EXECUTION COPY
SCIENTIFIC GAMES CORPORATION
CONVERTIBLE SENIOR SUBORDINATED DEBENTURES
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated December 23, 2004
(the
"Agreement") is entered into by and among Scientific Games
Corporation, a
Delaware corporation (the "Company"), the guarantors listed in
Schedule 1 hereto
(the "Guarantors") and J.P. Morgan Securities Inc. and Bear,
Stearns & Co. Inc.
as representatives of the Initial Purchasers (the
"Representatives") and
Jefferies & Company, Inc., Ramius Securities, LLC, BNY Capital
Markets, Inc.,
Commerzbank Capital Markets Corp. and LaSalle Debt Capital Markets,
a division
of ABN AMRO Financial Services, Inc. (collectively with the
Representatives, the
"Initial Purchasers").
Pursuant to the Purchase Agreement, dated as of December 1,
2004, among the
Company and the Representatives (the "Purchase Agreement"), the
Initial
Purchasers have agreed to purchase from the Company $250,000,000
aggregate
principal amount of its Convertible Senior Subordinated Debentures
due 2024,
and, at the option of the Initial Purchasers, up to an additional
$25,000,000
aggregate principal amount of its Convertible Senior Subordinated
Debentures due
2024 (together, the "Debentures"). The Debentures will be
convertible into fully
paid, non-assessable shares of Class A common stock, par value
$0.01 per share,
of the Company (the "Common Stock"). The Debentures will be
convertible on the
terms, and subject to the conditions, set forth in the Indenture
(as defined
herein). To induce the Initial Purchasers to purchase the
Debentures, the
Company and the Guarantors have agreed to provide the registration
rights set
forth in this Agreement pursuant to Section 5(j) of the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions. Capitalized terms used in this Agreement
without definition
shall have their respective meanings set forth in the Purchase
Agreement. As
used in this Agreement, the following capitalized terms shall have
the following
meanings:
"Additional Amounts": As defined in Section 3(a) hereof.
"Additional Amounts Payment Date": Each June 1 and December 1.
"Affiliate" of any specified person means any other person
which, directly
or indirectly, is in control of, is controlled by, or is under
common control
with, such specified person. For purposes of this definition,
"control" of a
person means the power, direct or indirect, to direct or cause the
direction of
the management and policies of such person whether by contract or
otherwise; and
the terms "controlling" and "controlled" have meanings correlative
to the
foregoing.
"Agreement": This Registration Rights Agreement.
"Amendment Effectiveness Deadline Date": As defined in Section
2(e) hereof.
"Business Day": The definition of "Business Day" in the
Indenture.
"Commission": Securities and Exchange Commission.
"Common Stock": As defined in the preamble hereto.
"Company": As defined in the preamble hereto.
"Debentures": As defined in the preamble hereto.
"Effectiveness Period": As defined in Section 2(a)(iii)
hereof.
"Effectiveness Target Date": As defined in Section 2(a)(ii)
hereof.
"Exchange Act": Securities Exchange Act of 1934, as amended.
"Guarantee": The senior subordinated guarantee of the
Debentures by the
Guarantors.
"Guarantors": As defined in the preamble hereto.
"Holder": A Person who owns, beneficially or otherwise,
Transfer Restricted
Securities.
"Indemnified Holder": As defined in Section 6(a) hereof.
"Indenture": The Indenture, dated as of December 23, 2004,
among the
Company, the Guarantors and Wells Fargo Bank, National Association,
as trustee
(the "Trustee"), pursuant to which the Debentures are to be issued,
as such
Indenture is amended, modified or supplemented from time to time in
accordance
with the terms thereof.
"Initial Purchasers": As defined in the preamble hereto.
"Majority of Holders": Holders holding over 50% of the
aggregate principal
amount of Debentures outstanding that are Transfer Restricted
Securities;
provided that, for the purpose of this definition, a holder of
shares of Common
Stock which constitute Transfer Restricted Securities and issued
upon conversion
of the Debentures shall be deemed to hold an aggregate principal
amount of
Debentures (in addition to the principal amount of Debentures held
by such
holder) equal to the quotient of (x) the number of such shares of
Common Stock
held by such holder and (y) the conversion rate in effect at the
time of such
conversion as determined in accordance with the Indenture.
