirectly, by Perelman. H. COMPLIANCE WITH LAWS. The Borrower is not in violation of any applicable statute, ordinance, law, rule or regulation (including without limitation environmental, health and safety laws, rules and regulations) of any Governmental Authority in any material respect. I. TAXES. All material taxes and assessments due and payable by the Borrower have been paid or are being contested in good faith by appropriate proceedings and the Borrower has filed all tax returns which he is required to file. J. FINANCIAL INFORMATION. To the extent that delivery of financial statements of the Borrower or any Guarantor is required hereunder, the most recent financial statements of such Person which have been delivered to the Bank fairly present such Person's financial condition as of the date thereof, and there has occurred no material adverse change in the financial condition of such Person since the date of such financial statements. The Borrower has not failed to disclose to the Bank any information that could materially affect the Borrower's or any Guarantor's properties, prospects or business or financial condition. K. ACCURACY OF INFORMATION. All information furnished by the Borrower to the Bank in connection with this Agreement and the other Loan Documents is and will be accurate and complete in all material respects on the date as of which such information is delivered to the Bank and is not and will not be incomplete by the omission of any material fact necessary to make such information not misleading. L. THE ISSUER. As of the Closing Date, the Borrower has no knowledge of (i) any insolvency or bankruptcy proceeding of any type instituted by or with respect to the Purchased Securities Issuer or any other issuer of Collateral or (ii) any event that could reasonably be expected to have a material adverse effect on the properties, prospects or business or financial condition of the Purchased Securities Issuer 16 or on the Purchased Securities Issuer's properties, except as disclosed in a statement or report heretofore filed by the Purchased Securities Issuer with the Securities and Exchange Commission. M. STOCK PURCHASE DOCUMENTS. 1. The Bank has received true and complete copies of the Stock Purchase Documents. None of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written agreement or instrument which has heretofore been delivered to the Bank; 2. No default has occurred under any of the Stock Purchase Documents; 3. The transactions contemplated by the Stock Purchase Documents have been consummated in accordance with the terms thereof and all applicable laws (including, without limitation, gaming laws); 4. Each Stock Purchase Document, when delivered, will be valid and binding upon each party thereto and enforceable in accordance with its terms; and 5. At the time of consummation of the transactions contemplated by the Stock Purchase Documents, all third party approvals and other consents and approvals of, and filings and registrations with, and all other actions in respect of, all Governmental Authorities (including, without limitation, gaming authorities) required in order to make or consummate the transactions contemplated by the Stock Purchase Documents have been obtained, given, filed or taken and are in full force and effect. Additionally, there does not exist any judgment, order or injunction prohibiting the transactions contemplated by the Stock Purchase Documents or the performance by any party to the Stock Purchase Documents. N. EVENT OF DEFAULT. No Event of Default has occurred and is continuing. O. USE OF PROCEEDS. The proceeds of the Loan will not be used in any manner that would violate any law, rule, regulation or order of any Governmental Authority, including without limitation, Regulations T, U and X of the Federal Reserve Board. P. INVESTMENT COMPANY ACT. The Borrower is not an "investment company" or a company "controlled" by an investment company, within the meaning of the Investment Company Act of 1940, as amended. Q. SPECIAL PURPOSE ENTITY. The Borrower was formed to effect the transactions contemplated by the Stock Purchase Documents. The Borrower has no material property (other than the Purchased Securities Collateral, other Convertible 17 Securities that do not constitute part of the Purchased Securities Collateral and its rights under the Stock Purchase Documents) and no material liabilities (other than liability for the Obligations and Permitted Indebtedness). R. CONTINUATION OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made under this Agreement shall be deemed to be made at and as of the Closing Date (and, if the date of the making of the Loan is after the Closing Date, at and as of the date of the making of the Loan) and, pursuant to Section V H., all such representations and warranties (other than the representations and warranties expressly made solely as of the Closing Date) shall constitute continuing covenants on the part of the Borrower. S. REGISTRABLE SECURITIES; COLLATERAL. 1. No consent or approval of any Governmental Authority or any other Person is or will be required as a condition to the conversion of the Convertible Securities into Trading Securities. 2. Upon conversion of the Convertible Securities into Trading Securities, such securities shall constitute "Registrable Securities" for purposes hereof as well as for purposes of the Stockholders Agreement. 3. The Collateral does not (and will not at any time) constitute more than five (5%) of the equity securities of the Purchased Securities Issuer. V. AFFIRMATIVE COVENANTS. Until full payment and performance of all Obligations of the Borrower under the Loan Documents, the Borrower will do all of the following (without limiting any requirement contained in any other Loan Document): A. