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                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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

                  For the fiscal year ended: February 24, 2001
                           Commission File No: 1-11250

                           GTECH HOLDINGS CORPORATION

         Delaware                                             05-0450121
 -------------------------                              -----------------------
(State or other jurisdiction                            (IRS Employer ID Number)
of incorporation or organization)

              55 Technology Way, West Greenwich, Rhode Island 02817
                                 (401) 392-1000
                            -------------------------
          (Address and telephone number of Principal Executive Offices)


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

        Title of Each Class:                         Common Stock $.01 par value
        Name of Each Exchange on which Registered:   New York Stock Exchange


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]

The aggregate market value of the registrant's Common Stock (its only voting
stock) held by non-affiliates of the registrant as of April 10, 2001 was
$863,287,810 (Reference is made to Page 35 herein for a statement of the
assumptions upon which this calculation is based.)

On April 10, 2001, there were 29,413,554 outstanding shares of the registrant's
Common Stock.

Documents Incorporated By Reference: Certain portions of the registrant's 2001
definitive proxy statement relating to its scheduled July 2001 Annual Meeting of
Shareholders (which proxy statement is expected to be filed with the Commission
not later than 120 days after the end of the registrant's last fiscal year) are
incorporated by reference into Part III of this report.


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                                     PART I
ITEM 1.  BUSINESS

GENERAL

GTECH Corporation ("GTECH") is the world's leading operator of computerized
online lottery systems and the wholly owned subsidiary of GTECH Holdings
Corporation ("Holdings"; collectively with its direct and indirect subsidiaries,
including GTECH, the "Company"). The Company currently operates, or supplies
equipment to, online lottery systems for 26 of the 38 online lottery authorities
in the United States and has supplied, currently operates or has entered into
contracts to operate in the future online lottery systems for 57 of the 104
international online lottery authorities.

Since the establishment of the first online lottery in 1975, the online lottery
industry has experienced substantial growth, as governments have increasingly
relied on lotteries as a non-tax source of revenue. However, in recent years the
Company has witnessed a downward trend in sales generated by certain of its
United States lottery customers. See "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations" below.

The Company's core business consists of providing online 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 online lottery systems and instant ticket support systems and
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' online lottery systems
in return for a percentage of the gross lottery revenues. Many of the Company's
international lottery customers have purchased their online lottery systems,
although some, especially lottery authorities in Eastern Europe and Latin
America, have entered into long-term service contracts with the Company. In
recent years there has been, in general, 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
online lottery service contracts with substantially all of the remainder being
derived from lottery product sales. In fiscal 2001 (which ended on February 24,
2001) approximately 93% of the Company's lottery revenues were derived from
online lottery service contracts.

In recent years, lottery authorities have recognized that by offering new games
or products, they often 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 online products and services introduced in recent years consist of
keno, instant ticket support systems and services and televised lottery programs
such as BingoVision(TM). Keno, an online 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 currently is offered by 16
of the Company's customers. The Company currently provides instant ticket
support services, products and systems in 24 domestic


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jurisdictions and 22 jurisdictions outside of the United States. The Company
also offers customers television lottery games. BingoVision(TM), the Company's
best known television game, is a televised bingo-based lottery game which is
played in 10 jurisdictions. See "Certain Products and Services" below.

In recent years, the Company has taken steps to broaden its offerings of
high-volume transaction processing services outside of its core business of
providing online lottery services. For example, since the start of fiscal 2000,
the Company has entered into agreements which permit bill payments over its
Brazilian and Chilean lottery networks. In addition, the Company continues to
develop and, where permitted, to market, its UWin!(TM) internet based platform
through which international providers of government-sponsored lottery products
and services may offer interactive games. During fiscal 2001, the Company
announced that Dreamport, Inc., the Company's gaming and entertainment
subsidiary, would henceforth focus on assisting lotteries to expand their
offerings in the area of video-machine gaming and central systems and that
activities and assets of Dreamport which were peripheral to the Company's core
lottery business would be consolidated and/or divested. See "Certain Significant
Developments Since the Start of Fiscal 2001" and "Certain Products and Services"
below.

GTECH was founded in 1980. Holdings acquired GTECH in a leveraged buy-out in
February 1990, in which members of then-senior management of GTECH participated.

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.


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Certain statements contained in this Report are forward looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934. Such statements include, without limitation,
statements relating to (i) the future prospects for and stability of the lottery
industry and other businesses in which the Company is engaged or expects to be
engaged, (ii) the future operating and financial performance of the Company,
(iii) the ability of the Company to retain existing business and to obtain and
retain new business, and (iv) the results and effects of legal proceedings and
investigations. Such forward looking statements reflect management's assessment
based on information currently available, but are not guarantees and are subject
to risks and uncertainties that could cause actual results to differ materially
from those contemplated in the forward-looking statements. These risks and
uncertainties include but are not limited to those set forth below and elsewhere
in this report and in the Company's subsequent press releases and Form 10Qs, and
other reports and filings with the Securities and Exchange Commission.

CERTAIN FACTORS THAT MAY AFFECT FUTURE PERFORMANCE

The future performance of the Company's business is subject to the factors set
forth below, as well as the other considerations described elsewhere herein.

                             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, which
generally conduct an intensive investigation of the Company and its employees
prior to and after the award of a lottery contract, may require the removal of
any Company employees deemed to be unsuitable and are generally empowered to
disqualify the Company 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 jeopardize the award of
a lottery contract to the Company or provide grounds for termination of an
existing lottery contract.

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 one or
more local companies in seeking international lottery contracts.



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         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 online lottery service contracts. The Company's
online 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 some or all of the
extension options under their contracts or have 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.
The termination of or failure to renew one or more lottery contracts could,
depending upon the circumstances, have a material adverse effect on the
Company's business, financial condition and results and prospects.

Further, there have been and may continue to be investigations of various types,
including grand jury investigations, conducted by governmental authorities into
possible improprieties and wrong-doing in connection with efforts to obtain
and/or the awarding of lottery contracts and related matters.

In light of the fact that such investigations frequently are conducted in
secret, the Company would not necessarily know of the existence of an
investigation which might involve 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, 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. In
addition, continuing adverse publicity resulting from these investigations and
related matters could have such a material adverse effect.

See also Item 3 - "Legal Proceedings" below.


                   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.





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                       LIQUIDATED DAMAGES UNDER CONTRACTS

The Company's lottery 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 also 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 should such termination occur. Certain of the
Company's United States lottery contracts have contained provisions for up to
$700,000 a day in liquidated damages for late system start-up and provide for up
to $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
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. 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.

Liquidated damages paid or incurred by the Company with respect to its contracts
equaled 0.25%, 0.21%, 0.35%, 0.56% and 0.47% of annual revenues in each of the
five fiscal years ending February 1997 through 2001, respectively.

                                GAMING OPPOSITION

While the Company believes that legalized gaming, especially lottery, generally
enjoys widespread public support, gaming opponents have continued to persist in
efforts to curtail the expansion of legalized gaming. For example, the National
Gaming Impact Study Commission, a commission created by the U.S. Congress in
1997 to study the economic and social effects of legalized gambling, narrowly
voted during fiscal 1999 to endorse a non-binding recommendation for a
moratorium on the spread of casinos, lotteries and slot machines in the United
States. In addition, during fiscal 2000, the voters of Alabama defeated a
referendum to authorize the introduction of state lottery in Alabama. Moreover,
online lottery sales in a number of US jurisdictions have leveled off or have
declined in recent years, a phenomenon which may reflect, in part, opposition to
gaming.

                          STRENGTHENING OF COMPETITION

The online lottery industry is increasingly competitive in the United States and
internationally, which increased competition could adversely affect the
Company's ability to win renewals of contracts from its existing customers and
to win contract awards from other lottery authorities. Such increased
competition also may have an adverse effect on the profitability of contracts
which the Company does obtain. Through fiscal 2003 (which ends in February
2003), several of

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 the Company's larger contracts (including the National Lottery of Brazil and
Texas, its two largest in fiscal 2001) are expected to be the subject of
competitive procurement procedures to select contractors to supply lottery
goods and services upon the termination of the Company's current contracts. See
"Certain Significant Developments Since the Start of Fiscal 2001 - Other New
Online Contracts and Extensions," "Facilities Management Contracts" and
"Competition" below. See also Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" below.

                       ATTRACTING AND RETAINING EMPLOYEES

As is the case with all technology companies, the Company's business prospects
and future success depend upon its ability to attract and to retain qualified
managerial, marketing and technical employees. Competition for such employees is
sometimes intense, especially during times of general economic prosperity. If
the Company is unable to continue to attract and retain the technical and
managerial personnel it requires, its business, financial condition and
operating results could be adversely affected.

                         FOREIGN CURRENCY EXCHANGE RATES

Foreign exchange exposures arise from current transactions and anticipated
transactions denominated in a currency other than an entity's functional
currency and from the translation of foreign currency balance sheet accounts
into U.S. dollar balance sheet accounts. The Company employs a variety of
strategies in its effort to manage its substantial foreign currency exchange
exposure. See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operation" below.

CERTAIN SIGNIFICANT DEVELOPMENTS SINCE THE START OF FISCAL 2001

          LOTTERY CONTRACT AWARDS AND RELATED SIGNIFICANT DEVELOPMENTS

Since the start of fiscal 2001 (which ended on February 24, 2001), the Company
has received a number of service contract awards and extensions from lottery
authorities.

NEW ONLINE CUSTOMERS. During fiscal 2001, the Company received awards to install
online systems from six new online customers. In April 2000, the Company
announced that it had been selected after a competitive procurement as the
preferred supplier to provide new online lottery equipment to Santa Casa da
Misericordia ("SCML"), the operator of the National Lottery of Portugal. Under
the terms of the product sale agreement entered into with SCML in October 2000,
GTECH agreed to replace SCML's offline system with a full turn-key online
lottery system. For a period of eight years, the Company also agreed to provide
ongoing services to SCML, including central system maintenance, terminal
maintenance and repairs, software and operations support, and field services.
Online sales with respect to the SCML lottery are expected to begin in June
2001. In June 2000, the Company entered into an agreement with the Virginia
lottery authority to provide 4,000 ISYS(TM) terminals offering advanced
marketing capabilities and implementation, software customisation and warranty
maintenance services. The Virginia lottery

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authority has the option to purchase additional terminals and other products
under its three-year contract with the Company. In August 2000, the Company
entered into a facilities management agreement to provide online lottery
equipment and services to the Ukranian National Lottery through 2010, subject to
the Lottery's option to discontinue certain services if a five-year revenue
forecast is not achieved. The Company has agreed to convert the Ukranian
National Lottery's existing online lottery system, expand the Lottery's existing
terminal base from approximately 1,000 terminals to approximately 5,000
Tiffany(TM) terminals, provide a variety of installation, maintenance and
marketing services, and install and maintain a secure, nationwide communications
network. Sales of online lottery tickets on the Ukranian National Lottery system
commenced in April 2001. In September 2000, the Company announced that it had
signed a new product sale agreement to provide a turn-key online lottery system,
including central system hardware and software, and 1,500 Altura(TM) terminals
to CMC Prospects Import and Export Company, a China-based corporation, which in
turn will supply the Company's equipment to the Beijing Welfare Lottery Center.
In addition, the Company entered into agreements to provide a variety of lottery
services to the Beijing lottery authority. Sales of online lottery tickets
commenced on the Beijing lottery authority's system in March 2001, after the
close of fiscal 2001. In January 2001, the Company entered into an agreement
with Supreme Ventures Limited ("Supreme Ventures") under which it is the
exclusive provider of a fully integrated and secure online lottery system and
supporting services to Supreme Venture, the holder of a ten-year license issued
by the Jamaica Betting, Gaming & Lotteries Commission to operate certain on-line
lottery games in Jamaica. Lottery sales on Supreme Venture's new
Company-provided system are expected to commence in June 2001, after the close
of fiscal 2001. In addition to these awards, in May 2000, the Company announced
that it had entered into an eight-year facilities management contract to provide
a fully integrated and secure online lottery system for the Ivory Coast National
Lottery. Implementation of the Ivory Coast National Lottery project has been
suspended indefinitely, however, pending the resolution of political
uncertainties in the Ivory Coast.

OTHER NEW ONLINE CONTRACTS AND EXTENSIONS. Since the start of fiscal 2001, the
Company also has been awarded online contracts by, or has received contract
extensions from, a number of its existing customers.

In June 2000, the Company announced that it had been selected by the Ohio
lottery authority, following a competitive procurement, to enter into a new
long-term facilities management contract to supply an integrated online and
instant ticket lottery system (including new central system hardware, software,
and terminals and a wide variety of services). The lottery system which is to be
installed under the Company's new agreement with the Ohio lottery authority is
expected to be operational in June 2001. In September 2000, the Company
announced that following a competitive procurement it had been awarded a
contract to supply an instant ticket lottery system, and related products and
services, to the Nebraska lottery authority. In December 2000, the Company
announced that Camelot Group plc ("Camelot") had been selected as the preferred
applicant for the next operating license for the United Kingdom's National
Lottery by the National Lottery Commission (the "NLC"). Since July 1994, the
United Kingdom National Lottery has been operated under a license held by
Camelot and the Company has been a supplier of lottery goods and services to
Camelot for the National Lottery. Camelot was selected by the NLC as the
preferred applicant for the next operating license following a competitive
procurement process. As part of Camelot's proposal for the new







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procurement process. As part of Camelot's proposal for the new license, the
Company entered into technology transfer and training arrangements with Camelot
to, among other things, transfer to Camelot the Company's National Lottery
equipment, facilities and U.K. technology employees (in a transaction which was
subsequently completed in February 2001), complete a technology transfer to
Camelot, and grant to Camelot exclusive rights to operate the Company's gaming
system software in the U.K. for the term of the new license, in consideration
for receiving certain license fees payable by Camelot over the term of the new
license. In February 2001, the Company entered into an agreement to supply
Camelot with more than 26,000 new ISYS(TM) terminals prior to the commencement
of Camelot's second operating license in January 2002. The Company is also
obligated to assist Camelot in converting the National Lottery's current online
gaming and instant ticket systems to the Company's AlphaGols(TM) system during
the term of the second operating license. See Item 3-"Legal Proceedings" and
Note F to "Notes to Consolidated Financial Statements" below.

In March 2000, the Company announced that it had signed a new agreement to
provide online lottery equipment, software and services to the Western Australia
Lotteries Commission. In connection with this product sale of central system
hardware, network communication equipment, and software the Company entered into
an agreement to provide software license and software support to the Western
Australia Lotteries Commission for a term of at least five years. In July 2000,
the Company announced that it had been selected, following a competitive
procurement, as the preferred supplier to provide lottery equipment to Sistemas
Tecnicos de Loterios del Estado ("STL"), provider of the online system for the
Spanish National Lottery. Under the terms of the product sale agreement the STL,
the Company will provide STL with Altura(TM) terminals and AccuTherm(TM)
printers, and a variety of services, including software development, technology
transfer and training.

In February 2001, after the close of fiscal 2001, the Company announced that
Totalizator Sportowy Sp. Zo.o., a government-sponsored lottery authority in
Poland ("TS"), had selected the Company after a competitive procurement as the
preferred applicant for award of a ten-year operating license for Poland's
National Lottery, such term to take effect upon the expiration of the Company's
current facilities management contract with TS in October 2001. However, 
recently it has been reported in the Polish press that the contract may be 
rebid.

Since the commencement of fiscal 2001, the lottery authorities of Barbados (T.L
Lotteries Ltd.), New Jersey and Missouri have extended the terms of their online
contracts with the Company. In addition, SAZKA, the Czech lottery authority, 
entered into an agreement with the Company to extend the Company's online 
contract as part of the resolution of certain matters which were the subject of 
an arbitration between the parties. See Item 3, "Legal Proceedings" and Note F 
to "Notes to Consolidated Financial Statements," below.

During fiscal 2001, the Company also reported that the Iowa lottery authority,
currently a customer of the Company, had selected another vendor to provide
equipment and services for a new online and instant ticket lottery system
following expiration of the Company's current contract in June 2001.

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                        NON-LOTTERY PRODUCTS AND SERVICES


Since the commencement of fiscal 2001, the Company has made several
announcements respecting its non-lottery products and services. During fiscal
2001, the Company continued to make progress in its efforts to broaden its
offerings of high-volume transaction processing services outside its core online
lottery application. In June 2000, the Company signed a new contract with Caixa
Economica Federal, operator of Brazil's National Lottery, to include additional
financial transaction services (including bill and tax payment, social security
contribution, credit card, and traditional banking transaction services) over
the Company's dedicated network infrastructure. Under the terms of the
agreement, the Company will install 7,300 terminals of which 4,800 will process
financial transactions exclusively, with the remaining 2,500 processing
financial and lottery transactions. In December 2000, the Company signed
agreements with more than 500 of its lottery retailers in Chile to provide
electronic bill payment services at lottery retailer outlets throughout Chile.
In May 2000, the Company announced that it had been selected by the Texas
Department of Human Services to provide call center support services for the
state's electronic benefit transfer system. In August 2000, in connection with
the Company's value assessment described below, the Company announced that
Dreamport, Inc. ("Dreamport"), the Company's gaming and entertainment
subsidiary, would henceforth focus on assisting lotteries to expand their
offerings in the area of video-machine gaming and central systems. Activities
and assets of Dreamport which were peripheral to the Company's core lottery
business, such as casino and slot operations, would be consolidated and/or
divested and Dreamport's operations would be relocated from Florida to Rhode
Island. In March 2001, after the close of fiscal 2001, the Company reported that
it had sold its 50% interest in three limited liability companies which were
pursuing non-lottery gaming opportunities in Michigan, Oregon and California,
respectively, to Full House Resorts, Inc., the owner of the remaining 50%
interest in these companies, for a cash purchase price of $1,800,000.


                                VALUE ASSESSMENT


In July 2000, the Company announced that it would conduct, and in February 2001
the Company announced that it had completed, a comprehensive value assessment of
its operations. In the wake of this value assessment, the Company undertook a
number of measures to strengthen its focus on its business strategy. Such
measures included the strategic and operational decisions respecting Dreamport,
described above, as well as the decision by the Company to reduce its workforce
by approximately 255 employees. The Company recorded special charges of $42.3
million in fiscal 2001 in connection with this value assessment. See "Note P of
Notes to Consolidated Financial Statements" included in this report.


                             MANAGEMENT DEVELOPMENTS

Since the start of fiscal 2001, there have been a number of significant
managerial developments. In May 2000, the Company appointed Kathleen McKeough as
Senior Vice President of Human Resources. In July 2000, W. Bruce Turner was 
appointed as non-executive Chairman of the Company's Board of Directors
following the resignations of William Y. O'Connor, the Company's Chairman of
the Board of Directors and Chief Executive Officer, and Steven P.


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Nowick, the Company's President and Chief Operating Officer. In September 2000,
the Company appointed Robert Vincent as Vice President of Corporate
Communications, and in February 2001, the Company appointed Antonio Carlos Rocha
as Senior Vice President of Marketing. In March 2001, after the close of fiscal
2001, the Company announced the appointment of Howard S. Cohen as Chief
Executive Officer, and Marc A. Crisafulli as Senior Vice President and General
Counsel of the Company.

LOTTERY INDUSTRY

Statements relating to the lottery industry contained in this report are based
on information compiled by the Company, or derived from independent public
sources which the Company believes to be reliable. No assurance can be given,
however, regarding the accuracy of such statements. In general, there is less
publicly-available information concerning the international lottery industry
than the lottery industry in the United States.

Lotteries are operated by state and foreign governmental authorities and their
licensees in approximately 190 jurisdictions worldwide. Governments have
authorized lotteries primarily as a means of generating non-tax revenues. In the
United States, lottery revenues are frequently designated for particular
purposes, such as education, economic development, conservation, transportation
and aid to the elderly. Many states have become increasingly dependent on their
lotteries as revenues from lottery ticket sales are often a significant source
of funding for these programs.

