GTECH HOLDINGS CORP, 424B1, 1996-06-20

GTECH HOLDINGS CORP
424B1, 1996-06-20
COMPUTER PROGRAMMING, DATA PROCESSING, ETC.

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<PAGE>
Filed Pursuant to Rule 424(b)(1)
Registration File No.: 333-3602

PROSPECTUS
JUNE 18, 1996

9,806,000 SHARES

GTECH HOLDINGS CORPORATION
COMMON STOCK

Of the 9,806,000 shares of Common Stock offered hereby, 7,844,800 shares
are being offered for sale in the United States and Canada by the U.S.
Underwriters (the "U.S. Offering") and 1,961,200 shares are being offered for
sale outside the United States and Canada in a concurrent offering by the
International Managers (the "International Offering" and, together with the
U.S. Offering, the "Offerings"). See "Underwriting."

All of the shares offered hereby are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of shares offered hereby.

The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") under the symbol "GTK." The reported closing price of the Company's
Common Stock on the NYSE on June 17, 1996 was $28 7/8 per share. See "Price
Range of Common Stock and Dividend Policy."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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PRICE UNDERWRITING PROCEEDS TO
TO THE DISCOUNTS AND THE SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
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<S> <C> <C> <C>
Per Share .. $28.75 $0.98 $27.77
Total(3) .... $281,922,500 $9,609,880 $272,312,620
- ------------------------------------------------------------------
</TABLE>

(1) See "Underwriting" for information relating to indemnification of the
Underwriters.

(2) The Company has agreed to pay certain expenses of the Selling
Stockholders estimated at $575,000.

(3) The Selling Stockholders have granted to the U.S. Underwriters a 30-day
option to purchase up to an additional 980,957 shares of Common Stock
in the aggregate solely to cover over-allotments, if any. If all such
shares are purchased, the total Price to the Public, Underwriting
Discounts and Commissions and Proceeds to the Selling Stockholders will
be $310,125,014, $10,571,218 and $299,553,796, respectively. See
"Underwriting."

The shares are offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters and subject to various prior
conditions, including the right of the Underwriters to reject orders in whole
or in part. It is expected that delivery of the shares will be made in New
York, New York, on or about June 21, 1996.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MERRILL LYNCH & CO.

SALOMON BROTHERS INC

<PAGE>

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.

NO ACTION HAS BEEN OR WILL BE TAKEN BY THE COMPANY, ANY SELLING
STOCKHOLDER OR ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE
COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY
JURISDICTION WHERE SUCH ACTION MAY BE REQUIRED, OTHER THAN IN THE UNITED
STATES.

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified by the more detailed information
appearing elsewhere in this Prospectus. Statements relating to the lottery
industry contained or incorporated by reference in this Prospectus are based
on information compiled by the Company or derived from independent public
sources which the Company believes to be reliable. In general, there is less
publicly available information concerning the international lottery industry
than the lottery industry in the United States.

THE COMPANY

GTECH is the world's leading operator of computerized on-line lottery
systems. The Company currently operates on-line lottery systems for 26 of the
37 on-line lottery authorities in the United States and has supplied or
currently operates on-line lottery systems for 48 of the 74 international
on-line lottery authorities. The Company, seeking to develop growth
opportunities in addition to those available in the on-line lottery industry,
is actively involved in the emerging electronic benefits delivery industry
and in the pursuit of gaming opportunities other than on-line lottery such as
destination gaming and video lottery.

Since the establishment of the first on-line lottery in 1975, the on-line
lottery industry has experienced substantial growth, as governments have
increasingly relied on lotteries as a non-tax source of revenue. In 1995,
ticket sales in the on-line lottery industry were approximately $20.2 billion
in the United States. The Company believes the on-line lottery industry will
continue to grow, assuming, as anticipated, that additional international
jurisdictions implement on-line lotteries and international and United States
jurisdictions with existing on-line lotteries expand their lottery systems
and introduce new lottery products and games.

The Company's core business consists of providing on-line lottery services
and products to governmental lottery authorities and governmental licensees
worldwide. The Company offers its customers a full range of lottery services,
including the design, assembly, installation, operation, maintenance and
marketing of on-line lottery systems and instant ticket support services. The
Company's lottery systems consist of numerous lottery terminals located in
retail outlets, central computer systems, systems software and game software,
and communications equipment which connects the terminals and the central
computer systems.

Historically, the majority of the Company's lottery customers in the
United States have entered into long-term service contracts pursuant to which
the Company provides, operates and maintains the customers' on-line lottery
systems in return for a percentage of the gross lottery revenues. Many of the
Company's international lottery customers have purchased their on-line
lottery systems, although some, especially lottery authorities in Eastern
Europe and Latin America, have entered into long-term service contracts with
the Company. Over the last several years, there has been an industry movement
away from product sales in favor of long-term service contracts. In fiscal
1993, approximately 70% of the Company's lottery revenues were derived from
its portfolio of long-term on-line lottery service contracts with
substantially all of the remainder being derived from lottery product sales.
In each year since fiscal 1993, the percentage of the Company's lottery
revenues derived from on-line lottery service contracts has risen, and in
fiscal 1996, approximately 92% of the Company's lottery revenues were derived
from on-line lottery service contracts. While the Company believes that
product purchases by lotteries during each of the next two years are likely
to exceed the level experienced in fiscal 1996, it is likely that the
percentage of the Company's revenues attributable to product sales will
remain closer to the percentage level realized in fiscal 1996 than to the
fiscal 1993 level.

In recent years, lottery authorities have recognized that by offering new
games or products, lotteries are able to generate significant additional
revenues. An important part of the Company's strategy is to develop new
products and services for its customers in order to increase their lottery
revenues. The Company's principal on-line products and services introduced in
recent years consist of keno, instant ticket support services and
BingoVision(Trademark). Keno, an on-line lottery game which features drawings
as often as every five minutes, was first introduced by the Company and the
Lotteries Commission of South Australia in 1990 and subsequently has been
introduced successfully by the Company and lottery authorities in 15
additional jurisdictions on four continents. The Company currently provides
instant ticket support services, products and systems in 21 domestic
jurisdictions and 11 jurisdictions outside of

<PAGE>

the United States. BingoVision(Trademark), a televised bingo-based lottery
game developed by the Company, has been implemented in three jurisdictions.
See "Business -- Certain Products and Services."

The Company also has broadened its product lines outside of its core
business of providing on-line lottery services and products. In August 1993,
the Company acquired a benefits delivery business as part of its acquisition
of the parimutuel wagering business of General Instrument Corporation which
the Company conducted through its AmTote International, Inc. subsidiary
("AmTote"). The Company recently divested AmTote but continues to build upon
the benefits delivery operations. The Company's benefits delivery systems
provide secure, high volume transaction processing of food stamps, Aid to
Families with Dependent Children and other benefits on behalf of governmental
authorities. The Company, principally through its wholly-owned subsidiary,
Transactive Corporation ("Transactive"), currently provides to the State of
Texas benefits delivery systems and services and recently has been selected
by the State of Illinois Department of Public Aid to provide, subject to
obtaining necessary federal government approvals, similar systems and
services. The State of Texas currently operates the largest electronic
benefits delivery system in the United States.

In November 1994, the Company announced the formation of its Gaming Group
to pursue gaming opportunities other than on-line lottery, including video
lottery and destination gaming. In May 1995, the Company announced an
agreement with Full House Resorts, Inc. ("Full House") to finance and develop
Native American and casino gaming opportunities. One such opportunity, a
casino on Native American lands in Coos Bay, Oregon, became operational in
May 1995. In addition, in February 1996, the Company and Full House entered
into agreements with Delaware State Fair and Harrington Raceway, Inc.
respecting the financing and construction of a gaming facility at the
Delaware State Fairgrounds, Kent County, Delaware, and other opportunities
are being developed by the Company and Full House.

In fiscal 1996, the Company formed a subsidiary, GTECH Worldserv, Inc. to
provide network communications services to private sector clientele. This
business is still in its initial start-up phase. See "Business--Certain
Products and Services."

The Company's principal executive offices are located at 55 Technology
Way, West Greenwich, Rhode Island 02817, and its telephone number is (401)
392-1000.

THE OFFERINGS

<TABLE>
<CAPTION>
<S> <C>
Common Stock Outstanding.. 43,054,212(1)
Shares to be Sold by the
Selling Stockholders:
U.S. Offering ........... 7,844,800
International Offering . 1,961,200
---------------
Total ................... 9,806,000
===============
NYSE Symbol .............. GTK
</TABLE>
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(1) At June 1, 1996. Excludes an aggregate of approximately 21,808 shares
of Common Stock subject to outstanding unvested grants under the
Company's stock benefit plans and 1,332,500 unexercised stock options
outstanding under the Company's stock option plan.
--------------
As used in this Prospectus, unless the context indicates otherwise, the
"Company" or "GTECH" means GTECH Holdings Corporation and its direct and
indirect subsidiaries, including GTECH Corporation, the Company's
wholly-owned subsidiary, and "Common Stock" means the Common Stock of the
Company. Unless otherwise indicated, all information in this Prospectus
assumes no exercise of the U.S. Underwriters' over-allotment option.

<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA

The summary consolidated financial data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Consolidated Financial Statements included in
the Company's fiscal 1996 Form 10-K which are incorporated herein by
reference and other financial information included and incorporated by
reference herein.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------------
FEBRUARY 29, FEBRUARY 27, FEBRUARY 26, FEBRUARY 25, FEBRUARY 24,
1992 (a) 1993 1994 1995 1996
-------------- -------------- -------------- ------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Services ............................................ $239,984 $343,213 $457,529 $547,767 $686,043
Sales of products ................................... 110,148 158,148 135,271 147,340 58,047
-------------- -------------- -------------- -------------- -----------
Total .............................................. 350,132 501,361 592,800 695,107 744,090
Gross Profit:
Services ............................................ 87,397 112,404 152,845 194,097 244,139
Sales of products ................................... 49,344 72,394 62,941 41,468 13,595
-------------- -------------- -------------- -------------- -----------
Total .............................................. 136,741 184,798 215,786 235,565 257,734
Operating income ..................................... 54,201 82,039 119,206 104,481(b) 117,983
Interest expense, net of interest income ............. 24,879 16,126 11,756 13,065 12,107
Income from continuing operations before dividends on
and accretion of Subsidiary Preferred Stock,
extraordinary charge and cumulative effect of
accounting change ................................... 18,534 40,400 66,473 52,319 66,627
Net income ........................................... 13,862 21,694(c) 56,150(d) 872(e) 66,627
PER SHARE DATA:
Earnings per common share from continuing operations $ 0.38 $ 0.92 $ 1.53 $ 1.20 $ 1.54
Earnings per common share ............................ 0.38 0.53(c) 1.29(d) 0.02(e) 1.54
Pro forma earnings per common share (f) .............. 0.64 1.02 1.29 0.02 1.54
Weighted average common shares outstanding (in
thousands) .......................................... 36,474 41,080 43,588 43,451 43,236
OTHER DATA:
Earnings before depreciation, amortization, interest,
taxes and other non-cash charges (g) ................ $113,248 $162,211 $213,756 $221,832 $273,570
Cumulative number of lottery terminals shipped (h) .. 126,994 164,180 221,254 261,287 280,897
Number of lottery terminals sold ..................... 14,053 19,078 17,557 12,282 3,658
Number of lottery customers at year-end .............. 56 59 67 72 74
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit) ............................ $(21,629) $ 47,458 $ 25,364 $ 6,086 $ 21,414
Total assets ......................................... 385,268 516,893 665,250 779,254 859,380
Long-term debt, less current portion ................. 202,669 225,064 258,961 338,468 382,930
Redeemable Subsidiary Preferred Stock ................ 27,347 -- -- -- --
Shareholders' equity ................................. 30,715 168,055 232,329 232,931 296,725
</TABLE>

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(a) 53-week year.
(b) Includes an $11.1 million special charge consisting of a $6.1 million
charge in connection with the reduction of the Company's workforce and
relocation of certain operating functions and $5.0 million to write off
its video gaming-related inventory. See Note J to the Consolidated
Financial Statements.
(c) Includes an after-tax extraordinary charge on early extinguishment of
debt of $18.5 million, or $0.45 per share, relating to the Company's
July 1992 initial public offering of Common Stock and $2.4 million, or
$0.06 per share, of income relating to an accounting change.
(d) Includes AmTote after-tax operating losses of $10.3 million, or $0.24
per share.
(e) Includes AmTote after-tax operating losses of $6.6 million, or $0.15
per share, the after-tax loss on the disposal of AmTote of $43.4
million, or $1.00 per share, and an after-tax extraordinary loss of
$1.4 million, or $0.03 per share, relating to the early extinguishment
of debt.
(f) Assumes that the initial public offering of Common Stock in July 1992
and the early retirement of certain long-term debt had occurred at the
beginning of fiscal 1993 and 1992, respectively.
(g) Represents income before income taxes and (i) interest expense, (ii)
depreciation and amortization, (iii) non-cash stock compensation
expense, (iv) certain purchase accounting adjustments relating to the
acquisition of the Company in 1990 and (v) certain other non-cash
items.
(h) Terminals shipped represents lottery terminals sold under product sales
contracts and lottery terminals supplied under service contracts.

<PAGE>

RISK FACTORS

Prospective purchasers of the Common Stock should carefully consider the
risk factors set forth below, as well as the other information set forth in
this Prospectus.

This Prospectus contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Those statements appear in a number of places in this Prospectus and
include statements regarding the intent, belief or current expectations of
the Company, its directors or its officers with respect to (i) the future
performance of its Transactive Corporation subsidiary, (ii) the future
performance of its Brazilian subsidiary, Racimec Informatica Brasileira S.A.,
(iii) future product sales levels, (iv) future operating performance of the
Company, and (v) the results and the effects of legal proceedings and
investigations. Prospective investors are cautioned that any such forward
looking statements are not guarantees of future performance and involve risks
and uncertainties, and that actual results may differ materially from those
in the forward looking statements as a result of various factors. The
accompanying information contained in this Prospectus, including without
limitation the information set forth below and the information under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" identifies important factors that could cause such
differences.

GOVERNMENTAL REGULATION

In the United States, lotteries are not permitted in a particular
jurisdiction unless expressly authorized by law in such jurisdiction. Once
authorized, the ongoing operation of a lottery is highly regulated. Lottery
authorities generally conduct an intensive investigation of the Company and
its employees prior to and after the award of a lottery contract and may
require removal of any employees deemed to be unsuitable. To date, the
Company has never been disqualified from receiving a lottery contract or
operating a lottery system as a result of any such investigation. Certain
jurisdictions also require extensive personal and financial disclosure and
background checks from persons and entities beneficially owning a specified
percentage (typically 5% or more) of the Company's securities. The failure of
such beneficial owners to submit to such background checks and provide such
disclosure could result in the imposition of penalties upon such beneficial
owners and could jeopardize the award of a lottery contract to the Company or
provide grounds for termination of an existing lottery contract. Transactive,
which is engaged primarily in providing computerized networks and services to
governments for electronic benefits transfers, is also subject to extensive
state as well as federal regulatory requirements.

The international jurisdictions in which the Company markets its lottery
systems also usually have legislation and regulations governing lottery
operations. The regulation of lotteries in these international jurisdictions
typically varies from the regulation of lotteries in the United States. In
addition, restrictions are often imposed on foreign corporations seeking to
do business in such jurisdictions. As a result, the Company has found it
desirable in a number of instances to ally itself as a subcontractor or joint
venture partner with a local company in seeking international lottery
contracts.

MAINTENANCE OF BUSINESS RELATIONSHIPS AND CERTAIN LEGAL MATTERS

A significant portion of the Company's revenues and cash flow is derived
from its portfolio of long-term on-line lottery service contracts. The
Company's on-line lottery service contracts typically have an initial term of
five years and usually provide the customer with options to extend the
contract under the same terms and conditions for additional periods generally
ranging from one to five years. The Company's customers have generally
exercised the extension options under their contracts or negotiated
extensions on different terms and conditions. Upon the expiration of a
contract, lottery authorities may award new contracts through a competitive
procurement process. There can be no assurance that, in the future, the
Company's contracts will be extended or that it will be awarded new contracts
as a result of competitive procurement processes. The Company's lottery
contracts typically permit a lottery authority to terminate the contract at
any time for failure to perform and other specified reasons, and many of such
contracts permit the lottery authority to terminate the contract at will and
do not specify the compensation, if any, to which the Company would be
entitled were such termination to occur. To date, no lottery authority has
ever exercised its option to terminate a contract with the Company at will
during the contract term or has ever terminated a contract with the Company
for failure to perform. The termination or failure to renew one or more
lottery contracts could, depending upon the circumstances, have a material
adverse effect on the Company's business or prospects.

<PAGE>

The Company regularly engages public affairs and governmental relations
advisors, including lobbyists, in various jurisdictions to advise legislators
and the public in connection with lottery legislation, to monitor potential
lottery legislation and to advise the Company in connection with the
Company's lottery and benefits delivery contract proposals. The Company also
makes contributions to various political parties and associations but does
not make contributions to individual candidates or their campaigns. The
Company believes that it has complied with all applicable political
contribution and lobbying disclosure laws and regulations.