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower will maintain a system of accounting satisfactory to the Bank and in accordance with GAAP consistently applied throughout the periods involved, permit the Bank's officers or authorized representatives to visit and inspect the Borrower's books of account and other records upon reasonable notice and at such reasonable times during normal business hours and as often as the Bank may reasonably desire, and pay the reasonable fees and disbursements of any accountants or other agents of the Bank selected by the Bank for the foregoing purposes. Unless written notice of another location is given to the Bank, the Borrower's books and records will be located at the Borrower's Address. All financial information, reports and statements called for below shall be prepared in form and content reasonably acceptable to the Bank. In addition, the Borrower will furnish to the Bank: 1. a Margin Maintenance Certificate upon request for the Loan and, thereafter, at least monthly not later than the 15th day of each month (or more frequently if requested by the Bank); 18 2. a copy of any material notice delivered under any of the Stock Purchase Documents, promptly after receipt; and 3. such information, reports and statements respecting the financial condition of the Borrower or any Guarantor as the Bank may reasonably request from time to time, promptly after receipt of such request. B. ADVERSE CONDITIONS OR EVENTS. The Borrower will promptly advise the Bank in writing of (i) any condition, event or act which comes to the attention of the Borrower that would or might materially adversely affect any of the Collateral or the Borrower's financial condition, prospects or operations or the Bank's rights under the Loan Documents, (ii) any litigation filed by or against the Borrower and (iii) any event that has occurred that would constitute an Event of Default. Notwithstanding anything to the contrary contained in the preceding CLAUSE (i) of this Section, the Borrower will not be required to advise the Bank of any non-public information pertaining to the Purchased Securities Issuer. C. EXISTENCE. The Borrower will preserve and maintain its separate corporate existence and all rights, privileges, and franchises in connection therewith, and maintain its qualification and good standing in states in which such qualification is necessary in order for the Borrower to conduct its business in such states. The Borrower will maintain in full force and effect all licenses, permits, charters and registrations which are material to the conduct of its business. D. COMPLIANCE WITH LAWS. The Borrower will duly observe and conform to in all material respects, all laws, rules and regulations made by any Governmental Authority. E. TAXES AND OTHER OBLIGATIONS. The Borrower will pay all taxes, assessments and other obligations, including, but not limited to taxes, costs or other expenses arising out of the transactions contemplated by the Loan Documents, as the same become due and payable, except to the extent the same are being contested in good faith by appropriate proceedings in a diligent manner. F. INTENTIONALLY DELETED. G. REGISTRABLE SECURITIES. 1. The Borrower will cause the Purchased Securities Issuer, at the sole cost and expense of the Purchased Securities Issuer or the Borrower, to file a Registration Statement on Form S-3 with the SEC (which Registration Statement will have the characteristics described in the last sentence of this paragraph) within forty-five (45) days after the Closing Date; PROVIDED, HOWEVER that if the Purchased Securities Issuer exercises its rights under Section 5(a)(iii) or Section 5(c)(ii)(ii) of the Stockholders Agreement such period will be extended by twenty (20) days. The Borrower agrees to give the Bank prompt written notice of such exercise, and the Borrower will further cause such Registration Statement to be declared effective by the SEC as soon as practicable thereafter, but in no event later than March 19, 2004. Such Registration Statement will 19 (A) cover all of the Registrable Securities (whether or not any conversion has taken place), and (B) provide for the registration under the Securities Act of the Registrable Securities to the extent necessary to permit the public disposition thereof by the Borrower (and its successors and assigns) upon the effectiveness of the Registration Statement and by the Bank following an Event of Default. 2. Once effective, the Borrower will cause the effectiveness of such Registration Statement to be continuously maintained (with any updates, amendments or supplements) until the earlier of (A) the date that all of the Registrable Securities have been disposed of (it being acknowledged that any disposition by the Borrower of the Registrable Securities will be subject to Section VI A.), and (B) the date that the Borrower receives an opinion of counsel to the Purchased Securities Issuer (addressed to the Borrower and the Bank) that is reasonably acceptable to the Bank that all of the Registrable Securities may be freely traded (without limitation or restriction as to quantity or timing and without registration under the Securities Act) pursuant to Rule 144 or otherwise. Subject to the foregoing, the Borrower will promptly notify the Bank upon becoming aware of any event which could reasonably be expected to adversely impact the continued effectiveness of the Registration Statement. 3. The Borrower shall further take, and cause the Purchased Securities Issuer to take, at the sole cost and expense of the Purchased Securities Issuer or the Borrower, all other actions reasonably requested by the Bank from time to time (whether or not an Event of Default exists) to facilitate the public disposition by the Bank of the Registrable Securities following an Event of Default in accordance with the Securities Act and all applicable laws, rules and regulations made by any Governmental Authority. 4. The Borrower (A) will use all available means to protect and enforce its rights under the Stockholders Agreement, including without limitation assuring that the Purchased Securities Issuer complies with all of the provisions of Section 5 thereof, and (B) will comply with all of its obligations to the other parties under the Stockholders Agreement. 