Although there are many types of lotteries in the world, it is possible to
categorize government authorized lotteries into two principal groups: online
lotteries and off-line lotteries. An online lottery is conducted through a
computerized lottery system in which lottery terminals are connected to a
central computer system, typically by dedicated telephone lines. An online
lottery system is generally utilized for conducting games such as lotto, sports
pools, keno and numbers, in which players make their own selections. Off-line
lotteries feature lottery games which are not computerized, including
traditional off-line lottery games and instant ticket games. Traditional
off-line lottery games, in which players purchase tickets which are manually
processed for a future drawing, generally are conducted only in international
jurisdictions. Instant ticket games, in which players scratch off a coating from
a pre-printed ticket to determine if it is a winning ticket, are conducted both
internationally and in the United States.

In general, online lotteries generate significantly greater revenues than both
traditional off-line lottery games and instant ticket games. In addition, there
are several other advantages to online lotteries as compared to traditional
off-line lotteries. Unlike traditional off-line lottery games, wagers can be
accepted and processed by an online lottery system until minutes before a
drawing, thereby significantly increasing the lottery's revenue in cases in
which a large prize has attracted substantial wagering interest. Online lottery
systems also provide greater reliability and security, allow a wider variety of
games to be offered and automate accounting and administrative procedures which
are otherwise manually performed.


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Typically, approximately 50% of the gross revenues of an online lottery in the
United States is returned to the public in the form of prizes. Approximately 35%
is used by the state to support specific public programs or as a contribution to
the state's general funds. The remaining 15% is generally used to fund the
operations of the lottery, including the cost of advertising, sales commissions
to point-of-purchase retailers and service fees to vendors such as GTECH.

From 1971 through 2000, total annual lottery ticket sales in the United States
grew from approximately $147.5 million to approximately $38.4 billion, although
the Company has witnessed, in recent years, a downward trend in sales generated
by certain of its United States lottery customers. See "General" above.
Historically, most of the growth in ticket sales has occurred in the online
portion of the lottery business which accounted for approximately 57.8% of total
lottery ticket sales in 2000.

There are currently 38 jurisdictions operating online lotteries in the United
States. Implementation of lotteries in other jurisdictions, including in South
Carolina (where in November 2000 voters approved an initiative to introduce an
online lottery), will depend upon successful completion of legislative,
regulatory and administrative processes.

Outside the United States, government operated or licensed lotteries, many of
which are off-line, have a long history. The international online lottery
industry has experienced significant growth. Since 1977, when there were no
online lotteries operating outside of the United States, 104 international
jurisdictions have implemented online lottery systems. A number of other
international jurisdictions, principally in Europe, Asia and Latin America, are
currently considering the implementation of online lotteries.

ONLINE LOTTERY CONTRACTS

The Company generally conducts 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 online
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 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 and the South African National Lottery provide important
exceptions

                                       11
   13

to the general rule in that in each case a licensee operates all aspects of the
respective National Lottery with the exception of proceeds allocation.

                         FACILITIES MANAGEMENT CONTRACTS

The Company's Facilities Management Contracts generally require the Company to
install, operate and maintain an online lottery system for an initial term,
which is typically at least five years, and usually contain options permitting
the lottery authority to extend the contract under the same terms and conditions
for one or more additional periods, generally ranging from one to five years. In
addition, the Company's customers occasionally renegotiate extensions on
different terms and conditions. See also "Certain Factors That May Affect Future
Performance- Liquidated Damages Under Contracts" above.

The Company's revenues under Facilities Management Contracts are generally based
upon a percentage of gross online lottery ticket sales. The level of lottery
ticket sales within a given jurisdiction is determined by many factors,
including population density, the types of games played and the games' design,
the number of terminals, the size and frequency of prizes, the nature of the
lottery's marketing efforts and the length of time the online lottery system has
been in operation.

Under its Facilities Management Contracts, the Company retains title to the
lottery system and typically provides its customers with the services necessary
to operate and manage the lottery system. The Company installs and commences
operations of a lottery system after being awarded a Facilities Management
Contract and, following the start-up of the lottery system, is responsible for
all aspects of the system's operations. The Company typically operates lottery
systems in each jurisdiction on a stand-alone basis through the installation of
two or more dedicated central computer systems, although in a few instances
several jurisdictions share the same central system. In addition, the Company
employs a dedicated work force in each jurisdiction, consisting of a site
director, marketing personnel, computer and hotline operators, communications
specialists and customer service representatives who service and maintain the
system.

Under certain of the Company's Facilities Management Contracts the lottery
authority has the right to purchase the Company's lottery system during the
contract term at a predetermined price, which is calculated so that it exceeds
the Company's net book value of the system at the time the right is exercisable.
The Company's role with respect to the continued operation of a lottery system
in the event of the exercise of such a purchase option generally is not
specified in such contracts and thus would be subject to negotiation. Under many
of the Company's Facilities Management Contracts, the lottery authority also has
the option to require the Company to install additional terminals and/or add new
lottery games. Such installations may require significant expenditures by the
Company. However, since the Company's revenues under such contracts generally
depend on the level of lottery ticket sales, such expenditures have generally
been recovered through the revenues generated by the additional equipment or
games and revenues from existing equipment.


                                       12
   14

Under a number of the Company's lottery contracts, in addition to providing,
operating and maintaining the online lottery system in these jurisdictions, the
company is providing a wide range of support services and equipment for the
lottery's instant ticket games, such as marketing, distribution and automation
of validation, inventory and accounting systems, for which it receives fees
based upon a percentage of the revenues of the instant ticket games.

Revenues from Facilities Management Contracts are accounted for as service
revenues in the Company's Income Statements.

Unless otherwise indicated, the table below sets forth the lottery authorities
with which the Company had Facilities Management Contracts and fully installed,
operational lottery systems as of March 30, 2001, and as to which the Company is
the sole supplier of central computers and terminals and material services. The
table also sets forth information regarding the term of each contract and, as of
March 30, 2001, the approximate number of terminals installed in each
jurisdiction.


                                       13

   15



                        APPROXIMATE                                                         CURRENT
                     NUMBER OF LOTTERY      DATE OF COMMENCEMENT  DATE OF EXPIRATION OF    EXTENSION
JURISDICTION      TERMINALS INSTALLED(1)    OF CURRENT CONTRACT   CURRENT CONTRACT TERM    OPTIONS*
------------      ----------------------    -------------------   ---------------------    --------
UNITED STATES:
Arizona                     2,500                  9/99                    9/04           2 one-year
California (2)             20,310                  10/93                  10/03               --
Colorado                    4,000                  3/95                   10/04               --
D.C. (3)                      575                  6/99                   11/09               --
Georgia                     6,930                  4/93                    9/03               --
Illinois                    6,660                  4/00                   10/07           1 one-year
Iowa (4)                    1,485                  4/91                    6/01           1 two-year
                                                                                          1 three-year
Kansas                      1,830                  7/97                    6/02           1 two-year
Kentucky                    3,000                  4/97                    6/03           5 one-year
Louisiana                   2,775                  6/97                    6/05           5 one- year
Maine (4)                     970                  4/89                    6/01               --
Michigan                    9,500                  1/98                    1/06           3 one-year
Missouri                    2,800                  7/96                    6/03               --
Nebraska                      900                  4/94                    6/04               --
New Jersey                  6,000                  6/96                   11/06               --
New Mexico                  1,235                  6/96                   11/03           5 one-year
New York                   13,700                 11/00                    3/07           3 one-year
Ohio                        7,500                 10/93                    6/03 (5)       3 two-year
Oregon                      2,760                 12/96                    6/05           3 one-year
Rhode Island                1,100                  1/97                    7/02           5 one-year
Texas                      17,050                  3/92                    8/02               --
Washington                  3,640                  9/95                    6/04               --
Wisconsin                   3,137                  6/97                    6/02           2 one-year


INTERNATIONAL:
Barbados                     200                  10/94                    11/04              --
-T.L. Lotteries
 Brazil (6)
-National
 Lottery (6)              22,000                   1/97                     1/03              --
-Minas Gerais                770                  10/94                    11/06              --
-Parana                      720                   9/99                     9/03          one 1-year
-Goias                       120                   7/97                     7/01          one 1-year

                                       14
   16
                        APPROXIMATE                                                         CURRENT
                     NUMBER OF LOTTERY      DATE OF COMMENCEMENT  DATE OF EXPIRATION OF    EXTENSION
JURISDICTION      TERMINALS INSTALLED(1)    OF CURRENT CONTRACT   CURRENT CONTRACT TERM    OPTIONS*
------------      ----------------------       ----------------   ---------------------    --------
Chile
-Polla Chilena de 
Beneficencia S.A.          1,650                   12/93                   8/02               --
Czech Republic

-SAZKA                     5,700                   10/92                12/05 (7)             --

Ireland (8)
-An Post Nat'l
Lottery Company            2,050                    3/93                   3/01              (8)

Ivory Coast
-Ivory Coast
National Lottery              (9)                   (9)                    (9)               (9)

Jamaica
-Supreme
Ventures Limited             (10)                  11/00                  01/11               --

Lithuania (11)
-OLIFEJA                     800                   12/94                  12/09              (11)

Morocco
-La Societe de
Gestion de la
Loterie Nationale
-La Marocaine des 
Jeux et Les Sports           800                   8/99                    8/08               --

Poland (12)
-Totalizator
Sportowy                   6,400                   3/91                   10/01              (12)

Puerto Rico
-Loteria
Electronica de
Puerto Rico                1,860                   3/99                    3/05          1 three-year

Slovak Republic
- TIPOS a.s.               1,140                   3/96                   10/04               --

South Africa (13)
-National Lottery          4,900                    7/99                  7/09                --

Spain
-L'Entitat
Autonoma de Jocs
I Apostes de la
Generalitat de
Catalunya                 2,510                     10/97                 10/03          1 six-month

Trinidad & Tobago
-National
Lotteries
Control Board               665                     12/93                  7/06            1 three


                                       15
   17
                        APPROXIMATE                                                         CURRENT
                     NUMBER OF LOTTERY      DATE OF COMMENCEMENT  DATE OF EXPIRATION OF    EXTENSION
JURISDICTION      TERMINALS INSTALLED(1)    OF CURRENT CONTRACT   CURRENT CONTRACT TERM    OPTIONS*
------------      ----------------------    -------------------   ---------------------    --------
United Kingdom
-The National
Lottery (14)             24,865                     7/94                   9/01               --

Ukraine
-Ukrainian
National Lottery            (15)                    8/00                   (15)               --

* 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 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 6,309 terminals using HISI's
        proprietary dial-up technology for online and instant ticket sales and
        validation.

(3)     Operated by Lottery Technology Enterprises, a joint venture in which the
        Company has a 1% interest, and to which the Company supplies lottery
        goods and services.

(4)     During fiscal 2001, the Iowa Lottery authority, and during fiscal 2000,
        the Maine lottery authority,  selected another vendor to provide lottery
        goods and services, respectively, at the expiration of the Company's
        current contract term.

(5)     During fiscal 2001, the Company entered into a new facilities management
        agreement to install a system which is expected to be operational in
        June 2001.

(6)     Operated by GTECH Brasil Holdings, S.A., a Brazilian company in which
        the Company owns all voting stock. During fiscal 2001, CAIXA, the
        lottery authority operating the Brazilian National Lottery, commenced a
        competitive procurement process to determine the provider of lottery
        goods and services upon the termination of the Company's contract in
        January 2003. The terms of this competitive procurement provide for more
        than one vendor to supply the lottery goods and services which are
        provided exclusively by the Company under the present contract.

(7)     In March 2001, the Company and SAZKA resolved certain business and
        contractual issues that had been the subject of an arbitration by, among
        other things, agreeing to extend the current contract through December
        2005.

(8)     The contracts with the Ireland licensee may either be extended for any
        period mutually acceptable to the Company and the lottery authority or
        continue indefinitely until termination by the licensee.

(9)     In May 2000, the Company entered into an eight-year facilities
        management contract to provide an integrated lottery system to the Ivory
        Coast National Lottery. Implementation of this project has been
        suspended for the indefinite future pending resolution of political
        uncertainties in the Ivory Coast.

(10)    Lottery sales are scheduled to commence in June 2001. The Company plans
        to have installed 700 terminals by the end of fiscal second quarter of
        2002.

(11)    The Company's contract with the Lithuania lottery authority
        automatically extends from year-to-year unless either party gives timely
        notice of non-renewal.




























(12)    In February 2001, after the close of fiscal 2001, the Company announced
        that the Poland Lottery authority had selected the Company after a
        competitive procurement as the preferred applicant for award of a
        ten-year operating license upon expiration of the Company's current
        facilities management contract in October 2001. Subsequent to this, the
        Company has received indications that it is possible that requisite
        governmental approvals will not be granted with respect to this
        contract.

(13)    Operated by Uthingo consortium, in which GTECH is a 10 percent equity
        owner.

(14)    Operated by Camelot Group plc, a consortium, on a facilities management
        basis. During fiscal 2001, Camelot was granted an interim license to
        operate the National Lottery through January 2002, and a second running
        license commencing upon the expiration of its current license to operate
        the National Lottery through January 2009. During fiscal 2001, the
        Company and Camelot entered into agreements under which the Company
        agrees to provide to Camelot technology transfer and training, software
        licensing and lottery terminals with respect to Camelot's second running
        license. See "Certain Significant Developments Since the Start of Fiscal
        2001."

(15)    Operated by the Company under an agreement entered into in August 2000
        which expires December 2010, subject to earlier termination by the
        Ukrainian National Lottery if, among other things, certain revenue
        targets are not achieved. The lottery commenced on-line lottery sales in
        April 2001 with an initial installation of 1800 terminals.


                                       16
   18


                               OPERATING CONTRACTS

Under an Operating Contract, the Company generally operates and maintains the
lottery system and provides on-going software support services in the same
manner as under a Facilities Management Contract, except that the Company sells
the lottery system and licenses the software to the lottery authority at the
beginning of the contract rather than retaining ownership of the system. Ongoing
service fees to the Company under its Operating Contracts are usually based on a
percentage of lottery ticket sales. The initial contract term, extensions,
rebidding processes and termination rights for Operating Contracts are generally
substantially the same as those under Facilities Management Contracts.

Revenues from sales of lottery systems and equipment under Operating Contracts
are accounted for as product sales revenue, and services provided under such
contracts are accounted for as service revenues in the Company's Income
Statements.

The table below sets forth the lottery authorities with which the Company had
Operating Contracts as of March 30, 2001. 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 30, 2001, the approximate
number of terminals installed in each jurisdiction.

                               OPERATING CONTRACTS


                           APPROXIMATE
                        NUMBER OF LOTTERY                        DATE OF EXPIRATION     CURRENT
                            TERMINALS      DATE OF COMMENCEMENT      OF CURRENT        EXTENSION
JURISDICTION               INSTALLED(1)     OF CURRENT CONTRACT     CONTRACT TERM      OPTIONS*
------------               ------------     -------------------     -------------      --------
UNITED STATES:
Idaho                          975                 2/99                 2/03          4 one-year


INTERNATIONAL:
Argentina
                    
-Loteria National              790                 11/93                4/03              --
Sociedad del Estado

Turkey

-Turkish National Lottery    4,000                 2/96                 11/01             (2)

================================================================================

        * 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 term of the contract with the Turkey lottery authority automatically
      renews for successive one-year extension terms unless either party gives
      timely notice of non-renewal. In addition, the Turkey 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.


                                       17
   19


                             PRODUCT SALES CONTRACTS

The Company sells, delivers and installs online lottery systems for a fixed
price under Product Sales Contracts. The Company also sells additional terminals
and central computers to expand existing systems and/or replace existing
equipment under Product Sales Contracts.

In connection with its Product Sales Contracts, the Company generally designs
the lottery system, trains the lottery authority's personnel and provides other
services required to make and keep the system operational. The Company also
generally licenses its software to its customers for a fixed additional fee.

Historically, product sales revenues have been derived from the installation of
new online lottery systems and the sales of lottery terminals and equipment in
connection with the expansion of existing lottery systems. The size and timing
of these transactions at times has resulted in variability in product sales
revenues from quarter to quarter. See Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

The table below lists certain of the Company's direct and indirect customers
that since March 1, 1998 have purchased (or have agreed to purchase) from the
Company new online lottery systems, software and/or lottery terminals and
equipment in connection with the expansion of existing lottery systems.

         Argentina         --National Lottery of Argentina
         Australia         --Lotteries Commission of New South Wales
         Australia         --Lotteries Commission of South Australia
         Australia         --Western Australia Lotteries Commission
         Belgium           --Loterie Nationale de Belgique
         China             --Beijing Welfare Lottery Center
         Denmark           --Dansk Tipstjanst
         France            --La Francaise des Jeux
         Israel            --Mifal Hapayis
         Italy             --Teseo S.r.l
         Massachusetts     --Massachusetts State Lottery Commission
         Netherlands       --Stichting de Nationale Sport Totalisator
         Portugal          --Santa Casa de Misericordia de Lisboa
         Singapore         --Singapore Pools (Pte) Ltd.
         South Africa      --Uthingo
         Spain             --Sistemas Tecnicos de Loterias del Estado
         Sweden            --AB Svenska Spel
         Switzerland       --Loterie de la Suisse Romande

                                       18
   20
         United Kingdom    --The National Lottery
         Virginia          --Virginia Lottery

CONTRACT AWARD PROCESS

In the United States, lottery authorities generally commence the contract award
process by issuing a request for proposals inviting proposals from various
lottery vendors. The request for proposals usually indicates certain
requirements specific to the jurisdiction, such as particular games which will
be required, particular pricing mechanisms, the experience required of the
vendor and the amount of any performance bonds that must be furnished. After the
bids have been evaluated and a particular vendor's bid has been accepted, the
lottery authority and the vendor generally negotiate a contract in more detailed
terms. Once the contract has been finalized, the vendor begins to install the
lottery system.

After the expiration of the initial or extended contract term, a lottery
authority in the United States generally may either seek to negotiate further
extensions or commence a new competitive bidding process. Internationally,
lottery authorities do not typically utilize as formal a bidding process, but
rather negotiate proposals with one or more potential vendors.

The Company's marketing efforts for its lottery products and services frequently
involve top management in addition to the Company's professional marketing
staff. These efforts consist primarily of marketing presentations to the lottery
authorities of jurisdictions in which requests for proposals have been issued.

Marketing of the Company's lottery products and services to lottery authorities
outside of the United States is often performed in conjunction with licensees
and consultants with whom the Company contracts for representation in specific
market areas. Although generally neither a condition of their contracts with the
Company nor a condition of their contracts with lottery authorities, such
licensees and consultants often agree with the Company to provide on-site
services after installation of the online lottery system.

From time to time, there are challenges or other proceedings relating to the
awarding of lottery contracts.

PRODUCTS AND SERVICES

The Company's lottery systems consist of lottery terminals, central computer
systems, systems and communications software and game software, and
communications equipment which connects the terminals and the central computer
systems. The systems' terminals are typically located in high-traffic retail
outlets, such as newsstands, convenience stores, food stores, tobacco shops and
liquor stores.

The Company's online lottery systems control and perform the following
functions: entry of wagers using a terminal's keyboard or a fully-integrated
optical mark recognition reader; automatic editing of each wager for correctness
by the originating terminal; encryption and

                                       19
   21

transmission of the wager and related data to the central computer
installation(s); processing of each wager by the central computers, including
entry of the wager into redundant data bases; transmission of authorization for
the originating terminal to accept the wager and print a receipt or ticket,
winning ticket identification and validation; and administrative functions,
including determination of prize pools and generation of management information
reports.

The basic functions of the Company's systems, which are listed above, as well as
various optional or custom-designed functions, are performed under internal
controls designed for maximum security and minimum processing time. Security is
provided through an integrated system of techniques, procedures and controls
supported by hardware, software and human resources. Individual systems
generally have redundant capacity at multiple levels and sophisticated software
to ensure continuous service to the customer.

                                    TERMINALS

The Company designs, manufactures and provides the point-of-sale terminals used
in its online lottery systems. The Company's model GT-101 FX terminals,
introduced in 1983, its model GT-101TF terminals, introduced in 1985, and its
model GT-401/OI terminals, introduced in 1989, are installed in numerous
jurisdictions. The Company's Spectra(R) terminal series (GT-401/0M, 402/0M and
403/OM), first introduced in 1989, is distinguished by its modular internal and
external architecture.