It has not been uncommon in the lottery industry for investigations of
various types, including federal grand jury investigations, to be conducted
by federal or state law enforcement and other officials into possible undue
influence, bribery or other improprieties or wrongdoing in connection with
efforts to obtain or the awarding of lottery contracts and related matters.
Some investigations in the past have involved the Company, or its
consultants, lobbyists or representatives, directly or indirectly, and the
Company is aware of federal grand jury investigations being conducted by the
U.S. Attorney in New Jersey, Georgia and Texas. The Company is cooperating
with such investigations by providing documents in response to subpoenas.

As previously publicly reported, in October 1994, it was announced by the
U.S. Attorney's Offices for the Western District of Kentucky and for the
District of New Jersey that separate indictments had been returned by federal
grand juries in those jurisdictions against J. David Smith, the former sales
manager of the Company (who resigned in early 1994 for reasons unrelated to
the indictments), and several other individuals who served as consultants or
suppliers to the Company. The indictments alleged essentially that,
unbeknownst to the Company, Mr. Smith received kickbacks from the consultants
and suppliers, which charges, if true, make the Company a victim. The
indictments do not charge the Company with any wrongdoing, and the actions
complained of did not affect the Company's Kentucky or New Jersey lottery
operations. On January 9, 1995 the trial of Mr. Smith commenced in Kentucky
and on January 12, 1995, the U.S. District Court for the Western District of
Kentucky granted the defendants' motion for judgment of acquittal and
dismissed all charges against Mr. Smith and the other defendant, a GTECH
supplier, at the conclusion of the Government's case. The Company understands
that the New Jersey trial of Mr. Smith is scheduled to commence in September
1996. The Company has cooperated and continues to cooperate with the U.S.
Attorney's Office by providing documents in response to subpoenas issued to
it.

No charges of wrongdoing have ever been brought against the Company by any
grand jury or other governmental authority. On two occasions in the past,
charges of wrongdoing were brought against lobbyists retained by the Company,
but neither lobbyist was found guilty of any activities relating to the
Company.

The Company does not believe that it has engaged in any wrongdoing in
connection with these matters. However, since the current investigations are
still underway and are conducted largely in secret, the Company lacks
sufficient information to determine with certainty their ultimate scope and
whether the government authorities will assert claims resulting from these or
other investigations that could implicate or reflect adversely upon the
Company. Because the Company's reputation for integrity is an important
factor in its business dealings with lottery and other governmental agencies,
if government authorities were to make an allegation of, or if there were to
be a finding of, improper conduct on the part of or attributable to the
Company in any matter, such an allegation or finding could have a material
adverse effect on the Company's business, including its ability to retain
existing contracts and to obtain new or renewal contracts.

The award of lottery contracts in the United States generally is subject
to competitive bidding, and it is not unusual for the award of such contracts
to be followed by protests being filed by the losing party or parties. See
"Business -- Legal Proceedings." In addition, it is not unusual for
competitors or politicians (who may include those opposed to gaming or the
lottery business) to make allegations of undue influence or other
improprieties in the award of contracts or to call for investigations of
lottery authorities. On occasion, these allegations or investigations may
involve the Company directly or indirectly. As noted above, no charges of
wrongdoing have ever been brought against the Company.

<PAGE>

In December 1995, Richard Branson filed suit in the United Kingdom's High
Court of Justice (Queen's Bench Division) against GTECH U.K. Corporation, a
subsidiary of the Company, and Robert Rendine, its press spokesman, and in
January 1996, Mr. Branson filed suit in this same court against the Company's
Co-Chairman, Guy B. Snowden, alleging that the defendants had libelled Mr.
Branson in responding to certain allegations which had been made by Mr.
Branson. Mr. Branson, whose consortium in 1994 lost the bid to operate the
U.K. National Lottery, had alleged in a television program broadcast in the
U.K. in December 1995 that Mr. Snowden had offered him an inducement in
September 1993 not to bid for the U.K. lottery contract. Mr. Snowden and the
Company have categorically denied Mr. Branson's allegations and have formally
asked the Director General of the U.K. National Lottery to investigate these
allegations. Queens Counsel Anne Rafferty has been appointed by the Director
General to conduct the inquiry. The Company intends to cooperate fully with
the inquiry and to defend its Co-Chairman, subsidiary and press spokesman
vigorously in the legal proceedings brought by Mr. Branson. In addition, Mr.
Snowden filed suit on January 11, 1996 in the U.K. against Mr. Branson
alleging that Mr. Branson's televised allegations have libelled Mr. Snowden.

INVESTMENTS IN RACIMEC AND TRANSACTIVE

The Company has substantial investments in its subsidiaries, Transactive
and RACIMEC Informatica Brasileira S.A. ("Racimec"), which were not
profitable in fiscal 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for information concerning the
Company's investments in Transactive and Racimec.

The prospects for the Company's electronic benefits delivery business may
be adversely affected by an initiative of the Federal EBT Task Force (the
"Task Force"). At various times in 1995, the Task Force supported a
procurement process for electronic benefits delivery systems and services
which, in essence, would permit only certain large, federally-insured banks
to participate. In March 1995, the Department of Treasury's Financial
Management Services ("FMS") issued an Invitation to Express Interest by which
it solicited, in a manner consistent with the efforts of the Task Force, a
full range of electronic benefits delivery services on behalf of a coalition
of states known as the Southern Alliance of States (the "SAS"). In the fall
of 1995, Citibank was designated by FMS as the financial institution to
provide benefits on behalf of the SAS. In March 1995 Transactive sued the
United States and the Department of Treasury in the Federal District Court
for the District of Columbia, arguing, among other things, that the SAS
procurement violated various applicable federal procurement and other laws
and was arbitrary, capricious and without rational basis. In September 1995,
the court granted a motion made by the Department of Treasury for summary
judgment and Transactive has appealed this decision to the U.S. Court of
Appeals for the District of Columbia Circuit. The parties are currently
awaiting the court's decision on this appeal. While several states or
coalitions of states have invited bids respecting electronic benefits
delivery systems and services since the SAS, none have used the Invitation to
Express Interest process of the SAS. Nevertheless, if the Invitation to
Express Interest were to be widely adopted by other states, and if the
September 1995 decision is not overturned, the Company's ability to
participate directly in the electronic benefits business could be adversely
affected.

FLUCTUATION OF QUARTERLY OPERATING RESULTS

The Company has experienced and may continue to experience significant
fluctuations in operating results from quarter to quarter due to such factors
as the amount and timing of product sales, the occurrence of large jackpots
in lotteries (which increase the amount wagered and the Company's revenue)
and expenses incurred in connection with lottery start-ups and other new
ventures.

LIQUIDATED DAMAGES UNDER CONTRACTS

The Company's lottery and electronic benefits delivery contracts typically
permit termination of the contract at any time for failure of the Company to
perform and for other specified reasons and generally contain demanding
implementation schedules and performance schedules. Failure to perform under
such contracts may result in substantial monetary liquidated damages, as well
as contract termination. Many of the Company's lottery contracts permit the
lottery authority to terminate the contract at will and do not

<PAGE>

specify the compensation, if any, to which the Company would be entitled
should such termination occur. Certain of the Company's United States lottery
contracts have contained provisions for up to approximately $700,000 a day in
liquidated damages for late system start-up and provide for up to
approximately $10,000 or more in penalties per minute for system downtime in
excess of a stipulated grace period, and certain of the Company's
international customers (most notably the United Kingdom's National Lottery)
similarly reserve the right to assess substantial monetary damages in the
event of contract termination or breach. Although such liquidated damages
provisions are customary in the lottery industry and the actual liquidated
damages imposed are generally subject to negotiation, such provisions in the
Company's lottery contracts present an ongoing potential for substantial
expense. Liquidated damages are generally deducted directly from revenues the
Company has otherwise earned from the lottery authorities and are budgeted by
the Company on an annual basis. Liquidated damages paid or incurred by the
Company with respect to its lottery contracts equaled 0.25%, 0.42%, 0.53%,
0.50% and 0.23% of annual revenues in each of the five fiscal years ending
February 1992 through 1996, respectively. Lottery contracts generally require
the vendor (i.e., the Company) to post a performance bond, which in some
cases may be substantial, securing the vendor's performance under such
contracts.

Electronic benefits delivery contracts may also provide for significant
liquidated damages and termination penalties to be assessed against vendors
in certain circumstances. For example, Transactive's electronic benefits
delivery contract with the Texas Department of Human Services provides for
liquidated damages of up to $250,000 per day in certain circumstances.

RECENT DEVELOPMENTS

In May 1996, the Company and the Texas lottery authority extended the term
of their agreement for five years (from September 1, 1997 through August
2002) and amended it to provide for the Company to furnish the Texas lottery
authority with a new central system, additional terminals and other lottery
equipment and services. The amendment also annually reduces over its
five-year term the percentage rate of the Texas lottery's revenues which the
Company is to receive as compensation under its agreement with the Texas
lottery authority. However, the Company believes that the effect of the
reduction in the percentage rate will be more than offset by the addition of
more terminals, but there can be no assurance that this will be the case.

The Company's fiscal 1997 first quarter ended on May 25, 1996. Revenues
for the quarter were $211.2 million, of which $195.0 million was from
services and $16.2 million was from product sale revenues. This compares with
revenues of $179.4 million, composed of $165.3 of service revenues and $14.1
million of product sale revenues, for the first quarter of fiscal 1996. Net
income for the fiscal 1997 first quarter was $18.2 million, or $0.42 per
share, compared with $18.3 million, or $0.42 per share, for the same quarter
last year. These results, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation. For further information, refer to the Current Report
on Form 8-K filed by the Company with the Securities and Exchange Commission
on June 10, 1996 and incorporated herein by reference.

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of the
Common Stock by the Selling Stockholders in the Offerings.

<PAGE>

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The principal United States market on which the Company's Common Stock is
traded is the New York Stock Exchange where it is traded under the symbol
"GTK."

The following table sets forth on a per share basis the high and low sale
prices of Common Stock for the fiscal quarters indicated, as reported on the
New York Stock Exchange Composite Tape.

<TABLE>
<CAPTION>
PRICE RANGE
OF COMMON
STOCK
-------------
YEAR ENDED FEBRUARY 25, 1995 HIGH LOW
- ---------------------------- ------ -----
<S> <C> <C>
1st Quarter ................. $38 7/8 $22 3/8
2nd Quarter ................. 23 3/4 15 1/8
3rd Quarter ................. 23 3/4 17 7/8
4th Quarter ................. 23 3/8 15 3/4
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 24, 1996 HIGH LOW
- ---------------------------- ------ -----
<S> <C> <C>
1st Quarter ................. $26 $18 3/8
2nd Quarter ................. 30 1/2 23 1/8
3rd Quarter ................. 30 3/4 23 3/8
4th Quarter ................. 31 1/2 24 1/8
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 22, 1997
- ----------------------------
<S> <C> <C>
1st Quarter ................. $33 1/2 $27 1/4
2nd Quarter (through June
17, 1996) ................. 33 1/8 28 7/8
</TABLE>

The closing price of the Common Stock on the New York Stock Exchange as of
a recent date is set forth on the cover page of this Prospectus. As of April
1, 1996, there were approximately 1,700 holders of record of the Common
Stock.

The Company has never paid cash dividends on its Common Stock and does not
plan to do so in the foreseeable future. The current policy of the Company's
Board of Directors is to reinvest earnings in the operation and expansion of
the Company's business. Further, the Company is a holding company and the
operations of the Company are conducted through its subsidiaries.
Accordingly, the ability of the Company to pay dividends on its Common Stock
is dependent on the earnings and cash flow of its subsidiaries and the
availability of such cash flow to the Company. See Note G to the Consolidated
Financial Statements.

<PAGE>

CAPITALIZATION

The following table sets forth the short-term debt and total
capitalization of the Company at February 24, 1996. The data in this table
should be read in conjunction with the Consolidated Financial Statements.

<TABLE>
<CAPTION>
AS OF
FEBRUARY 24,
1996
------------
(IN THOUSANDS)
<S> <C>
Current portion of long-term debt ........................................ $ 3,993
==============
Long-term debt (excluding current portion):
Credit Facilities ....................................................... $366,500
Other bank facilities ................................................... 16,430
--------------
382,930
Shareholders' equity (a):
Common Stock, par value $.01 per share, 43,021,839 shares outstanding
(b) ..................................................................... 437
Additional paid-in capital .............................................. 167,758
Equity carryover basis adjustment ....................................... (7,008)
Translation adjustment .................................................. (463)
Retained earnings ....................................................... 150,938
--------------
311,662
Less treasury stock ..................................................... (14,937)
--------------
Total shareholders' equity ............................................. 296,725
--------------
Total capitalization ................................................... $679,655
==============
</TABLE>

- --------------------
(a) The Company also has 20,000,000 shares of authorized preferred stock,
$.01 par value, with such rights and preferences as the Board of
Directors of the Company may establish from time to time. No shares of
such preferred stock have been issued.
(b) Does not include an aggregate of 43,443 shares of Common Stock subject
to outstanding unvested grants under the Company's stock benefit plans
and 1,214,150 unexercised stock options outstanding under the Company's
stock option plan.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Consolidated Financial Statements and the
other financial information included and incorporated by reference herein.
The operating and balance sheet data in the table are derived from the
Consolidated Financial Statements which were audited by independent auditors.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------------------
FEBRUARY 29, FEBRUARY 27, FEBRUARY 26, FEBRUARY 25, FEBRUARY 24,
1992(A) 1993 1994 1995 1996
----------------- -------------- -------------- ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Services ........................................... $239,984 $ 343,213 $457,529 $547,767 $686,043
Sales of products .................................. 110,148 158,148 135,271 147,340 58,047
----------------- -------------- -------------- -------------- -----------
Total ............................................. 350,132 501,361 592,800 695,107 744,090
Gross Profit:
Services ........................................... 87,397 112,404 152,845 194,097 244,139
Sales of products .................................. 49,344 72,394 62,941 41,468 13,595
----------------- -------------- -------------- -------------- ----------
Total ............................................. 136,741 184,798 215,786 235,565 257,734
Operating income .................................... 54,201 82,039 119,206 104,481(b) 117,983
Interest expense, net of interest income ............ 24,879 16,126 11,756 13,065 12,107
Income from continuing operations before dividends
on and accretion of Subsidiary Preferred Stock,
extraordinary charge and cumulative effect of
accounting change ................................. 18,534 40,400 66,473 52,319 66,627
Loss from operations of AmTote ...................... -- -- (10,323) (6,583) --
Loss on disposal of AmTote .......................... -- -- -- (43,444) --
Dividends on and accretion of Subsidiary Preferred
Stock .............................................. (4,672) (2,604) -- -- --
Extraordinary charge ................................ -- (18,534)(c) -- (1,420) --
Cumulative effect of accounting change .............. -- 2,432 -- -- --
Net income .......................................... 13,862 21,694 56,150 872 66,627
PER SHARE DATA:
Earnings per common share
from continuing operations ......................... $ 0.38 $ 0.92 $ 1.53 $ 1.20 $ 1.54
Earnings per common share ........................... 0.38 0.53(d) 1.29 (e) 0.02 (f) 1.54
Pro forma earnings per common share (g) ............. 0.64 1.02 1.29 0.02 1.54
Weighted average common shares outstanding
(in thousands) ..................................... 36,474 41,080 43,588 43,451 43,236
OTHER DATA:
Earnings before depreciation, amortization,
interest, taxes and other non-cash charges (h) .... $113,248 $ 162,211 $213,756 $221,832 $273,570
Cumulative number of lottery terminals shipped (i) . 126,994 164,180 221,254 261,287 280,897
Number of lottery terminals sold .................... 14,053 19,078 17,557 12,282 3,658
Number of lottery customers at year-end ............. 56 59 67 72 74
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit) ........................... $(21,629) $ 47,458 $ 25,364 $ 6,086 $ 21,414
Total assets ........................................ 385,268 516,893 665,250 779,254 859,380
Long-term debt, less current portion ................ 202,669 225,064 258,961 338,468 382,930
Redeemable Subsidiary Preferred Stock ............... 27,347 -- -- -- --
Shareholders' equity ................................ 30,715 168,055 232,329 232,931 296,725
</TABLE>

- ------------------
(a) 53-week year.
(b) Includes an $11.1 million special charge consisting of a $6.1 million
charge in connection with the reduction of the Company's workforce and
relocation of certain operating functions and $5.0 million to write off
its video gaming-related inventory. See Note J to the Consolidated
Financial Statements.
(c) Represents an after-tax extraordinary charge on the early
extinguishment of debt relating to the Company's July 1992 initial
public offering of Common Stock.
(d) Includes the after-tax extraordinary charge described in (c), $0.45 per
share, and $0.06 per share, of income relating to an accounting change.
(e) Includes after-tax operating losses of AmTote, $0.24 per share.
(f) Includes after-tax operating losses of AmTote, $0.15 per share, the
after-tax loss on disposal of AmTote, $1.00 per share, and an after-tax
extraordinary loss relating to early extinguishment of debt, $0.03 per
share.
(g) Assumes that the initial public offering of Common Stock in July 1992
and the early retirement of certain long-term debt had occurred at the
beginning of fiscal 1993 and 1992, respectively.
(h) Represents income before income taxes and (i) interest expense, (ii)
depreciation and amortization, (iii) non-cash stock compensation
expense, (iv) certain purchase accounting adjustments relating to the
acquisition of the Company in 1990 and (v) certain other non-cash
items.
(i) Terminals shipped represents lottery terminals sold under product sales
contracts and lottery terminals supplied under service contracts.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company has derived substantially all of its revenues from the
rendering of services and the sale or supply of computerized on-line lottery
systems and components to government-authorized lotteries. Service revenues
have been derived primarily from service contracts, which are typically of at
least five years' duration, and are generally based upon a percentage of a
lottery's gross on-line lottery sales, which typically falls within a range
of 1.5% to 5.0%. Product sales revenues have been derived primarily from the
installation of new on-line lottery systems and sales of lottery terminals
and equipment in connection with the expansion of existing lottery systems.
The size and timing of these transactions have resulted in variability in
product sales revenues from period to period. Over the past several years
there has been an industry movement toward service contracts and away from
product sales contracts. In fiscal 1993, approximately 70% of the Company's
lottery revenues were derived from its portfolio of long-term on-line lottery
service contracts with substantially all of the remainder being derived from
lottery product sales. In each year since fiscal 1993, the percentage of the
Company's lottery revenues derived from on-line lottery service contracts has
risen, and in fiscal 1996, approximately 92% of the Company's lottery
revenues were derived from on-line lottery service contracts. While the
Company believes that product purchases by lotteries during each of the next
two years are likely to exceed the level experienced in fiscal 1996, it is
likely that the percentage of the Company's revenues attributable to product
sales will remain closer to the percentage level realized in fiscal 1996 than
to the fiscal 1993 level.