5. The Borrower will not sell any securities or permit any Person whose sales of securities would be aggregated with sales by the Bank under Rule 144(e) promulgated under the Securities Act to sell any securities, the result of which would be to require the Bank to aggregate any Registrable Securities constituting part of the Collateral to be sold by the Bank following an Event of Default with any securities to be sold by the Borrower or any other Person for purposes of Rule 144(e). H. REPRESENTATIONS AND WARRANTIES. The Borrower will cause all the representations and warranties (other than the representations and warranties expressly made solely as of the Closing Date) to be true and correct in all material respects at all times until full payment and performance of all Obligations of the Borrower under the Loan Documents. 20 I. REGULATION U. Upon each conversion of the Convertible Securities constituting part of the Collateral (or more frequently upon the Bank's request if at any time the Bank, with the advice of counsel, determines that the transactions contemplated by this Agreement or any of the other Loan Documents are or may become subject to Regulation U of the Federal Reserve Board), the Borrower will promptly complete, execute and deliver a Federal Reserve Form FR U-1 (the statements made in which shall be reasonably acceptable to the Bank) and such other documentation as the Bank may reasonably require from time to time in order to maintain continuing compliance with Regulation U. VI. NEGATIVE COVENANTS.Until full payment and performance of all Obligations of the Borrower under the Loan Documents, the Borrower will not do any of the following (without limiting any requirement contained in any other Loan Document): A. DISPOSITION OF PROPERTY. The Borrower will not sell, lease, transfer, assign, or otherwise dispose of any of the Collateral or any substantial portion of its other property. B. LIENS AND ENCUMBRANCES. The Borrower will not (i) grant or permit to exist any lien upon any of its property of any kind, except for liens in favor of the Bank on the Collateral and liens in favor of the holders of the Permitted Indebtedness on Convertible Securities that do not constitute part of the Collateral, or (ii) enter into any other agreement with any other Person (other than in favor of the holders of Permitted Indebtedness, which agreements with such holders shall not restrict the Borrower's ability to grant any lien on any of the Collateral in favor of the Bank) which shall contain a covenant substantially similar to that set forth in clause (i) of this Section VI B. C. INDEBTEDNESS. The Borrower will not incur, create, assume, or permit to exist any indebtedness, guaranty or similar liability or obligation, except for the Obligations and the Permitted Indebtedness. D. MERGERS. The Borrower will not merge with or into or consolidate or otherwise combine with any other Person or enter into any liquidation or dissolution. E. ACQUISITIONS. The Borrower will not acquire all or a substantial portion of the property or capital stock or other equity interests of any Person other than investments permitted under Section VI G. F. TRANSACTIONS WITH AFFILIATES. The Borrower will not enter into, or be a party to, any transaction with any of its Affiliates or enter into any partnership, joint venture or operating management agreement with any of its Affiliates, except for transactions not expressly prohibited by this Agreement or the other Loan Documents which are on fair and reasonable terms no less favorable to the Borrower than it would obtain in a comparable arm's length transaction with a Person not its Affiliate. 21 G. LOANS AND INVESTMENTs. The Borrower will not make any loans to, or purchase any debt or equity securities of, or otherwise make any investment in, any Person, other than investments in the Purchased Securities Issuer or such other issuer of the Collateral as may be approved by the Bank. H. DISTRIBUTIONS. The Borrower will not declare or pay or make any form of Distribution if an Event of Default has occurred and is continuing. I. BUSINESS. The Borrower will not conduct or engage in any business or operations other than acquiring the Convertible Securities and the Trading Securities. The Borrower will not (i) change its state of incorporation or incorporate in another state other than Delaware, or (ii) change its legal name. J. STOCK PURCHASE DOCUMENTS. The Borrower will not enter into, or permit Mafco to enter into, any material amendment, waiver or modification of the Certificate of Designations or the Stockholders Agreement without the prior written consent of the Bank, it being agreed that any modification to the Certificate of Designations or the Stockholders Agreement impacting the Conversion Rate (as defined in the Certificate of Designations), or the registration rights with respect to the Purchased Securities Collateral, will be considered to be material. K. CHANGE OF CONTROL. The Borrower will not permit a Change of Control to occur. VII. REMEDIES UPON DEFAULT.If an Event of Default shall occur, the Bank may exercise all rights, powers and remedies available to it under each of the Loan Documents, as well as all rights and remedies available at law or in equity. VIII. NOTICES.All notices, requests or demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to the other party at the following address: Borrower: c/o Mafco Holdings Inc. 35 East 62nd Street New York, New York 10021 Attention: Barry F. Schwartz Fax No.: (212) 572-5056 with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Richard G. Mason Fax No.: (212) 403-2000 22 Bank: Bank of America, N.A. Private Client Group 101 South Tryon Street 6th Floor Charlotte, North Carolina 28255 Attention: Bryn Rose Fax No.: (704) 388-0040 with a copy to: Bank of America, N.A. Private Client Group 767 Fifth Avenue, Floor 12A New York, New York 10153 Attention: Jane R. Heller Fax No.: (212) 407-5461 and