"NASD": National Association of Securities Dealers, Inc.
"Notice and Questionnaire": a written notice executed by the
respective
Holder and delivered to the Company containing substantially the
information
called for by the Selling Securityholder Notice and Questionnaire
attached as
Exhibit A to the Offering Memorandum of the Company dated December
1, 2004
relating to the Debentures.
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"Notice Holder": on any date, any Holder that has delivered a
Notice and
Questionnaire to the Company on or prior to such date.
"Person": An individual, partnership, corporation, company,
unincorporated
organization, trust, joint venture or a government or agency or
political
subdivision thereof.
"Prospectus": The prospectus included in a Shelf Registration
Statement, as
amended or supplemented by any prospectus supplement and by all
other amendments
thereto, including post-effective amendments, and all material
incorporated by
reference into such prospectus.
"Purchase Agreement": As defined in the preamble hereto.
"Record Holder": With respect to any Additional Amounts
Payment Date, each
Person who is a Holder on the 15th day preceding the relevant
Additional Amounts
Payment Date.
"Registration Default": As defined in Section 3(a) hereof.
"Securities Act": Securities Act of 1933, as amended.
"Shelf Filing Deadline": As defined in Section 2(a)(i) hereof.
"Shelf Registration Statement": As defined in Section 2(a)(i)
hereof.
"Subsequent Shelf Registration Statement" has the meaning set
forth in
Section 2(c) hereof.
"Suspension Notice": As defined in Section 4(c) hereof.
"Suspension Period": As defined in Section 4(b)(i) hereof.
"TIA": Trust Indenture Act of 1939, as amended, and the rules
and
regulations of the Commission thereunder, in each case, as in
effect on the date
the Indenture is qualified under the TIA.
"Transfer Restricted Securities": Each Debenture (and
Guarantee thereof)
and each share of Common Stock issued upon conversion of Debentures
until the
earliest of:
(i) the date on which such Debenture or such share
of Common
Stock issued upon conversion has been effectively
registered under the
Securities Act and disposed of in accordance with the
Shelf
Registration Statement; provided that, with respect to
shares of
Common Stock issued upon conversion of a Debenture that
has been so
registered and disposed of, the relevant date shall be
the date on
which such Debenture that was converted was registered
and disposed
of, provided that upon conversion
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the shares of Common Stock received by the holder are
freely
transferable without additional registration under
Securities Act;
(ii) the date on which such Debenture or such share
of Common
Stock issued upon conversion is transferred in compliance
with Rule
144 under the Securities Act (or any other similar
provision then in
force) or may be sold or transferred by a person who is
not an
Affiliate of the Company pursuant to Rule 144 under the
Securities Act
(or any other similar provision then in force) without
any volume or
manner of sale restrictions thereunder; or
(iii) the date on which such Debenture or such share
of Common
Stock issued upon conversion ceases to be outstanding
(whether as a
result of redemption, repurchase and cancellation,
conversion or
otherwise).
"Underwritten Registration": A registration in which
Debentures are sold to
an underwriter for reoffering to the public.
Unless the context otherwise requires, the singular includes
the plural,
and words in the plural include the singular.