The Company's lottery service contracts are generally subject to a new
competitive procurement process after the expiration of the contract term and
any extensions thereof. For fiscal 1996, 1995 and 1994, the aggregate
revenues from the State of Texas represented 19.6%, 16.1% and 15.9% of the
Company's consolidated revenues, respectively. No other customer accounted
for more than 10% of consolidated revenues in such years.

All references to years contained in this section refer to the Company's
fiscal year which ends on the last Saturday in February. Fiscal 1996 ended on
February 24, 1996.

All references to the Consolidated Financial Statements of the Company and
Notes thereto are to the Consolidated Financial Statements of the Company and
Notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended February 24, 1996, which is incorporated by reference into
this Prospectus and Registration Statement.

The Company's business is highly regulated, and the competition to secure
new government contracts is often intense. Awards of contracts to the Company
also, from time to time, are being challenged by competitors. Further, there
have been and continue to be investigations of various types, including
federal grand jury investigations, conducted by governmental authorities into
possible improprieties and wrongdoing in connection with efforts to obtain
and/or the awarding of lottery contracts and related matters. Although the
Company does not believe that it has engaged in any wrongdoing in connection
with these matters, certain investigations are still underway and are
conducted largely in secret. Accordingly, the Company lacks sufficient
information to determine with certainty their ultimate scope and whether the
government authorities will assert claims resulting from these or other
investigations that could implicate or reflect adversely upon the Company.
Because the Company's reputation for integrity is an important factor in its
business dealings with lottery and other governmental agencies, if government
authorities were to make an allegation of, or if there were to be a finding
of, improper conduct on the part of or attributable to the Company in any
matter, such an allegation or finding could have a material adverse effect on
the Company's business, including its ability to retain existing contracts
and to obtain new or renewal contracts. See Note H to the Consolidated
Financial Statements and "Risk Factors -- Maintenance of Business
Relationships and Certain Legal Matters" and "Business -- Legal Proceedings"
for further information concerning these matters and other contingencies.

<PAGE>

The following discussion should be read in conjunction with the table
below.

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------
FEBRUARY 26, FEBRUARY 25, FEBRUARY 24,
1994 1995 1996
------------------- ------------------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Services ....................... $457,529 77.2% $547,767 78.8% $686,043 92.2%
Sales of products .............. 135,271 22.8 147,340 21.2 58,047 7.8
---------- ------- ---------- ------- ---------- -------
Total ......................... 592,800 100.0 695,107 100.0 744,090 100.0
Costs and expenses:
Costs of services (a) .......... 304,684 66.6 353,670 64.6 441,904 64.4
Costs of sales (a) ............. 72,330 53.5 105,872 71.9 44,452 76.6
---------- ------- ---------- ------- ---------- -------
Total ......................... 377,014 63.6 459,542 66.1 486,356 65.4
Gross profit .................... 215,786 36.4 235,565 33.9 257,734 34.6
Selling, general and
administrative ................. 71,834 12.1 91,960 13.2 110,212 14.8
Research and development ........ 24,746 4.2 28,024 4.1 29,539 4.0
Special charge .................. -- -- 11,100 1.6 -- --
---------- ------- ---------- ------- ---------- -------
Operating income ................ 119,206 20.1 104,481 15.0 117,983 15.8
Other income (expense):
Interest income ................ 1,715 0.3 5,120 0.7 12,124 1.6
Equity in earnings of
unconsolidated affiliates .... 1,853 0.3 1,872 0.3 8,060 1.1
Other income (expense) ......... 1,344 0.2 (689) (0.1) 939 0.1
Interest expense ............... (13,471) (2.2) (18,185) (2.6) (24,231) (3.2)
---------- ------- ---------- ------- ---------- -------
Income from continuing
operations before income taxes
and extraordinary charge ....... 110,647 18.7 92,599 13.3 114,875 15.4
Income taxes .................... 44,174 7.5 40,280 5.8 48,248 6.5
---------- ------- ---------- ------- ---------- -------
Income from continuing
operations before extraordinary
charge ......................... 66,473 11.2 52,319 7.5 66,627 8.9
Loss from operations of AmTote,
net of tax benefit ............. (10,323) (1.8) (6,583) (1.0) -- --
Loss on disposal of AmTote, net
of tax benefit ................. -- -- (43,444) (6.2) -- --
Extraordinary charge, net of tax
benefit ........................ -- -- (1,420) (0.2) -- --
---------- ------- ---------- ------- ---------- -------
Net income ...................... $ 56,150 9.4% $ 872 0.1% $ 66,627 8.9%
========== ======= ========== ======= ========== =======
</TABLE>

- ----------------
(a) Percentages are computed based on cost as a percentage of related
revenue.

<PAGE>

TRANSACTIVE CORPORATION

The Company's Transactive subsidiary, which commenced substantial
operations in fiscal 1996, has incurred significant operating losses and
currently expects to incur significant operating losses during fiscal 1997.
As of February 24, 1996, the Company had invested approximately $61.1 million
in systems, equipment and other assets to establish infrastructure to support
its current and future benefits delivery business. (See Note E to the
Consolidated Financial Statements.)

During the second half of fiscal 1996, the Company implemented a plan for
Transactive to enhance its existing revenue streams, reduce operating costs,
leverage its infrastructure within existing states with new applications and
win business with new states. The Company has confidence in this plan and is
monitoring its progress carefully. However, if adequate progress is not made
within a reasonable period of time, the Company may consider alternatives for
Transactive, including joint venturing with another entity. There can be no
assurance that these efforts will be successful, and if they are not
successful, the Company may be required to recognize a loss on a portion of
its investment in Transactive.

RACIMEC

On September 1, 1993, the Company acquired 41.5% of the voting common
stock and 41.5% of the non-voting preferred stock of Racimec, a Brazilian
company engaged in the lottery business (which lottery business includes the
pursuit of Brazil's national on-line lottery contract), for cash
consideration of approximately $6.9 million plus related expenses. On January
31, 1996, the Company acquired the remaining voting common stock and 37.7% of
non-voting preferred stock of Racimec (resulting in the Company owning 83% of
the total equity of Racimec) for cash consideration of $4.6 million plus
related expenses and the exchange by the Company of $9.4 million of notes and
related accrued interest receivable from a shareholder of Racimec. The
results of Racimec for fiscal 1996 are included in the financial statements
of the Company on the equity method of accounting through January 31, 1996.
Subsequent to January 31, 1996 the financial statements of Racimec have been
consolidated. At February 24, 1996, the Company's investment in Racimec
approximated $84.9 million. (See Note B to the Consolidated Financial
Statements.)

Racimec incurred significant operating losses during fiscal 1996 due
principally to start-up losses related to new on-line state lottery networks
which began operation during the year, along with pre-launch marketing costs.
On an unaudited pro forma basis as if the January 31, 1996 acquisition had
taken place at the beginning of fiscal 1996, the Company's earnings per share
would have been reduced to $1.25 per share. Pro forma results, however, do
not purport to represent what the Company's results would actually have been
had Racimec been acquired at the beginning of the fiscal year or to project
the Company's or Racimec's results for any future period. A revenue
enhancement and cost reduction plan for Racimec was implemented during the
fourth quarter of fiscal 1996, and management currently expects that
Racimec's pre-tax operating results for fiscal 1997 will substantially
improve over fiscal 1996. There can be no assurance that the Company's
efforts relating to Racimec will be successful, and if they are not
successful, the Company may be required to recognize a loss on a portion of
its investment in Racimec.

AMTOTE

In February 1995, the Board of Directors of the Company approved a plan to
dispose of the Company's AmTote subsidiary. AmTote, which was acquired by the
Company in fiscal 1994, was engaged in the parimutuel on-track services and
benefits delivery system businesses. In connection with the Company's
decision to dispose of AmTote, the Company recorded an after-tax charge of
$43.4 million, or $1.00 per share, in fiscal 1995. In addition, the results
of operations for AmTote for fiscal 1995 and 1994 were reported as losses
from discontinued operations net of income tax benefit. In February 1996, the
Company divested itself of AmTote and agreed to reimburse Mudge Acquisitions
Group, the acquirer, for certain liabilities of AmTote. (See Note D to the
Consolidated Financial Statements.)

<PAGE>

RESULTS OF OPERATIONS

COMPARISON OF FISCAL 1996 WITH 1995

Revenues for fiscal 1996 were $744.1 million, representing a $49.0
million, or 7.0%, increase over revenues of $695.1 million in fiscal 1995.

Service revenues in fiscal 1996 were $686.0 million, representing a $138.2
million, or 25.2%, increase over the $547.8 million of service revenues in
fiscal 1995. The increase in service revenues resulted primarily from higher
service revenues of $82.6 million from the Company's existing customer base
(due in part to higher jackpot activity and expanded services), $31.7 million
of higher service revenues from the United Kingdom lottery which became
operational in November 1994, $15.8 million of service revenues from
Transactive, $4.3 million of service revenues from Racimec for the month of
February 1996 and $3.8 million of service revenues from new on-line lottery
systems operated by the Company which commenced operations in fiscal 1996.

Product sales for fiscal 1996 were $58.0 million, representing an $89.3
million, or 60.6%, decrease from product sales of $147.3 million in fiscal
1995. This decrease resulted primarily from lower sales of component parts
and equipment ("OEM equipment") in connection with the United Kingdom
operations (which began during fiscal 1995) along with lower lottery terminal
and central system sales. The Company sold approximately 3,700 lottery
terminals during fiscal 1996, as compared to approximately 12,300 terminals
during fiscal 1995.

Gross margins on service revenues increased to 35.6% in fiscal 1996 from
35.4% in fiscal 1995 due principally to higher revenues earned from certain
jurisdictions (attributable primarily to higher jackpots and expanded
services) without a corresponding increase in the costs associated with
operating those lotteries. These higher margins were reduced by a significant
loss incurred by Transactive.

Gross margins on product sales fluctuate depending primarily on the mix
and timing of product sales contracts. Gross margins on product sales
decreased to 23.4% in fiscal 1996 from 28.1% in fiscal 1995. This decrease
was due primarily to a small loss incurred in connection with the sale of a
central system in fiscal 1996 that is expected to be more than offset in
fiscal 1997 as the Company completes the shipment of terminals under the
contract. This reduction in margin was partially offset by higher margins on
terminal sales.

Selling, general and administrative expenses in fiscal 1996 were $110.2
million, representing an $18.2 million, or 19.8%, increase from the $92.0
million incurred in fiscal 1995. This increase was primarily attributable to
higher administrative costs which were necessary to support expanded
operations (including Transactive) and increased sales and marketing
activity. In addition, the Company continued to spend in the area of
management information staff and new systems as part of its efforts to
improve its business information systems. As a percentage of revenues,
selling, general and administrative expenses were 14.8% and 13.2% during
fiscal 1996 and fiscal 1995, respectively.

Research and development expenses in fiscal 1996 were $29.5 million,
representing a $1.5 million, or 5.4%, increase from research and development
expenses of $28.0 million in fiscal 1995. These increases in expenses were
attributable to increased development activity for new lottery equipment and
software and new lottery games for the Company's increased number of service
customers. In addition, a lower level of software engineering cost was
capitalized to new on-line lottery system projects. As a percentage of
revenues, research and development expenses were 4.0% and 4.1% during fiscal
1996 and fiscal 1995, respectively.

Interest income in fiscal 1996 was $12.1 million, representing an increase
of $7.0 million from interest income of $5.1 million earned during fiscal
1995. This increase was due primarily to interest earned on loans to Racimec.

Equity in earnings of unconsolidated affiliates in fiscal 1996 was $8.1
million, representing an increase of $6.2 million from $1.9 million earned
during fiscal 1995. This increase was due primarily to higher earnings from
the Company's 22.5% investment in Camelot Group plc ("Camelot"), the
consortium which operates the United Kingdom lottery, partially offset by
losses from the Company's investment in Racimec.

<PAGE>

Interest expense in fiscal 1996 was $24.2 million, an increase of $6.0
million, or 33.3%, from interest expense of $18.2 million in fiscal 1995.
This increase was due primarily to higher average debt outstanding, along
with higher average interest rates.

The Company's effective income tax rate decreased to 42.0% in fiscal 1996
from 43.5% in fiscal 1995 due principally to the increase in equity in
earnings of unconsolidated affiliates which is reported on an after-tax
basis. The Company's effective income tax rate was greater than the statutory
rate due primarily to state income taxes and certain expenses that are not
deductible for income tax purposes.

COMPARISON OF FISCAL 1995 WITH 1994

Revenues for fiscal 1995 were $695.1 million, representing a $102.3
million, or 17.3%, increase over revenues of $592.8 million in fiscal 1994.

Service revenues in fiscal 1995 were $547.8 million, representing a $90.3
million, or 19.7%, increase over the $457.5 million of service revenues in
fiscal 1994. The increase in service revenues resulted primarily from higher
revenues of $36.2 million from the Company's existing customer base, due in
part to higher lottery jackpots, $17.3 million of higher revenues from the
Georgia on-line lottery system which became operational in August 1993, $18.1
million of higher revenues from the Company's lottery customer in New York,
primarily as a result of the Company providing services for the entire system
beginning in September 1993, $15.7 million of service revenues from new
on-line lottery systems operated by the Company which commenced operations in
fiscal 1995 and $3.0 million of service revenues from the Company's benefits
delivery business which was acquired from General Instruments in August 1993.

Product sales for fiscal 1995 were $147.3 million, representing a $12.0
million, or 8.9%, increase from product sales of $135.3 million in fiscal
1994. The higher product sales resulted from the sale of OEM equipment in
connection with the United Kingdom operations, partially offset by lower
terminal sales. The Company sold approximately 12,300 lottery terminals
during fiscal 1995, as compared to approximately 17,500 terminals during
fiscal 1994. The Company sold one new central lottery system in both fiscal
1995 and fiscal 1994.

Gross margins on service revenues increased to 35.4% in fiscal 1995 from
33.4% in fiscal 1994 due principally to higher lottery jackpots in fiscal
1995 without a corresponding increase in the costs associated with operating
those lotteries, along with expense reductions resulting from cost
improvement programs. Partially offsetting these factors was higher
depreciation expense on new on-line lottery systems installed in fiscal 1994
in California, Georgia, Ireland, New York and Ohio.

Gross margins on product sales fluctuate depending primarily on the mix
and timing of product sales contracts. Gross margins on product sales
decreased to 28.1% in fiscal 1995 from 46.5% in fiscal 1994 due primarily to
lower margin OEM equipment sales in connection with the United Kingdom
operations, lower margins on terminal sales and higher warranty provisions
relating to certain terminal sales. Revenues from the United Kingdom
operations made significant contributions to the Company's service and
product sales revenues in fiscal 1995, but did not have an impact sufficient
to offset the overall product sale margin decline.

Selling, general and administrative expenses in fiscal 1995 were $92.0
million, representing a $20.2 million, or 28.0%, increase from the $71.8
million incurred in fiscal 1994. These increases were primarily attributable
to higher administrative costs which were necessary to support expanded
operations (including Transactive), increased sales and marketing activity,
higher executive compensation and higher legal costs relating primarily to
previously disclosed protests, investigations and the shareholder class
action suit. In addition, the Company increased its resources in the area of
management information staff and new systems as part of its efforts to
improve its business information systems. These higher costs were partially
offset by lower stock compensation expense. As a percentage of revenues,
selling, general and administrative expenses were 13.2% and 12.1% during
fiscal 1995 and fiscal 1994, respectively.