The Company's ISYS terminal series, (GT-501, 502 and 503), introduced during
fiscal 1996, is an integral, single-unit terminal which features modular
subassemblies, high performance ticket printer and playslip reader
subassemblies, an easy-to-use design, and a host of new features and
technologies.

During fiscal 1999, the Company announced its agreement to provide to the
Colorado lottery its new terminal, Player's Express(TM), which was designed
specifically for large retail environments, such as grocery stores, with
numerous checkout lanes. The Company has subsequently entered into agreements
with the Nebraska, Ohio, Washington, California, New Jersey, New York, Rhode
Island, Israel, Ireland, , Loto-Quebec, The Netherlands and New Zealand lottery
authorities to supply PlayerExpress(TM) terminals.

During fiscal 1999, the Company also announced the launch of its Altura(TM)
family of terminals. See "Certain Products and Services" below.

                                    SOFTWARE

The Company designs and provides all applications solutions for its lottery
systems. The Company's highly sophisticated and specialized software is designed
to provide the following system characteristics: rapid processing, storage and
retrieval of transaction data in high volumes and in multiple applications; the
ability to down-line load (i.e., to reprogram the lottery terminals from the
central computer installation via the communications system to add new games); a
high degree of security and redundancy to guard against unauthorized access and
tampering and to

                                       20
   22

ensure continued operations without data loss; and a comprehensive management
information and control system. In addition to featuring the aforementioned
characteristics, the Company's latest generation software system, ProSys(R), is
based on client server architecture and provides open interfaces which allow for
the integration and support of third-party and commercial modules and
applications. See "Certain Products and Services" below.

                                CENTRAL COMPUTERS

Each of the Company's lottery systems contains one or more central computer
sites to which the lottery terminals are connected. The Company's central
computer systems are manufactured by Compaq Computer Corporation (formerly
Digital Equipment Corporation) and Stratus Computer, Inc. The specifications for
the configuration of the Company's central computer installations are designed
to provide continuous availability, a high throughput rate and maximum security.
Central computer installations typically include: redundant mainframe computers,
various peripheral devices (such as magnetic storage devices, management
terminals and hard copy printers), and various safety, environmental control and
security subsystems (including a back-up power supply), which are all
manufactured by third parties, and a microcomputer-based communication and
switching subsystem. In addition, the Company supplies management information
systems that provide lottery personnel access to important financial and
operational data without compromising the security of the online system.

                                 COMMUNICATIONS

The Company's lottery terminals are typically connected to the central computer
installations by dedicated telephone lines owned or leased by the jurisdiction
in which the system is located. Due to the varying nature of telecommunications
services available in lottery jurisdictions, the Company has developed the
capability to interface with a wide range of communications technologies,
including UHF Radio capability (narrow-band and Spread Spectrum), GSAT/VSAT,
Microwave, Integrated Services Digital Networking (ISDN), Data Over Voice (DOV),
fiber optic and cellular telephone. In Argentina, Barbados, Brazil, the Spanish
province of Catalunya, Chile, the Czech Republic, Estonia, Jamaica, Lithuania,
Mexico, Morocco, New Mexico, Poland, Puerto Rico, Slovakia, South Africa,
Trinidad and Tobago, and Ukraine, the Company utilizes UHF Radio Data-Link
Communications system in lieu of telephone lines to provide a data
communications pathway between the lottery terminals and the central computers.
The Company also uses this technology in the United States to supplement the
existing telephone networks in Rhode Island, Texas, Washington and the District
of Columbia. The Company's GSAT satellite technology makes it feasible to serve
large market areas where telephone lines are either unavailable, unreliable or
too costly. GSAT currently operates in the United States in remote areas of
Colorado, Nebraska, New Mexico, Texas and Washington, and internationally in
Argentina, the Czech Republic, Brazil, Chile, Israel, South Africa and the
United Kingdom. The Company has also implemented UHF radio in conjunction with
GSAT to further enhance reliability and cost savings in remote areas.

                                      GAMES



                                       21
   23


An important factor in maintaining and increasing public interest in lottery
games is innovation in game design. The Company's GameScape(TM) group, in
conjunction with lottery authorities, utilizes principles of demographics,
sociology, psychology, mathematics and computer technology to design customized
lottery games which are intended to appeal to the populations served by its
lottery systems. The principal characteristics of game design include: frequency
of drawing, size of pool, cost per play and setting of appropriate odds. The
Company believes that its expertise in game design has enhanced the marketing of
its lottery systems and has contributed to increases in the revenues of the
Company's customers.

The Company's GameScape(TM) group currently has a substantial number of
variations of lottery games in its software library and several promising new
games under development. The Company believes that this game library and the
"know how" and experience accumulated by its professionals since the Company's
inception make it possible for the Company to meet the requirements of its
customers for specifically tailored games on a timely and comprehensive basis.

During fiscal 1999, the Company augmented its game design expertise by acquiring
Europrint Holdings Limited (which is among the world's largest providers of
media promotional games) and its wholly-owned subsidiaries including Interactive
Games International, Inc. (which has pioneered the development of interactive,
televised lottery games including BingoVision(TM), SplitLevel(TM) and
DoubleChance(TM)).

                                    MARKETING

In United States jurisdictions in which the Company has been awarded a lottery
contract, the Company is frequently asked to assist the lottery authority in the
marketing of lottery games to the public. Such assistance generally includes
advice with respect to game design, and promotion and development and
distribution of terminals and advertising programs. As part of such assistance,
the Company developed "GMark," a computerized marketing analysis system used to
determine favorable locations for new lottery terminals. The lottery authorities
of California, Georgia, Illinois, Louisiana, Massachusetts, Missouri, New
Jersey, New York, Ohio, Rhode Island, Texas and Washington currently utilize
GMark systems, and many customers contact the Market Research Group at
GameScape(TM) from time to time to obtain GMark services.


                                       22
   24

                                    WARRANTY

Because the Company retains title to the system under a Facilities Management
Contract, no warranty is provided on the Company's products supplied under such
contracts. The Company does repair or replace such products as necessary to
fulfill its obligations under such contract. There is no standard warranty on
products manufactured by the Company. A typical warranty provides that the
Company will repair or replace defective products for a period of time (usually
one year) from the date a product is delivered and tested. Product warranty
expenses for the fiscal years 2001, 2000 and 1999 were not material. The Company
typically does not provide a warranty on products it sells that are manufactured
by third parties, but attempts to pass the manufacturer's warranty, if any, on
to the customer. With respect to computer software, the Company typically
modifies its software as necessary so that the software conforms to the
specifications of the contract with the customer.

CERTAIN PRODUCTS AND SERVICES

                                 ONLINE LOTTERY

Lottery authorities for years have recognized that by offering new games or
products, the lotteries are often 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 online lottery products and services introduced in recent
years are keno, instant ticket support services and televised lottery games,
such as BingoVision(TM). In addition, the Company has also launched in recent
years its Altura(TM) series terminals, Players Express(TM) terminal and
ProSys(R) software system to enhance the functionality and appeal of its
existing software and terminal lines.

KENO. While new online 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 online lottery revenues. Keno is more
interactive than typical online 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.

The Company introduced in April 1990 the first online keno game for the
Lotteries Commission of South Australia and currently assists lottery
authorities in Australia (Lotteries Commission of South Australia), Brazil
(Parana, Minas Gerais, and Goias), California, Georgia, Kansas,

                                       23
   25

Lithuania, Massachusetts, New York, Oregon, Rhode Island, Catalunya (Spain),
Switzerland (La Societe de la Loterie de la Suisse Romande), Trinidad and
Tobago, and West Virginia in implementing and operating online keno games.

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 $1.9 billion and accounting for more than 8.7%
of total United States online lottery revenues in calendar year 2000. The
popularity of keno has led the Company to explore the development of new games
based upon keno. Most notably, the Company developed in recent years Keno
Plus(TM), a new product that combines expanded keno game characteristics with
new hardware and enhanced product support.

Keno has been the subject of legal challenges in recent years. Most notably, in
June 1996, the California Supreme Court in Western Telecon, Inc. et al v.
California State Lottery unexpectedly reversed trial and appellate court
decisions and found the California keno game to be a banked game rather than a
lottery because it provides for a fixed prize that is not dependent upon the
size of the prize pool. Accordingly, the Court concluded that the keno game was
not authorized by the California lottery law, and the California State Lottery
suspended operation of the keno game in June 1996. In September 1996, the
Company launched a parimutuel monitor game designed by the Company and the
California State Lottery as a replacement for the suspended game. Although the
new game, like keno, features frequent drawings, its payouts are based upon a
prize pool determined by sales rather than by predetermined or fixed amounts.
Keno was also the subject of an unsuccessful legal challenge in New York which
began in August 1995. There can be no assurances that legal challenges to keno
will not be brought in the future in these or other jurisdictions, nor can there
be any assurances respecting the results of such legal challenges, if any, upon
the operations of keno in jurisdictions serviced by the Company.

In March 1999, the Company announced that Quick Draw, the keno-style lottery
game operated in New York State provided by the Company, would terminate
effective April 1, 1999, and the game did terminate as announced, due to the
failure by the New York State legislature to extend the legislation authorizing
the game. In August 1999, the New York legislature extended the legislation
authorizing the game through March 2001 and sales of Quick Draw resumed. The New
York legislature subsequently extended authorization for Quick-Draw through June
2001. It is uncertain at present whether Quick-Draw will be authorized in New
York beyond June 2001.

INSTANT TICKET SUPPORT SERVICES. The Company provides certain products, systems
and services to the instant ticket lottery industry. The Company's online
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
online instant ticket support systems for instant ticket agents who are not part
of a lottery's online lottery system. The Company also offers add-on

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validation terminals which attach to its online lottery terminals and provide
the same functionality as the GVT, while using the existing communications
network.

The Company is providing or has contracted to provide marketing, distribution,
online 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 Arizona, California, Colorado,
District of Columbia, Georgia, Idaho, Illinois, Kansas, Kentucky, Louisiana,
Massachusetts, Michigan, Missouri, Nebraska, New Jersey, New Mexico, New York,
Ohio, Oregon, Rhode Island, Texas, Washington and Wisconsin. Internationally,
the Company currently supplies lottery authorities in Australia, Belgium,
Brazil, Chile, Denmark, Finland, Ireland, Israel, Mexico, Morocco, Netherlands,
New Zealand, Portugal, The Slovak Republic, South Africa, Spain (Catalunya),
Sweden and the United Kingdom with instant ticket support services.

TELEVISION LOTTERY GAMES. The Company in recent years has offered a product line
of televised lottery games. Players buy tickets from online lottery retailers
and mark them while following a live, televised game show which includes a draw
of numbers.

Through the use of proprietary game-tracking software, the Company is able to
display, live, how many at-home players are winners or about to become winners,
with each new numbers draw. The Company has implemented BingoVision(TM), a
television lottery game featuring a bingo draw, in Estonia, Lithuania, New
Zealand, The Slovak Republic, Belgium, and five German states; has implemented
SplitLevel(TM), a televised game featuring displayed boards of numbers with
winners determined by the number of matches from these boards in Lithuania; and
is actively marketing these and other games to other lottery authorities.

THE PROSYS(R) SOFTWARE SYSTEM. ProSys(R) is the Company's latest software
system. Employing a user friendly interface, lotteries can use ProSys(R) to
manage all aspects of their gaming environment, including online, 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. ProSys(R) was first installed in September 1994 for Societe de
la Loterie de la Suisse Romande, Switzerland. Since that time, the Company has
installed ProSys(R) in systems used by the lottery authorities of Arizona,
Washington, D.C.; Colorado; Idaho; Ontario, Canada; Leipzig, Germany; Washington
State; Missouri; Denmark; New Mexico; Massachusetts; New Jersey; Thuringen,
Germany; Kansas; Kentucky; Ohio; Oregon; Rhode Island; Wisconsin; New Zealand;
Belgium; Sweden; Switzerland; Michigan; Texas; Mexico; Netherlands; Israel;
South Africa; South Australia; New South Wales, Western Australia and Illinois
and is in the process of installing ProSys(R) in three additional jurisdictions.

THE ISYS(TM) TERMINAL SERIES. During fiscal 1996, the Company introduced its
ISYS(TM) terminal series. ISYS(TM) is an integral, single-unit terminal which
features modular subassemblies, high performance ticket printer and playslip
reader subassemblies, an easy-to-use design, and a host of new features and
technologies. The Company believes that ISYS(TM) 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. The

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Company has installed ISYS(TM) in systems used by lottery authorities in Brazil,
Massachusetts, Missouri, New Jersey, New Mexico, Turkey, Washington State,
District of Columbia, Wisconsin and W. Australia, Kansas, and Rhode Island. See
"Products and Services--Terminals" above.

THE PLAYER EXPRESS(TM) TERMINAL. During fiscal 1999, the Company announced the
introduction of its new terminal, the Player Express(TM). Player Express(TM),
which had its inaugural installation under the Company's contract with the
Colorado lottery authority, was designed as part of the Company's attempt to
provide a total solution for selling lottery tickets in large retail
environments with numerous checkout lanes. Player Express(TM) allows consumers
to conveniently play lottery at the checkout area of retail stores as part of
their regular shopping.

THE ALTURA(TM) TERMINAL. During fiscal 1999, the Company announced the launch of
its Altura(TM) family of terminals. Altura(TM), which represents the initial
offering of the Company's ninth generation of online lottery terminals, permits
applications to be written in the Java programming language enabling the rapid
development of a wide variety of games that are compatible with numerous
software environments.

VIDEOSITE(TM). During fiscal 1998, the Company acquired VideoSite, Inc., a
leading provider of multimedia broadcasting software. Since its acquisition by
the Company, VideoSite has been in the process of developing lottery and retail
advertising and promotional products which will use its broadcasting software to
complement the Company's video-based gaming software products. During fiscal
2000, VideoSite launched NextVision(TM), which brings new lottery-animation,
high quality graphics and full-motion video to monitor games and began selling
advertising over Rhode Island's keno network.

                    NON-LOTTERY GAMING PRODUCTS AND SERVICES

In September 1995, the Company incorporated Dreamport, Inc. to pursue gaming
opportunities other than online lottery including video lottery and venue-based
gaming.

The Company entered the video lottery machine gaming business during fiscal 1991
and currently provides machine gaming video lottery products and services to
lottery jurisdictions in Minas Gerais, Santa Catarina and Parana, Brazil;
Switzerland; Alberta, British Columbia, Saskatchewan, Canada; Oregon; and Rhode
Island. Dreamport's video lottery machine gaming systems combine the security
and integrity of the Company's traditional online lottery systems with
entertainment-based video games. These video lottery machine gaming systems
include a controlling central computer system, video lottery terminal gaming
machines (which the Company acquires through an exclusive OEM manufacturing
relationship with Bally Gaming Systems, Inc.), the Company's ticket validation
terminals, and a self-diagnostic communications network. Games offered by these
video lottery machine gaming systems include poker, blackjack, keno, bingo, reel
games and electronic instant lottery games.

During fiscal 2001, the Company announced that Dreamport would focus upon
assisting lotteries to expand their offerings in the area of video machine
gaming systems and would consolidate

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and/or divest gaming activities and assets which were peripheral to the
Company's core lottery business. See "Certain Significant Developments Since the
Start of Fiscal 2001."

                                      UWIN!

During fiscal 1999, the Company established UWin!(TM) to provide Internet-based
interactive games to international providers of government-sponsored lottery
products and services. The Company continues to actively market its UWin!(TM)
offering, where permitted, to international lottery authorities.

PRODUCT DEVELOPMENT

The Company devotes substantial resources in order to enhance its present
products and systems and develop new products. In fiscal 2001, the Company spent
approximately $49.3 million on research and development, as compared to $46.1
million in fiscal 2000 and $40.2 million in fiscal 1999.

INTELLECTUAL PROPERTY

Although the Company occasionally seeks patent protection on certain
technological developments, the Company generally has not sought to obtain
patents on its products, and it is doubtful whether patents could be obtained in
many instances. The Company believes that its technical "know-how," trade
secrets and the creative skills of its personnel are of substantially more
importance to the success of the Company than the benefit which patent
protection ordinarily would afford. The Company typically requires customers,
employees, licensees, subcontractors and joint venture partners who have access
to proprietary information concerning the Company's products to sign
non-disclosure agreements, and the Company relies on such agreements, other
security measures and trade secret law to protect such proprietary information.

PRODUCTION, ASSEMBLY AND COMPONENTS

The Company purchases most of the parts, components and subassemblies (some of
which are designed by the Company) necessary for its terminals and other
products from outside sources and assembles them into finished products. The
Company offers central systems manufactured by Compaq Computer Corporation
(formerly Digital Equipment Corporation) and Stratus Computer, Inc. for its
lottery systems.

BACKLOG

The backlog of the Company's orders for sales of its products believed by the
Company to be firm amounted to approximately $199.9 million as of February 24,
2001, as compared to a backlog of approximately $101.8 million as of February
26, 2000. Approximately $30.2 million, or 15.1% of the backlog at February 24,
2001, is not expected to be filled during fiscal 2002.


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COMPETITION

The online lottery business is highly competitive in the United States and
internationally. Both in the United States and internationally, price is an
increasingly 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.

During fiscal 2001, the Company's principal competitors in the online lottery
business (and the number of online lottery jurisdictions currently serviced or
under contract worldwide by such competitors) were as follows: Automated
Wagering International, Inc. ("AWI"), a subsidiary of Anchor Gaming (by virtue
of its merger, described below, with Powerhouse Technologies, Inc., the prior
corporate parent of AWI) (14); Autotote Corporation ("Autotote") (18);
International Totalizator Systems, Inc. (5); and Essnet/Alcatel (15).

During fiscal 2000, Anchor Gaming, an operator and developer of gaming machines
and casinos, and Powerhouse Technologies, Inc., merged. The merger of these two
companies is likely to provide Automated Wagering International, Inc., the
Company's leading competitor in the U.S. and a subsidiary of Powerhouse
Technologies, Inc., with enhanced financial resources.

In addition, during fiscal 2001, Scientific Games Holdings Corporation, a
leading provider of instant ticket lottery technology as well as of online
lottery systems and services, was acquired by Autotote, and the lottery
divisions of these two companies were integrated. This merger provides the
combined entity with a broader range of product offerings than the entities had
previously offered individually.

PERSONNEL

As of April 2, 2001, the Company had approximately 4,650 full-time employees
worldwide. The Company's employees are not represented by any labor union. The
Company believes that its relationship with its employees is satisfactory.

ITEM 2.  PROPERTIES

The Company's corporate headquarters and research and development and main
production facility are located in its approximately 260,000 square foot
building on approximately 26 acres in West Greenwich, Rhode Island, which the
Company leases from West Greenwich Technology Associates Limited Partnership.
The Company is a limited partner in, and owns 50% of, this partnership. The
Company's lease term runs until August 26, 2013 with two five-year options to
extend the term and the Company has an option to purchase the property.

The Company owns approximately 24 acres adjoining its headquarters in West
Greenwich, Rhode Island.


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The Company also owns an approximately 140,000 square foot manufacturing and
central storage facility in Coventry, Rhode Island. In addition, the Company
leases approximately 22,650 square feet of an office building in Warwick, Rhode
Island which it uses to house its finance and external training departments.

In addition, except in New York State, where the Company owns its back-up data
center facility, and in Austin, Texas, where the Company owns an approximately
39,000 square foot facility which is used by Transactive Corporation, the
Company's benefits delivery subsidiary, the Company leases, or is supplied by
the relevant state authorities with, its data center facilities in the various
jurisdictions. The Company also leases office, depot maintenance and warehouse
space in a number of other locations.

The Company's facilities are in good condition and are adequate for its present
needs.