Blank Rome LLP The Chrysler Building 405 Lexington Avenue New York, New York 10174 Attention: Michael J. Feinman Fax No.: (212) 885-5001 or to such other address as any party may designate by written notice to the other party. Each such notice, request and demand shall be deemed given or made as follows: A. If sent by mail, upon the earlier of (x) the date of receipt or (y) five (5) days after deposit in the mail, certified and postage prepaid: B. If sent by any other means, upon delivery. IX. COSTS, EXPENSES AND ATTORNEYS' FEES.The Borrower shall pay to the Bank immediately upon demand the full amount of (a) all reasonable costs and expenses, including, without limitation, reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the Bank's in-house counsel if permitted by applicable law), incurred by the Bank in connection with negotiation and preparation of this Agreement and each of the Loan Documents, whether or not the Loan actually closes, and (b) all other reasonable costs and attorneys' fees incurred by the Bank for which the Borrower is obligated to reimburse the Bank in accordance with the terms of the Loan Documents. 23 X. MISCELLANEOUS.The Borrower and the Bank further covenant and agree as follows, without limiting any requirement of any other Loan Document: A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted to the Bank under any Loan Document, or allowed it by law or equity shall be cumulative of each other right and may be exercised in addition to any and all other rights of the Bank, and no delay in exercising any right shall operate as a waiver thereof, nor shall any single or partial exercise by the Bank of any right preclude any other future exercise thereof or the exercise of any other right. The Borrower expressly waives any presentment, demand, protest or other notice of any kind, including but not limited to notice of intent to accelerate and notice of acceleration. No notice to or demand on the Borrower in any case shall, of itself, entitle the Borrower to any other or future notice or demand in similar or other circumstances. B. APPLICABLE LAW; VENUE AND JURISDICTION. This Agreement and the rights and obligations of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of New York for contracts made and performed within that state and applicable United States federal law. In any litigation in connection with or to enforce this Agreement or any Loan Document, the Borrower irrevocably consents to and confers personal jurisdiction on the courts of the State of New York or the United States located within the State of New York and expressly waives any objection as to venue in any such courts. Nothing contained herein shall, however, prevent the Bank from bringing any action or exercising any rights within any other state or jurisdiction or from obtaining personal jurisdiction by any other means available under applicable law. C. AMENDMENT. No modification, consent, amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall be effective unless the same shall be in writing and signed by an officer that is at least a vice president of the Bank, and then shall be effective only in the specified instance and for the purpose for which given. This Agreement is binding upon the Borrower, its successors and assigns, and inures to the benefit of the Bank, its successors and assigns; PROVIDED, HOWEVER, that (i) no assignment or other transfer of the Borrower's rights or obligations hereunder shall be made or be effective without the Bank's prior written consent, nor shall it relieve the Borrower of any obligations hereunder; and (ii) if, and only if, no Event of Default has occurred and is continuing, no assignment or other transfer of the Bank's rights or obligations hereunder shall be made without the Borrower's prior written consent, which consent by the Borrower may not be unreasonably withheld, conditioned or delayed. There is no third party beneficiary of this Loan Agreement. D. DOCUMENTS. All documents, certificates and other items required under this Agreement to be executed and/or delivered to the Bank shall be in form and content satisfactory to the Bank and its counsel. E. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of this Agreement shall not affect the enforceability or validity of any other 24 provision herein and the invalidity or unenforceability of any provision of any Loan Document to any Person or circumstance shall not affect the enforceability or validity of such provision as it may apply to other Persons or circumstances. F. INDEMNIFICATION. The Borrower shall indemnify, defend and hold the Bank, its Affiliates and each of their respective officers, directors, employees, agents, attorneys-in-fact, successors and assigns (each an "Indemnified Person") harmless from and against any and all claims, demands, suits, losses, damages, assessments, fines, penalties, reasonable costs or other expenses (including reasonable attorneys' fees and court costs) arising from or in any way related to any of the transactions contemplated hereby and the Loan Documents (collectively, the "Indemnified Liabilities"). Notwithstanding the foregoing, the Borrower shall have no obligation under this paragraph to any Indemnified Party with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Party. The Borrower's obligations under this paragraph shall survive the repayment of the Loan and any foreclosure upon any Collateral. G. SURVIVABILITY. All covenants, agreements, representations and warranties made herein or in the other Loan Documents shall survive the making of the Loan and shall continue in full force and effect so long as any Obligation is outstanding. XI. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF THE BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS AGREEMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, 25 THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. ss. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSURE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. XII. WAIVER OF CONSEQUENTIAL DAMAGES. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, The borrower KNOWINGLY AND INTENTIONALLY WAIVES ANY RIGHT TO CLAIM OR RECOVER FROM THE BANK ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES, IN CONNECTION WITH ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY other loan DOCUMENT, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT. XIII. WAIVER OF RIGHT TO JURY TRIAL. 26 EACH PARTY TO THIS AGREEMENT KNOWINGLY AND INTENTIONALLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF or related to THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE obligations. XIV. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. 27 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives as of the date first above written. BORROWER: SGMS ACQUISITION CORPORATION By: /s/ Barry F. Schwartz ------------------------------------------ Name: Barry F. Schwartz Title: Executive Vice President, Secretary, Treasurer, and General Counsel BANK: BANK OF AMERICA, N.A. By: /s/ Jane R. Heller ------------------------------------------ Name: Jane R. Heller Title: Senior Vice President EX-99 7 nov26scigamesex12to13d.txt EXHIBIT 12 TERM NOTE $15,000,000.00 New York, New York As of November 19, 2003 FOR VALUE RECEIVED, SGMS ACQUISITION CORPORATION, a Delaware corporation, having a registered office at c/o National Registered Agents, Inc., 9 East Loockerman Street, Suite 1B, Dover, Delaware 19901 ("MAKER"), promises to pay to the order of HSBC BANK USA, a New York banking institution having an office at 452 Fifth Avenue, New York, New York 10018 ("PAYEE"), or at such other place as the holder hereof may from time to time designate in writing, the principal sum of FIFTEEN MILLION AND NO/l00 DOLLARS ($15,000,000.00) (the "PRINCIPAL AMOUNT"), with interest on the unpaid Principal Amount to be computed from the date of the advance of principal evidenced hereby at the Applicable Interest Rate (as hereinafter defined), in lawful money of the United States of America, which shall at the time of payment be legal tender in payment of all debts and dues, public and private. ARTICLE I - TERMS, CONDITIONS AND DEFINITIONS 1.1 PAYMENT OF PRINCIPAL AND INTEREST. Maker covenants to pay the outstanding principal and interest due under this Note as follows: (A) On the first day of December, 2003, and on the first day of each and every succeeding calendar month thereafter (each, a "PAYMENT DATE") through and including the Loan Maturity Date (as hereinafter defined), Maker shall pay to Payee interest only in arrears on the portion of the Principal Amount outstanding from time to time, at an annual rate of interest equal to the LIBOR Rate (as hereinafter defined). Notwithstanding the foregoing, if at any time during the term of this Note, Maker selects a LIBOR Interest Period (as hereinafter defined) of ninety (90) days or more, the Payment Date for payments of interest only during such LIBOR Interest Period shall be the first day of the fourth (4th) month following the commencement of such LIBOR Interest Period and on the first day of each and every fourth (4th) month thereafter. (B) The entire outstanding principal balance of this Note, together with accrued and unpaid interest and any other amounts due under this Note or any other Loan Document (as hereinafter defined) shall be due and payable on December 1, 2005 (the "LOAN MATURITY DATE"). 1.2 DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings: "BUSINESS DAY" means any day other than a Saturday, a Sunday or any other day on which Payee is not open for business. "LIBOR INDEX" means the rate which appears on Reuters Screen LIBOR page 3750 (or at 1 such page as may replace such page on that service) at approximately 11:00 a.m. (London Time) two (2) Business Days prior to the first day of the applicable LIBOR Interest Period selected by Maker and having the same term as the applicable LIBOR Interest Period. "LIBOR INTEREST PERIOD" means one of the following periods selected by Maker pursuant to Section 1.3 of this Note to determine the LIBOR Rate: thirty (30) days, sixty (60) days, ninety (90) days, one hundred eighty (180) days or three hundred sixty (360) days. "LIBOR RATE" means an annual rate of interest equal to one hundred fifty (150) basis points (1.50%) above the applicable LIBOR Index with respect to the applicable LIBOR Interest Period. Any change in the LIBOR Rate will be fixed by Payee as of the end of the second Business Day preceding the effective date of any change made to the LIBOR Interest Period pursuant to Section 1.3. "LOAN DOCUMENT" means any instrument delivered (whether now or hereafter and whether by Maker or any other person or entity) to Payee or any other holder of this Note in connection with the loan evidenced by this Note. "NOTE" means this Term Note. 1.3 DETERMINATION OF LIBOR INTEREST PERIOD. Maker shall have the option of choosing one of the following LIBOR Interest Periods which shall be used to determine the LIBOR Rate: thirty (30) days, sixty (60) days, ninety (90) days, one hundred eighty (180) days or three hundred sixty (360) days. No such period shall extend beyond the Loan Maturity Date. If Maker wishes to change or select the next succeeding LIBOR Interest Period, Maker shall notify by telephone Maker's account executive at Payee followed by written confirmation to Payee by facsimile by 2:00 p.m. (New York time) on the day which is two (2) Business Days prior to the last date of the current LIBOR Interest Period. Maker may not change the LIBOR Interest Period prior to the end of a LIBOR Interest Period. In the event Maker fails to change the LIBOR Interest Period in accordance with the foregoing provisions, the next succeeding LIBOR Rate shall be determined based upon a LIBOR Interest Period of thirty (30) days. 1.4 [reserved] 1.5 APPLICATION OF PAYMENTS. All payments made under this Note shall be applied as follows: first, to the payment of interest on the Principal Amount outstanding hereunder from time to time; second, to the payment of sums payable by Maker to the holder of this Note under any Loan Document other than on account of principal and interest; and third, to the payment of the Principal Amount. 