2. Shelf Registration.
(a) The Company and the Guarantors shall:
(i) not later than 120 days after the first date
of the
original issuance of the Debentures (the
"Shelf Filing
Deadline"), cause to be filed a registration
statement
pursuant to Rule 415 under the Securities Act
(the "Shelf
Registration Statement"), which Shelf
Registration
Statement shall provide for resales of all
Transfer
Restricted Securities held by Holders that
have provided
the information required pursuant to the terms
of Section
2(b) hereof;
(ii) use reasonable efforts to cause the Shelf
Registration
Statement to be declared effective by the
Commission not
later than 210 days after the first date of
the original
issuance of the Debentures (the "Effectiveness
Target
Date"); and
(iii) use reasonable efforts to keep the Shelf
Registration
Statement continuously effective, supplemented
and amended
as required by the provisions of Section 4(b)
hereof to the
extent necessary to ensure that (A) it is
available for
resales by the Holders of Transfer Restricted
Securities
entitled, subject to Section 2(b), to the
benefit of this
Agreement and (B) conforms with the
requirements of this
Agreement and the Securities Act and the rules
and
regulations of the Commission promulgated
thereunder as
announced from time to time, for a period (the
"Effectiveness Period") until the earliest of:
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(1) two years following the last date of
original
issuance of any of the Debentures;
(2) the date when the Holders of Transfer
Restricted
Securities are able to sell all such Transfer
Restricted
Securities immediately without restriction
pursuant to the
volume limitation provisions of Rule 144 under
the
Securities Act (or any similar provision then
in force); or
(3) the date when all of the Transfer
Restricted
Securities cease to be outstanding or have been
sold either
pursuant to the Shelf Registration Statement or
pursuant to
Rule 144 under the Securities Act or any
similar provision
then in force.
(b) At the time the Shelf Registration Statement is
declared
effective, each Holder that became a Notice Holder on or prior
to the date
that is 10 Business Days prior to such time of effectiveness
shall be named
as a selling securityholder in the Shelf Registration
Statement and the
related Prospectus in such a manner as to permit such Holder
to deliver
such Prospectus to purchasers of Transfer Restricted
Securities in
accordance with applicable law. No such Holder (other than the
Initial
Purchasers) shall be entitled to have its Transfer Restricted
Securities
covered by such Shelf Registration Statement unless such
Holder agrees in
writing to be bound by all the provisions of this Agreement
applicable to
such Holder. None of the Company's or the Guarantors'
securityholders
(other than the Holders of Transfer Restricted Securities)
shall have the
right to include any of the Company's or any of the
Guarantors' securities
in the Shelf Registration Statement.
(c) If the Shelf Registration Statement or any Subsequent
Shelf
Registration Statement ceases to be effective for any reason
at any time
during the Effectiveness Period (other than because all
Transfer Restricted
Securities registered thereunder shall have been resold
pursuant thereto or
shall have otherwise ceased to be Transfer Restricted
Securities), the
Company and the Guarantors shall use their reasonable efforts
to obtain the
prompt withdrawal of any order suspending the effectiveness
thereof, and in
any event shall within 45 days of such cessation of
effectiveness amend the
Shelf Registration Statement in a manner reasonably expected
to obtain the
withdrawal of the order suspending the effectiveness thereof,
or file an
additional Shelf Registration Statement covering all of the
securities that
as of the date of such filing are Transfer Restricted
Securities (a
"Subsequent Shelf Registration Statement"). If a Subsequent
Shelf
Registration Statement is filed, the Company and the
Guarantors shall use
their reasonable efforts to cause the Subsequent Shelf
Registration
Statement to become effective as promptly as is practicable
after such
filing and to keep such Registration Statement (or Subsequent
Shelf
Registration Statement) continuously effective until the end
of the
Effectiveness Period.
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(d) The Company and the Guarantors shall supplement and
amend the
Shelf Registration Statement if required by the rules,
regulations or
instructions applicable to the registration form used by the
Company and
the Guarantors for such Shelf Registration Statement, if
required by the
Securities Act or as reasonably requested by the Initial
Purchasers or by
the Trustee on behalf of the Holders of the Transfer
Restricted Securities
covered by such Shelf Registration Statement.