ITEM 3.  LEGAL PROCEEDINGS

As publicly reported, in February 1999, a witness appearing before the Moriarty
Tribunal, an investigative body convened by the Irish Parliament and chaired by
Mr. Justice Moriarty to investigate the business affairs generally of the former
Taoiseach (Prime Minister) of Ireland, Charles Haughey, testified that in
February 1993 Guy B. Snowden, then Chief Executive Officer of the Company, had
invested pounds sterling 67,000 (approximately $100,000) of his personal funds
in a company owned by Mr. Haughey's son. Mr. Haughey had resigned as Taoiseach
in February 1992. In July 1992, the An Post Irish National Lottery Company, the
Irish lottery authority (the "Irish NLC"), issued a Request for Proposals
respecting online and instant ticket lottery goods and services, and in
September 1992 the Company, which was then the incumbent provider of lottery
goods and services to the Irish NLC under an agreement awarded to the Company in
1987, submitted a Proposal to the Irish NLC in response to the Irish NLC's
Request for Proposals. In November 1992, the Irish NLC selected the Company to
provide online and instant ticket goods and services to the Irish NLC under the
terms of the competitive procurement and, following negotiations, a definitive
agreement was entered into between the Irish NLC and the Company in March 1993.
In calendar 1999, the Tribunal requested that the Company provide various
documents regarding the Company's business in Ireland, which the Company has
done, and the Company has been cooperating with the Tribunal. In addition, the
Company has made its own inquiry into the facts surrounding Mr. Snowden's
investment and the extent, if any, of the Company's involvement in or knowledge
of that investment. The Company's investigation has determined that no Company
funds were used to make Mr. Snowden's investment, and there is no information to
suggest that Mr. Snowden ever sought reimbursement for the investment from the
Company. Further, there is no information to suggest that Mr. Snowden informed
anyone else at the Company of his investment at the time or that his investment
was related in any way to the renewal of the Company's contract to supply
systems and support to the Irish NLC. Mr. Snowden has advised the Company
through his counsel that (i) his investment was a strictly personal one, (ii)
the investment was made from his personal funds, (iii) he never sought
reimbursement for any portion of his investment from the Company or any other
entity, and (iv) his investment was not related to the Irish NLC and was not
intended to and did not influence the Irish NLC's decision to renew the
Company's contract.


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No charges of wrongdoing have been brought against the Company in connection
with the Moriarty investigation, and the Company does not believe that it has
engaged in any wrongdoing in connection with this matter. However, since this
investigation is or may still be underway and, investigations of this type
customarily are conducted in whole or in part in secret, the Company lacks
sufficient information to determine with certainty its ultimate scope and
whether the government authorities will assert claims resulting from this
investigation 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 a government
authority were to make an allegation, or if there were to be a finding, of
improper conduct on the part of or attributable to the Company in any matter,
including in respect of the Moriarty investigation, 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. In addition, continuing adverse publicity resulting from this
investigation and related matters could have such a material adverse effect.

Since July 1994, the United Kingdom National Lottery has been operated under a
license held by Camelot Group plc ("Camelot"), and the Company has been a
supplier of lottery goods and services to Camelot for the lottery. As publicly
reported, in or around April or May 2000, the United Kingdom National Lottery
Commission (the "NLC"), the regulator of the United Kingdom National Lottery,
commenced an investigation into a lottery terminal software malfunction in the
United Kingdom in which, under certain rare circumstances, a duplicate
transaction was recorded on the Company's central system while only one ticket
was presented to the retailer. The software malfunction resulted in a relatively
small amount of overcharges to lottery retailers with respect to the duplicate
transactions and a relatively small amount of overpayments or underpayments to
certain prizewinners. The Company first identified this software malfunction in
the United Kingdom in June 1998 and corrected the malfunction in July 1998, but
without notifying Camelot or the NLC, as it should have done. The Company fully
cooperated with the NLC's investigation and undertook to implement a number of
measures respecting its corporate compliance and governance functions and
software development processes in the wake of the investigation. The Company has
also agreed to reimburse United Kingdom lottery players and retailers for any
financial losses incurred by virtue of the software malfunction.

As has also been publicly reported, the developments described above took place
in the context of a competitive procurement respecting the award by the NLC of a
new license to operate the National Lottery with effect from October 1, 2001. In
1999, the NLC established a competitive procedure for the award of the new
license, and two bidders, Camelot and The People's Lottery ("TPL"), subsequently
submitted bids for the new license. Camelot's bid was supported by agreements
with the Company pursuant to which the Company had contracted to continue to
supply lottery goods and services to Camelot during the term of the new license
in the event that Camelot was awarded the new license.

In August 2000, the NLC announced that it had decided that the NLC would proceed
on the basis of a new procedure under which it would negotiate exclusively with
TPL for one month.

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Promptly after the NLC's announcement, Camelot initiated legal proceedings in
the United Kingdom challenging the legality of the NLC's decision to initiate a
new procedure of negotiation with TPL to the exclusion of Camelot. In September
2000, the High Court of Justice (Queen's Bench Division) overturned the NLC's
August 2000 decision to negotiate exclusively with TPL and directed that the NLC
enter into an exclusive negotiation period with Camelot so as to afford Camelot
the same opportunity granted to TPL to improve its bid to address the NLC's
concerns.

As part of the improved Camelot proposal for the new license, the Company
entered into technology transfer and training arrangements with Camelot
providing for the transfer to Camelot of the Company's National Lottery
equipment, facilities and U.K. technology employees, a technology transfer to
Camelot (after a period of training), and a grant to Camelot of exclusive rights
to operate the Company's gaming system software in the U.K. for the term of the
new license. Under these new arrangements, the Company will license its software
and provide a range of support services to Camelot for which the Company expects
to receive compensation during the term of the new license in the range of
between $40 to $45 million per year commencing in fiscal year 2003. The Company
also anticipates receiving revenues of approximately $65 million with respect to
the sale to Camelot of new terminals prior to the commencement of the new
license term. The Company further agreed to negotiate a technology transfer and
a related software license for the exclusive use by Camelot under the new
license of the internet gaming applications of the Company's UWin! subsidiary.

In December 2000, the NLC announced its decision to award a new seven-year
license to operate the National Lottery to Camelot and that it will grant
Camelot an interim license to cover the period from October 1, 2001 through
January 30, 2002 in order to provide a twelve-month conversion period prior to
the beginning of the new license. TPL has not protested the NLC's decision to
award the new license to Camelot and the period in which a protest must be made
has since lapsed.

In April 2001, the NLC issued a report of its investigation into the above
described lottery software terminal malfunction. The NLC report states that its
investigation of the lottery software incident had established breaches of
Camelot's license, including in respect of the failure of the Company to give
proper notification before rectifying the software fault. The report further
states that Camelot has agreed to pay pounds sterling 115,000 (approximately
$175,000) into the National Lottery prize fund as compensation for underpayments
to players resulting from the software malfunction, and that Camelot has
undertaken to identify the amounts by which individual retailers have been
overcharged. The NLC has declined, however, to fine Camelot with respect to
breaches of its license resulting from (or revealed by the NLC investigation of)
the software incident. The NLC report summarizes the steps taken and to be
undertaken by the Company in the wake of investigation of the lottery software
malfunction (including the measures implemented by the Company with respect to
its corporate compliance and governance functions and software development
processes and the technology transfer arrangements, as described above) and
concludes, in light of these steps, that the Company sufficiently addressed the
NLC's ongoing concerns about whether it is a "fit and proper" body for purposes
of involvement in the operation of the National Lottery. Payment by the Company
of amounts: (i) to reimburse Camelot for payments with respect to underpayments
to United Kingdom players and overcharges of retailers,

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as described above, (ii) to reimburse Camelot with respect to any other
out-of-pocket costs incurred by Camelot with respect to the lottery terminal
software malfunction, and (iii) to reimburse other customers of the Company with
respect to effects of the lottery terminal software malfunction outside the
United Kingdom, which amounts have been accrued in the accompanying financial
statements, are not expected to have a material adverse effect on the Company's
consolidated financial position or results of operation.

As publicly reported, in August 2000, a shareholder class action lawsuit on
behalf of all persons who purchased Company stock during the period from April
11, 2000 to July 25, 2000, was brought against the Company, the Company's former
Chairman and Chief Executive Officer, William Y. O'Connor, and the Company's
current Chairman, W. Bruce Turner, in the U.S. District Court of Rhode Island
relating to various Company announcements made between April 11, 2000 and July
25, 2000. The complaint filed in the case, Sandra Kafenbaum, individually and on
behalf of all others similarly situated, v. GTECH Holdings Corporation, William
Y. O'Connor and W. Bruce Turner, generally alleges that the defendants violated
federal securities laws (including Section 10(b) of the Securities Exchange Act
of 1934) by making allegedly false and misleading statements (including
statements alleged to be overly optimistic respecting certain lottery contract
awards to the Company and respecting the Company's prospects in certain
non-lottery business lines and investments), while failing to disclose in a
timely manner certain allegedly material adverse information that it purportedly
had a duty to disclose (including an alleged inability to close certain contract
awards and as to certain alleged cost overruns). The complaint seeks to recover
monetary damages from the Company and the individual defendants. In February
2001, the plaintiffs filed an amended complaint which added Steven P. Nowick,
the Company's former President and Chief Operating Officer, as an individual
defendant. In addition, the amended complaint expands the purported class of
plaintiffs to include all persons who purchased common stock of the Company
during the period from July 13, 1998 through August 29, 2000. The type of relief
sought in the amended complaint is similar to that sought in the original
action. The Company believes that it has good defenses to the claims made in
this lawsuit and intends to file a motion to dismiss the amended complaint as to
all of the defendants. At the present time, however, the Company is unable to 
predict the outcome, or the financial statement impact, if any, of this lawsuit.

As publicly reported, in May 2000, Sazka, a.s., a lottery customer of the
Company in the Czech Republic ("Sazka"), filed a Request for Arbitration with
the International Arbitral Centre of the Austrian Federal Economic Chamber of
Commerce in Vienna, Austria, seeking to arbitrate certain business and
contractual issues under the Company's online lottery contract with Sazka. Sazka
sought damages valued at approximately $2.6 million in connection with alleged
delays in the recent extensive expansion of the lottery sales network. Sazka
also sought a determination that its online contract with the Company would
expire approximately two years earlier than the date on which the Company
maintained its contract would terminate. The Company, believing the claims made
by Sazka to be without merit, filed a Memorandum in Reply and Counterclaim
disputing such claims and raising counterclaims for breach of contract by Sazka.
In March 2001, the Company entered into an agreement with Sazka which, among
other things, resolved the arbitration. Under the agreed settlement, Sazka
dropped its demand for liquidated damages, paid to the Company certain disputed
amounts which it had previously withheld and agreed to extend the term of the
contract. The Company in turn agreed to reduce its fee and to provide certain
additional equipment and services under its contract with Sazka.


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In February 1999, the Company was sued by a Florida corporation called EIG
Gaming International, Inc. ("EIG"), in the Circuit Court of the Eleventh
Judicial Circuit of Florida. The Company removed the case to the U.S. District
Court for the Southern District of Florida, where it is captioned EIG Gaming
International, Inc. v. GTECH Corporation, Case No. 99-1808-Civ-Jordan. In its
complaint EIG alleges that it entered into a Letter of Intent with the Company
pursuant to which it would assist the Company to obtain the lottery contract for
Peru in return for a percentage of the lottery's receipts. EIG further contends
that it secured the Peruvian contract for the Company but that the Company
thereupon declined to pursue it. Plaintiff claims damages exceeding $80 million.
The Company vigorously denies plaintiff's allegations, to which it believes it
has good defenses, and, in November 2000, moved for summary judgment. That
motion is pending. In April 2001, the court entered an order tentatively
scheduling a trial in the case during July 2001. At the present time, the
Company is unable to predict the outcome, or the financial statement impact, if
any, of this lawsuit.

For further information respecting legal proceedings, see Item 1, "Certain
Factors Affecting Future Performance - Maintenance of Business Relationships and
Certain Legal Matters" and Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," of this report, and Note F of
Notes to Consolidated Financial Statements included in this report. The Company
also is subject to certain other legal proceedings and claims which management
believes, on the basis of information presently available to it, will not
materially adversely affect the Company's consolidated financial position or
results of operations.

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

No matters were submitted to a vote of Holding's security holders during the
last quarter of fiscal 2001.

ADDITIONAL INFORMATION

The following information is furnished in this Part I pursuant to Instruction 3
to Item 401(b) of Regulation S-K:


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EXECUTIVE OFFICERS OF THE COMPANY

The Executive Officers of Holdings as of April 1, 2001 are:

Name                    Age   Position
----                    ---   --------

Howard S. Cohen         54    Chief Executive Officer (since March 2001).
                              Previously, Mr. Cohen was President and Chief
                              Executive Officer of Bell & Howell, a leading
                              information solutions and services provider, from
                              January 2000 to January 2001; President, Chief
                              Executive Officer and Chairman of Sidus Systems,
                              Inc., a Toronto Canada based systems integrator,
                              contract manufacturer and distributor, from 1998
                              to 2000; and President, Chief Executive Officer,
                              and Chief Operating Officer of Peak Technologies
                              Group, a systems integrator of data capture,
                              printing, service solutions and software products,
                              from 1996 to 1998. Prior to this, Mr. Cohen was
                              President of OCE Systems, Inc., a U.S. subsidiary
                              of the Netherlands-based OCE Corporation, which
                              specializes in printing systems and
                              reprographic equipment, from 1992 to 1996.

David J. Calabro        51    Senior Vice President, with responsibility for the
                              Company's worldwide facilities management
                              business, since March 1999. Previously, Mr.
                              Calabro was employed by Unisys Corporation, a
                              leading provider of information technology, from
                              May 1995 through February 1999 as its Vice
                              President and General Manager of the United States
                              and Canada Public Sector Market Group, and prior
                              to that, was Director of Business Operations
                              (Government Systems Group) from August 1987
                              through April 1995 for Digital Equipment
                              Corporation, a leading supplier of computer goods
                              and services.

Marc A. Crisafulli      32    Senior Vice President and General Counsel (since
                              March 2001). Previously, Mr. Crisafulli was an
                              associate (from September 1994 through June 2000)
                              and a partner (from July 2000 through March 2001)
                              of the Providence-based law firm of Edwards &
                              Angell, LLP where he practiced as a commercial
                              trial lawyer.

Jean-Pierre Desbiens    50    Senior Vice President, with responsibility for
                              product sales and business development, since
                              August 1998. Previously, Mr. Desbiens was employed
                              by BABN Technologies Inc., one of the world's
                              largest printers of lottery tickets, in a series
                              of increasingly responsible positions over the
                              course of 16 years including, from September 1990
                              until January 1998, as its President and Chief
                              Executive Officer.

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Kathleen E. McKeough    50    Senior Vice President of Human Resources (since
                              May 2000). Previously, Ms. McKeough was Senior
                              Vice President of Human Resources of Allied Domecq
                              Retailing U.S., a subsidiary of Allied Domecq, a
                              leading producer and distributor of wines and
                              spirits and owner of quick-service restaurants,
                              from 1996 to 1999, and prior to that was Chief
                              Financial Officer and Treasurer of Allied Domecq
                              Retailing U.S. from 1994 to 1996.

Jaymin B. Patel         33    Senior Vice President and Chief Financial Officer
                              since January 2000. Previously, beginning in 1994
                              Mr. Patel was employed by the Company in a series
                              of increasingly responsible positions including,
                              from April 1998 until January 2000, as GTECH's
                              Vice President, Financial Planning and Business
                              Evaluation.

Antonio Carlos Rocha    52    Senior Vice President of Marketing (since February
                              2001). Previously, Mr. Rocha served as President
                              of GTECH Brasil Lda, the Company's Brazilian
                              subsidiary, from January, 1996 during which time
                              the Company obtained the contract to provide
                              online lottery services to Caixa Economica
                              Federale, which operates Brazil's National
                              Lottery. Prior to this, Mr. Rocha was Chairman of
                              the Executive Committee of AT&T Brazil from July
                              1993 until late 1995, and President of NCR Brazil
                              from April 1991 to July 1993.

Donald L. Stanford      50    Senior Vice President, with responsibility for 
                              technology, for more than five years.

Donald R. Sweitzer      53    Senior Vice President - Public Affairs since July
                              1998. Previously, Mr. Sweitzer was President of
                              the Dorset Resource and Strategy Group, a
                              government affairs consultancy, from November 1996
                              through June 1998, and President and Managing
                              Partner of Politics Inc., a political consulting
                              firm, from January 1995 through August 1996. Mr.
                              Sweitzer also served as the Political Director of
                              the Democratic National Committee from April 1993
                              through January 1995, and served as the Finance
                              Director of this same body from April 1985 through
                              January 1989.

Executive officers and other officers are elected or appointed by, and serve at
the pleasure of, the Board of Directors. Some are party to employment contracts
with the Company. The information set forth above reflects positions held with
Holdings except as expressly provided to the contrary.

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

For the purposes of calculating the aggregate market value of the shares of
Common Stock of Holdings held by nonaffiliates, as shown on the cover page of
this report, it has been assumed that all the outstanding shares were held by
nonaffiliates except for the shares beneficially owned by: directors, officers,
and employees of and consultants to Holdings and GTECH. However, this should not
be deemed to constitute an admission that all such persons or entities are, in
fact, affiliates of Holdings, or that there are not other persons who may be
deemed to be affiliates of Holdings. Further information concerning
shareholdings of officers, directors and principal

                                       35
   37

shareholders of Holdings will be included in Holdings' definitive proxy
statement relating to its scheduled July 2001 Annual Meeting of Shareholders to
be filed with the Securities and Exchange Commission.


                                       36

   38


                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
         RELATED STOCKHOLDER MATTERS

The principal United States market on which Holdings' 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.

FISCAL 2000                                               HIGH          LOW
-----------                                               ----          ---
First Quarter (February 28 - May 29, 1999)                $28 3/16      $22 1/8
Second Quarter (May 30 - August 28, 1999)                 $25 11/16     $22 1/2
Third Quarter (August 29 - November 27, 1999)             $26           $19 3/8
Fourth Quarter (November 28, 1999 - February 26, 2000)    $23 1/8       $19 3/8

FISCAL 2001                                               HIGH          LOW
-----------                                               ----          ---
First Quarter (February 27 - May 27, 2000)                $23           $17 7/8
Second Quarter (May 28 - August 26, 2000)                 $23 1/2       $17 5/8
Third Quarter (August 27 - November 25, 2000)             $19 1/4       $15 3/8
Fourth Quarter (November 26, 2000 - February 24, 2001)    $27 3/4       $18 1/4

The closing price of the Common Stock on the New York Stock Exchange on April
10, 2001 was $29.26. As of April 10, 2001, there were approximately 900 holders
of record of the Common Stock.

Holdings has never paid cash dividends on its Common Stock and has no current
plan to do so. The current policy of Holdings' Board of Directors is to reinvest
earnings in the operation and expansion of the Company's business and, from time
to time, to execute repurchases of shares of Holdings' Common Stock under the
Company's open market share repurchase program. Further, Holdings is a holding
company and its operations are conducted through the Company and its
subsidiaries. Accordingly, the ability of Holdings to pay dividends on its
Common Stock would be dependent on the earnings and cash flow of its
subsidiaries and the availability of such cash flow to Holdings.



                                       37

   39

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data below should be read in conjunction
with Item 7 -- "Management's Discussion and Analysis of Financial Condition and
Results of Operations," the Consolidated Financial Statements and the other
financial information included in this report. The operating, balance sheet and
per share data in the table are derived from the consolidated financial
statements of the Company which were audited by independent auditors.