1.6 COMPUTATION OF INTEREST; PAYMENTS ETC. The interest payable on this Note shall be computed by the holder of this Note on the basis of a three-hundred-sixty-day year. Principal, interest, and all other sums payable under this Note shall be paid in lawful money of the United States (except as may be expressly provided in 2 the Loan Documents) free and clear of, and without deduction or offset for, any present or future taxes, levies, imposts, charges, withholdings, or liabilities with respect thereto, and (except as may be expressly provided in the Loan Documents) free and clear of any and all other defenses, offsets, claims, counterclaims, credits or deductions of any kind. Notwithstanding anything to the contrary contained herein, when any payment hereunder is due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day. 1.7 MAXIMUM INTEREST RATE. Nothing in this Note or in any other Loan Document shall require the payment or permit the collection by the holder hereof of interest in an amount exceeding the maximum amount permitted under applicable law (the "MAXIMUM INTEREST AMOUNT"). Maker shall not be obligated to pay to said holder any interest in excess of the Maximum Interest Amount, and the amount of interest payable to said holder under the Loan Documents shall under no circumstance be deemed to exceed the Maximum Interest Amount. To the extent that any payment made to said holder under the Loan Documents would cause the amount of interest charged to exceed the Maximum Interest Amount, such payment shall be deemed a prepayment of principal as to which no Prepayment Charge (as defined below) or notice shall be required, notwithstanding anything to the contrary in this Note or in any other Loan Document, or, if the amount of excess interest exceeds the unpaid principal balance of this Note, such excess shall be refunded to Maker. 1.8 PREPAYMENT. This Note may not be prepaid in whole or in part except as specified in this paragraph and shall be prepaid as specified in Section 1.13 hereof. Maker shall be entitled to prepay all or part of the entire then-outstanding Principal Amount of this Note at any time without the requirement that Maker pay to Payee any premium or other charge on account of such prepayment, provided that (a) Maker gives to the holder of this Note not less than ten (10) days' or more than sixty (60) days' prior written notice of such prepayment, (b) such prepayment is made on the expiration of any LIBOR Interest Period unless Maker pays the Prepayment Charge to Payee at the time of prepayment, and (c) at the time of such prepayment, Maker also pays to the holder of this Note all accrued and unpaid interest and all other sums payable to the holder of this Note pursuant to the Loan Documents. Any prepayment, in whole or in part, made other than in strict accordance with the preceding sentences (whether voluntary or involuntary) shall require payment to Payee of a prepayment charge (the "PREPAYMENT CHARGE") which shall be, as reasonably determined by Payee any cost, loss or expense, including, but not limited to, any interest, breakage (LIBOR or otherwise) or other fees which are or would have been payable by Payee to lenders of funds actually obtained by Payee or, if not actually obtained, would have been obtained if Payee had decided to obtain same, in order to make or maintain its loan to Maker under this Note hereunder, caused or would have been caused by the prepayment by the Maker. Upon request, Payee shall deliver to Maker a statement setting forth the amount and basis of determination of any Prepayment Charge. In addition, at any time and from time to time, but in no event, more than four (4) times during each year during the term hereof, Maker shall have the right to request from Payee a good faith estimate of the applicable components and amount of any Prepayment Charge which would be incurred by Maker if Maker were to make a voluntary 3 prepayment hereunder. Except as otherwise expressly provided in this Note, Maker shall pay the Prepayment Charge whether the prepayment is voluntary or involuntary (in connection with the Payee's acceleration of the unpaid Principal Amount or the mandatory prepayment required by Section 1.13 hereof.) 1.9 SECURITY. This Note is secured by (i) certain Security Agreement of even date herewith between Maker and Payee (the "SECURITY AGREEMENT") covering certain personal property owned by Borrower (the "COLLATERAL") to which Security Agreement reference is made for a complete description of the property pledged thereunder, and (ii) the other Loan Documents executed by Maker and delivered to Payee. All of the terms, covenants, conditions and agreements of the Security Agreement and the other Loan Documents are hereby made a part of this Note to the same extent and with the same force and effect as if fully set forth herein. Maker shall pay when due all sums required to be paid pursuant to, and shall otherwise fully comply with, the Security Agreement and the other Loan Documents. 1.10 LATE CHARGE If all or a portion of any payment required to be made to the holder of this Note (whether pursuant to this Note or any other Loan Document), other than the payment of the entire outstanding Principal Amount when the same becomes due, whether at maturity, upon acceleration of the loan evidenced by this Note or otherwise, is not received on or before the fifteenth (15th) day after the date such payment is due (without reference to any grace period provided for in the Loan Documents), a late charge of four percent (4%) of the amount so overdue ("LATE CHARGE") shall immediately be due to said holder. Any such Late Charge shall be secured by the security for this Note, shall be paid no later than the due date of the next subsequent installment of interest payable under this Note and, if not so paid, shall bear interest at the rate then in effect with respect to the principal sum of this Note. In addition, if Maker shall fail to make timely payment in full of any sum payable under this Note, beyond applicable notice, grace and cure periods, if any, Maker shall pay all reasonable costs of collection, including, but not limited to, reasonable attorneys' fees and disbursements, whether or not suit is filed hereon. 