(e) Each Holder agrees that if such Holder wishes to sell
Transfer
Restricted Securities pursuant to a Shelf Registration
Statement and
related Prospectus, it will do so only in accordance with
Section 2(b),
Section 2(e) and Section 4(b). Each Holder wishing to sell
Transfer
Restricted Securities pursuant to a Shelf Registration
Statement and
related Prospectus agrees to deliver a Notice and
Questionnaire to the
Company at least 10 Business Days prior to any intended
distribution of
Transfer Restricted Securities under the Shelf Registration
Statement. From
and after the date the Shelf Registration Statement is
declared effective
the Company and the Guarantors shall, as promptly as
practicable after the
date a Notice and Questionnaire is delivered, and in any event
upon the
later of (x) 10 Business Days after such date or (y) 10
Business Days after
the expiration of any Suspension Period in effect when the
Notice and
Questionnaire is delivered or put into effect:
(i) if required by applicable law, file with the SEC
a
post-effective amendment to the Shelf Registration
Statement or
prepare and, if required by applicable law, file a
supplement to the
related Prospectus or a supplement or amendment to any
document
incorporated therein by reference or file any other
required document
so that the Holder delivering such Notice and
Questionnaire is named
as a selling securityholder in the Shelf Registration
Statement and
the related Prospectus in such a manner as to permit such
Holder to
deliver such Prospectus to purchasers of the Transfer
Restricted
Securities in accordance with applicable law and, if the
Company shall
file a post-effective amendment to the Shelf Registration
Statement,
use reasonable efforts to cause such post-effective
amendment to be
declared effective under the Securities Act as promptly
as is
practicable, but in any event by the date (the "Amendment
Effectiveness Deadline Date") that is 60 days after the
date such
post-effective amendment is required by this clause to be
filed;
(ii) provide such Holder a copy of any documents
filed pursuant
to Section 2(e)(i); and
(iii) notify such Holder as promptly as practicable
after the
effectiveness under the Securities Act of any
post-effective amendment
filed pursuant to Section 2(e)(i);
provided that if such Notice and Questionnaire is delivered during
a Suspension
Period, the Company shall so inform the Holder delivering such
Notice and
Questionnaire and
6
shall take the actions set forth in clauses (i), (ii) and (iii)
above upon
expiration of the Suspension Period in accordance with Section
4(b).
Notwithstanding anything contained herein to the contrary, (i)
neither the
Company nor the Guarantors shall be under any obligation to name
any Holder that
is not a Notice Holder as a selling securityholder in any
Registration Statement
or related Prospectus, (ii) the Amendment Effectiveness Deadline
Date shall be
extended by up to 10 Business Days from the expiration of a
Suspension Period
(and neither the Company nor the Guarantors shall incur any
obligation to pay
Additional Amounts during such extension) if such Suspension Period
shall be in
effect on the Amendment Effectiveness Deadline Date and (iii) the
Company shall
not be obligated to file more than one post-effective amendment
pursuant to
Section 2(e) in any single fiscal quarter of the Company.
(f) The Company may require each Notice Holder to furnish
to the
Company such information regarding the Notice Holder and the
distribution
of the Transfer Restricted Securities as the Company may from
time to time
reasonably request for inclusion in the Shelf Registration
Statement, and
the Company may exclude from such registration the Transfer
Restricted
Securities of any Notice Holder that unreasonably fails to
furnish such
information within 20 business days after receiving such
request, without
prejudice to that Notice Holder's right to request
participation in
subsequent amendments to or filings of a Shelf Registration
Statement.