                                                                      Fiscal Year Ended
                                        ------------------------------------------------------------------------
                                         February 24,   February 26,   February 27,   February 28,   February 22,
                                            2001           2000           1999         1998 (a)         1997
                                        ------------    -----------   ------------   ------------   ------------
                                                        (Dollars in thousands, except per share amounts)
OPERATING DATA:  
Revenues:
     Services                           $   856,475    $   860,419    $   887,395    $   868,522    $   789,534
     Sales of products                       80,068        150,379         85,528        122,045        114,738
                                        ------------   ------------   ------------   ------------   ------------
         Total                              936,543      1,010,798        972,923        990,567        904,272

Gross Profit:
     Services (b)                           292,380        305,110        297,630        266,940        239,332
     Sales of products                        5,224         48,426         25,703         48,230         47,297
                                        ------------   ------------   ------------   ------------   ------------
         Total                              297,604        353,536        323,333        315,170        286,629

Special charges (credit) (c)                 42,270         (1,104)        15,000         99,382            ---

Operating income                             81,905        180,000        141,720         44,104        127,091

Interest expense, net of interest income     21,569         25,523         23,326         24,578         16,388

Net income                                   43,148         93,585         89,063         27,214         77,803

PER SHARE DATA:
Basic                                   $      1.25    $      2.58    $      2.17    $       .65    $      1.81
Diluted                                        1.25           2.58           2.16            .64           1.80

OTHER DATA:
Earnings before depreciation, amortization,
     interest, taxes and other special
     and noncash charges                $   305,223    $   361,126    $   376,158    $   347,099    $   326,054
Cumulative number of lottery terminals
     shipped (d)                            434,139        408,906        377,857        360,202        316,614
Number of lottery terminals sold              5,570         13,293          4,921         11,963         13,609
Number of lottery customers at year-end          83             82             81             78             79

BALANCE SHEET DATA (AT END OF PERIOD):
Working capital                         $    65,273    $    28,253    $     3,755    $    27,371    $    36,914
Total assets                                938,160        891,023        874,215      1,023,812        956,541
Long-term debt, less current portion        316,961        349,400        319,078        453,587        382,499
Shareholders' equity (f)                    314,362        296,576        283,906        345,210        358,133


----------------------------------------
(a)  53-week year.
(b)  Fiscal years prior to 2001 have been reclassified to present goodwill
     amortization as a single operating expense line item in the Consolidated
     Income Statements.
(c)  The impact of the special charges (credit) on earnings per share on a
     diluted basis was $0.74, $(0.02), $0.22 and $1.44, in fiscal 2001, 2000,
     1999 and 1998, respectively. See Note P to the Consolidated Financial
     Statements.
(d)  Terminals shipped represents lottery terminals sold under product sale
     contracts and lottery terminals supplied under service contracts.
(f)  In March 2001, after the close of its 2001 fiscal year, the Company
     repurchased five million shares of its Common Stock for $130.0 million.




                                       38
   40
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS


Certain statements contained in this section and elsewhere in this report are
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934. Such statements
include, without limitation, statements relating to (i) the future prospects for
and stability of the lottery industry and other businesses in which the Company
is engaged or expects to be engaged, (ii) the future operating and financial
performance of the Company, (iii) the ability of the Company to retain existing
business and to obtain and retain new business, and (iv) the results and effects
of legal proceedings and investigations. Such forward-looking statements reflect
management's assessment based on information currently available, but are not
guarantees and are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in the forward-looking
statements. These risks and uncertainties include, but are not limited to, those
set forth below and elsewhere in this report, and in the Company's subsequent
press releases and Form 10-Q's and other reports and filings with the Securities
and Exchange Commission.

General

The Company operates on a 52- to 53-week fiscal year ending on the last Saturday
in February and fiscal 2001 ended on February 24, 2001.

The Company has derived substantially all of its revenues from the rendering of
services and the sale or supply of computerized online lottery systems and
components to government-authorized lotteries. Service revenues have been
derived primarily from lottery service contracts. These contracts are typically
at least five years in duration, and are generally based upon a percentage of a
lottery's gross online lottery sales. These percentages vary depending on the
size of the lottery and the scope of services provided to the lottery. Product
sale revenues have been derived primarily from the installation of new online
lottery systems, installation of new software 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 sale
revenues from period to period. The Company currently anticipates that product
sales during fiscal 2002 will be in a range of $160 million to $170 million.

The Company has taken steps to broaden its offerings of high-volume transaction
processing services outside of its core business of providing online lottery
services. For example, the Company has entered into agreements which permit bill
payments over its Brazilian and Chilean lottery networks. In addition, the
Company continues to develop, and where permitted, market, its UWin! internet
based platform through which international providers of government-sponsored
lottery products and services may offer interactive games.

The Company's business is highly regulated, and the competition to secure new
government contracts is often intense. Awards of contracts to the Company are,
from time to time, challenged by competitors. Further, there have been and may
continue to be investigations of various types, including 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. In light of the fact that
such investigations frequently are

   41

conducted in secret, the Company would not necessarily know of the existence of
an investigation which might involve the Company. Because the Company's
reputation for integrity is an important factor in its business dealings with
lottery and other government 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. In
addition, continuing adverse publicity resulting from these investigations and
related matters could have such a material adverse effect. See Note F to the
Consolidated Financial Statements, Part I, Item 1, -- "Certain Factors That May
Affect Future Performance --Maintenance of Business Relationships and Certain
Legal Matters" and Part I, Item 3 -- "Legal Proceedings" herein for further
information concerning these matters and other contingencies.

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 Item 8 herein.
   42
The following discussion should be read in conjunction with the table below.




                                                                             SUMMARY FINANCIAL DATA

                                                                                Fiscal Year Ended
                                               ------------------------------------------------------------------------------------
                                                           February 24,            February 26,               February 27,
                                                              2001                    2000                       1999
                                               ------------------------------------------------------------------------------------
                                                                               (Dollars in thousands)
Revenues:
        Services                                 $    856,475       91.5 %   $     860,419      85.1 %  $    887,395      91.2 %
        Sales of products                              80,068        8.5           150,379      14.9          85,528       8.8
                                                 ------------   ----------   -------------  ----------  ------------    --------
            Total                                     936,543      100.0         1,010,798     100.0         972,923     100.0

Costs and expenses:
        Costs of services (a)(b)                      564,095       65.9           555,309      64.5         589,765      66.5
        Costs of sales (a)                             74,844       93.5           101,953      67.8          59,825      69.9
                                                 ------------   ----------   -------------  ----------  ------------    --------
            Total                                     638,939       68.2           657,262      65.0         649,590      66.8
                                                 ------------   ----------   -------------  ----------  ------------    --------

Gross profit                                          297,604       31.8           353,536      35.0         323,333      33.2

Selling, general and administrative (b)               117,997       12.6           122,334      12.1         120,601      12.4
Research and development                               49,267        5.3            46,053       4.6          40,158       4.1
Goodwill amortization (b)                               6,165        0.6             6,253       0.6           5,854       0.6
                                                 ------------   ----------   -------------  ----------  ------------    --------
        Operating expenses                            173,429       18.5           174,640      17.3         166,613      17.1

Special charges (credit)                               42,270        4.5            (1,104)     (0.1)         15,000       1.5

Operating income                                       81,905        8.8           180,000      17.8         141,720      14.6

Other income (expense):
        Interest income                                 5,596        0.6             3,509       0.3           4,079       0.4
        Equity in earnings of unconsolidated
           affiliates                                   3,167        0.3             2,843       0.3           7,113       0.7
        Other income (expense)                          7,232        0.8            (1,343)     (0.1)         25,447       2.6
        Interest expense                              (27,165)      (2.9)          (29,032)     (2.9)        (27,405)     (2.8)
                                                 ------------   ----------   -------------  ----------  ------------    --------

Income before income taxes                             70,735        7.6           155,977      15.4         150,954      15.5

Income taxes                                           27,587        3.0            62,392       6.1          61,891       6.3

                                                 ------------   ----------   -------------  ----------  ------------    --------
Net income                                       $     43,148        4.6 %   $      93,585       9.3 %  $     89,063       9.2 %
                                                 ============   ==========   =============  ==========  ============    ========

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

(b)     Fiscal years 2000 and 1999 have been reclassified to present
        goodwill amortization as a single operating expense line item in the
        Consolidated Income Statements.



   43


Special Charges

In fiscal 2001, the Company recorded special charges of $42.3 million ($25.8
million after-tax, or $0.74 per share) in connection with certain contractual
obligations and a value assessment of the Company's business operations. The
major components of the special charges consisted of $14.0 million for a
workforce reduction that eliminated approximately 255 Company positions
worldwide, $11.5 million for contractual obligations in connection with the
departures in July 2000 of the Company's former Chairman and Chief Executive
Officer and former President and Chief Operating Officer, $8.5 million for costs
associated with the exit of certain business strategies and product lines and
$8.3 million for the termination of consulting agreements and facility exit
costs, net of gains on the disposition of Company aircraft. See Note P to the
Consolidated Financial Statements.

The Company realized approximately $12.0 to $13.0 million of pre-tax savings in
fiscal 2001 from the value assessment. Beginning in fiscal 2002, the Company
expects annual net pre-tax operating expense savings in the range of $30.0 to
$32.0 million from the value assessment.


Upcoming Significant Contract Rebids

A significant portion of the Company's revenues and cash flow is derived from
its portfolio of long-term online lottery service contracts, each of which in
the ordinary course of the Company's business periodically is the subject of
competitive procurement or renegotiation. Through fiscal 2003 (which ends in
February 2003), several of the Company's larger contracts (including the
National Lottery of Brazil and Texas, its two largest in fiscal 2001) are
expected to be the subject of competitive procurements to select contractors to
supply lottery goods and services upon the termination of the Company's current
contracts. See Part I, Item 1, -- "Certain Factors That May Affect Future
Performance -- Strengthening of Competition" and "Lottery Contract Awards and
Related Significant Developments" herein for further information concerning
these matters.

Results of Operations

COMPARISON OF FISCAL 2001 WITH 2000

Revenues for fiscal 2001 were $936.5 million, representing a $74.3 million, or
7.3%, decrease from revenues of $1.0 billion in fiscal 2000.

Service revenues, including lottery and other services, in fiscal 2001 were
$856.5 million, representing a $3.9 million, or 0.5%, decrease from the $860.4
million of service revenues in fiscal 2000. This decrease reflects a decline in
domestic lottery service revenues, partially offset by an increase in
international lottery service revenues.

The Company's domestic lottery service revenues were $465.4 million in fiscal
2001, a decrease of 2.8% from the $478.8 million recorded in the same period of
fiscal 2000. This decrease was


   44

primarily due to the loss of online lottery contracts in Indiana, West Virginia,
Vermont and New Hampshire and the loss of an instant ticket validation contract
in New York. These decreases were partially offset by increases in lottery sales
generated by a number of the Company's existing domestic customers, including
Texas, New York and New Jersey.

The Company's international lottery service revenues increased 4.5% in fiscal
2001 to $360.3 million compared with the $344.7 million recorded in the same
period last year, primarily due to the launch of the national lotteries in South
Africa and Morocco, along with growth in sales for existing customers in Brazil,
Poland and Mexico and a contractual rate increase in Brazil. These increases
were partially offset by the impact of the reduction in the dollar value of
foreign currencies.

Product sales in fiscal 2001 were $80.1 million, a decrease of $70.3 million
from the $150.4 million of product sales in fiscal 2000. Prior year product
sales included sales of an online lottery system to Israel, a new central system
with instant ticket capabilities to Sweden, and equipment to South Africa. The
Company sold approximately 5,600 lottery terminals in fiscal 2001, compared to
approximately 13,300 lottery terminals in fiscal 2000.

Gross margins on service revenues were 34.1% in fiscal 2001 compared to 35.5%
in fiscal 2000, primarily driven by start-up losses on the lottery system 
installation in Morocco, along with additional costs incurred relating to the
delayed start-up of the Colombia lottery that launched on January 17, 2001.

Gross margins on product sales fluctuate depending on the mix, volume and timing
of product sales contracts. Gross margins on product sales decreased from 32.2%
in fiscal 2000 to 6.5% in fiscal 2001, primarily due to previously announced
cost over-runs on the lottery system conversion the Company is implementing in
New South Wales, Australia, and the lower volume of equipment sales to South
Africa in fiscal 2001 compared to fiscal 2000.

Selling, general and administrative expenses in fiscal 2001 were $118.0 million,
representing a $4.3 million, or 3.5%, decrease from the $122.3 million incurred
in fiscal 2000. This decrease was primarily attributable to cost reductions
resulting from the value assessment, partially offset by non-cash charges
associated with the implementation of the Company's Restricted Stock Plan in
August 2000. As a percentage of revenues, selling, general and administrative
expenses were 12.6% and 12.1% during fiscal 2001 and 2000, respectively.

Research and development expenses in fiscal 2001 were $49.3 million,
representing a $3.2 million, or 7.0%, increase over research and development
expenses of $46.1 million in fiscal 2000. This increase reflects higher spending
on the Company's central system software and interactive media offerings. As a
percentage of revenues, research and development expenses were 5.3% and 4.6%
during fiscal 2001 and 2000, respectively.

Other income of $7.2 million in fiscal 2001 was comprised principally of the
amortization of the gain on the sale of the Company's 22.5% equity interest in
Camelot Group plc ("Camelot"), which the Company sold in April 1998, and which
is being amortized over the remaining period of Camelot's first operating
license, due to expire in September 2001. Other expense in fiscal 2000 of $1.3
million, was comprised of net foreign exchange losses associated with the
Company's global asset protection and foreign exchange management programs
designed to provide a degree of protection for future cash flows, partially
offset by the amortization of the

   45

gain on the sale of Camelot. The Company recorded $0.4 million of net foreign
exchange gains in fiscal 2001, compared to $6.7 million of net foreign exchange
losses in the prior year.

Interest expense in fiscal 2001 was $27.2 million, a decrease of $1.8 million
from interest expense of $29.0 million incurred during fiscal 2000. This
decrease was primarily due to lower average debt outstanding under the Company's
revolving credit facility.

The Company's effective income tax rate decreased from 40% in fiscal 2000 to 39%
in fiscal 2001, principally due to lower state taxes and increased research and
development tax credits. The Company's effective income tax rate was greater
than the statutory rate primarily due to state income taxes and certain expenses
that are not deductible for income tax purposes.

Weighted average shares in fiscal 2001 declined 1.7 million shares to 34.6
million shares as a result of the Company's share repurchase program. On March
19, 2001, after the end of its 2001 fiscal year, the Company repurchased 5
million shares of its common stock from Tiger Management, its largest
shareholder, for $130.0 million.


COMPARISON OF FISCAL 2000 WITH 1999

Revenues for fiscal 2000 were $1.0 billion, representing a $37.9 million, or
3.9%, increase over revenues of $972.9 million in fiscal 1999.

Service revenues, including lottery and other services, in fiscal 2000 were
$860.4 million, representing a $27.0 million, or 3.0%, decrease from the $887.4
million of service revenues in fiscal 1999. This decrease reflects a 6.1%
decline in domestic lottery service revenues, partially offset by a 1.8%
increase in international lottery service revenues.

In fiscal 2000, lottery sales by the Company's domestic customers declined
approximately 4.0% compared with fiscal 1999, primarily reflecting lower sales
in Texas, the temporary suspension of Quick Draw in New York and lower jackpot
activity. This decline, coupled with the loss of the Company's Indiana lottery
contract and contractual rate changes, resulted in a 6.1% decline in the
Company's domestic service revenues.

Lottery sales by the Company's international customers increased 14.6% in fiscal
2000 compared with fiscal 1999, driven primarily by growth in Brazil, Germany,
the Czech Republic, Poland and Mexico. This increase, coupled with contractual
rate increases in Brazil was almost fully offset by the impact of the reduction
in the dollar value of foreign currencies, resulting in a 1.8% increase in the
Company's international lottery service revenues.

Product sales were $150.4 million in fiscal 2000, an increase of $64.9 million
over the $85.5 million of product sales in fiscal 1999. This increase was
primarily driven by equipment sales to South Africa, an on-line lottery system
to Israel and a new central system, including instant ticket validation
capabilities to Sweden. The Company sold approximately 13,300 lottery terminals
during fiscal 2000, compared to approximately 4,900 lottery terminals during
fiscal 1999.

Gross margins on service revenues improved from 33.5% in fiscal 1999 to 35.5% in
fiscal 2000 due to improved margins from the Company's operations in Brazil.


   46

Gross margins on product sales fluctuate depending on the mix, volume and timing
of product sales contracts. Gross margins on product sales increased from 30.1%
in fiscal 1999 to 32.2% in fiscal 2000, primarily due to the change in product
mix.

Selling, general and administrative expenses in fiscal 2000 were $122.3 million,
representing a $1.7 million, or 1.4%, increase from the $120.6 million incurred
in fiscal 1999. This increase was primarily attributable to the Company's
bi-annual user's conference held during the second quarter of fiscal 2000. As a
percentage of revenues, selling, general and administrative expenses were 12.1%
and 12.4% during fiscal 2000 and 1999, respectively.

Research and development expenses in fiscal 2000 were $46.1 million,
representing a $5.9 million, or 14.7%, increase over research and development
expenses of $40.2 million in fiscal 1999. This increase reflected development
activities associated with the Company's next generation lottery operating
system and terminals along with increased spending on a number of new products
in the development pipeline. As a percentage of revenues, research and
development expenses were 4.6% and 4.1% during fiscal 2000 and 1999,
respectively.

Equity in earnings of unconsolidated affiliates in fiscal 2000 was $2.8 million,
a decrease of $4.3 million from the $7.1 million earned during fiscal 1999. This
decrease resulted principally from the Company's sale, in April 1998, of its
22.5% equity interest in Camelot.

Other expense in fiscal 2000 was $1.3 million and was comprised of net foreign
exchange losses associated with the Company's global asset protection and
foreign exchange management programs designed to provide a degree of protection
for future cash flows, partially offset by the amortization of the gain on the
sale of Camelot. The foreign exchange losses during fiscal 2000 were more than
offset by higher cash gross margin from the Company's foreign operations due to
stronger than expected foreign currencies relative to the U.S. dollar. Other
income of $25.4 million in fiscal 1999 was comprised principally of foreign
exchange gains associated with the Company's global asset protection and foreign
exchange management programs, as well as the amortization of the gain on the
sale of Camelot. As a result of the material devaluation that took place in
Brazil in January 1999, and the hedging strategy that the Company had in place
at the time, the Company recognized a one-time foreign exchange gain of
approximately $17 million.

Interest expense in fiscal 2000 was $29.0 million, an increase of $1.6 million
over interest expense of $27.4 million incurred during fiscal 1999. This
increase was primarily due to higher average debt outstanding under the
Company's revolving credit facility, along with higher average interest rates on
the Company's outstanding debt.

The Company's effective income tax rate decreased from 41% in fiscal 1999 to 40%
in fiscal 2000 due principally to lower state taxes and increased research and
development tax credits. The Company's effective income tax rate was greater
than the statutory rate primarily due to state income taxes and certain expenses
that are not deductible for income tax purposes.



   47



Changes in Financial Position, Liquidity and Capital Resources

During fiscal 2001, the Company generated $252.0 million of cash from
operations. This cash was used principally to fund the purchase of $136.9
million of systems, equipment and other assets relating to contracts, repurchase
$19.6 million of the Company's common stock and repay $42.8 million of the
Company's long-term debt.

Inventories increased by $50.4 million, from $67.4 million at February 26, 2000
to $117.8 million at February 24, 2001, primarily due to spending related to
product sales expected to be delivered during fiscal 2002 in France, Spain and
China, along with inventory purchased for new system installations in New York
and Ohio. Advance payments of $23.4 million have been received related to these
product sales expected to be delivered in fiscal 2002.

Current deferred income taxes increased by $11.0 million, from $15.9 million at
February 26, 2000 to $26.9 million at February 24, 2001, primarily due to
accrued expenses that are not currently deductible for income tax purposes.

Other assets decreased by $28.5 million, from $145.2 million at February 26,
2000 to $116.7 million at February 24, 2001, primarily due to the return of
deposits on a corporate aircraft which was sold in August 2000, along with the
amortization of capitalized software.

Accrued expenses increased by $11.8 million, from $43.3 million at February 26,
2000 to $55.1 million at February 24, 2001, primarily due to the additional cost
to complete the lottery system conversion underway in New South Wales,
Australia.

The special charge accrual of $10.4 million at February 24, 2001 consists
primarily of $7.9 million of severance payments remaining under the workforce
reduction and $1.6 million of payments remaining under contractual obligations
to former executives.

Advance payments from customers increased by $22.0 million, from $33.4 million
at February 26, 2000 to $55.4 million at February 24, 2001, primarily due to
advances received from customers in France, Spain and China related to product
sales expected to be delivered during fiscal 2002.

Income taxes payable, that are reported net of income tax refunds receivable,
increased by $15.2 million, from $49.4 million at February 26, 2000 to $64.6
million at February 24, 2001. This increase was primarily due to a $16.0 million
income tax refund relating to the fiscal 2001 special charge, along with the
timing of income tax payments.