Research and development expenses in fiscal 1995 were $28.0 million,
representing a $3.3 million, or 13.2%, increase from research and development
expenses of $24.7 million in fiscal 1994. These increases in expenses were
attributable to increased development activity for new lottery equipment and
software

<PAGE>

and new lottery games for the Company's increased number of customers
partially offset by a higher level of capitalized software engineering cost
for new on-line lottery system projects and the new benefits delivery system
in Texas. As a percentage of revenues, research and development expenses were
4.1% and 4.2% during fiscal 1995 and fiscal 1994, respectively.

In the fourth quarter of fiscal 1995, the Company recorded an $11.1
million pre-tax special charge ($6.7 million after-tax, or $0.15 per share)
consisting of a $6.1 million charge in connection with the elimination of 126
positions from the Company's worldwide workforce and the consolidation and
relocation of certain functions within domestic and international operations
and $5.0 million to write off its remaining video gaming-related inventory in
connection with its decision to discontinue manufacture of video terminals.
However, the Company is continuing to design, procure and provide software
and installation services with respect to video lottery terminals.

Interest income in fiscal 1995 was $5.1 million, representing an increase
of $3.4 million from interest income of $1.7 million earned during fiscal
1994. This increase was due primarily to interest earned on loans to Racimec,
on a sales-type lease of an on-line lottery system to a customer in Argentina
and on terminal sales with extended payment terms to the Company's lottery
customer in Poland.

Interest expense in fiscal 1995 was $18.2 million, an increase of $4.7
million, or 35.0%, from interest expense of $13.5 million in fiscal 1994.
This increase was due primarily to higher average debt outstanding, along
with higher average interest rates.

The Company's effective income tax rate increased from 39.9% in fiscal
1994 to 43.5% in fiscal 1995 primarily due to limitations on the
deductibility of certain expenses imposed by the Revenue Reconciliation Act
of 1993 and foreign operating losses which generated no income tax benefit.
These same factors, along with state income taxes, also were primarily
responsible for the Company's effective income tax rate of 43.5% for fiscal
1995 being greater than the statutory rate of 35.0%.

CHANGES IN FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

During fiscal 1996, the Company generated $207.0 million of cash from
operations. This cash, together with $39.2 million of net borrowings, was
used primarily to fund the purchase of $184.0 million of systems, equipment
and other assets relating to contracts, $37.9 million of investments in
unconsolidated affiliates and the purchase of $10.3 million of property,
plant and equipment.

Current deferred income taxes decreased by $15.6 million from $41.3
million at February 25, 1995 to $25.7 million at February 24, 1996 due
primarily to the divestiture of AmTote.

The cost of systems, equipment and other assets relating to contracts
increased by $228.8 million from $658.4 million at February 25, 1995 to
$887.2 million at February 24, 1996. This increase reflects the consolidation
of approximately $56.7 million of Racimec assets along with the purchase of
the rights to a contract in California. In addition, the Company installed a
keno system in New York, installed new lottery networks in Colorado and the
District of Columbia, began the installation of a new lottery network in the
State of Washington, continued the installation of a benefits delivery system
in Texas and expanded lottery systems in several domestic and international
locations.

Goodwill increased by $26.5 million from $88.3 million at February 25,
1995 to $114.8 million at February 24, 1996 due primarily to the acquisition
of additional equity in Racimec.

Investments in and advances to unconsolidated affiliates decreased by
$38.5 million from $87.6 million at February 25, 1995 to $49.1 million at
February 24, 1996. This decrease resulted primarily from the consolidation of
Racimec assets and liabilities with the Company partially offset by the
Company's equity in earnings of Camelot and loans related to the Company's
agreements with Full House.

Other assets decreased by $11.4 million from $40.0 million at February 25,
1995 to $28.6 million at February 24, 1996, due primarily to scheduled
collections of long-term receivables.

Accrued employee compensation increased by $5.2 million from $19.7 million
at February 25, 1995 to $24.9 million at February 24, 1996, due primarily to
higher bonus and profit sharing accruals, reflecting certain improvements in
the financial performance of the Company, along with accruals associated with
the consolidation of Racimec.

<PAGE>

The accrual for discontinued operations decreased from $39.7 million at
February 25, 1995 to $5.7 million at February 24, 1996 due to the divestiture
of AmTote and the reclassification of $9.8 million of certain current
liabilities to other liabilities. These remaining accruals at February 24,
1996 represent estimated liabilities which the Company has agreed to
reimburse the acquirer in connection with the divestiture. (See Note D to the
Consolidated Financial Statements.)

The Company's business is capital-intensive. Although it is not possible
to estimate precisely, due to the nature of the business, the Company
currently anticipates that the level of capital expenditures for systems and
equipment and other assets relating to contracts required during fiscal 1997
will be lower than those expended in fiscal 1996. In addition, the Company
anticipates that the level of capital expenditures for property, plant and
equipment in fiscal 1997 will be lower than the fiscal 1996 levels. The
Company currently has a $500.0 million unsecured Credit Facility with a
syndicate of banks. At May 25, 1996, the Company had outstanding borrowings
of approximately $364.0 million and approximately $136.0 million was
available under this facility. The Company currently expects that its cash
flow from operations and available borrowings under its Credit Facility,
together, if necessary, with other sources of capital believed to be
available, will be sufficient to permit it to meet its anticipated working
capital and ordinary capital expenditure needs, to service its debt
obligations and to permit it to fund anticipated growth. However, the Company
is currently reviewing its debt structure and is considering refunding and/or
increasing its debt capacity. (See Note G to the Consolidated Financial
Statements.)

INFLATION, INTEREST RATES AND FOREIGN EXCHANGE FLUCTUATION

The impact of inflation on the Company's operations has not been
significant to date. While the Company believes that its business is not
highly sensitive to inflation, there can be no assurance that a high rate of
inflation in the future would not have an adverse effect on the Company's
operations.

The Company uses various interest rate hedging instruments to reduce the
risk associated with future increases in interest rates on its floating rate
long-term debt. On November 8, 1994, the Company entered into two interest
rate corridors with an aggregate notional amount of $165.0 million which
provide interest rate protection to November 8, 1996. The corridors
effectively entitle the Company to receive payments from the financial
institutions which are counterparties to the corridors should the three-month
London Interbank Offered Rates ("LIBOR") be between 6.75% and 8.75%. Should
LIBOR exceed 8.75%, the Company will receive a payment up to the 8.75%
ceiling but not above. At February 24, 1996, LIBOR was 5.25%.

On January 24, 1996, the Company entered into three interest rate swaps
with an aggregate notional amount of $125.0 million which provide interest
rate protection over the period January 26, 1996 to April 28, 1997. The swaps
effectively entitle the Company to receive payments from the financial
institutions which are counterparties to the swaps should LIBOR exceed
approximately 5.05%.

The Company attempts to manage its foreign exchange risk by securing
payment from its customers in U.S. dollars, by sharing risk with its
customers, by utilizing foreign currency borrowings, by leading and lagging
receipts and payments and by entering into forward foreign exchange
contracts. In addition, a significant portion of the costs attributable to
the Company's foreign currency revenues are incurred in the local currencies.

The Company, from time to time, enters into foreign currency exchange
contracts to hedge certain firm sales commitments, anticipated revenue
streams and certain assets and liabilities denominated in foreign currencies.
The effect of this practice is to minimize the impact of foreign exchange
rate movements on the Company's operating income. The Company does not engage
in currency speculation. Gains and losses on contracts which hedge specific
foreign currency commitments are deferred and accounted for as part of the
transaction being hedged. Contracts used to hedge anticipated revenue streams
and certain assets and liabilities are marked to market, and the resulting
transaction gain or loss is included in the determination of net income. As
of February 24, 1996, the Company had approximately $38.2 million of foreign
forward exchange contracts, primarily denominated in British Pounds, German
Deutschemarks and Irish Pounds.

For further information on the above, see Note P to the Consolidated
Financial Statements.

<PAGE>

BUSINESS

Historically, the majority of the Company's lottery customers in the
United States have entered into long-term service contracts pursuant to which
the Company provides, operates and maintains the customers' on-line lottery
systems in return for a percentage of the gross lottery revenues. Many of the
Company's international lottery customers have purchased their on-line
lottery systems, although some, especially lottery authorities in Eastern
Europe and Latin America, have entered into long-term service contracts with
the Company. Over the last several years, there has been an industry movement
away from product sales in favor of long-term service contracts. In fiscal
1993, approximately 70% of the Company's lottery revenues had been derived
from its portfolio of long-term on-line lottery service contracts with
substantially all of the remainder being derived from lottery product sales.
In each year since fiscal 1993, the percentage of the Company's lottery
revenues derived from on-line lottery service contracts has risen, and in
fiscal 1996, approximately 92% of the Company's lottery revenues were derived
from on-line lottery service contracts. While the Company believes that
product purchases by lotteries during each of the next two years are likely
to exceed the level experienced in fiscal 1996, it is likely that the
percentage of the Company's revenues attributable to product sales will
remain closer to the percentage level realized in fiscal 1996 than to the
fiscal 1993 level.

ON-LINE LOTTERY CONTRACTS

The Company generally conducts its lottery business under one of three
types of contractual arrangements: Facilities Management Contracts, Operating
Contracts and Product Sales Contracts. Under a typical Facilities Management
Contract, the Company installs, operates and maintains a lottery system,
while retaining ownership of the lottery system. These contracts generally
provide for service fees directly from the lottery authority to the Company
based on a percentage of on-line lottery ticket sales. Under an Operating
Contract, the Company generally provides the same services as under a
Facilities Management Contract, but sells the lottery system and licenses the
computer software to the lottery authority. Ongoing service fees to the
Company under an Operating Contract are usually based on a percentage of
lottery ticket sales. Under a Product Sales Contract, the Company sells,
delivers and installs a turnkey lottery system or lottery equipment and
licenses the computer software for a fixed price, and the lottery authority
subsequently operates and maintains the lottery system. The purchase price
for products sold under Operating Contracts and Product Sales Contracts is
generally paid prior to or upon acceptance of the products.

The collection of lottery monies, the selection of winners, the financial
responsibility for the payment of prizes and the qualification of retail
sales agents are usually the sole responsibility of the lottery authority in
each jurisdiction in which the Company operates a lottery. The United
Kingdom's National Lottery provides an important exception to this general
rule. Camelot Group plc, a consortium of companies of which the Company is a
member, was licensed by the United Kingdom government to operate all aspects
of the National Lottery with the exception of proceeds allocation.

<PAGE>

FACILITIES MANAGEMENT CONTRACTS

The table below sets forth the lottery authorities with which the Company
had Facilities Management Contracts as of March 9, 1996 except as otherwise
noted. Unless otherwise indicated, the Company is the sole supplier of
central computers and terminals and services to each of the lottery
authorities listed below. The table also sets forth information regarding the
term of each contract and, as of March 9, 1996, the approximate number of
terminals installed in each jurisdiction.

FACILITIES MANAGEMENT CONTRACTS

<TABLE>
<CAPTION>
APPROXIMATE DATE OF DATE OF
NO. OF LOTTERY COMMENCEMENT EXPIRATION OF CURRENT
TERMINALS OF CURRENT CURRENT EXTENSION
JURISDICTION INSTALLED(1) CONTRACT CONTRACT TERM OPTIONS*
- --------------------------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
UNITED STATES:
Arizona(2) ....................... (2) (2) (2) --
California(3) .................... 13,170 10/93 10/98 5 one-year
Colorado ......................... 2,270 3/95 10/00 2 two-year
District of Columbia(4) .......... 620 5/95 11/99 --
Georgia .......................... 4,820 4/93 9/98 5 years
Illinois ......................... 6,270 2/89 10/97 3 one-year
Indiana .......................... 3,250 3/90 6/98 1 one-year
Iowa ............................. 1,500 4/91 6/01 1 two-year
Kansas ........................... 1,620 1/88 6/97 --
Louisiana ........................ 2,640 11/91 1/97 5 years
Maine(5) ......................... 1,070 7/90 6/00 --
Maryland(6) ...................... 3,920 4/91 7/96 --
Michigan ......................... 5,850 4/88 1/99 --
Missouri(7) ...................... 2,370 7/96 7/01 2 one-year
Nebraska ......................... 720 4/94 6/00 1 four-year
New Hampshire(5) ................. 890 7/90 6/00 --
New Jersey(8) .................... 5,120 7/84 5/96(8) 2 four-month
New York ......................... 10,510 2/93 2/99 3 one-year
Ohio ............................. 6,250 10/93 6/97 2 two-year
Oregon ........................... 2,670 8/85 5/97 1 three-month
Rhode Island ..................... 900 1/87 1/97 --
Texas(9) ......................... 12,340 3/92 8/02 --
Vermont(5) ....................... 450 7/90 6/00 --
Washington State ................. (10) 9/95 6/01 3 years
West Virginia .................... 1,250 2/92 6/00 2 one-year
Wisconsin ........................ 3,060 5/89 3/97 --
Subtotal ..................... 93,530
INTERNATIONAL:
Barbados
-- T.L. Lotteries ............... 190 10/94 1/00 2 one-year
Brazil(11)
-- Minas Gerais ................. 620 10/94 10/00 (11)
-- Parana ....................... 750 8/94 8/98 (11)
-- Santa Catarina ............... 180 5/95 5/00 (11)
-- FGFS Sports Club ............. 40 11/94 11/99 (11)
Chile
-- Polla Chilena de
Beneficencia S.A. ............ 1,640 12/93 8/99 --
</TABLE>

<PAGE>

- -------------------------
* Reflects extensions available to the lottery authority under the same
terms as the current contract. Lottery authorities occasionally
negotiate extensions on different terms and conditions.
(1) Total does not include instant ticket validation terminals.
(2) In May 1996, the Company entered into a one-year agreement with the
Arizona lottery authority to provide on-line and instant ticket
lottery equipment and services. This agreement becomes effective upon
termination of Arizona lottery authority's agreement with its current
supplier, Automated Wagering International, Inc., which it is
anticipated will terminate in fiscal 1997. Subject to such
termination, the agreement calls for the Company to reinstall,
operate and maintain the equipment (including up to 2,500 terminals)
which the Company had supplied under its previous contract with the
Arizona lottery authority. The Company's previous contract commenced
in October 1988 and expired in October 1995. The Company's new
agreement provides for a term of one-year from commencement of sales
under the Company's system and for an indefinite number of 90-day
extensions at the lottery's option.
(3) In addition, the Company is a subcontractor to High Integrity
Systems, Inc. ("HISI"), which has a contract with the California
lottery authority to install and maintain 6,000 terminals using
HISI's proprietary dial-up technology for on-line and instant ticket
sales and validation.

<PAGE>

(4) Operated by Lottery Technology Enterprises, a joint venture in which
the Company has a 40% interest.
(5) The Maine, New Hampshire and Vermont lotteries share a central
computer system.
(6) At the end of the current contract term, the Company will be replaced
by a competitor.
(7) Reflects contract awarded to the Company in January 1996. The
Company's current contract with the Missouri lottery authority
commenced in December 1990.
(8) The Company has been selected to provide a new on-line system upon
termination of the present contract. This award is subject to the
negotiation and execution of a contract and may be the subject of a
protest by a competitor. See "Business -- Legal Proceedings."
(9) In May 1996, the Company and the Texas lottery authority extended the
term of their agreement for 5 years (from September 1, 1997 through
August 2002) and amended it to provide for the Company to furnish the
Texas lottery authority with a new central system, additional
terminals and other lottery equipment and services. See "Recent
Developments".
(10) The Company plans to commence operations in Washington in June 1996
with approximately 3,000 terminals.
(11) Operated by Racimec, a Brazilian company in which the Company owns
all voting stock. Each of the Brazilian agreements may be extended,
at the option of the respective lottery authority, for one extension
term not to exceed the duration of the base term.
(12) The contract with the Czech Republic lottery authority runs until
seven years after the installation of the 2,500th terminal or three
years after the installation of any terminals after the 3,000th
terminal, whichever is later.
(13) The Company's contract with Ras Eesti Loto provides for an automatic
three-year extension, in certain circumstances, and an indefinite
number of one-year extension options.
(14) The contracts with the lottery authorities of Ireland, Spain (Loto
Catalunya) and Venezuela (Loteria de Oriente and Loteria de Zulia)
may either be extended for any period mutually acceptable to the
Company and the respective lottery authority or continue indefinitely
until termination by the respective lottery authority.
(15) The Company's contract with the Lithuanian lottery authority
automatically extends from year-to- year unless either party gives
timely notice of non-renewal.
(16) Reflects the earliest contract still in effect. The Company has
several additional contracts with the Mexico lottery authority under
which the commencement of the initial five-year term will occur upon
installation of terminals. At the conclusion of the initial term of
each contract, ownership of the lottery system, including all
terminals, will pass to the Mexico lottery authority. To date, title
to approximately 2,500 of the terminals has passed to the Mexico
lottery authority. The Company does not operate the system in Mexico
but does maintain the system.
(17) The expiration date of the Company's contract with the Polish Lottery
authority is seven years from a rolling date that is determined by
reference to the installation of the final terminal under the
contract. The contract's term automatically renews for an indefinite
number of one-year extension periods thereafter unless either party
gives timely notice of non-renewal.
(18) The Company's agreement with SPORTNIKE a.s. expired in July 1995 upon
termination of SPORTNIKE'S license to conduct a lottery in Slovakia.
Since then, the Company has been operating the system for, and in
March 1996 entered into a definitive agreement with, TIPOS a.s., the
current license holder. The Company's contract with TIPOS expires
seven years after the installation of the 1,000th terminal on the
system.
(19) Operated by Camelot Group plc, a consortium in which the Company
holds a 22.5% equity interest, on a facilities management basis. The
Company also sells equipment to Camelot Group plc for use by The
National Lottery.
(20) The Venezuela lottery authorities share the same central computer
system.