3. Additional Amounts.
(a) If:
(i) the Shelf Registration Statement is not filed
with the
Commission prior to or on the Shelf Filing Deadline;
(ii) the Shelf Registration Statement has not been
declared
effective by the Commission prior to or on the
Effectiveness Target
Date;
(iii) the Company or the Guarantors have failed to
perform their
obligations set forth in Section 2(e) within the time
period required
therein;
(iv) any post-effective amendment to a Shelf
Registration
Statement filed pursuant to Section 2(e)(i) has not
become effective
under the Securities Act on or prior to the Amendment
Effectiveness
Deadline Date;
(v) except as provided in Section 4(b)(i) hereof,
the Shelf
Registration Statement is filed and declared effective
but, during the
Effectiveness Period, shall thereafter cease to be
effective or fail
to be usable for its intended purpose without being
succeeded within
15 Business Days by a post-effective amendment to the
Shelf
Registration Statement, a supplement to the Prospectus or
a report
filed with the Commission pursuant to Section 13(a),
13(c), 14 or
15(d) of the Exchange
7
Act that cures such failure and, in the case of a
post-effective
amendment, is itself immediately declared effective; or
(vi) (A) prior to or on the 30th day of any
Suspension Period,
such suspension has not been terminated or (B) Suspension
Periods
exceed an aggregate of 90 days in any 360 day period,
(each such event referred to in foregoing clauses (i) through (vi),
a
"Registration Default"), the Company and the Guarantors hereby
agree to pay
additional amounts in cash ("Additional Amounts") with respect to
the Transfer
Restricted Securities to each Holder of such Transfer Restricted
Securities who
has complied with such Holder's obligations under this Agreement
from and
including the day following the Registration Default to but
excluding the
earlier of (1) the day on which all Registration Defaults have been
cured and
(2) the date the Shelf Registration Statement is no longer required
to be kept
effective as set out below:
(A) in respect of the Debentures, the Company
and the
Guarantors jointly and severally agree to pay
interest to each
holder of Debentures accruing at a rate of (x) with
respect to
the first 90-day period during which a Registration
Default shall
have occurred and be continuing, equal to 0.25% per
annum of the
aggregate issue price of the Debentures, and (y)
with respect to
the period commencing on the 91st day following the
day the
Registration Default shall have occurred and be
continuing, equal
to 0.50% per annum of the aggregate issue price of
the
Debentures; provided that in no event shall
Additional Amounts
accrue at a rate per year exceeding 0.50% of the
aggregate issue
price of the Debentures; and
(B) in respect of Common Stock, each Holder of
such Common
Stock will not be entitled to any Additional Amounts
on such
Common Stock;
provided that the Company shall not be required to pay Additional
Amounts in
respect of more than one Registration Default at any one time.
(b) All accrued Additional Amounts shall be paid in
arrears to Record
Holders by the Company and the Guarantors on each Additional
Amounts
Payment Date. Additional Amounts pursuant to clauses (iii)
through (vi) of
Section 3(a) shall only be payable to Holders of Transfer
Restricted
Securities that have delivered a timely and properly completed
Notice and
Questionnaire. Upon the cure of all Registration Defaults
relating to any
particular Debenture, the accrual of Additional Amounts with
respect to
such Debenture shall cease.
All obligations of the Company and the Guarantors set forth in
this Section
3 that are outstanding with respect to any Transfer Restricted
Security at the
time such security ceases to be a Transfer Restricted Security
shall survive
until such time as all such
8
obligations with respect to such Transfer Restricted Security shall
have been
satisfied in full.
The Additional Amounts set forth above shall be the exclusive
monetary
remedy available to the Holders of Transfer Restricted Securities
for each
Registration Default.
4. Registration Procedures.
(a) In connection with the Shelf Registration Statement,
the Company
and the Guarantors shall comply with all the provisions of
Section 4(b)
hereof and shall use reasonable efforts to effect such
registration to
permit the sale of the Transfer Restricted Securities, and
pursuant
thereto, shall as expeditiously as possible prepare and file
with the
Commission a Shelf Registration Statement relating to the
registration on
any appropriate form under the Securities Act.
(b) In connection with the Shelf Registration Statement
and any
Prospectus required by this Agreement to permit the sale or
resale of
Transfer Restricted Securities, the Company and the Guarantors
shall:
(i) Subject to any notice by the Company or the
Guarantors in
accordance with this Section 4(b) of the existence of any
fact or
event of the kind described in Section 4(b)(iii)(D), use
reasonable
efforts to keep the Shelf Registration Statement
continuously
effective during the Effectiveness Period; upon the
occurrence of any
event that would cause the Shelf Registration Statement
or the
Prospectus contained therein (A) to contain a material
misstatement or
omission or (B) not to be effective and usable for resale
of Transfer
Restricted Securities during the Effectiveness Period,
the Company
and/or the Guarantors shall use reasonable efforts to
file promptly an
appropriate amendment to the Shelf Registration
Statement, a
supplement to the Prospectus or a report filed with the
Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, in
the case of clause (A), correcting any such misstatement
or omission,
and, in the case of either clause (A) or (B), use
reasonable efforts
to cause such amendment to be declared effective and the
Shelf
Registration Statement and the related Prospectus to
become usable for
their intended purposes as soon as practicable
thereafter.