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, equipment and
other assets relating to contracts required during fiscal 2002 will be in a
range of $220 million to $245 million. The principal sources of liquidity for
the Company are expected to be cash generated from operations and borrowings
under the Company's credit facility. The Company currently expects that its cash
flow from operations and available borrowings under its Credit Facility will be
sufficient to fund its anticipated working capital and ordinary capital
expenditure needs, to service its debt obligations, to fund anticipated internal
growth and to repurchase shares of the Company's Common Stock, from time to
time, under the Company's open market share repurchase program in the
foreseeable future. The Company is currently in discussions with its lenders to
refinance its credit facility which is scheduled to expire in June 2002.

   48
On March 19, 2001, the Company repurchased 5 million shares of its Common Stock
from Tiger Management, its largest shareholder, for $130.0 million. This
purchase was outside of the Company's open market share repurchase program. As
of March 31, 2001 the Company had utilized approximately $63.3 million of its
$400 million Credit Facility, including $13.6 million of letters of credit
issued under the Credit Facility.


Market Risk Disclosures

The primary market risk inherent in the Company's financial instruments and
exposures is the potential loss arising from adverse changes in interest rates
and foreign currency rates. The Company's exposure to commodity price changes is
not considered material and is managed through its procurement and sales
practices. The Company did not own any marketable equity securities during
fiscal 2001.


Interest rates

Interest rate market risk is estimated as the potential change in the fair value
of the Company's total debt or current earnings resulting from a hypothetical
10% adverse change in interest rates. At February 24, 2001, and February 26,
2000, the estimated fair value of the Company's fixed rate debt, as determined
by an independent investment banker, approximated $305.7 million and $293.9
million, respectively. At February 24, 2001, a hypothetical 10% increase in
interest rates would change the estimated fair value of the Company's fixed rate
debt to $300.1 million and a hypothetical 10% decrease in interest rates would
change the estimated fair value of the Company's fixed rate debt to $311.5
million. Comparatively, at February 26, 2000, after taking into consideration
$150.0 million of interest rate swaps, a hypothetical 10% increase in interest
rates would change the estimated fair value of the Company's fixed rate debt to
$290.5 million and a hypothetical 10% decrease in interest rates would change
the estimated fair value of the Company's fixed rate debt to $297.2 million.

A hypothetical 10% adverse or favorable change in interest rates applied to
variable rate debt would not have a material affect on current earnings.

The Company uses various techniques to mitigate the risk associated with future
changes in interest rates, including entering into interest rate swaps and the
private placement of fixed rate debt. In February 2000, the Company entered into
two interest rate swaps with an aggregate notional amount of $150.0 million that
provided interest rate protection over the period February 25, 2000 to May 15,
2007. The swaps effectively entitled the Company to exchange fixed rate payments
for variable rate payments. On February 1, 2001, the Company sold the two
interest rate swaps for $13.0 million. The Company has deferred the recognition
of the gain on the sale as a component of long-term debt and is recognizing such
gain ratably over the period February 2001 through May 2007.


Foreign Currency Exchange Rates

Foreign exchange exposures arise from current transactions and anticipated
transactions denominated in a currency other than an entity's functional
currency and from the translation of foreign currency balance sheet accounts
into United States dollar balance sheet accounts.

The Company seeks 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 foreign currency exchange and option contracts. In addition, a
significant portion of the costs attributable to the Company's

   49

foreign currency revenues are payable in the local currencies. Whenever
possible, the Company negotiates clauses into its contracts that allow for price
adjustments should a material change in foreign exchange rates occur.

The Company, from time to time, enters into foreign currency exchange and option
contracts to reduce the exposure associated with current transactions and
anticipated transactions denominated in foreign currencies. However, the Company
does not engage in currency speculation. At February 24, 2001 and February 26,
2000, a hypothetical 10% adverse change in foreign exchange rates would result
in a translation loss of $14.6 million and $16.3 million, respectively, that
would be recorded in the equity section of the Company's balance sheet.

At February 24, 2001 and February 26, 2000, a hypothetical 10% adverse change in
foreign exchange rates would result in a net transaction loss of $3.4 million in
both years that would be recorded in current earnings after considering the
effects of foreign exchange contracts currently in place.

At February 24, 2001, a hypothetical 10% adverse change in foreign exchange
rates would result in a net reduction of cash flows from anticipatory
transactions in fiscal 2002 of $21.2 million. Comparatively, at February 26,
2000, the result of a hypothetical 10% adverse change in foreign exchange rates
would have resulted in a net reduction of cash flows from anticipatory
transactions of $12.1 million in fiscal 2001. The percentage of fiscal 2001 and
fiscal 2000 anticipatory cash flows that were hedged varied throughout each
fiscal year, but averaged 51% in fiscal 2001 compared to 73% in fiscal 2000.

As of February 24, 2001, the Company had contracts for the sale of foreign
currency of approximately $94.8 million (primarily Spanish pesetas, Australian
dollars and pounds sterling) and the purchase of foreign currency of
approximately $65.5 million (primarily pounds sterling), compared to contracts
for the sale of foreign currency of approximately $87.7 million (primarily
Spanish pesetas, South African rand and Irish punts) and the purchase of foreign
currency of approximately $66.7 million (primarily pounds sterling) at February
26, 2000.



   50

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company's market risk disclosures are included in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" above.




   51


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


   52
                         Report of Independent Auditors

Board of Directors and Shareholders
GTECH Holdings Corporation

We have audited the accompanying consolidated balance sheets of GTECH Holdings
Corporation and subsidiaries as of February 24, 2001 and February 26, 2000 and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended February 24, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of GTECH Holdings
Corporation and subsidiaries at February 24, 2001 and February 26, 2000 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended February 24, 2001, in conformity with accounting
principles generally accepted in the United States.



                                                               ERNST & YOUNG LLP

Boston, Massachusetts
March 27, 2001

   53
                  GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS


                                                           February 24,   February 26,
                                                               2001           2000
                                                           ---------------------------
                                                              (Dollars in thousands) 
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                 $  46,948      $  11,115
  Trade accounts receivable                                   118,721        115,358
  Sales-type lease receivables                                  8,722         10,110
  Inventories                                                 117,789         67,418
  Deferred income taxes                                        26,850         15,853
  Other current assets                                         18,798         19,346
                                                            ---------      ---------
      TOTAL CURRENT ASSETS                                    337,828        239,200

SYSTEMS, EQUIPMENT AND OTHER ASSETS RELATING TO CONTRACTS     361,334        375,918

GOODWILL                                                      122,325        130,710

OTHER ASSETS                                                  116,673        145,195
                                                            ---------      ---------
      TOTAL ASSETS                                          $ 938,160      $ 891,023
                                                            =========      =========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short term borrowings                                     $   2,316      $   1,620
  Accounts payable                                             49,267         53,103
  Accrued expenses                                             55,140         43,278
  Special charge                                               10,431             --
  Employee compensation                                        31,898         30,057
  Advance payments from customers                              55,418         33,438
  Income taxes payable                                         64,573         49,382
  Current portion of long-term debt                             3,512             69
                                                            ---------      ---------
      TOTAL CURRENT LIABILITIES                               272,555        210,947

LONG-TERM DEBT, less current portion                          316,961        349,400

OTHER LIABILITIES                                              29,883         27,363

DEFERRED INCOME TAXES                                           4,399          6,737

COMMITMENTS AND CONTINGENCIES                                      --             --

SHAREHOLDERS' EQUITY:
  Preferred Stock, par value $.01 per share--20,000,000
    shares authorized, none issued                                 --             --
  Common Stock, par value $.01 per share--150,000,000
    shares authorized, 44,507,315 and 44,171,315 shares
    issued; 34,257,527 and 34,804,004 shares outstanding
    at February 24, 2001 and February 26, 2000,
    respectively                                                  445            442
  Additional paid-in capital                                  183,294        176,750
  Equity carryover basis adjustment                            (7,008)        (7,008)
  Accumulated other comprehensive loss                        (85,852)       (69,493)
  Retained earnings                                           479,305        437,830
                                                            ---------      ---------
                                                              570,184        538,521
  Less cost of 10,249,788 and 9,367,311 shares
    in treasury at February 24, 2001 and
    February 26, 2000, respectively                          (255,822)      (241,945)
                                                            ---------      ---------
                                                              314,362        296,576
                                                            ---------      ---------
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY            $ 938,160      $ 891,023
                                                            =========      =========

See Notes to Consolidated Financial Statements
   54


                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                         CONSOLIDATED INCOME STATEMENTS


                                                                        Fiscal Year Ended
                                                       -----------------------------------------------------
                                                          February 24,      February 26,       February 27,
                                                             2001               2000              1999
                                                       ----------------  ----------------- -----------------
                                                         (Dollars in thousands, except per share amounts)
Revenues:
    Services                                           $       856,475   $        860,419  $        887,395
    Sales of products                                           80,068            150,379            85,528
                                                       ----------------  ----------------- -----------------
                                                               936,543          1,010,798           972,923
Costs and expenses:
    Costs of services                                          564,095            555,309           589,765
    Costs of sales                                              74,844            101,953            59,825
                                                       ----------------  ----------------- -----------------
                                                               638,939            657,262           649,590
                                                       ----------------  ----------------- -----------------

Gross profit                                                   297,604            353,536           323,333

Selling, general and administrative                            117,997            122,334           120,601
Research and development                                        49,267             46,053            40,158
Goodwill amortization                                            6,165              6,253             5,854
Special charges (credit)                                        42,270             (1,104)           15,000
                                                       ----------------  ----------------- -----------------

Operating income                                                81,905            180,000           141,720

Other income (expense):
    Interest income                                              5,596              3,509             4,079
    Equity in earnings of unconsolidated affiliates              3,167              2,843             7,113
    Other income (expense)                                       7,232             (1,343)           25,447
    Interest expense                                           (27,165)           (29,032)          (27,405)
                                                       ----------------  ----------------- -----------------

Income before income taxes                                      70,735            155,977           150,954

Income taxes                                                    27,587             62,392            61,891
                                                       ----------------  ----------------- -----------------

Net income                                             $        43,148   $         93,585  $         89,063
                                                       ================  ================= =================


                                                       ----------------  ----------------- -----------------
Basic earnings per share                               $          1.25   $           2.58  $           2.17
                                                       ================  ================= =================

                                                       ----------------  ----------------- -----------------
Diluted earnings per share                             $          1.25   $           2.58  $           2.16
                                                       ================  ================= =================




See Notes to Consolidated Financial Statements

   55
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                                                                                    Equity
                                                                                               Additional         Carryover
                                                          Outstanding         Common             Paid-in            Basis
                                                            Shares             Stock             Capital          Adjustment
                                                        ----------------  ----------------  ------------------  ---------------
                                                                                  (Dollars in thousands)
Balance at February 28, 1998                                 41,284,146    $          439    $        171,302    $      (7,008)

Comprehensive income:
     Net income                                                       -                 -                   -                -
     Other comprehensive income (loss), net of tax:
         Foreign currency translation                                 -                 -                   -                -
         Net gain on derivative instruments                           -                 -                   -                -

Comprehensive income
Treasury shares repurchased                                  (2,794,100)                -                   -                -
Shares issued under stock award plans                             5,688                 -                 159                -
Shares reissued under stock award plans                           2,079                 -                   -                -
Shares issued upon exercise of stock options                    224,250                 3               4,973                -

                                                        ----------------  ----------------  ------------------  ---------------
Balance at February 27, 1999                                 38,722,063    $          442    $        176,434    $      (7,008)

Comprehensive income:
     Net income                                                       -                 -                   -                -
     Other comprehensive income, net of tax:
         Foreign currency translation                                 -                 -                   -                -
         Net gain on derivative instruments                           -                 -                   -                -

Comprehensive income
Treasury shares repurchased                                  (4,049,100)                -                   -                -
Shares reissued under employee
     stock purchase and stock award plans                       112,291                 -                   -                -
Shares issued upon exercise of stock options                     18,750                 -                 316                -

                                                        ----------------  ----------------  ------------------  ---------------
Balance at February 26, 2000                                 34,804,004    $          442    $        176,750    $      (7,008)

Comprehensive income:
     Net income                                                       -                 -                   -                -
     Other comprehensive income (loss), net of tax:
         Foreign currency translation                                 -                 -                   -                -
         Net loss on derivative instruments                           -                 -                   -                -
         Unrealized gain on investments                               -                 -                   -                -

Comprehensive income
Director stock compensation                                           -                 -                  92                -
Treasury shares repurchased                                  (1,105,200)                -                   -                -
Shares reissued under employee
     stock purchase and stock award plans                       222,723                 -                   -                -
Shares issued upon exercise of stock options                    336,000                 3               6,452                -

                                                        ----------------  ----------------  ------------------  ---------------
Balance at February 24, 2001                                 34,257,527    $          445    $        183,294    $      (7,008)
                                                        ================  ================  ==================  ===============

                                                          Accumulated
                                                             Other
                                                          Comprehensive        Retained          Treasury
                                                          Income (Loss)        Earnings            Stock              Total
                                                        ------------------ ----------------- ------------------  -----------------
                                                                              (Dollars in thousands)
Balance at February 28, 1998                             $            (42)  $       255,955   $        (75,436)   $       345,210

Comprehensive income:
     Net income                                                         -            89,063                  -             89,063
     Other comprehensive income (loss), net of tax:
         Foreign currency translation                             (85,094)                -                  -            (85,094)
         Net gain on derivative instruments                           294                 -                  -                294
                                                                                                                 -----------------
Comprehensive income                                                                                                        4,263
Treasury shares repurchased                                             -                 -            (70,757)           (70,757)
Shares issued under stock award plans                                   -                 -                  -                159
Shares reissued under stock award plans                                 -                 -                 55                 55
Shares issued upon exercise of stock options                            -                 -                  -              4,976

                                                        ------------------ ----------------- ------------------  -----------------
Balance at February 27, 1999                             $        (84,842)  $       345,018   $       (146,138)   $       283,906

Comprehensive income:
     Net income                                                         -            93,585                  -             93,585
     Other comprehensive income, net of tax:
         Foreign currency translation                              15,223                 -                  -             15,223
         Net gain on derivative instruments                           126                 -                  -                126
                                                                                                                 -----------------
Comprehensive income                                                                                                      108,934
Treasury shares repurchased                                             -                 -            (98,747)           (98,747)
Shares reissued under employee
     stock purchase and stock award plans                               -              (773)             2,940              2,167
Shares issued upon exercise of stock options                            -                 -                  -                316

                                                        ------------------ ----------------- ------------------  -----------------
Balance at February 26, 2000                             $        (69,493)  $       437,830   $       (241,945)   $       296,576

Comprehensive income:
     Net income                                                         -            43,148                  -             43,148
     Other comprehensive income (loss), net of tax:
         Foreign currency translation                             (16,004)                -                  -            (16,004)
         Net loss on derivative instruments                          (447)                -                  -               (447)
         Unrealized gain on investments                                92                 -                  -                 92
                                                                                                                 -----------------
Comprehensive income                                                                                                       26,789
Director stock compensation                                             -                 -                  -                 92
Treasury shares repurchased                                             -                 -            (19,587)           (19,587)
Shares reissued under employee
     stock purchase and stock award plans                               -            (1,673)             5,710              4,037
Shares issued upon exercise of stock options                            -                 -                  -              6,455

                                                        ------------------ ----------------- ------------------  -----------------
Balance at February 24, 2001                             $        (85,852)  $       479,305   $       (255,822)   $       314,362
                                                        ================== ================= ==================  =================
See Notes to Consolidated Financial Statements
   56

                  GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                               Fiscal Year Ended
                                                                     ----------------------------------------
                                                                     February 24,  February 26,  February 27,
                                                                        2001          2000          1999
                                                                     ------------  ------------  ------------
                                                                              (Dollars in thousands)
OPERATING ACTIVITIES
Net income                                                            $  43,148     $  93,585     $  89,063
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation                                                        156,262       168,284       184,748
    Intangibles amortization                                             11,968        10,839         8,719
    Goodwill amortization                                                 6,165         6,253         5,854
    Special charges (credit)                                             42,270        (1,104)       15,000
    Deferred income taxes provision (benefit)                           (13,335)        1,753         9,868
    Termination of interest rate swap                                    12,970           ---           ---
    Equity in earnings (losses) of unconsolidated affiliates,
      net of dividends received                                           1,343          (376)       (3,117)
    Foreign currency transaction losses (gains)                            (970)          900        (8,650)
    Other                                                                 1,408           954         2,405
    Changes in operating assets and liabilities, net of effects 
      of acquisitions:
      Trade accounts receivable                                             956       (10,006)      (10,716)
      Inventories                                                       (50,369)       (5,659)      (33,479)
      Special charge                                                    (23,426)       (4,954)      (26,105)
      Other assets and liabilities                                       63,580       (29,687)       52,692
                                                                      ---------     ---------     ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                               251,970       230,782       286,282

INVESTING ACTIVITIES
Purchases of systems, equipment and other assets relating
  to contracts                                                         (136,891)     (128,618)     (121,198)
Acquisitions (net of cash acquired)                                          --          (318)      (19,687)
Investments in and advances to unconsolidated affiliates                (16,601)      (16,209)         (529)
Cash received from affiliates                                             2,075            --         1,906
Proceeds from sale of investments                                            --            --        84,904
Other                                                                   (11,149)      (19,198)      (22,627)
                                                                      ---------     ---------     ---------
NET CASH USED FOR INVESTING ACTIVITIES                                 (162,566)     (164,343)      (77,231)

FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt                             95,908       221,500       117,706
Principal payments on long-term debt                                   (138,737)     (192,936)     (254,768)
Purchases of treasury stock                                             (19,587)      (98,747)      (70,757)
Proceeds from stock options                                               6,455           316         4,976
Other                                                                     5,236         2,114          (205)
                                                                      ---------     ---------     ---------
NET CASH USED FOR FINANCING ACTIVITIES                                  (50,725)      (67,753)     (203,048)

Effect of exchange rate changes on cash                                  (2,846)        4,696        (6,520)
                                                                      ---------     ---------     ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         35,833         3,382          (517)

Cash and cash equivalents at beginning of year                           11,115         7,733         8,250
                                                                      ---------     ---------     ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR                              $  46,948     $  11,115     $   7,733
                                                                      =========     =========     =========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest payments (net of amounts capitalized)                      $  26,937     $  28,697     $  27,574
  Income tax payments                                                    44,297        66,883        24,945
  Income tax refunds                                                    (18,701)         (662)      (13,345)

See Notes to Consolidated Financial Statements
   57


                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: GTECH Holdings Corporation ("Holdings") conducts
business through its consolidated subsidiaries and unconsolidated affiliates and
has, as its only asset, an investment in GTECH Corporation ("GTECH"), its wholly
owned subsidiary. The Consolidated Financial Statements include the accounts of
Holdings, GTECH, all majority and wholly owned subsidiaries and other entities
controlled by GTECH (collectively referred to herein as the "Company").
Significant intercompany accounts and transactions have been eliminated in
preparing the Consolidated Financial Statements. Investments in 20% to 50% owned
affiliates, investments in corporate joint ventures and other entities that are
not controlled by GTECH are accounted for using the equity method and
investments in less than 20% owned affiliates are accounted for using the cost
method.

Certain reclassifications have been made to the prior years' financial
statements to conform to the current year presentation. Goodwill amortization,
that was included in cost of services and selling, general and administrative
expense in prior periods has been presented as a single line item in the
Consolidated Income Statements.

Industry Segment and Nature of Operations: The Company operates in one
reportable business segment that provides online, high speed, highly secured
transaction processing systems to the worldwide lottery industry. 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.
The Company's business is highly regulated, and the competition to secure new
government contracts is often intense.

Fiscal Year: The Company operates on a 52- to 53-week fiscal year ending on the
last Saturday in February. Fiscal 2001, 2000 and 1999 were 52-week years.

Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Revenue Recognition: Service revenues are recognized as the services are
performed. Liquidated damages (as defined in Note F) are recorded as a reduction
in revenue in the period in which it is determined that they are probable and
estimable. Revenues from product sales or sales-type leases are recognized when
installation is complete and the customer accepts the product, when acceptance
is a stipulated contractual term. In those instances where the Company is not
responsible for installation, revenue is recognized when the product is shipped.