<PAGE>

OPERATING CONTRACTS

The table below sets forth the lottery authorities with which the Company
had Operating Contracts as of March 9, 1996. Unless otherwise indicated, the
Company is the sole supplier of lottery equipment and services to each of the
lottery authorities listed below. The table also sets forth information
regarding the term of each contract and, as of March 9, 1996, the approximate
number of terminals installed in each jurisdiction.

OPERATING CONTRACTS

<TABLE>
<CAPTION>
APPROXIMATE NO. DATE OF DATE OF
OF LOTTERY COMMENCEMENT EXPIRATION OF CURRENT
TERMINALS OF CURRENT CURRENT EXTENSION
JURISDICTION INSTALLED(1) CONTRACT CONTRACT TERM OPTIONS*
- ------------------------------- --------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
UNITED STATES:
Idaho .......................... 600 3/90 2/99 1 one-year
Kentucky(2) .................... 2,710 10/89 (2) --
---------------
Subtotal ...................... 3,310

INTERNATIONAL:
Argentina
-- Loteria National Sociedad
del Estado ................. 770 11/93 4/01 1 two-year
Denmark
-- Dansk Tipstjanst(3) ........ 2,780 9/95 1/00 --
The Netherlands
-- Stichting de Nationale
Sporttotalisator(5) ........ 2,610 12/91 2/97 (4)
Turkey
-- Turkish National Lottery .. (6) 2/96 (6) (6)
---------------
Subtotal ...................... 6,160
---------------
Total Terminals Installed ..... 9,470
===============
</TABLE>

- ------------------------
* Reflects extensions available to the lottery authority under the same
terms as the current contract. Lottery authorities occasionally
negotiate extensions on different terms and conditions.
(1) Total does not include instant ticket validation terminals.
(2) The Company's contract with the Kentucky lottery authority runs from
month-to-month through October 15, 1997. In October 1995, the
Kentucky lottery authority awarded to a competitor a new facilities
management contract to supply and maintain on-line lottery equipment
and provide services to the Kentucky lottery authority upon the
expiration of the Company's current Operating Contract.
(3) The Denmark lottery authority has exercised an option to assume
responsibility for the operation and maintenance of the lottery
system.
(4) The contract may either be extended for any period mutually
acceptable to the Company and the lottery authority or continues
indefinitely until termination by the lottery authority.
(5) The Company has entered into a Memorandum of Understanding with CGK
Computer Gesellschaft Konstanz mbH which has the contract with the
Netherlands lottery authority. The Netherlands lottery authority
operates the system and maintains all terminals. The Company performs
all software maintenance, except terminal application maintenance.
The Company also provides spare and repair parts.
(6) The Company's contract with Turkey's National Lottery Administration,
that was entered into in February 1996, provides that the Company
will sell up to 5,000 terminals and will provide comprehensive
services to the lottery authority. The contract terminates five years
after system start-up, currently scheduled for September 1996,
provided that the term of the contract will automatically renew for
successive one-year extension terms unless either party gives timely
notice of non-renewal. In addition, the Turkish lottery authority has
the option to assume responsibility for the provision of certain
lottery services at any time after the second anniversary of system
start-up.

<PAGE>

PRODUCT SALES CONTRACTS

The table below lists certain of the Company's direct and indirect
customers that have purchased lottery terminals and other on-line lottery
equipment from the Company since March 1, 1991. The Company has found the
size and timing of product sales often difficult to predict and has
experienced variability in product sales revenues from period to period.

<TABLE>
<CAPTION>
<S> <C>
Argentina -- National Lottery of Argentina
Argentina -- Provincial Lottery of Buenos Aires
Australia -- Lotteries Commission of South
Australia
Australia -- Tattersall Sweep Consultation
Australia -- Lotteries Commission of West
Australia
Austria -- Osterreichische Lotto Toto
Gesmbh
Belgium -- Loterie Nationale de Belgique
Canada -- Atlantic Lottery Corporation
Canada -- British Columbia Lottery
Corporation
Canada -- Ontario Lottery Corporation
Canada -- Western Canada Lottery
Corporation
Canada -- Saskatchewan Gaming Commission
Finland -- Oy Veikkaus AB
Germany -- Sachsiche Lotto-GmbH
Germany -- Lotterie Treuhandgesellschaft Mbh
Thuringen*
Iceland -- Islensk Getspa
Iceland -- Islenskar Getraunir
Malaysia -- Pan Malaysian Pools
Malaysia -- Lotteries Corporation (Sabah) Sdn.
Bhd.
Malaysia -- Sports Toto Malaysia Bhd.
New -- New Zealand Lotteries
Zealand Commission
Singapore -- Singapore Pools (Pte) Ltd.
Spain -- Sistemas Tecnicos de Loterias del
Estado
Sweden -- AB Tipstjanst
Switzerland -- Sport-Toto Gesellschaft
Switzerland -- Loterie de la Suisse Romande
United Kingdom -- The National Lottery
</TABLE>

- ---------------
* Sale pending

CERTAIN PRODUCTS AND SERVICES

ON-LINE LOTTERY

In recent years, lottery authorities have recognized that by offering new
games or products, the lotteries are able to generate significant additional
revenues. An important part of the Company's strategy is to develop new
products and services for its customers in order to increase their lottery
revenues. The Company's principal on-line lottery products and services
introduced in recent years are keno, instant ticket support services and
BingoVision(Trademark). In addition, the Company has recently introduced its
ISYS(Trademark) series terminal and PRO:SYS(Trademark) software system to
enhance the functionality and appeal of its existing software and terminal
lines.

Keno. While new on-line jurisdictions offer growth by providing access to
new players, more mature markets, such as the United States, rely principally
upon the introduction of new games to provide growth. One such game
introduced by the Company is keno. In keno, players typically choose up to 10
numbers from a field of 80 and attempt to match their numbers against any 20
numbers which are randomly selected by a central computer system.
Alternatively, the player may choose up to 10 numbers and wager that none of
such numbers will match the 20 numbers randomly selected. This game combines
the multiple prize payouts of a lotto-type game with the immediacy of an
instant scratch-off lottery game. It is also unique in its play-style and
distribution, which decreases the risk that the game will cannibalize
existing on-line lottery revenues. Keno is more interactive than typical
on-line lottery games and is designed to be played in the company of others.
While most lotto and numbers games are found in convenience stores and
supermarkets, places visited frequently and often individually, keno outlets
are often located in restaurants, taverns and bowling alleys and other social
settings which tend to be visited by groups of people.

<PAGE>

From the Company's introduction in April 1990 of the first on-line keno
game for the Lotteries Commission of South Australia through the end of
fiscal 1995 on February 25, 1995, the Company assisted lottery authorities in
Belgium, Brazil (Parana and Minas Gerais), California, Iceland, Kansas,
Maryland, Oregon, Rhode Island, Catalunya (Spain), Switzerland (La Societe de
la Loterie de la Suisse Romande), West Virginia and Venezuela (Loteria de
Caracas) to introduce on-line keno games. During fiscal 1996, the Company
assisted the New York and Georgia lottery authorities in implementing keno
games. Based on the success of keno in these jurisdictions, the Company
believes keno will be adopted in other jurisdictions in the next few years.

Keno illustrates the impact that new games can have on lottery revenues.
Since the United States introduction of keno in 1991, United States keno
revenues have grown significantly, exceeding $1.3 billion and accounting for
more than 7% of total United States on-line lottery revenues in 1995. The
popularity of keno has led the Company to explore the development of new
games based upon keno. Most notably, the Company has developed Keno
Plus(Trademark), a new product that combines expanded keno game
characteristics with new hardware and enhanced product support.

Instant Ticket Support Services. The Company provides certain products,
systems and services to the instant ticket lottery industry. The Company's
on-line support systems for the instant ticket lottery business provide
comprehensive functionality, including: instant ticket validation; retailer
accounting; inventory control and tracking; ticket stock distribution;
electronic funds transfer; finance and sales tracking reports; and marketing
support.

In order to automate and increase the security of instant ticket
lotteries, the Company developed the GTECH Validation Terminal ("GVT"), a
point-of-sale device that facilitates instant ticket validation and provides
access to the Company's on-line instant ticket support systems for instant
ticket agents who are not part of a lottery's on-line lottery system. The
Company also offers add-on validation terminals which attach to its on-line
lottery terminals and provide the same functionality as the GVT, while using
the existing communications network.

The Company is providing marketing, distribution, on-line validation,
inventory control and accounting support services and equipment (but not the
printing of the instant tickets) for the Texas lottery's instant ticket
games. In addition, the Company currently provides instant ticket support
services to lottery authorities in Colorado, District of Columbia, Georgia,
Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland,
Michigan, Missouri, New Hampshire, New Jersey, New York, Ohio, Oregon, Rhode
Island, Texas and Wisconsin. Internationally, the Company currently supplies
lottery authorities in Australia, Belgium, Chile, Denmark, Finland, Ireland,
Netherlands, New Zealand, Spain and the United Kingdom with instant ticket
support services.

BingoVision(Trademark). The Company has recently developed
BingoVision(Trademark), a televised bingo-based lottery game, in which
players buy tickets from on-line lottery retailers and mark them while
following a live televised draw. The Company has implemented
BingoVision(Trademark) in Estonia, the Czech Republic and Lithuania and is
actively marketing the game to other lottery authorities.

The PRO:SYS(Trademark) Software System. PRO:SYS(Trademark) is the
Company's latest software system. Employing a user friendly interface,
lotteries can use PRO:SYS(Trademark) to manage all aspects of their gaming
environment, including on-line, instant ticket sales and accounting and video
games. Features such as promotions management and information analysis allow
lottery authorities to tailor the system to their individual needs.
PRO:SYS(Trademark) was first installed in September, 1994 for Societe de la
Loterie de la Suisse Romande, Switzerland. Since that time, the Company has
installed PRO:SYS(Trademark) in systems used by the lottery authorities of
Washington, D.C.; Colorado; Idaho; Ontario, Canada; and Sachsische Lotto-GmbH
in Leipzig, Germany and is in the process of installing PRO:SYS(Trademark) in
Washington State, Missouri, Denmark, and Sweden. In addition,
PRO:SYS(Trademark) was used as the base architecture for the electronic
benefits transfer system installed by the Company under its February 1994
contract with the Texas Department of Human Services. See "Benefits Delivery
Systems and Services."

The ISYS(Trademark) Terminal Series. During fiscal 1996, the Company
introduced its ISYS(Trademark) terminal series. ISYS(Trademark) is an
integral, single-unit terminal which features modular subassemblies, high
perfor-

<PAGE>

mance ticket printer and playslip reader subassemblies, an easy-to-use
design, and a host of new features and technologies. The Company believes
that ISYS(Trademark) improves upon previous terminal designs by featuring
simplified wager entry via intuitive keyboard and screen formats, improved
system status monitoring and the latest instant ticket validator technology.

BENEFITS DELIVERY SYSTEMS AND SERVICES

The Company in recent years has sought to build upon its expertise in
providing secure, high volume transaction processing systems and services for
governmental authorities through its involvement in the emerging government
benefits delivery industry. Through Transactive, the Company is active in the
business of providing government benefits delivery systems and services. In
October 1995, the Company completed full implementation of a computerized
system for the electronic delivery of food stamps and Aid to Families with
Dependent Children ("AFDC") benefits under its February 1994 contract with
the Texas Department of Human Services. The Texas electronic benefits
delivery system provides food stamps and AFDC benefits to approximately 1.1
million households and is the largest electronic benefits delivery system
currently operating in the United States.

In December 1995, the Company announced that Transactive had been selected
to negotiate a contract to supply equipment and services for an electronic
benefit transfer system to the Illinois Department of Public Aid. Transactive
has subsequently entered into a final contract with the Illinois Department
of Public Aid which contemplates that the system, when fully implemented,
will provide AFDC, food stamp and public assistance benefits to approximately
500,000 households.

The Company acquired a contract to provide an on-line system and services
for the distribution of public assistance funds and food stamps for the Human
Resources Administration of the City of New York ("HRA") in August 1993 as
part of its acquisition of the on-track and off-track parimutuel wagering
business and related assets of General Instrument Corporation that the
Company has recently divested. Transactive will continue to provide this
system and services to HRA through December 31, 1996 and is engaged in
discussions with HRA respecting an extension of this contract. The State of
New York recently declared its conditional intent to award a benefits
delivery contract to a competitor of Transactive. If this award becomes
final, HRA's program of delivering public assistance funds and food stamps
will likely be subsumed within the New York State program, and Transactive's
contract, which is profitable, with HRA will likely terminate as a result.

In July 1995, Transactive entered into an agreement with the Texas Parks
and Wildlife Department to provide an on-line system for the sale of fish and
game licenses and in September 1995, sales of fish and game licenses
commenced on this system. In August 1995, the Company entered into an
agreement with the Idaho lottery and the Idaho Department of Fish and Game
("IDFG") to provide equipment, software and services to permit the sale of
fish and game licenses for the IDFG utilizing, in part, the on-line lottery
system provided by the Company to the Idaho lottery authority.

In addition, during fiscal 1996 Transactive obtained required approvals
from the State of New York of its September 1994 subcontract with Continental
Currency Services, Inc. to provide equipment and related services for the
production and issuance of benefit identification cards. This contract has
not yet been implemented pending determination by the State of New York of
its requirements thereunder.

NON-LOTTERY GAMING PRODUCTS AND SERVICES

In November 1994, the Company announced the formation of its Gaming Group
to pursue gaming opportunities other than on-line lottery including video
lottery and destination gaming. During fiscal 1996, the Company entered into
agreements with Full House to share in the financing and development of
Native American and casino gaming ventures. Operations with respect to one
such venture, a casino in Coos Bay, Oregon, on Native American lands,
featuring approximately 850 video lottery terminals, assorted table games,
bingo and keno, commenced in May 1995. In addition, the Company and Full
House entered into agreements with Delaware State Fair, Inc. and Harrington
Raceway, Inc. in February 1996 to finance and construct a gaming facility at
the Delaware State Fairgrounds, Kent County, Delaware. It is anticipated that
the facility will house approximately 500 video lottery terminals and will
commence operations during fiscal 1997.

<PAGE>

The Company's video lottery systems combine the security and integrity of
the Company's traditional on-line lottery systems with entertainment-based
video games. The Company's video lottery systems include a controlling
central computer system, multiple video lottery terminals (which the Company
acquires from third-party manufacturers), the Company's ticket validation
terminals, and a self-diagnostic communications network. Games offered by the
Company's video lottery systems include poker, blackjack, keno and bingo and
other games. The Company entered the video lottery business during fiscal
1991 and currently provides video lottery products to lottery jurisdictions
in Alberta and Saskatchewan, Canada, Oregon and Rhode Island. Currently,
video lotteries are operated or are being implemented or tested in six
jurisdictions in the United States and ten international jurisdictions. There
can be no assurance as to how many jurisdictions will eventually legalize
video lottery systems.

COMMUNICATIONS NETWORK SERVICES

During fiscal 1996, the Company formed its wholly-owned subsidiary, GTECH
Worldserv, Inc., to offer network communications services principally to
private sector customers. This venture, which is in its initial start-up
phase, plans to offer wide area network design, installation, operation and
maintenance services and full local area network administration services,
among other services. GTECH Worldserv, Inc. has entered into contracts with
Xerox Corporation, The Gartner Group and Metropolitan Fiber Systems to
provide network communications and related services.

TOTALIZATOR SYSTEMS

The Company announced in February 1996 that it had completed the
divestiture of its wholly-owned subsidiary, AmTote, to Mudge Acquisitions
Group, Inc. AmTote had conducted the on-track and off-track parimutuel
wagering business that the Company acquired in August 1993 from General
Instrument Corporation. See "The Company."

COMPETITION

The on-line lottery business is highly competitive in both the United
States and internationally. Both in the United States and internationally,
price is an important, but usually not the sole criterion for selection.
Other significant factors that influence the award of lottery contracts are:
the ability to optimize lottery revenues through technical capability and
applications knowledge; the quality, dependability and upgrade capability of
the system; the marketing and gaming experience, financial condition and
reputation of the vendor; and the satisfaction of other requirements and
qualifications that the lottery authority may impose.