1.11 INVOLUNTARY RATE. If a default or other event shall occur that, under the terms of the Security Agreement, shall permit Payee to cause the principal sum of this Note to become due and payable and Payee shall declare the outstanding Principal Amount to be due and payable, then the entire unpaid balance of said Principal Amount, together with all accrued and unpaid interest and all other sums payable to said holder (whether pursuant to this Note or any other Loan Document), shall immediately become due and payable, together with any applicable Prepayment Charge. In the case of a default continuing beyond the expiration of any applicable notice, grace or cure period, interest on the outstanding Principal Amount of this Note shall be computed at an annual rate 4 equal to the interest rate then in effect under this Note plus two percent (2.0%), but in no event, in excess of the Maximum Interest Amount (the "INVOLUNTARY RATE"). If Payee shall have declared the entire Principal Amount of this Note to be due and payable, interest at the Involuntary Rate shall be calculated from and after the date of the occurrence which is the basis of the default upon which Payee shall have declared the Principal Amount to be due and payable until the date that the holder of this Note receives payment of the entire outstanding Principal Amount. If Payee shall not have declared the entire Principal Amount of this Note to be due and payable, interest at the Involuntary Rate shall be calculated from and after the date of expiration of any applicable notice, grace or cure period to the date on which such default shall be cured. In addition, if a default under the Security Agreement occurs and is continuing beyond the expiration of any applicable notice, grace or cure period, the holder of this Note shall have, and shall be entitled to exercise, such rights and remedies as are set forth in the Loan Documents and/or as may be available at law or in equity (including, without limitation, the right, which may be exercised without notice to, or demand upon, Maker, to set off against the indebtedness evidenced by this Note any and all monies or other property of Maker in the possession of said holder and any monies owed to Maker by said holder, whether or not then due). 1.12 [reserved] 1.13 MANDATORY PREPAYMENTS. (A) If at any time the outstanding Principal Amount of the Loan exceeds the Market Value (as herein defined) of the Collateral multiplied times twenty five percent (25%), then, within two (2) days of notice to the Maker of such event (a "MARGIN CALL"), the Maker shall (1) pledge additional collateral to the Payee which may be additional shares of Series A Convertible Preferred Stock of Scientific Games Corporation ("SGCorp") (provided, that at no time shall the total Collateral consisting of shares of SGCorp exceed four and nine tenths percent (4.9%) of the total outstanding shares thereof) or such other collateral acceptable to the Payee in its sole and absolute discretion, (2) repay the Principal Amount, or a portion thereof, or (3) do any combination of (1) or (2), so that, after giving effect to such deposit of additional Collateral and/or repayment, the outstanding Principal Amount of the Loan is not greater than twenty five percent (25%) of the Market Value of the Collateral. For purposes of this Section 1.13, the Series B Preferred Stock of SGCorp pledged by the Maker shall have no Market Value. (B) If at any time the Maker has not satisfied its obligation to deposit additional Collateral or repay the Principal Amount as required in the event of a Margin Call (as described in subsection (A) above) or if at any time the outstanding Principal Amount exceeds the Market Value of the Collateral multiplied times forty percent (40%), the Maker shall IMMEDIATELY, WITHOUT ANY FURTHER OR ADDITIONAL NOTICE, repay the Loan or a portion thereof, so that, after giving effect to such repayment, the outstanding Principal Amount is not greater than the twenty five percent (25%) of the Market Value of the Collateral; any failure to comply with the requirements hereof shall be an Event of Default under this Note and the Payee shall have the immediate right, in addition to the other rights of the Payee hereunder or under the other Loan Documents, but subject to applicable law, and without notice or other action (notwithstanding any prior notice given under any other provision of this Note), to immediately sell or redeem all or some of the Collateral and to exercise any or all of the rights and remedies available to the 5 Payee hereunder, and under the other Loan Documents, including, without limitation, the right to exercise its rights against any Collateral and to redeem any Collateral pursuant to the terms of the agreements governing such Collateral. Any prepayment required hereby shall be subject to the additional requirement of the payment of any applicable Prepayment Charge under Section 1.8 hereof. The "MARKET VALUE" of Collateral shall be determined by reference to the most recent closing bid price reported by the applicable securities exchange or quoted by the National Association of Securities Dealers Automated Quotation System for the underlying shares of common stock into which the Collateral may be converted on any date of determination thereof or, in the absence of any such reported price, on such other basis as the Payee may reasonably determine. ARTICLE II - GENERAL CONDITIONS 2.1 MODIFICATION. AMENDMENT. WAIVER ETC. The release of any security for this Note or the modification, amendment or waiver of any provision of this Note or any other Loan Document shall not release, diminish, modify or otherwise affect the liability of Maker or any other person or entity that may be or become liable under or with respect to this Note. This Note may not be amended or modified in any way, nor may any provision hereof be waived, except by a written instrument duly executed by the holder hereof. 