Product sales under long-term contracts are recorded under the percentage of
completion method. Costs and estimated gross margins are recorded as sales as
work is completed and accepted by the customer by utilizing the most recent
estimates of cost to complete. Adjustments in estimates are made in the period
in which the information necessary to make the adjustment becomes available. If
the current contract estimate indicates a loss, provision is made for the
estimated loss when it becomes known and quantifiable.

Effective November 26, 2000, the Company adopted Staff Accounting Bulletin (SAB)
101, "Revenue Recognition in Financial Statements". SAB 101 summarizes the
Securities and Exchange Commission's views regarding the application of
generally accepted accounting principles to selected revenue recognition issues.
The adoption and implementation of SAB 101 did not have a material effect on the
results of operations or financial position of the Company.



   58


                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)

Foreign Currency Translation: The functional currency for the majority of the
Company's foreign operations is the applicable local currency. The translation
of the applicable foreign currencies into U.S. dollars is performed for balance
sheet accounts using exchange rates in effect at the balance sheet date and for
revenue and expense accounts using a weighted average exchange rate during the
period. The gains or losses resulting from such translation are reported in
accumulated other comprehensive income, whereas gains or losses resulting from
foreign currency transactions are included in results of operations. The Company
recognized net foreign exchange gains (losses) of $434,000, $(6,683,000) and
$15,268,000 in fiscal 2001, 2000 and 1999, respectively, which are included as a
component of other income in the Company's Consolidated Income Statements.

For those foreign subsidiaries operating in a highly inflationary economy or
having the U.S. dollar as their functional currency, nonmonetary assets and
liabilities are translated at historical rates and monetary assets and
liabilities are translated at current rates. Translation adjustments are
included in the determination of net income.

Research and Development: Research and development expenses are charged to
operations as incurred.

Stock-Based Compensation: The Company grants stock options for a fixed number of
shares of the common stock of Holdings ("Common Stock") to employees and
nonemployee directors with an exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for stock option grants in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and related Interpretations. The Company has not
recognized any compensation expense for stock option grants.

Derivatives: The Company uses derivative financial instruments principally to
manage the risk of foreign currency exchange rate and interest rate fluctuations
and accounts for its derivative financial instruments in accordance with
Financial Accounting Standards Board Statement 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133").

From time to time, the Company enters into foreign currency exchange and option
contracts to reduce the exposure associated with certain firm commitments,
variable service revenues and certain assets and liabilities denominated in
foreign currencies. These contracts generally have maturities of 12 months or
less, and are regularly renewed to provide continuing coverage throughout the
year. The Company does not engage in currency speculation.

The Company records certain contracts used to provide a degree of protection to
the Company against foreign exchange risk on its variable service revenues at
fair value in its Consolidated Balance Sheets. The related gains or losses on
these contracts are either deferred in shareholders' equity (accumulated other
comprehensive income) or immediately recognized in earnings dependent on whether
the contract can be treated as a hedge. The deferred gains and losses are
subsequently recognized in earnings in the period that the related items being
hedged are received and recognized in earnings. Contracts used to hedge assets
and liabilities denominated in foreign currencies are recorded in the Company's
Consolidated Balance Sheets at fair value and the related gains or losses on
these contracts are immediately recognized in earnings as a component of other
income in the Company's Consolidated Income Statements.

Income Taxes: Deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted income tax rates and laws that will be in
effect when the temporary differences are expected to reverse. Additionally,
deferred tax assets and liabilities are separated into current and noncurrent
amounts based on the classification of the related assets and liabilities for
financial reporting purposes.


   59



                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)

Cash Equivalents: The Company considers short-term, highly liquid investments
with an original maturity of three months or less at the date of purchase to be
cash equivalents.

Trade Accounts Receivable: Trade accounts receivable are reflected net of
allowances for doubtful accounts and liquidated damages of $7,373,000 and
$3,187,000 at February 24, 2001 and February 26, 2000, respectively.

Inventories: Inventories include amounts related to the Company's long-term
service contracts and product sales contracts, including product sales under
long-term contracts, and are stated at the lower of cost (first-in, first-out
method) or market. Provision for potentially obsolete or slow-moving inventory
is made based on management's analysis of inventory levels and future sales
forecasts. Inventory allowances were $6,708,000 and $5,142,000 at February 24,
2001 and February 26, 2000, respectively. Inventory manufactured or assembled by
the Company for its long-term service contracts is transferred to systems,
equipment and other assets relating to contracts upon shipment.

Systems, Equipment and Other Assets Relating to Contracts: Systems, equipment
and other assets relating to contracts are stated on the basis of cost. The cost
less any salvage value is depreciated over the base contract term, not to exceed
ten years, using the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes.

Capitalized Software Development Costs: Unamortized software development costs,
included in systems, equipment and other assets relating to contracts and other
assets in the Company's Consolidated Balance Sheets, were $36,393,000 and
$44,291,000 at February 24, 2001 and February 26, 2000, respectively. Related
amortization expense amounted to $19,018,000, $17,167,000 and $12,821,000 in
fiscal 2001, 2000 and 1999, respectively, and is included in cost of services or
cost of sales in the Company's Consolidated Income Statements.

Impairment of Long-Lived Assets: If facts and circumstances were to indicate
that the Company's long-lived assets might be impaired, the estimated future
undiscounted cash flows associated with the long-lived asset would be compared
to its carrying amount to determine if a write-down to fair value is necessary.
During fiscal 2001, 2000 and 1999, the Company recorded charges of $4,236,000,
$1,000,000 and $18,165,000, respectively, relating to impairments of certain
long-lived assets.

Goodwill: Goodwill represents the excess of cost over the fair value of net
assets acquired and is amortized on a straight-line basis over periods ranging
from seven to 40 years. As of February 24, 2001 and February 26, 2000,
accumulated amortization was $40,850,000 and $36,271,000, respectively. Goodwill
is periodically reviewed for impairment by comparing the carrying amount to the
estimated future undiscounted cash flows of the businesses acquired. If this
review indicates that goodwill is not recoverable, the carrying amount would be
reduced to fair value. During fiscal 2001, the Company reduced goodwill by
$2,220,000 to reflect impairment associated with a prior acquisition.

Accumulated Other Comprehensive Income: Accumulated other comprehensive income
as of February 24, 2001, included $(85,917,000), $(27,000) and $92,000 related
to foreign currency translation, net loss on derivative instruments and
unrealized gain on investments, respectively. Accumulated other comprehensive
income as of February 26, 2000, included $(69,913,000) and $420,000 related to
foreign currency translation and net gain on derivative instruments,
respectively.



   60



                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE B - BUSINESS ACQUISITIONS

On July 1, 1998, the Company acquired 80% of the equity of Europrint Holdings
Ltd. ("Europrint") and its wholly owned subsidiaries, including Interactive
Games International ("IGI"), for a net cash purchase price of $21,641,000,
including related acquisition costs. Europrint is a provider of media
promotional games and IGI has pioneered the development of interactive,
televised lottery games. The Company has the option, and under certain
circumstances the obligation, to acquire the remaining 20% of the equity of
Europrint and IGI within five years from the date of acquisition.

The acquisition was accounted for using the purchase method of accounting,
whereby the purchase price was allocated to the assets acquired and liabilities
assumed based on their respective fair values. Purchase price in excess of these
fair values has been recorded as goodwill. The Company has included the
operating results of Europrint and its wholly owned subsidiaries in its
consolidated results since the date of acquisition.

Pro forma information has not been provided because the acquisition was not
material to the Company's operations.



NOTE C - INVENTORIES

Inventories consist of:

                                                              February 24, 2001           February 26, 2000
                                                              -----------------           -----------------
                                                                         (Dollars in thousands)

Raw materials                                                $             45,689       $             23,623
Work in progress                                                           57,210                     42,701
Finished goods                                                             14,890                      1,094
                                                             --------------------       --------------------
                                                             $            117,789       $             67,418
                                                             ====================       ====================



NOTE D - SYSTEMS, EQUIPMENT AND OTHER ASSETS RELATING TO CONTRACTS

Systems, equipment and other assets relating to contracts consists of:


                                                              February 24, 2001           February 26, 2000
                                                              -----------------           -----------------
                                                                         (Dollars in thousands)

Land and buildings                                           $              5,259       $              5,259
Computer terminals and systems                                          1,122,286                  1,069,541
Furniture and equipment                                                   116,098                    110,734
Contracts in progress                                                      39,771                     46,221
                                                             --------------------       --------------------
                                                                        1,283,414                  1,231,755
Less accumulated depreciation and amortization                            922,080                    855,837
                                                             --------------------       --------------------
                                                             $            361,334       $            375,918
                                                             ====================       ====================



   61



                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE E - LONG-TERM DEBT

Long-term debt consists of:

                                                              February 24, 2001           February 26, 2000
                                                              -----------------           -----------------
                                                                         (Dollars in thousands)

Revolving credit facility                                    $               ----       $             45,000
7.75% Series A Senior Notes due 2004                                      150,000                    150,000
7.87% Series B Senior Notes due 2007                                      150,000                    150,000
Deferred gain on interest rate swaps                                       12,810                       ----
Other                                                                       7,663                      4,469
                                                             --------------------       --------------------
                                                                          320,473                    349,469
Less current portion                                                        3,512                         69
                                                             --------------------       --------------------
                                                             $            316,961       $            349,400
                                                             ====================       ====================


The Company has an unsecured revolving credit facility of $400,000,000 expiring
in June 2002 (the "Credit Facility"). At February 24, 2001, there were no
outstanding borrowings under the Credit Facility. The Company is required to pay
a facility fee of .125% per annum on the total revolving credit commitment. The
restrictive provisions of the Credit Facility include, among other things,
requirements relating to the maintenance of certain financial ratios,
restrictions on additional indebtedness and restrictions on the ability of the
Company to make cash distributions on its Common Stock under certain
circumstances. At February 24, 2001, under the most restrictive covenants, the
Company had available $141,476,000 of retained earnings for the payment of
dividends. 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 and to repurchase shares of the Company's Common 
Stock, from time to time, under the Company's open market share repurchase 
program. The Company's 7.75% Series A Senior Notes due 2004 and
7.87% Series B Senior Notes due 2007 (collectively, the "Senior Notes") are
unsecured. Interest on each issue is payable semiannually in arrears.

Up to $100,000,000 of the Credit Facility may be used for the issuance of
letters of credit. The Company had, at February 24, 2001, $12,117,000 of letters
of credit issued and outstanding under the Credit Facility and $65,512,000 of
letters of credit issued and outstanding outside of the Credit Facility. The
total weighted average annual cost for all letters of credit was 0.6%.

At February 24, 2001, long-term debt matures as follows:


                     Fiscal Year     (Dollars in thousands)
                     -----------
                        2002                 3,512
                        2003                 3,991
                        2004                 3,991
                        2005               153,991
                        2006                 2,553
                        2007                 2,075
                        2008               150,360


Long-term debt includes a deferred gain on the sale of interest rate swaps. (See
Note O for additional information.)



   62

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE F - COMMITMENTS AND CONTINGENCIES

Contracts

Contracts generally contain time schedules for, among other things, commencement
of system operations and the installation of terminals, as well as detailed
performance standards. The Company is typically required to furnish substantial
bonds to secure its performance under these contracts. In addition to other
possible consequences, including contract termination, failure to meet specified
deadlines or performance standards could trigger substantial penalties in the
form of liquidated damage assessments. Many of the Company's contracts permit
the customer to terminate the contract at will and do not specify the
compensation, if any, that the Company would be entitled were such a termination
to occur.

Legal Matters

     As publicly reported in February 1999, a witness appearing before the
Moriarty Tribunal, an investigative body convened by the Irish Parliament and
chaired by Mr. Justice Moriarty to investigate the business affairs generally of
the former Taoiseach (Prime Minister) of Ireland, Charles Haughey, testified
that in February 1993 Guy B. Snowden, then Chief Executive Officer of the
Company, had invested pounds sterling 67,000 (approximately $100,000) of his
personal funds in a company owned by Mr. Haughey's son. Mr. Haughey had resigned
as Taoiseach in February 1992. In July 1992, the An Post Irish National Lottery
Company, the Irish lottery authority (the "Irish NLC"), issued a Request for
Proposals respecting online and instant ticket lottery goods and services, and
in September 1992 the Company, which was then the incumbent provider of lottery
goods and services to the Irish NLC under an agreement awarded to the Company in
1987, submitted a Proposal to the Irish NLC in response to the Irish NLC's
Request for Proposals. In November 1992, the Irish NLC selected the Company to
provide online and instant ticket goods and services to the Irish NLC under the
terms of the competitive procurement and, following negotiations, a definitive
agreement was entered into between the Irish NLC and the Company in March 1993.
In calendar 1999, the Tribunal requested that the Company provide various
documents regarding the Company's business in Ireland, which the Company has
done, and the Company has been cooperating with the Tribunal. In addition, the
Company has made its own inquiry into the facts surrounding Mr. Snowden's
investment and the extent, if any, of the Company's involvement in or knowledge
of that investment. The Company's investigation has determined that no Company
funds were used to make Mr. Snowden's investment, and there is no information to
suggest that Mr. Snowden ever sought reimbursement for the investment from the
Company. Further, there is no information to suggest that Mr. Snowden informed
anyone else at the Company of his investment at the time or that his investment
was related in any way to the renewal of the Company's contract to supply
systems and support to the Irish NLC. Mr. Snowden has advised the Company
through his counsel that (i) his investment was a strictly personal one, (ii)
the investment was made from his personal funds, (iii) he never sought
reimbursement for any portion of his investment from the Company or any other
entity, and (iv) his investment was not related to the Irish NLC and was not
intended to and did not influence the Irish NLC's decision to renew the
Company's contract.

No charges of wrongdoing have been brought against the Company in connection
with the Moriarty investigation, and the Company does not believe that it has
engaged in any wrongdoing in connection with this matter. However, since this
investigation is or may still be underway, and investigations of this type
customarily are conducted in whole or in part in secret, the Company lacks
sufficient information to determine with certainty its ultimate scope and
whether the government authorities will assert claims resulting from this
investigation 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 a government
authority were to make an allegation, or if there were to be a finding, of
improper conduct on the part of or attributable to the Company in any matter,
including in respect of the Moriarty investigation, 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. In addition, continuing adverse publicity resulting from this
investigation and related matters could have such a material adverse effect.


   63

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE F - COMMITMENTS AND CONTINGENCIES-(CONTINUED)

Since July 1994, the United Kingdom National Lottery has been operated under a
license held by Camelot Group plc ("Camelot"), and the Company has been a
supplier of lottery goods and services to Camelot for the lottery. As publicly
reported, in or around April or May 2000, the United Kingdom National Lottery
Commission (the "NLC"), the regulator of the United Kingdom National Lottery,
commenced an investigation into a lottery terminal software malfunction in the
United Kingdom in which, under certain rare circumstances, a duplicate
transaction was recorded on the Company's central system while only one ticket
was presented to the retailer. The software malfunction resulted in a relatively
small amount of overcharges to lottery retailers with respect to the duplicate
transactions and a relatively small amount of overpayments or underpayments to
certain prizewinners. The Company first identified this software malfunction in
the United Kingdom in June 1998 and corrected the malfunction in July 1998, but
without notifying Camelot or the NLC, as it should have done. The Company fully
cooperated with the NLC's investigation and undertook to implement a number of
measures respecting its corporate compliance and governance functions and
software development processes in the wake of the investigation. The Company has
also agreed to reimburse United Kingdom lottery players and retailers for any
financial losses incurred by virtue of the software malfunction.

As has also been publicly reported, the developments described above took place
in the context of a competitive procurement respecting the award by the NLC of a
new license to operate the National Lottery with effect from October 1, 2001. In
1999, the NLC established a competitive procedure for the award of the new
license, and two bidders, Camelot and The People's Lottery ("TPL"), subsequently
submitted bids for the new license. Camelot's bid was supported by agreements
with the Company pursuant to which the Company had contracted to continue to
supply lottery goods and services to Camelot during the term of the new license
in the event that Camelot was awarded the new license.

In August 2000, the NLC announced that it had decided that the NLC would proceed
on the basis of a new procedure under which it would negotiate exclusively with
TPL for one month. Promptly after the NLC's announcement, Camelot initiated
legal proceedings in the United Kingdom challenging the legality of the NLC's
decision to initiate a new procedure of negotiation with TPL to the exclusion of
Camelot. In September 2000, the High Court of Justice (Queen's Bench Division)
overturned the NLC's August 2000 decision to negotiate exclusively with TPL and
directed that the NLC enter into an exclusive negotiation period with Camelot so
as to afford Camelot the same opportunity granted to TPL to improve its bid to
address the NLC's concerns.

As part of the improved Camelot proposal for the new license, the Company
entered into technology transfer and training arrangements with Camelot
providing for the transfer to Camelot of the Company's National Lottery
equipment, facilities and U.K. technology employees, a technology transfer to
Camelot (after a period of training), and a grant to Camelot exclusive rights to
operate the Company's gaming system software in the U.K. for the term of the new
license. Under these new arrangements, the Company will license its software and
provide a range of support services to Camelot for which the Company expects to
receive compensation during the term of the new license in the range of
$40,000,000 to $45,000,000 per year commencing in fiscal year 2003. The Company
also anticipates receiving revenues of approximately $65,000,000 with respect to
the sale to Camelot of new terminals prior to the commencement of the new
license term. The Company further agreed to negotiate a technology transfer and
a related software license for the exclusive use by Camelot under the new
license of the internet gaming applications of the Company's UWin! subsidiary.

In December 2000, the NLC announced its decision to award a new seven-year
license to operate the National Lottery to Camelot and that it will grant
Camelot an interim license to cover the period from October 1, 2001 through
January 30, 2002 in order to provide a twelve-month conversion period prior to
the beginning of the new license. TPL has not protested the NLC's decision to
award the new license to Camelot and the period in which a protest must be made
has since lapsed.


   64

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE F - COMMITMENTS AND CONTINGENCIES-(CONTINUED)

In April 2001, the NLC issued a report of its investigation into the above
described lottery software terminal malfunction. The NLC report states that its
investigation of the lottery software incident had established breaches of
Camelot's license, including in respect of the failure of the Company to give
proper notification before rectifying the software fault. The report further
states that Camelot has agreed to pay pounds sterling 115,000 (approximately
$175,000) into the National Lottery prize fund as compensation for underpayments
to players resulting from the software malfunction, and that Camelot has
undertaken to identify the amounts by which individual retailers have been
overcharged. The NLC has declined, however, to fine Camelot with respect to
breaches of its license resulting from (or revealed by the NLC investigation of)
the software incident. The NLC report summarizes the steps taken and to be
undertaken by the Company in the wake of investigation of the lottery software
malfunction (including the measures implemented by the Company with respect to
its corporate compliance and governance functions and software development
processes and the technology transfer arrangements, as described above) and
concludes, in light of these steps, that the Company sufficiently addressed the
NLC's ongoing concerns about whether it is a "fit and proper" body for purposes
of involvement in the operation of the National Lottery. Payment by the Company
of amounts: (i) to reimburse Camelot for payments with respect to underpayments
to United Kingdom players and overcharges of retailers, as described above, 
(ii) to reimburse Camelot with respect to any other out-of-pocket costs incurred
by Camelot with respect to the lottery terminal software malfunction, and 
(iii) to reimburse other customers of the Company with respect to effects of the
lottery terminal software malfunction outside the United Kingdom, which amounts
have been accrued in the accompanying financial statements, are not expected to
have a material adverse effect on the Company's consolidated financial position
or results of operation.