In the past year, the lottery authorities of Arizona, Kentucky and
Maryland announced the award of on-line lottery contracts to a competitor of
the Company upon expiration of their then current contracts with the Company.
In June 1995, the Company was selected to provide on-line lottery equipment
and services to the Washington State lottery upon expiration of the lottery
authority's present contract with the same competitor. In May 1996, the
Company entered into a one-year agreement with the Arizona lottery authority
to provide on-line and instant ticket lottery equipment and services, subject
to and effective upon termination of the Arizona lottery authority's contract
with its current supplier.

The Company's competitors in the on-line lottery business (and the number
of on-line lottery jurisdictions currently serviced worldwide by such
competitors) are as follows: Automated Wagering International, Inc. ("AWI"),
a subsidiary of Video Lotteries Technologies, Inc. ("VLT") (7; not counting
Kentucky and Maryland which it is anticipated will be serviced by AWI during
fiscal 1997, and Arizona which, while currently serviced by AWI, is
anticipated will terminate during fiscal 1997); Autotote Corporation (8)
("Autotote") (6 of these on-line jurisdictions are jointly serviced by
Autotote and International des Jeux); International Totalizator Systems, Inc.
(7); International des Jeux (Lotto France) (7) (6 of these on-line
jurisdictions are jointly serviced by Autotote and International des Jeux);
and Essnet/Alcatel (10). Electronic Data Systems Corporation ("EDS") and VLT
are parties to a strategic alliance in which EDS holds a 20% equity interest
in VLT.

The emerging government benefits delivery industry is also highly
competitive. Among the Company's competitors are banking institutions with
access to larger capital resources than the Company

<PAGE>

to invest in benefits delivery projects and, in some cases, with existing
automated teller machine infrastructures that can be utilized to deliver
government benefits. The primary competitors of the electronic benefit
transfer operations of the Company's Transactive subsidiary are Citibank EBT
Services, Deluxe Data Systems, Inc., EDS and First Security Processing
Services, Inc.

The Company's Gaming Group faces competition from numerous companies that
seek to finance, develop and manage destination gaming facilities, on and off
of Native American lands, as well as from technology providers. The principal
competitors providing video lottery technology in competition with the
Company include Autotote Systems, Inc., International Game Technology, Inc.,
Spielo Manufacturing, Inc., Video Lottery Technologies, Inc. and WMS Gaming,
Inc., some of which have supplied substantially more systems and terminals
than the Company.

LEGAL PROCEEDINGS

At the end of May 1994, several shareholder class action lawsuits were
brought against the Company and various of its executive officers (Messrs.
Snowden, Markowicz and Breakstone) in the U.S. District Court of Rhode Island
relating to the Company's May 25, 1994 announcement that earnings for its
1995 fiscal year could be at or below fiscal 1994 levels. On September 23,
1994, the plaintiffs in these actions filed an Amended Consolidated Class
Action Complaint which generally alleged that the defendants violated federal
securities laws in disseminating materially false and misleading statements
about the Company's prospects and failing to disclose on a timely basis the
fact that fiscal 1995 earnings were expected to be less than allegedly
anticipated by the public. The complaint sought to recover monetary damages
from the Company and the individual defendants. This complaint was eventually
dismissed for failing sufficiently to state a meritorious claim; and on May
23, 1995, the plaintiffs filed a Second Consolidated Amended Class Action
Complaint making essentially similar allegations. On June 9, 1995, the
Company announced that, in order to avoid the costs and disruptions of
further proceedings, it had reached a settlement of this lawsuit. Under the
terms of the settlement, which is subject to approval by The Federal District
Court of Rhode Island and several other contingencies, the Company and its
insurer have agreed to pay an aggregate of $1,250,000 in full settlement of
all claims against the Company and the other defendants.

On March 8, 1996, AWI filed an administrative protest of the intended
award of the New Jersey lottery contract to the Company. AWI alleged that (i)
there are questions regarding the Company's integrity which will impair
public confidence in the lottery and (ii) the Company's proposal materially
deviated from the requirements of the request for proposals and, therefore,
the Company's bid should be rejected. On May 31, 1996, the hearing officer
issued his Findings and Decision respecting this administrative protest to
the Director of the New Jersey Department of Treasury Division of Purchase
and Property, finding, in essence, no merit to AWI's protest. By letter dated
June 14, 1996, the Director advised the Company of her award of the contract
to the Company. On June 17, 1996, AWI requested that the Director stay the
signing and implementation of the contract to afford AWI the opportunity to
consider an appeal of the award and, the Director granted a temporary stay
through June 21, 1996. The Company believes that the claims raised by AWI are
without merit and intends to vigorously oppose AWI's claims if there are any
further proceedings in this matter.

The Company also is subject to certain other legal proceedings and claims.
See "Risk Factors -- Maintenance of Business Relationships and Certain Legal
Matters." Although it is not possible to determine the eventual outcome or
financial impact of these other proceedings and claims at this stage,
management believes, on the basis of information presently available to it,
that the disposition of these matters will not materially adversely affect
the Company's consolidated financial position or results of operations.

<PAGE>

DIRECTORS AND OFFICERS

The following table sets forth as of June 11, 1996, certain information
concerning the directors and executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE OCCUPATION
- ---- --- ----------
<S> <C> <C>
Guy B. Snowden 50 Director, Co-Chairman, Chief Executive Officer and Member of
the Executive Operating Committee of the Company. Mr.
Snowden's present term of office as Director expires in 1998.
Mr. Snowden was a co-founder of GTECH and has been its Chief
Executive Officer since its inception in 1980. He served as
Chairman from 1987 to 1990 and was President from 1981 to 1987
and 1989 through December 1994. Mr. Snowden is a director of
Bugaboo Creek Steak House, Inc.

Victor Markowicz 51 Director, Co-Chairman and Member of the Executive Operating
Committee of the Company. Mr. Markowicz has been a Director
since GTECH's inception in 1980. His present term of office as
Director expires in 1996. Mr. Markowicz was a co-founder of
GTECH and served as Vice Chairman from 1987 to 1990, Senior
Vice President from 1988 to 1989 and Executive Vice President
and Secretary from 1981 to 1988.

Michael R. Chambrello 38 Vice President -- U.S. Operations, of the Company since 1991
and Member of the Executive Operating Committee of the Company
since December 1994. Prior to this, Mr. Chambrello served in
various positions since joining the Company in 1982.

Joel J. Cohen 58 Director of the Company since 1992. Mr. Cohen's present term
of office as Director expires in 1997. Mr. Cohen has been
Managing Director, Investment Banking Division, of Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJSC") since
October 1989. Previously, Mr. Cohen was a consultant from
February 1988 until October 1989; a Partner of Davis Polk &
Wardwell, attorneys, from 1969 until September 1987; and
General Counsel, Presidential Task Force on Market Mechanisms,
from November 1987 through January 1988. Mr. Cohen is also a
director of The Chubb Corporation, Maersk, Inc. and Maersk
Line, Limited.

Robert M. Dewey, Jr. 64 Director of the Company since 1995. Mr. Dewey's present term
of office as Director expires in 1998. Mr. Dewey is Chairman
of Autranet, Inc., a wholly-owned subsidiary of Donaldson,
Lufkin & Jenrette, Inc. ("DLJ"), an investment banking firm.
Mr. Dewey was Managing Director, Institutional Equities
Division, of DLJSC from 1983 through 1995.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AGE OCCUPATION
- ---- --- ----------
<S> <C> <C>
Burnett W. Donoho 56 Director of the Company since 1992 and from May 1990 to June
1991. Mr. Donoho's present term of office as Director expires
in 1997. Mr. Donoho has been a self-employed Retail Consultant
since December 1994. Previously, Mr. Donoho was the Vice
Chairman and Chief Operating Officer of Macy's East, a
division of R. H. Macy & Co., Inc., a department store chain,
from July 1992 until December 1994; Mr. Donoho was a member of
Ernst & Young's Great Lakes Management Consulting Group from
June 1991 to June 1992; consultant to the superintendent of
the Chicago Public Schools from November 1990 to May 1991; and
President of Marshall Field and Co., a department store chain,
from 1984 to June 1990. In January 1992, R. H. Macy & Co.,
Inc. filed a petition for protection under Chapter 11 of the
Federal bankruptcy laws. Mr. Donoho is also a director of
OfficeMax, Inc.

Carl H. Freyer 57 Director of the Company since May 1990 and from 1983 to
February 1990. Mr. Freyer's present term of office as Director
expires in 1996. Mr. Freyer is President of the investment
management firms of Freyer Corporation and Freyer Capital
Management, and has been Vice President of the investment
management firm of Caribbean Basin Capital Consultants, Inc.
since its organization February 1992.

Carl B. Menges 65 Director of the Company since 1992. Mr. Menges' present term
of office as Director expires in 1996. Mr. Menges is Vice
Chairman of DLJ and was formerly Managing Director and
Chairman, Financial Services Group, of DLJSC. Mr. Menges is
Chairman of Wood, Struthers & Winthrop, the investment
management division of DLJ; and Chairman of the Winthrop Focus
Funds.

The Rt. Hon. Lord Moore 58 Director of the Company since 1992. Lord Moore's present term
of Lower Marsh of office as Director expires in 1998. Lord Moore has been the
European Chairman and a director of The Monitor Company, a
strategic consulting company, since October 1990. Previously,
Lord Moore held various ministerial posts in the Government of
the United Kingdom, most recently as Secretary of State for
Social Security from July 1988 to July 1989 and as Secretary
of State for Health and Social Security from 1987 to 1988.
Lord Moore is also the Chairman and a director of Credit
Suisse Investment Management Group Limited, Credit Suisse
Investment Management Limited and Credit Suisse Asset
Management Limited; a director of BEA Associates, Inc., Blue
Circle Industries plc, CS First Boston Australia Investment
Management Limited, Marvin & Palmer Inc., Rolls-Royce plc, The
Central European Growth Fund plc and Camelot Holdings Limited;
a member of the supervisory board of ITT Automotive Europe
Gmbh; and the President of Energy Savings Trust Ltd., a
not-for-profit energy conservation organization.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AGE OCCUPATION
- ---- --- ----------
<S> <C> <C>
William Y. O'Connor 52 Director of the Company since 1995. Mr. O'Connor's present
term of office as Director expires in 1997. Mr. O'Connor has
been President, Chief Operating Officer and Member of the
Executive Operating Committee of the Company since December
1994. Previously, Mr. O'Connor was the President and Chief
Executive Officer of Ascom Timeplex, a telecommunications
company, from 1992 to 1994, and prior to that was Corporate
Senior Vice President and President of the Broadband
Communications Group of Scientific Atlanta, Inc. from 1987 to
1992.

Thomas J. Sauser 52 Senior Vice President, Treasurer and Chief Financial Officer
of the Company and member of the Executive Operating Committee
since February 1, 1996. Mr. Sauser was Chief Financial Officer
and Senior Vice President of EG&G, Inc., a provider of
scientific equipment systems and services, from 1994 through
1995. Prior to this, Mr. Sauser was employed by IBM
Corporation where, from 1991 to 1994, he was Assistant General
Manager and Vice President, Finance.
</TABLE>
- ------------

Except as otherwise noted, the named individuals have had the occupations
indicated (other than directorships) for at least five years. The indicated
employment and directorship histories with the Company for periods prior to
the acquisition of GTECH Corporation by the Company in February 1990 refer to
positions held with GTECH Corporation. The Company was formed in 1989 for the
purpose of making such acquisition.

<PAGE>

VOTING AGREEMENTS

The Company and certain of its stockholders are parties to a Stockholders
Agreement dated as of July 20, 1992, as amended (the "Stockholders
Agreement"), which provides, among other things, for the nomination of and
voting for directors of the Company. The principal parties to voting
provisions of this agreement are: (i) Donaldson, Lufkin & Jenrette Capital
Corporation ("DLJCC"), a subsidiary of DLJ, and related persons (other than
the employees or former employees of DLJSC); (ii) Messrs. Snowden, Markowicz
and the certain other members of management of the Company; and (iii) Norwest
Bank Fort Wayne, N.A. (formerly known as Lincoln National Bank and Trust
Company of Fort Wayne), as trustee (the "Voting Trustee") under the Second
Amended and Restated Voting Trust Agreement, dated as of July 29, 1992 (the
"Voting Trust Agreement"), pursuant to which DLJCC and related persons have
deposited all of their shares of Common Stock in excess of 5% of the
Company's outstanding Common Stock. See "Principal and Selling Stockholders."

The applicable voting provisions of the Stockholders Agreement require
that each of the parties subject to such provisions who hold shares of voting
stock of the Company vote for the election to the Board of Directors of the
Company of the following individuals: (i) three individuals nominated by
DLJCC; (ii) three individuals nominated from among and by the management of
the Company; (iii) one individual nominated by the Voting Trustee; and (iv)
two individuals who are not affiliated with any of the current principal
stockholders.

The Voting Trustee has the sole power and discretion to act as and to
exercise the rights and powers of a shareholder with respect to the shares in
the Voting Trust, except that DLJCC and related persons are entitled to
receive dividends, distributions and payments in respect of their shares of
Common Stock held by the Voting Trustee, if and when the same are paid by the
Company (except that shares of Common Stock issued as a dividend,
distribution or other payment of the shares held by the Voting Trustee will
also be subject to the Voting Trust Agreement). The address of the Voting
Trustee is P.O. Box 2363, Fort Wayne, Indiana 46801.

Upon the successful consummation of the Offerings, the Voting Trust
Agreement and the voting provisions of the Stockholders Agreement will
terminate.

DIRECTOR AND MANAGEMENT CHANGES

It is anticipated that, assuming successful completion of the Offerings,
Messrs. Cohen, Dewey and Menges, the three directors nominated by DLJCC, will
resign from the Company's Board of Directors not later than the date of the
Company's 1996 Annual Meeting of stockholders (which has not yet been
scheduled). The future composition of the Board has not been determined but
is currently under consideration by the recently appointed Nominating
Committee of the Board consisting of Messrs. Snowden, Donoho and Moore.

It is not contemplated that there will be any significant changes in
management as a result of the Offerings. However, for some time the Company
has been making efforts to add to the strength of its management team and to
provide a source of qualified executives who can ultimately succeed to top
management positions. Toward this end, the Company hired Mr. O'Connor in late
1994 as President and Chief Operating Officer with the mutual contemplation
that he would, in time, become Chief Executive Officer, and Mr. O'Connor's
employment agreement provides that he is entitled to resign with specified
pay and benefits if he is not made Chief Executive Officer by December 1996.