2.2 WAIVER OF NOTICE, PRESENTMENT ETC. Maker for itself and for all other persons and entities that may become liable for all or any part of the obligations evidenced by this Note consents to any number of renewals or extensions of time for payment hereof. Any such renewals or extensions shall not affect the liability of Maker or any such other person or entity. In addition, Maker, for itself and all such other persons and entities waives, to the extent permitted by applicable law, valuation and appraisement, presentment and demand for payment, protest and notice of protest, dishonor and notice of dishonor, notice of nonpayment, bringing of suit, lack of diligence or delays in collection or enforcement of this Note and notice of the intention to accelerate, the release of any person or entity liable for all or any part of the obligations evidenced by this Note, any other indulgence or forbearance by the holder of this Note and the benefit of all statutes, ordinances, judicial rulings, and other legal principles of any kind, now or hereafter enacted or in force, affording any right of redemption or cure or any right to a moratorium or stay of execution or extension of time for payment or exempting any property from levy and sale upon execution of any judgment obtained by the holder in respect of this Note. 2.3 REMEDIES CUMULATIVE ETC. No right or remedy of the holder of this Note is intended to be exclusive of any other right or remedy specified herein, in any other Loan Document or available to said holder at law 6 or in equity. All such rights and remedies shall be cumulative and concurrent and, in said holder's sole discretion, may be pursued singularly, successively or together and may be exercised as often as occasion therefor shall arise. Without limiting the generality of the foregoing, the payment by Maker of any Prepayment Charge, Late Charge or installment of interest at the Involuntary Rate is intended by the parties hereto to represent a non-exclusive remedy of payment of an agreed amount as compensation to said holder with respect to costs and expenses incurred and/or damage suffered by said holder as a result of Maker's prepayment of this Note or failure to comply with one or more obligations imposed upon Maker in the Loan Documents, and any such payment shall be in addition to, and not in lieu of, such other rights and remedies. 2.4 GOVERNING LAW. This Note and the rights of the parties hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York for contracts made and wholly performed within that State; provided, however, that the foregoing is not intended to limit the rate of interest that may be charged or collected under this Note by the holder hereof if, pursuant to any law applicable to said holder, said holder is entitled to charge or collect interest at a higher rate than is permitted under the laws of said state. If any provision hereof or of any of the other Loan Documents is invalid or unenforceable in any jurisdiction, the other provisions hereof and thereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the holder of this Note in order to effectuate the intent of this Note and of the other Loan Documents. The invalidity of any provision of this Note or of any of the other Loan Documents in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, including the State of New York. 2.5 NOTICE. All notices to be given hereunder shall be delivered by hand or sent to the party to be notified, via certified mail, return receipt requested, and shall be deemed given when delivered by hand or three (3) days after posted with the United Postal Services addressed to the parties as follows: If to the Payee at: HSBC Bank USA 452 Fifth Avenue New York, New York 10018 Attn.: Patricia Chambers Telephone: (212) 525-5070 Telecopy: (212) 525-6835 If to the Maker at: SGMS Acquisition Corporation c/o MacAndrews & Forbes Holdings Inc. 35 East 62nd Street New York, New York 10021 7 Telephone: (212) 572-5060 Te1ecopy: (212) 572-8401 With copies to: MacAndrews & Forbes Holdings Inc. 35 East 62nd Street New York, New York 10021 Attn: General Counsel Telephone: (212) 572-5170 Telecopy: (212) 572-5056 and Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, NY 10019 Attn.: Richard G. Mason Telephone: (212) 403-1252 Telecopy: (212) 403-2000 2.6 SUCCESSORS AND ASSIGNS ETC. The provisions of this Note shall bind Maker, its successors and assigns and shall inure to the benefit of Payee, any subsequent holders of this Note and their respective successors and assigns. Notwithstanding anything to the contrary in this Note or any of the other Loan Documents, Payee shall not be entitled to assign, transfer, grant participation interest in or pledge all or any part of its rights and obligations with respect to the loan evidenced by this Note or any interest therein without first obtaining Maker's written consent, which consent shall not be uneasonably withheld. [NO FURTHER TEXT ON THIS PAGE] 8 IN WITNESS WHEREOF, the undersigned has executed the foregoing instrument as of the day and year first above written. SGMS ACQUISITION CORPORATION, a Delaware corporation By: /s/ Barry F. Schwartz ------------------------------------ Name: Barry F. Schwartz Title: Executive Vice President, Secretary, Treasurer, and General Counsel STATE OF NEW YORK ) :ss.: COUNTY OF NEW YORK ) On the 19 day of November, in the year 2003, before me, the undersigned personally appeared Barry F. Schwartz, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. /s/ Marvin Schaffer - --------------------------------------------------- Signature and Office of individual taking acknowledgment -----END PRIVACY-ENHANCED MESSAGE-----