Notwithstanding the foregoing, the Company may suspend
the
effectiveness of the Shelf Registration Statement by
written notice to
the Holders for a period not to exceed an aggregate of 30
days in any
90-day period (each such period, a "Suspension Period")
upon:
(x) the occurrence or existence of any fact or the
happening of
any event as a result of which the Shelf Registration
Statement, the
Prospectus, any amendment or supplement thereto, or any
document
incorporated by reference therein would, in the Company's
judgment,
contain an untrue statement of a material fact or omit to
state a
material
9
fact required to be stated therein or necessary to make
the
statements therein not misleading; and
(y) the occurrence or existence of any corporate
development
that, in the Company's judgment, makes it appropriate to
suspend the
effectiveness of the Shelf Registration Statement;
provided that the Company and the Guarantors will use their
reasonable
efforts to ensure that the use of the Prospectus may be
resumed (A) in the
case of clause (x) above, as soon as, in the judgment of the
Company,
public disclosure of such fact or event would not be
prejudicial to or
contrary to the interests of the Company or, if necessary to
avoid
unreasonable burden or expense, as soon as practicable
thereafter and (B)
in the case of clause (y) above, as soon as, in the judgment
of the
Company, such suspension is no longer appropriate; provided,
however, that
Suspension Periods shall not exceed an aggregate of 90 days in
any 360-day
period; provided further that the Company may not suspend the
effectiveness
of the Shelf Registration Statement to avoid its obligations
hereunder. The
Company shall not be required to specify in the written notice
to the
Holders the nature of the event giving rise to the Suspension
Period.
(ii) Prepare and file with the Commission such
amendments and
post-effective amendments to the Shelf Registration
Statement as may
be necessary to keep the Shelf Registration Statement
effective during
the Effectiveness Period; cause the Prospectus to be
supplemented by
any required Prospectus supplement, and as so
supplemented to be filed
pursuant to Rule 424 under the Securities Act, and to
comply fully
with the applicable provisions of Rules 424 and 430A
under the
Securities Act in a timely manner; and comply with the
provisions of
the Securities Act with respect to the disposition of all
Debentures
or shares of Common Stock covered by the Shelf
Registration Statement
during the applicable period in accordance with the
intended method or
methods of distribution by the sellers thereof set forth
in the Shelf
Registration Statement or supplement to the Prospectus.
(iii) Advise the selling Holders promptly and, if
requested by
such selling Holders, to confirm such advice in writing,
except as
provided in clause (D) below:
(A) when the Prospectus or any Prospectus
supplement or
post-effective amendment has been filed, and, with
respect to the
Shelf Registration Statement or any post-effective
amendment
thereto, when the same has become effective,
(B) of any request by the Commission for
amendments to the
Shelf Registration Statement or amendments or
supplements to the
Prospectus or for additional information relating
thereto,
10
(C) of the issuance by the Commission of any
stop order
suspending the effectiveness of the Shelf
Registration Statement
under the Securities Act or of the suspension by any
state
securities commission of the qualification of the
Transfer
Restricted Securities for offering or sale in any
jurisdiction,
or the initiation of any proceeding for any of the
preceding
purposes, or
(D) of the existence of any fact or the
happening of any
event, during the Effectiveness Period, that makes
any statement
of a material fact made in the Shelf Registration
Statement, the
Prospectus, any amendment or supplement thereto, or
any document
incorporated by reference therein untrue, or that
requires the
making of any additions to or changes in the Shelf
Registration
Statement or the Prospectus in order to make the
statements
therein not misleading.
If at any time the Commission shall issue any stop order
suspending
the effectiveness of the Shelf Registration Statement, or any
state
securities commission or other regulatory authority shall
issue an order
suspending the qualification or exemption from qualification
of the
Transfer Restricted Securities under state securities or Blue
Sky laws, the
Company and the Guarantors shall use their reasonable efforts
to obtain the
withdrawal or lifting of such order at the earliest possible
time and will
provide to each Holder who is nam
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