<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table provides, to the best of the Company's knowledge,
information as of April 23, 1996 and as adjusted to reflect the sale of
Common Stock offered hereby, as to the ownership of Common Stock by (i) each
director and executive officer of the Company and all directors and executive
officers as a group, (ii) each person who is believed by the Company to be
the beneficial owner of more than 5% of the Company's Common Stock based upon
the Company's records, and (iii) the principal Selling Stockholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERINGS OWNED AFTER OFFERINGS(1)
------------------------ -------------- ------------------------
NUMBER OF % OF SHARES BEING NUMBER OF % OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS OFFERED(1) SHARES CLASS
- ----------------------------------------- --------------- ------- -------------- --------------- -------
<S> <C> <C> <C> <C> <C>
DLJCC and related persons ................ 9,730,783(2) 22.6% 8,700,750 1,030,033 2.4%
277 Park Avenue
New York, New York 10172
Tiger Management Corporation ............. 6,694,330 15.5 -- 6,694,330 15.5
101 Park Avenue
New York, New York 10178
Firstar Investment Research & Management
Co. ..................................... 2,461,200(3) 5.7 -- 2,461,200(3) 5.7
777 East Wisconsin Avenue,
Suite 1800
Milwaukee, Wisconsin 53202
Guy B. Snowden ........................... 1,560,423(4) 3.6 549,767 1,010,656 2.3
Co-Chairman and
Chief Executive Officer
Victor Markowicz ......................... 1,563,516(5) 3.6 549,768 1,013,748 2.4
Co-Chairman
Michael L. Chambrello .................... 15,000(6) * 2,188 12,812(6) *
Vice President
Joel J. Cohen ............................ 7,081(7) * 6,691 390 *
Director
Robert M. Dewey, Jr. ..................... 20,635(8) * -- 20,635(8) *
Director
Burnett W. Donoho ........................ 3,000 * -- 3,000 *
Director
Carl H. Freyer ........................... -- -- --
Director
Carl B. Menges ........................... 28,322(9) * 26,762 1,560 *
Director
The Rt. Hon. Lord Moore .................. 4,500 * -- 4,500 *
Director
William Y. O'Connor ...................... 54,250(10) * -- 54,250(10) *
Director, President & Chief Operating
Officer
Thomas J. Sauser ......................... -- -- --
Senior Vice President, Treasurer
and Chief Financial Officer
Other present and former employees of the
Company, who own less than 1% of the
class as a group, and none of whom is
selling more than 35% of his or her
shares (11 persons)(11) ................. 10,148 * 3,527 6,621 *
All directors and executive officers as a
group (11 persons) ...................... 3,256,727(12) 7.6 1,135,176 2,121,551(12) 4.9
</TABLE>

- ----------------------------
* less than 1%
(1) Assumes no exercise of the U.S. Underwriters' over-allotment option.
In the event such option is exercised in full, the Selling
Stockholders will sell up to an additional 980,957 shares.
(2) Includes shares beneficially owned by DLJCC and related persons as
follows: 5,751,442 shares by DLJCC; 258,700 shares by DLJSC; 165,953
shares by The Equitable Life Assurance Society of the United States
("Equitable Life"); 34,338 shares by Equitable Variable Life
Insurance Company ("Equitable Variable"); 1,092,500 shares by four of
The Sprout Group funds; and 2,427,850 shares held by DLJSC as
Custodian for the benefit of approximately 170 employees of DLJSC and
its affiliates (including Joel J. Cohen, Robert M. Dewey, Jr. and
Carl B. Menges, directors of the Company), none of whom holds as much
as 1% of the outstanding Common Stock, which shares were acquired
pursuant to certain DLJSC employee compensation arrangements. An
aggregate of 8,292,067 of the above shares are held in the Voting
Trust under the control of an independent Voting Trustee who holds
and exercises voting rights associated with such shares. See
"Directors and Officers

<PAGE>

-- Voting Agreements" DLJCC and DLJSC are both indirectly
majority-owned subsidiaries of The Equitable Companies Incorporated
("EQ"). Equitable Life is a wholly-owned subsidiary of EQ and
Equitable Variable is a wholly-owned subsidiary of Equitable Life.
The address of Equitable Life and Equitable Variable is 787 Seventh
Avenue, New York, New York 10019. The Sprout Group is a division of
DLJCC. AXA, a French holding company located at 23 Avenue Matignon,
75008 Paris, France, currently holds approximately 60.7% of
outstanding common stock as well as certain convertible preferred
stock of EQ. DLJCC disclaims beneficial ownership of the shares held
by Equitable Life and Equitable Variable and by the employees and
former employees of DLJSC. The Sprout Funds consist of four venture
capital funds under common control: Sprout Capital VI, L.P., Sprout
Growth, L.P., Sprout Growth, Ltd. and DLJ Venture Capital Fund II,
L.P. Excludes an aggregate of 25,000 shares held by DLJSC, as
nominee, 5,700 shares held by Alliance Capital Management L.P., a
majority-owned subsidiary of Equitable Life and 3,000 shares held by
Wood, Struthers & Winthrop Management Corp., a wholly-owned
subsidiary of DLJSC. These 33,700 shares are not being sold pursuant
to this prospectus. Certain employees of DLJSC who own an aggregate
of approximately 522,981 shares of Common Stock will not be Selling
Stockholders, however, such employees have agreed not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock
for a period of 90 days from the date of this Prospectus. See
"Underwriting."
(3) Includes 135,600 shares as to which Firstar Corporation shares voting
and dispositive power.
(4) Includes 89,619 shares held by five trusts established by Mr. Snowden
for the benefit of family members as to which he disclaims beneficial
ownership.
(5) Includes 607,645 shares held by a trust established by Mr. Markowicz
for the benefit of family members as to which he disclaims beneficial
ownership.
(6) Including 8,750 shares subject to vested but unexercised stock
options awarded under the Company's 1994 Stock Option Plan.
(7) Mr. Cohen is a Managing Director of DLJSC. The share ownership of Mr.
Cohen reflected in the table above consists of shares acquired
pursuant to the DLJSC employee compensation arrangements referred to
in footnote (2) above but does not otherwise include any of the
shares included in the table above as beneficially owned by DLJCC and
related persons (other than shares held for the benefit of Mr.
Cohen), as to which Mr. Cohen disclaims beneficial ownership.
(8) Mr. Dewey is Chairman of Autranet, Inc., a wholly-owned subsidiary of
Donaldson, Lufkin & Jenrette, Inc. The share ownership of Mr. Dewey
reflected in the table above consists of shares acquired pursuant to
the DLJSC employee compensation arrangements referred to in footnote
(2) above but does not otherwise include any of the shares included
in the table above as beneficially owned by DLJCC and related persons
(other than shares held for the benefit of Mr. Dewey), as to which
Mr. Dewey disclaims beneficial ownership.
(9) Mr. Menges is a Managing Director of DLJSC and Vice Chairman of
Donaldson, Lufkin & Jenrette, Inc. The share ownership of Mr. Menges
reflected in the table above consists of shares acquired pursuant to
the DLJSC employee compensation arrangements referred to in footnote
(2) above but does not otherwise include any of the shares included
in the table above as beneficially owned by DLJCC and related persons
(other than shares held for the benefit of Mr. Menges), as to which
Mr. Menges disclaims beneficial ownership.
(10) Includes 53,000 shares subject to vested but unexercised stock
options awarded under the Company's 1994 Stock Option Plan.
(11) Details with respect to such parties are included in an exhibit to
the Registration Statement of which this Prospectus forms a part.
(12) Excludes shares included in the table above for DLJCC and related
persons other than Messrs. Cohen, Dewey and Menges. Also excludes
approximately 13,750 shares subject to unvested awards under the
Company's stock benefit plans, and 600,250 shares subject to unvested
stock options awarded under the Company's 1994 Stock Option Plan.

<PAGE>

DESCRIPTION OF CAPITAL STOCK OF THE COMPANY

The authorized capital stock of the Company consists of 150,000,000 shares
of Common Stock, par value $.01 per share, and 20,000,000 shares of preferred
stock, par value $.01 per share. As of June 1, 1996, 43,054,212 shares of
Common Stock and no shares of such preferred stock were outstanding.

The holders of the Company's Common Stock are entitled to one vote per
share for each share held of record on all matters submitted to a vote of
stockholders. Subject to preferential rights with respect to any series of
preferred stock that may be issued, holders of the Company's Common Stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors on the Company's Common Stock out of funds legally available
therefor, and in the event of a liquidation, dissolution or winding-up of the
affairs of the Company, are entitled to share equally and ratably in all
assets and funds of the Company remaining after satisfaction of the Company's
liabilities. The holders of the Company's Common Stock have no preemptive
rights, cumulative voting rights, or rights to convert shares of the
Company's Common Stock into any other securities and are not subject to
future calls or assessments by the Company. All outstanding shares of the
Company's Common Stock are fully paid and nonassessable by the Company.

The Certificate of Incorporation provides for a classified Board of
Directors consisting of three classes as nearly equal in size as the then
authorized number of directors constituting the Board of Directors permits.
At each annual meeting of stockholders, the class of directors to be elected
at such meeting will be elected for a three-year term and the directors in
the other two classes will continue in office. Each class shall hold office
until the date of the third annual meeting for the election of directors
following the annual meeting at which such director was elected, except that
the initial terms of directors elected to fill vacancies in the Board of
Directors may be less than three years. As a result, one-third of the Board
of Directors will be elected each year. Moreover, under the Delaware General
Corporation Law (and the Company's Certificate of Incorporation and By-laws),
in the case of a corporation having a classified board, stockholders may
remove a director only for cause. This provision, when coupled with the
provision of the By-laws authorizing the Board of Directors to fill vacant
directorships, precludes a stockholder from removing incumbent directors
without cause and simultaneously gaining control of the Board of Directors by
filling the vacancies created by such removal with its own nominees.

The Board of Directors has the authority to issue preferred stock in one
or more classes or series and to fix the voting powers, preferences and
relative participating, optional or other special rights of such preferred
stock, without any further vote or action by the stockholders. The ability of
the Board of Directors to issue preferred stock, while providing flexibility
in connection with possible acquisitions and other corporate purposes, could
adversely affect the voting power of the holders of the Common Stock and
could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from acquiring, control of the
Company. The Company has no present plans to issue any of the preferred
stock.

The Bank of New York is the transfer agent and register for the Company's
Common Stock.

CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK

The following discussion concerns certain United States federal income and
estate tax consequences of the ownership and disposition of Common Stock
applicable to Non-U.S. Holders of such Common Stock. For the purposes of this
discussion, a "Non-U.S. Holder" is any person or entity that, for United
States federal income tax purposes, is a non-resident alien individual, a
foreign corporation, a foreign partnership or non-resident fiduciary of a
foreign estate or trust. The discussion is based on current law which is
subject to change, does not address all aspects of federal income and estate
taxation that may be relevant to such Non-U.S. Holders in light of their
particular circumstances, and does not deal with foreign, state and local tax
consequences. Accordingly, prospective investors are urged to consult their
tax advisors regarding the United States federal, state, local and non-U.S.
income and other tax consequences of holding and disposing of shares of
Common Stock.

<PAGE>

Proposed United States Treasury Regulations were issued on April 15, 1996
(the "Proposed Regulations") which, if adopted, would affect the United
States taxation of dividends paid to a Non-U.S. Holder on Common Stock. The
Proposed Regulations are generally proposed to be effective with respect to
dividends paid after December 31, 1997, subject to certain transition rules.
The discussion below is not intended to be a complete discussion of the
provisions of the Proposed Regulations, and prospective investors are urged
to consult their tax advisors with respect to the effect the Proposed
Regulations would have if adopted.

Dividends. The Company does not currently intend to pay dividends on
shares of Common Stock. See "Price Range of Common Stock and Dividend
Policy." In the event that such dividends are paid to a Non-U.S. Holder, such
Holder will be subject to United States withholding tax at a 30% rate (or any
lower rate specified by an applicable tax treaty) unless the dividends are
either (a) effectively connected with a trade or business carried on by the
Non-U.S. Holder within the United States or (b) if a tax treaty applies,
attributable to a United States permanent establishment maintained by the
Non-U.S. Holder. Dividends effectively connected with such a trade or
business or attributable to such a permanent establishment will not be
subject to withholding if the Non-U.S. Holder files Form 4224 with the payor
of the dividend and will be subject to United States federal income tax at
the same rates applicable to U.S. Holders. In the case of a Non-U.S. Holder
that is a corporation, such effectively connected income also may be subject
to the branch profits tax at a rate of 30% (or any lower rate specified by an
applicable tax treaty). To determine the applicability of a tax treaty
providing for a lower rate of withholding, dividends paid to an address in a
foreign country are presumed under current Treasury regulations to be paid to
a resident of that country, absent knowledge that such presumption is not
warranted.

Under the Proposed Regulations, to obtain a reduced rate of withholding
under a treaty, a Non-U.S. Holder would generally be required to provide an
Internal Revenue Service Form W-8 certifying such Non-U.S. Holder's
entitlement to benefits under a treaty. The Proposed Regulations would also
provide special rules to determine whether, for purposes of determining the
applicability of a tax treaty, dividends paid to a Non-U.S. Holder that is an
entity should be treated as paid to the entity or those holding an interest
in that entity.

A Non-U.S. Holder eligible for a reduced rate of United States withholding
tax pursuant to a tax treaty may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund.

Sale of Common Stock. Generally, a Non-U.S. Holder will not be subject to
United States federal income tax on any gain realized upon the disposition of
his Common Stock unless (i) the Company is or has been a "U.S. real property
holding corporation" for federal income tax purposes (which the Company is
not and does not believe that it is likely to become) and, provided the
Common Stock is "regularly traded on an established securities market"
(within the meaning of the relevant provisions of the Code), the Non-U.S.
Holder held, directly or indirectly at any time during the five-year period
ending on the date of disposition, more than 5% of the Common Stock; (ii) the
gain is effectively connected with a trade or business carried on by the
Non-U.S. Holder within the United States or, if a tax treaty applies,
attributable to a permanent establishment maintained by the Non-U.S. Holder
in the United States; (iii) the Non-U.S. Holder is an individual who holds
the Common Stock as a capital asset and is present in the United States for
183 days or more in the taxable year of the disposition and certain other
conditions are met; or (iv) the Non-U.S. Holder is subject to tax pursuant to
the provisions of U.S. tax law applicable to certain United States
expatriates.

Estate Tax. Common Stock owned or treated as owned by an individual
Non-U.S. Holder at the time of death will be includible in such Holder's
gross estate for United States federal estate tax purposes, unless an
applicable tax treaty provides otherwise, and may be subject to United States
federal estate tax.

Backup Withholding and Information Reporting. The Company must report
annually to the Internal Revenue Service and to each Non-U.S. Holder the
amount of dividends paid to, and the tax withheld with respect to, each
Non-U.S. Holder. These reporting requirements apply regardless of whether
withholding was reduced or eliminated by an applicable tax treaty. Copies of
these information returns also may be made available under the provisions of
a specific treaty or agreement to the tax authorities in the country in which
the Non-U.S. Holder resides. United States back-up withholding tax

<PAGE>

(which generally is a withholding tax imposed at a rate of 31% on certain
payments to persons that fail to furnish the information required under the
United States information reporting requirements) will generally not apply to
dividends paid on Common Stock to a Non-U.S. Holder at an address outside the
United States.

The payment of the proceeds from the disposition of Common Stock to or
through the United States office of a broker will be subject to information
reporting and backup withholding unless the owner certifies, among other
things, its name, address and status as a Non-U.S. Holder, or otherwise
establishes an exemption. The payment of the proceeds from the disposition of
Common Stock to or through a non-U.S. broker will not be subject to backup
withholding and will generally not be subject to information reporting.
Unless the broker has documentary evidence in its files that the owner is a
Non- U.S. Holder, information reporting (but not backup withholding) will
apply, however, to a disposition through (i) a non-U.S. office of a U.S.
broker and (ii) a non-U.S. office of a non-U.S. broker that is either a
"controlled foreign corporation" for United States federal income tax
purposes or a person 50% or more of whose gross income from all sources for a
certain three-year period was effectively connected with a United States
trade or business.

The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions under which a Non-U.S. Holder would be subject to backup
withholding and information reporting unless the Company receives
certification of non-U.S. status from the holder.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.

<PAGE>

UNDERWRITING

Subject to certain conditions contained in the Underwriting Agreement, the
United States underwriters named below (the "U.S. Underwriters") and the
international managers named below (the "International Managers") (the U.S.
Underwriters and International Managers being hereinafter collectively
referred to as the "Underwriters") have severally agreed to purchase from the
Selling Stockholders 9,806,000 shares of Common Stock, of which 7,844,800
shares of Common Stock are being purchased by the U.S. Underwriters and
1,961,200 shares of Common Stock are being purchased by the International
Managers. The number of shares of Common Stock that each Underwriter has
agreed to purchase is set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS U.S. SHARES
- ----------------- -----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation 1,863,600
Merrill Lynch, Pierce, Fenner & Smith Incorporated . 1,863,600
Salomon Brothers Inc ................................ 1,863,600
Bear, Stearns & Co. Inc. ............................ 98,000
Alex. Brown & Sons Incorporated ..................... 98,000
Cowen & Company ..................................... 98,000
Deutsche Morgan Grenfell/C.J. Lawrence Inc. ........ 98,000
A.G. Edwards & Sons, Inc. ........................... 98,000
Gerard Klauer Mattison & Co., LLC ................... 98,000
Goldman, Sachs & Co. ................................ 98,000
Lazard Freres & Co. LLC ............................. 98,000
Lehman Brothers Inc. ................................ 98,000
Montgomery Securities ............................... 98,000
Prudential Securities Incorporated .................. 98,000
Raymond James & Associates, Inc. .................... 98,000
Scotia Capital Markets (USA) Inc. ................... 98,000
Smith Barney Inc. ................................... 98,000
Advest, Inc. ........................................ 49,000
Arnhold and S. Bleichroeder, Inc. ................... 49,000
Robert W. Baird & Co. Incorporated .................. 49,000
Black & Company, Inc. ............................... 49,000
J.C. Bradford & Co. ................................. 49,000
First of Michigan Corporation ....................... 49,000
Janney Montgomery Scott Inc. ........................ 49,000
Johnston, Lemon & Co. Incorporated .................. 49,000
McDonald & Company Securities, Inc. ................. 49,000
Needham & Company, Inc. ............................. 49,000
The Ohio Company .................................... 49,000
Parker/Hunter Incorporated .......................... 49,000
Pennsylvania Merchant Group Ltd. .................... 49,000
Principal Financial Securities, Inc. ................ 49,000
Sutro & Co. Incorporated ............................ 49,000
Tucker Anthony Incorporated ......................... 49,000
Van Kasper & Company ................................ 49,000
Wheat First Butcher Singer .......................... 49,000
U.S. Offering Subtotal ............................. 7,844,800

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL
INTERNATIONAL MANAGERS SHARES
- ---------------------- -------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation 465,400
Merrill Lynch International ......................... 465,400
Salomon Brothers International Limited .............. 465,400
ABN Amro Bank N.V. .................................. 113,000
Banque Paribas ...................................... 113,000
Credit Lyonnais Securities .......................... 113,000
Morgan Grenfell & Co. Limited ....................... 113,000
Societe Generale .................................... 113,000
International Offering Subtotal .................... 1,961,200
---------------
Total ............................................. 9,806,000
===============
</TABLE>

The Underwriting Agreement provides that the several Underwriters will be
obligated to purchase all of the shares of Common Stock offered hereby (other
than the shares covered by the over-allotment option described below) if any
are purchased. The consummation of the U.S. and International Offerings are
contingent upon one another.

The Company and the Selling Stockholders have been advised by the
Underwriters that the Underwriters propose to offer the shares of Common
Stock to the public initially at the Price to the Public set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $0.58 per share; that the Underwriters may allow,
and such dealers may reallow, a discount of not in excess of $0.10 per share
on sales to other dealers; and that the Price to the Public, concessions and
discounts to dealers may be changed by the Underwriters after the public
offering. The Underwriters will not confirm sales to accounts over which they
exercise discretionary authority without the prior written approval of the
customer.

The U.S. Underwriters have been granted an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to 980,957 additional shares
of Common Stock from the Selling Stockholders at the initial Price to the
Public less underwriting discounts and commissions. The U.S. Underwriters may
exercise such right of purchase only for the purpose of covering
over-allotments, if any, incurred in connection with the sale of the shares
of Common Stock offered hereby. To the extent that the U.S. Underwriters
exercise such options, each of the U.S. Underwriters will become obligated,
subject to certain conditions, to purchase the same proportion of such
additional shares as the number of other shares to be purchased by that U.S.
Underwriter bears to the total number of shares being sold in the U.S.
Offerings on the same terms as those on which all shares are being sold in
the Offerings.

In the Underwriting Agreement, the Company, the Selling Stockholders and
the Underwriters have agreed to indemnify each other against certain
liabilities under the Act.

The Company, all Selling Stockholders and certain other stockholders of
the Company have agreed not to offer, sell, contract to sell, or otherwise
dispose of any shares of Common Stock (other than in the Offerings) or any
securities convertible into or exchangeable for Common Stock for a period of
90 days from the date of this Prospectus without the prior written consent of
a majority of the U.S. Underwriters, subject to certain limited exceptions.

Affiliates of DLJSC own shares of Common Stock and are Selling
Stockholders in the Offerings. In addition, Joel J. Cohen and Carl B. Menges,
Managing Directors of DLJSC and Robert M. Dewey, Jr., formerly a Managing
Director of DLJSC, were nominated as Directors of the Company pursuant to the
Stockholders Agreement. See "Directors and Officers." The provisions of
Schedule E to the by-laws of the National Association of Securities Dealers,
Inc. apply to the Offerings because DLJSC is deemed to be an affiliate of the
Company for purposes of Schedule E.

Pursuant to the Agreement between U.S. Underwriters and International
Managers dated the date hereof (the "Agreement Between"), each U.S.
Underwriter has agreed that, as part of the distribution of

<PAGE>

the Common Stock, (i) it is not purchasing any Common Stock for the account
of anyone other than a United States or Canadian Person (as defined below)
and (ii) it has not offered or sold, and will not offer or sell, directly or
indirectly, any Common Stock or distribute this Prospectus outside the United
States and Canada or to anyone other than a United States or Canadian Person.
Each International Manager has agreed that, as part of the distribution of
the Common Stock (i) it is not purchasing any Common Stock for the account of
any United States or Canadian Person and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any Common Stock or
distribute this Prospectus in the United States or Canada or to any United
States or Canadian Person. The foregoing limitations do not apply to
stabilization transactions, to certain other transactions among the
International Managers and the U.S. Underwriters pursuant to the Agreement
Between or to purchases, offers or sales by a U.S. Underwriter who is also
acting as an International Manager or by an International Manager who is also
acting as a U.S. Underwriter. As used in this section, "United States" means
the United States of America, its territories, its possessions and all areas
subject to its jurisdiction and "United States or Canadian Person" means any
national or resident of the United States or Canada or any corporation,
pension, profit sharing or other trust or other entity organized under or
governed by the laws of the United States or Canada or of any political
subdivision thereof (other than a branch located outside the United States or
Canada of any United States or Canadian Person), and includes any United
States or Canadian branch of a person other than a United States or Canadian
Person.

Pursuant to the Agreement Between, sales may be made among the
International Managers and the U.S. Underwriters of such number of shares of
Common Stock to be purchased pursuant to the Underwriting Agreement as may be
mutually agreed. Unless otherwise agreed among the Underwriters, the price of
any shares so sold shall be the initial offering price less an amount not
greater than the selling concession and the currency of payment shall be U.S.
dollars.

Pursuant to the Agreement Between, each U.S. Underwriter has represented
that it has not offered or sold, and has agreed not to offer or sell any
Common Stock, directly or indirectly, in Canada in contravention of the
securities laws of Canada or any province or territory thereof and, without
limiting the generality of the foregoing, represents that any offer of shares
in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer
is made. Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any Common Stock a notice stating in substance that, by
purchasing Common Stock, such dealer represents and agrees that it has not
offered or sold and will not offer or sell, directly or indirectly, any such
Common Stock in Canada or to, or for the benefit of, any resident of Canada
in contravention of the securities laws of Canada or any province or
territory thereof and that any offer of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province of Canada in which such offer is made and that such dealer will
deliver to any other dealer to whom it sells any of such Common Stock a
notice to the foregoing effect.

Pursuant to the Agreement Between, each International Manager has
represented and agreed that (i) it has not offered or sold and, prior to the
expiration of the period of six months from the closing date, will not offer
or sell any shares of Common Stock in the United Kingdom by means of any
document (other than in circumstances which do not constitute an offer to the
public within the meaning of the Public Offers of Securities Regulations
1995), (ii) has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the shares of Common Stock, in, from or otherwise involving the
United Kingdom, and (iii) it has only issued or passed on and will only issue
or pass on to any person in the United Kingdom any document received by it in
connection with the proposed offer or sale of the shares of Common Stock, to
any person of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to
whom such document may otherwise lawfully be issued or passed on.

LEGAL MATTERS

Drinker Biddle & Reath, Philadelphia, Pennsylvania, counsel for the
Company, will render an opinion as to the validity of the shares offered
hereby. Certain legal matters in connection with the Offerings will be passed
upon for the Underwriters by Davis Polk & Wardwell.

<PAGE>

EXPERTS

The consolidated financial statements and schedule appearing in GTECH
Holdings Corporation's Annual Report (Form 10-K) for the fiscal year ended
February 24, 1996 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference, which as to the fiscal years ended February
24, 1996, and February 25, 1995, is based in part on the reports of Price
Waterhouse, independent auditors, dated April 9, 1996, with respect to the
consolidated financial statements of Camelot Group plc as of February 3,
1996, and February 4, 1995, and for the year ended February 3, 1996, and for
the period from April 1, 1994, through February 4, 1995; and dated March 29,
1995, with respect to the financial statements of Racimec Informatica
Brasileira, S.A. as of and for the year ended February 28, 1995. The
consolidated financial statements and schedule of GTECH Holdings Corporation
referred to above are incorporated herein and in the Registration Statement
by reference in reliance upon such reports given upon the authority of such
firms as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC") relating to its business,
financial statements and other matters. Reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549-1004
and at the regional offices of the SEC located at 7 World Trade Center, New
York, N.Y. 10048, and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549-1004. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. Such material can also be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005, on which
the Common Stock is listed.

The Company has filed with the SEC a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), for the
registration of the Common Stock offered hereby. This Prospectus omits
certain information contained in the Registration Statement, and reference is
made to the Registration Statement and the exhibits and schedules thereto for
further information with respect to the Company and the Common Stock to which
this Prospectus relates. Statements contained herein concerning the
provisions of any documents are not necessarily complete, and, in each
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement. Each such statement is qualified in its
entirety by such reference.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents heretofore filed by the Company under the Exchange
Act with the Commission are incorporated herein by reference: (i) the
Company's Registration Statement on Form 8-A dated July 2, 1992; (ii) the
Company's Annual Report on Form 10-K for the year ended February 24, 1996, as
amended by Form 10-K/A filed on June 12, 1996; and (iii) the Company's
Current Report on Form 8-K filed on June 10, 1996.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the Offerings shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.

The Company will provide, upon written or oral request, without charge to
each person to whom this Prospectus has been delivered a copy of any or all
of the documents referred to above which have been or may be incorporated by
reference herein other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference therein). Requests for such copies
should be directed to GTECH Holdings Corporation, Investor Relations
Department, 55 Technology Way, West Greenwich,Rhode Island 02817, telephone
number (401) 392-4899.

<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING STOCKHOLDER, ANY UNDERWRITER OR ANY OTHER PERSON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO OR
SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.

--------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 6
Recent Developments ........................ 9
Use of Proceeds ............................ 9
Price Range of Common Stock and Dividend
Policy ..................................... 10
Capitalization ............................. 11
Selected Consolidated Financial Data ...... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 13
Business ................................... 20
Directors and Officers ..................... 30
Principal and Selling Stockholders ........ 34
Description of Capital Stock of the
Company ................................... 36
Certain United States Federal Tax
Consequences to Non-U.S. Holders of
Common Stock .............................. 36
Underwriting ............................... 39
Legal Matters .............................. 41
Experts .................................... 42
Available Information ...................... 42
Documents Incorporated by Reference ....... 42
</TABLE>

9,806,000 SHARES

[LOGO]

GTECH HOLDINGS CORPORATION

COMMON STOCK

------------
PROSPECTUS
------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MERRILL LYNCH & CO.

SALOMON BROTHERS INC

JUNE 18, 1996

<PAGE>

INTERNATIONAL PROSPECTUS

PROSPECTUS
JUNE 18, 1996

9,806,000 SHARES

[LOGO]

GTECH HOLDINGS CORPORATION
COMMON STOCK

Of the 9,806,000 shares of Common Stock offered hereby, 1,961,200 shares
are being offered for sale outside the United States and Canada by the
International Managers (the "International Offering") and 7,844,800 shares
are being offered for sale in the United States and Canada in a concurrent
offering by the U.S. Underwriters (the "U.S. Offering" and, together with the
International Offering, the "Offerings"). See "Underwriting."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS TO THE
TO THE DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
- ---------------------------------------------------------------
<S> <C> <C> <C>
Per Share .. $28.75 $0.98 $27.77
Total(3) .... $281,922,500 $9,609,880 $272,312,620
- ---------------------------------------------------------------
</TABLE>

(1) See "Underwriting" for information relating to indemnification of the
Underwriters.
(2) The Company has agreed to pay certain expenses of the Selling
Stockholders estimated at $575,000.
(3) The Selling Stockholders have granted to the U.S. Underwriters a 30-day
option to purchase up to an additional 980,957 shares of Common Stock
in the aggregate solely to cover over-allotments, if any. If all such
shares are purchased, the total Price to the Public, Underwriting
Discounts and Commissions and Proceeds to the Selling Stockholders will
be $310,125,014, $10,571,218 and $299,553,796, respectively. See
"Underwriting."

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MERRILL LYNCH INTERNATIONAL

SALOMON BROTHERS INTERNATIONAL LIMITED

<PAGE>

INTERNATIONAL PROSPECTUS

UNDERWRITING

Subject to certain conditions contained in the Underwriting Agreement, the
international managers named below (the "International Managers") and the
United States underwriters named below (the "U.S. Underwriters") (the U.S.
Underwriters and International Managers being hereinafter collectively
referred to as the "Underwriters") have severally agreed to purchase from the
Selling Stockholders 9,806,000 shares of Common Stock, of which 1,961,200
shares of Common Stock are being purchased by the International Managers and
7,844,800 shares of Common Stock are being purchased by the U.S.
Underwriters. The number of shares of Common Stock that each Underwriter has
agreed to purchase is set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL
INTERNATIONAL MANAGERS SHARES
- ---------------------- ---------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation 465,400
Merrill Lynch International ........................ 465,400
Salomon Brothers International Limited ............. 465,400
ABN Amro Bank N.V. ................................. 113,000
Banque Paribas ..................................... 113,000
Credit Lyonnais Securities ......................... 113,000
Morgan Grenfell & Co. Limited ...................... 113,000
Societe Generale ................................... 113,000
International Offering Subtotal ................... 1,961,200
---------------
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS U.S. SHARES
- ----------------- -------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation 1,863,600
Merrill Lynch, Pierce, Fenner & Smith Incorporated 1,863,600
Salomon Brothers Inc ............................... 1,863,600
Bear, Stearns & Co. Inc. ........................... 98,000
Alex. Brown & Sons Incorporated .................... 98,000
Cowen & Company .................................... 98,000
Deutsche Morgan Grenfell/C.J. Lawrence Inc. ....... 98,000
A. G. Edwards & Sons, Inc. ......................... 98,000
Gerard Klauer Mattison & Co., LLC .................. 98,000
Goldman, Sachs & Co. ............................... 98,000
Lazard Freres & Co. LLC ............................ 98,000
Lehman Brothers Inc. ............................... 98,000
Montgomery Securities .............................. 98,000
Prudential Securities Incorporated ................. 98,000
Raymond James & Associates, Inc. ................... 98,000
Scotia Capital Markets (USA) Inc. .................. 98,000
Smith Barney Inc. .................................. 98,000
Advest, Inc. ....................................... 49,000
Arnhold and S. Bleichroeder, Inc. .................. 49,000
Robert W. Baird & Co. Incorporated ................. 49,000
Black & Company, Inc. .............................. 49,000
J.C. Bradford & Co. ................................ 49,000
First of Michigan Corporation ...................... 49,000
Janney Montgomery Scott Inc. ....................... 49,000
Johnston, Lemon & Co. Incorporated ................. 49,000
McDonald & Company Securities, Inc. ................ 49,000

<PAGE>

NUMBER OF
U.S. UNDERWRITERS U.S. SHARES
- ----------------- -------------
Needham & Company, Inc. ............................ 49,000
The Ohio Company ................................... 49,000
Parker/Hunter Incorporated ......................... 49,000
Pennsylvania Merchant Group Ltd .................... 49,000
Principal Financial Securities, Inc. ............... 49,000
Sutro & Co. Incorporated ........................... 49,000
Tucker Anthony Incorporated ........................ 49,000
Van Kasper & Company ............................... 49,000
Wheat First Butcher Singer ......................... 49,000
U.S. Offering Subtotal ............................ 7,844,800
-------------
Total ............................................ 9,806,000
=============
</TABLE>

The U.S. Underwriters have been granted an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to 980,957 additional shares
of Common Stock from the Selling Stockholders at the initial Price to the
Public less underwriting discounts and commissions. The U.S. Underwriters may
exercise such right of purchase only for the purpose of covering
over-allotments, if any, incurred in connection with the sale of the shares
of Common Stock offered hereby. To the extent that the U.S. Underwriters
exercise such option, each of the U.S. Underwriters will become obligated,
subject to certain conditions, to purchase the same proportion of such
additional shares as the number of other shares to be purchased by that U.S.
Underwriter bears to the total number of shares being sold in the U.S.
Offerings on the same terms as those on which all shares are being sold in
the Offerings.

In the Underwriting Agreement, the Company, the Selling Stockholders and
the Underwriters have agreed to indemnify each other against certain
liabilities under the Act.

<PAGE>

INTERNATIONAL PROSPECTUS

Pursuant to the Agreement between U.S. Underwriters and International
Managers dated the date hereof (the "Agreement Between"), each U.S.
Underwriter has agreed that, as part of the distribution of the Common Stock,
(i) it is not purchasing any Common Stock for the account of anyone other
than a United States or Canadian Person (as defined below) and (ii) it has
not offered or sold, and will not offer or sell, directly or indirectly, any
Common Stock or distribute this Prospectus outside the United States and
Canada or to anyone other than a United States or Canadian Person. Each
International Manager has agreed that, as part of the distribution of the
Common Stock (i) it is not purchasing any Common Stock for the account of any
United States or Canadian Person and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any Common Stock or
distribute this Prospectus in the United States or Canada or to any United
States or Canadian Person. The foregoing limitations do not apply to
stabilization transactions, to certain other transactions among the
International Managers and the U.S. Underwriters pursuant to the Agreement
Between or to purchases, offers or sales by a U.S. Underwriter who is also
acting as an International Manager or by an International Manager who is also
acting as a U.S. Underwriter. As used in this section, "United States" means
the United States of America, its territories, its possessions and all areas
subject to its jurisdiction and "United States or Canadian Person" means any
national or resident of the United States or Canada or any corporation,
pension, profit sharing or other trust or other entity organized under or
governed by the laws of the United States or Canada or of any political
subdivision thereof (other than a branch located outside the United States or
Canada of any United States or Canadian Person), and includes any United
States or Canadian branch of a person other than a United States or Canadian
Person.

LEGAL MATTERS

<PAGE>

INTERNATIONAL PROSPECTUS

EXPERTS

AVAILABLE INFORMATION

DOCUMENTS INCORPORATED BY REFERENCE

<PAGE>

TABLE OF CONTENTS

<PAGE>

INTERNATIONAL PROSPECTUS

9,806,000 SHARES

[LOGO]

GTECH HOLDINGS CORPORATION

COMMON STOCK

------------
PROSPECTUS
------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MERRILL LYNCH
INTERNATIONAL

SALOMON BROTHERS
INTERNATIONAL LIMITED

JUNE 18, 1996