As publicly reported, in August 2000, a shareholder class action lawsuit on
behalf of all persons who purchased Company stock during the period from April
11, 2000 to July 25, 2000, was brought against the Company, the Company's former
Chairman and Chief Executive Officer, William Y. O'Connor, and the Company's
current Chairman, W. Bruce Turner, in the U.S. District Court of Rhode Island
relating to various Company announcements made between April 11, 2000 and July
25, 2000. The complaint filed in the case, Sandra Kafenbaum, individually and on
behalf of all others similarly situated, v. GTECH Holdings Corporation, William
Y. O'Connor and W. Bruce Turner, generally alleges that the defendants violated
federal securities laws (including Section 10(b) of the Securities Exchange Act
of 1934) by making allegedly false and misleading statements (including
statements alleged to be overly optimistic respecting certain lottery contract
awards to the Company and respecting the Company's prospects in certain
non-lottery business lines and investments), while failing to disclose in a
timely manner certain allegedly material adverse information that it purportedly
had a duty to disclose (including an alleged inability to close certain contract
awards and as to certain alleged cost overruns). The complaint seeks to recover
monetary damages from the Company and the individual defendants. In February
2001, the plaintiffs filed an amended complaint which added Steven P. Nowick,
the Company's former President and Chief Operating Officer, as an individual
defendant. In addition, the amended complaint expands the purported class of
plaintiffs to include all persons who purchased common stock of the Company
during the period from July 13, 1998 through August 29, 2000. The type of relief
sought in the amended complaint is similar to that sought in the original
action. The Company believes that it has good defenses to the claims made in
this lawsuit and intends to file a motion to dismiss the amended complaint as to
all of the defendants. At the present time, however, the Company is unable to
predict the outcome, or the financial statement impact, if any, of this lawsuit.

As publicly reported, in May 2000, Sazka, a.s., a lottery customer of the
Company in the Czech Republic ("Sazka"), filed a Request for Arbitration with
the International Arbitral Centre of the Austrian Federal Economic Chamber of
Commerce in Vienna, Austria, seeking to arbitrate certain business and
contractual issues under the Company's online lottery contract with Sazka. Sazka
sought damages valued at approximately $2,600,000 in connection with alleged
delays in the recent extensive expansion of the lottery sales network. Sazka
also sought a determination that its online contract with the Company would
expire approximately two years earlier than the date on which the Company
maintained its contract would terminate. The Company, believing the claims made
by Sazka to be without merit, filed a Memorandum in Reply and Counterclaim
disputing such claims and raising counterclaims for breach of contract by Sazka.
In March 2001, the Company entered into an agreement with Sazka which, among


   65


                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE F - COMMITMENTS AND CONTINGENCIES-(CONTINUED)

other things, resolved the arbitration. Under the agreed settlement, Sazka
dropped its demand for liquidated damages, paid to the Company certain disputed
amounts which it had previously withheld and agreed to extend the term of the
contract. The Company in turn agreed to reduce its fee and to provide certain
additional equipment and services under its contract with Sazka.

In February 1999, the Company was sued by a Florida corporation called EIG
Gaming International, Inc. ("EIG"), in the Circuit Court of the Eleventh
Judicial Circuit of Florida. The Company removed the case to the U.S. District
Court for the Southern District of Florida, where it is captioned EIG Gaming
International, Inc. v. GTECH Corporation, Case No. 99-1808-Civ-Jordan. In its
complaint EIG alleges that it entered into a Letter of Intent with the Company
pursuant to which it would assist the Company to obtain the lottery contract for
Peru in return for a percentage of the lottery's receipts. EIG further contends
that it secured the Peruvian contract for the Company but that the Company
thereupon declined to pursue it. Plaintiff claims damages exceeding $80,000,000.
The Company vigorously denies plaintiff's allegations, to which it believes it
has good defenses, and, in November 2000, moved for summary judgment. That
motion is pending. In April 2001, the court entered an order tentatively
scheduling a trial in the case during July 2001. At the present time, the
Company is unable to predict the outcome, or the financial statement impact, if
any, of this lawsuit.

The Company also is subject to certain other legal proceedings and claims which
management believes, on the basis of information presently available to it, will
not materially adversely affect the Company's consolidated financial position or
results of operations.



   66

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE G - STOCK-BASED COMPENSATION PLANS

Under various stock-based compensation plans, officers and other key employees
of the Company may receive grants of incentive stock options, nonqualified stock
options, restricted stock, stock appreciation rights and performance awards and
nonemployee members of the Company's Board of Directors automatically are
granted annual stock options and may elect to receive stock in lieu of
directors' fees. The Company is authorized to grant up to 5,240,000 shares of
Common Stock under these plans and, at February 24, 2001, 3,026,250 stock
options and restricted stock had been granted. All current outstanding shares
are nonqualified stock options and restricted stock.

The stock options granted under these plans are to purchase Common Stock at a
price not less than fair market value at the date of grant. Employee stock
options generally become exercisable ratably over a four-year period from date
of grant and expire 10 years after date of grant unless an earlier expiration
date is set at time of grant. Nonemployee director stock options are exercisable
approximately one year after date of grant and expire 10 years after date of
grant. Both employee and nonemployee directors' stock options are subject to
possible earlier exercise and termination in certain circumstances.

During fiscal 2001, the Company awarded 387,250 shares of restricted stock to
officers and certain key employees, with a weighted average fair value at the
date of grant of $19.00 per share. The fair value of the restricted stock award
is being charged to expense over the vesting period. Grants generally vest
within two years from the date of grant. Recipients of restricted stock do not
pay any cash consideration to the Company for the shares. During fiscal 2001,
the Company recorded noncash charges to operations of $4,549,000 as compensation
expense related to restricted stock.

The Company follows Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and related Interpretations in accounting for its
stock option grants, whereby no compensation expense is deducted in determining
net income. Had compensation expense for stock option grants under the plans
been determined pursuant to Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", the Company's net income would have
decreased accordingly. Using the Black-Scholes option pricing model, the
Company's pro forma net income and pro forma weighted average fair value of
options granted, with related assumptions, are as follows:

                                                                                     Fiscal Year Ended
                                                    --------------------------------------------------------------------------------
                                                       February 24, 2001            February 26, 2000            February 27, 1999
                                                    -----------------------      ------------------------     ----------------------

Pro forma net income (in thousands)                     $       39,269               $        89,936              $       85,797
Pro forma basic earnings per share                      $         1.14               $          2.48              $         2.09
Pro forma diluted earnings per share                    $         1.13               $          2.48              $         2.09
Pro forma weighted average fair value
  per share of options granted                          $         7.00               $         10.00              $        15.00
Expected life (in years)                                          4.4                           5.4                         5.3
Risk-free interest rates                                          6.12%                         5.21%                       5.77%
Volatility factors of the expected market
   price of the Common Stock                                       .34                           .35                         .40
Dividend yield                                                      ---                           ---                         ---


The effects on fiscal 2001, 2000 and 1999 pro forma net income and earnings per
share of expensing the estimated fair value of stock options are not necessarily
representative of the effects on reported net income for future years because of
the vesting period of the stock options and the potential for issuance of
additional stock options in future years.



   67

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE G - STOCK-BASED COMPENSATION PLANS-(CONTINUED)

The Company's stock option activity and related information is summarized as
follows:

                                                                             Fiscal Year Ended
                                       --------------------------------------------------------------------------------------------
                                             February 24, 2001                February 26, 2000              February 27, 1999
                                       -------------------------------   ---------------------------    ---------------------------
                                                          Weighted                        Weighted                       Weighted
                                          Shares           Average          Shares         Average        Shares          Average
                                           under          Exercise           under        Exercise         under         Exercise
                                          Options           Price           Options         Price         Options          Price
                                       -------------   ---------------   -------------  ------------    ------------   ------------
Outstanding at beginning of year           2,824,175   $    27.71           2,083,300   $   29.26          1,501,550   $   25.13
Granted                                    1,279,000        19.78           1,075,500       24.79          1,012,500       34.04
Exercised                                   (336,000)       19.21             (18,750)      16.88           (228,750)      22.30
Forfeited                                   (472,800)       25.08            (315,875)      28.62           (202,000)      30.46
                                       -------------                     ------------                   ------------
Outstanding at end of year                 3,294,375   $    25.87           2,824,175   $   27.71          2,083,300   $   29.26
                                       =============                     ============                   ============

Exercisable at end of year                 1,681,750   $    28.30           1,176,800   $   26.62            890,550   $   24.22
                                       =============                     ============                   ============


Exercise prices for stock options outstanding under the plans as of February 24,
2001 are summarized as follows:

                                                   Weighted Average
                                               -------------------------                     Weighted
                                                Remaining                                    Average
         Range of               Options        Contractual     Exercise         Options      Exercise
      Exercise Prices         Outstanding      Life (Years)     Price         Exercisable     Price
  ------------------------    -----------      ------------   ----------      -----------   ----------

     $16.88 - $22.19           1,037,250            8.6       $   19.25          163,500    $  18.48
     $22.25 - $25.31             838,500            7.9       $   24.86          415,125    $  24.96
     $25.69 - $35.28           1,418,625            6.0       $   31.32        1,103,125    $  31.02
                               ---------                                       ---------
                               3,294,375                                       1,681,750
                               =========                                       =========



NOTE H - EMPLOYEE STOCK PURCHASE PLAN

In July 1998, shareholders approved the GTECH Holdings Corporation 1998 Employee
Stock Purchase Plan (the "Plan") that allows substantially all full-time
employees to acquire shares of Common Stock through payroll deductions over
six-month offering periods. The purchase price is equal to 85% of the shares'
fair market value on either the first or last day of the offering period,
whichever is lower. Purchases are limited to 10% of an employee's salary, up to
a maximum of $25,000 per calendar year. The Plan expires upon the earlier of
July 31, 2003 or the date the shares provided by the Plan have been purchased. A
total of 750,000 treasury shares are available for purchase under the Plan. At
February 24, 2001, 212,807 shares of Common Stock had been issued under the
Plan.


   68

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE I - EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

                                                                      Fiscal Year Ended
                                                 -----------------------------------------------------------
                                                 February 24, 2001    February 26, 2000    February 27, 1999
                                                 -----------------    -----------------    -----------------
                                                 (Dollars and shares in thousands, except per share amounts)
Numerator:
    Net income                                    $        43,148      $        93,585      $        89,063

Denominator:
    Weighted average shares - Basic                        34,564               36,217               40,957

    Effect of dilutive securities:
       Employee stock options and
         unvested restricted shares                            91                   43                  188
                                                  ---------------      ---------------      ---------------
    Weighted average shares - Diluted                      34,655               36,260               41,145
                                                  ===============      ===============      ===============

Basic earnings per share                          $          1.25      $          2.58      $          2.17
                                                  ===============      ===============      ===============

Diluted earnings per share                        $          1.25      $          2.58      $          2.16
                                                  ===============      ===============      ===============



   69

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE J - INCOME TAXES

The components of income before income taxes were as follows:

                                                                       Fiscal Year Ended
                                                   ---------------------------------------------------------
                                                   February 24, 2001   February 26, 2000   February 27, 1999
                                                   -----------------   -----------------   -----------------
                                                                    (Dollars in thousands)

United States                                      $         13,455    $         93,848     $      51,773
Foreign                                                      57,280              62,129            99,181
                                                   ----------------    ----------------     -------------
                                                   $         70,735    $        155,977     $     150,954
                                                   ================    ================     =============


Significant components of the provision for income taxes were as follows:

                                                                       Fiscal Year Ended
                                                   --------------------------------------------------------
                                                   February 24, 2001   February 26, 2000  February 27, 1999
                                                   -----------------   -----------------  -----------------
                                                                    (Dollars in thousands)
Current:
    Federal                                        $        10,634     $         12,375    $         3,135
    State                                                    3,101                5,780              4,448
    Foreign                                                 27,187               42,484             44,440
                                                   ---------------     ----------------    ---------------
        Total Current                                       40,922               60,639             52,023
                                                   ---------------     ----------------    ---------------
Deferred:
    Federal                                        $       (17,149)    $           (129)   $        14,216
    State                                                     (931)                 107              2,521
    Foreign                                                  4,745                1,775             (6,869)
                                                   ---------------     ----------------    ---------------
        Total Deferred                                     (13,335)               1,753              9,868
                                                   ---------------     ----------------    ---------------
    Total Provision                                $        27,587     $         62,392    $        61,891
                                                   ===============     ================    ===============


Significant components of the Company's deferred tax assets and liabilities were
as follows:

                                                               February 24, 2001   February 26, 2000
                                                               -----------------   -----------------
                                                                      (Dollars in thousands)

Deferred tax assets:
   Accruals not currently deductible for tax purposes            $      19,956       $     14,034
   Tax credits                                                           7,517                ---
   Special charges                                                       3,822                ---
   Cash collected in excess of revenue recognized                        3,690              5,398
   Inventory reserves                                                    2,207              2,788
   Other                                                                 3,750              5,578
                                                                 -------------       ------------
                                                                        40,942             27,798
Deferred tax liabilities:
   Depreciation                                                        (15,070)           (15,553)
   Other                                                                (3,421)            (3,129)
                                                                 -------------       -------------
                                                                       (18,491)           (18,682)
                                                                 -------------       -------------
Net deferred tax assets                                          $      22,451       $      9,116
                                                                 =============       ============



   70

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE J - INCOME TAXES-(CONTINUED)

Undistributed earnings of foreign subsidiaries, excluding accumulated net
earnings of foreign subsidiaries that, if remitted, would result in little or no
additional tax because of the availability of foreign tax credits, amounted to
$5,977,000 at February 24, 2001. These earnings reflect full provision for
foreign income taxes and are intended to be indefinitely reinvested in foreign
operations. United States taxes that would be payable upon the remittance of
these earnings are estimated to be $598,000.

At February 24, 2001, the Company had $7,517,000 of tax credit carryforwards
which will begin to expire in fiscal year 2020 if not utilized.

The effective income tax rate on income before income taxes differed from the
statutory federal income tax rate for the following reasons:

                                                                            Fiscal Year Ended
                                                   ------------------------------------------------------------------
                                                   February 24, 2001        February 26, 2000       February 27, 1999
                                                   -----------------        -----------------       -----------------

Federal income tax using statutory rate                        35.0%                     35.0%                   35.0%
State taxes, net of federal benefit                             2.0                       2.5                     3.0
Equity in earnings of unconsolidated
   affiliates                                                 ---                          .4                   ---
Nondeductible expenses                                          2.9                       1.7                     1.6
Goodwill                                                        3.4                       1.1                     1.1
Tax credits                                                    (2.5)                     (1.0)                    (.8)
Other                                                          (1.8)                       .3                     1.1  
                                                   -----------------        ------------------      ------------------
                                                               39.0%                     40.0%                   41.0%
                                                   =================        ==================      ==================




   71

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE K - TRANSACTIONS WITH RELATED PARTIES

The Company has a 10% interest in Uthingo Management Proprietary Limited
("Uthingo"), which is accounted for using the equity method. Uthingo is a
corporate joint venture that holds the license to operate the South African
National Lottery. Sales of products and services to Uthingo were $28,236,000 and
$41,845,000 in fiscal 2001 and 2000, respectively. At February 24, 2001 and
February 26, 2000 the Company had trade receivables of $6,355,000 and
$12,092,000 and loans receivable of $4,791,000 and $9,151,000 from Uthingo.

Prior to February 24, 2001, the Company had a 50% interest in each of four joint
ventures with Full House Resorts, Inc, ("Full House"). The joint ventures with
Full House are engaged in the financing and development of Native American and
other casino gaming ventures. At February 24, 2001 and February 26, 2000, the
Company had a promissory note receivable ("Note") from Full House of $3,000,000.
The Note bears interest at the prime rate due monthly. The principal balance on
the Note was due on January 25, 2001. On March 30, 2001, after the close of its
2001 fiscal year, the Company sold its interest in three of the four joint
ventures with Full House for cash consideration of $1,800,000 which approximated
carrying value. In connection with this transaction, the Company amended the
terms of the Note to extend the maturity date until January 25, 2002.

The Company paid rent of $3,510,000, $3,510,000 and $2,612,000 to West Greenwich
Technology Associates Limited Partnership (which is 50% owned by the Company and
50% owned by an unrelated third party), in fiscal 2001, 2000 and 1999,
respectively, for the Company's West Greenwich, Rhode Island corporate
headquarters and research and development and main production facility. Rent
payments will escalate to $3,531,000 beginning March 1, 2004.

Prior to February 2001, the Company held a 40% interest in Lottery Technology
Enterprises ("LTE"). The Company's interest is now 1%. LTE is a joint venture
comprised of the Company and District Enterprise for Lottery Technology
Applications of Washington, D.C., that holds a contract with the District of
Columbia Lottery and Charitable Games Control Board. Sales of products and
services to LTE were $2,125,000, $3,598,000 and $4,155,000 in fiscal 2001, 2000
and 1999, respectively. At February 24, 2001 and February 26, 2000, the Company
had receivables of $2,893,000 and $682,000, respectively, from LTE.



   72

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE L - LEASES

The Company leases certain facilities, equipment and vehicles under
noncancelable operating leases that expire at various dates through fiscal 2014.
Certain of these leases have escalation clauses and renewal options ranging from
one to 10 years. The Company is required to pay all maintenance, taxes and
insurance relating to its leased assets.

Future minimum lease payments, by year and in the aggregate, under noncancelable
operating leases with initial terms greater than one year, consist of the
following at February 24, 2001:


                           Fiscal Year                                            (Dollars in thousands)
                           -----------
                           2002                                                     $           31,614
                           2003                                                                 28,699
                           2004                                                                 15,445
                           2005                                                                 12,504
                           2006                                                                 11,245
                           Thereafter                                                           34,959
                                                                                    ------------------
                           Total minimum lease payments                             $          134,466
                                                                                    ==================


Rental expense for operating leases was $31,632,000, $31,412,000 and $28,358,000
for fiscal 2001, 2000 and 1999, respectively.



NOTE M - EMPLOYEE BENEFITS

The Company has two defined contribution 401(k) retirement savings and profit
sharing plans (the "Plans") covering substantially all employees in the United
States and the Commonwealth of Puerto Rico. Under these Plans, an eligible
employee may elect to defer receipt of a portion of base pay each year. The
Company contributes this amount on the employee's behalf to the Plans and also
makes a matching contribution. For periods prior to January 1, 2001, the
employer matching contribution was equal to 50% of the amount that the employee
elected to defer, up to a maximum matching contribution of 2 1/2% of the
employee's base pay. Effective January 1, 2001, and subject to Board of Director
approval, the Company increased the matching contribution for the U.S. Plan to
100% on the first 3% and 50% on the next 2% that the employee elects to defer,
up to a maximum matching contribution of 4% of the employee's base pay.
Participants are 100% vested at all times in the amounts they defer and the
Company's matching contributions on these amounts. The Company, at its
discretion, may contribute additional amounts to the Plans on behalf of
employees based upon its profits for a given fiscal year. Employees become 100%
vested in these profit sharing contributions one year from their hire date.
Benefits under the Plans generally will be paid to participants upon retirement
or in certain other limited circumstances. In fiscal 2001, 2000, and 1999, the
Company recorded expense under these Plans of $6,559,000, $5,840,000, and
$7,070,000, respectively.

The Company has a defined contribution Supplemental Retirement Plan that
provides additional retirement benefits to certain key employees. The Company,
at its discretion, may contribute additional amounts to this plan on behalf of
such key employees equal to the percentage of profit sharing contributions
contributed for the calendar year multiplied by the key employees' compensation
(as defined) for such year. In fiscal 2001, 2000, and 1999 the Company recorded
expense under this plan of $266,000, $275,000, and $415,000, respectively.



   73

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE N - BUSINESS SEGMENT AND GEOGRAPHIC DATA

The Company presently has one reportable segment, the Lottery segment, which
provides online, high speed, highly secured transaction processing systems to
the worldwide lottery industry. The accounting policies of the Lottery segment
are the same as those described in the summary of significant accounting
policies. Executive management of the Company evaluates segment performance
based on net operating profit after income taxes. The "All Other" category (as
reported below) is comprised of the Company's Transactive and IGI/Europrint
subsidiaries (See Note P for additional information regarding the Company's
Transactive subsidiary). The composition of the "All Other" category for all
periods presented was changed during fiscal 2001 to reflect a value assessment
of the Company's business whereby the Company's Dreamport business unit was
consolidated into the Lottery segment.

The Company's business segment data is summarized below:

                                                                          Lottery             All Other              Consolidated
                                                                      --------------          ---------              ------------
                                                                                       (Dollars in thousands)
   February 24, 2001
   -----------------
    OPERATING DATA:
      Revenues from external sources                                  $      889,522        $      47,021           $      936,543
      Net operating profit after income taxes                                 85,708                3,570                   89,278
      Interest income                                                          5,548                   48                    5,596
      Equity in earnings of unconsolidated affiliates                          3,167                  ---                    3,167
      Depreciation                                                           155,329                  933                  156,262
      Intangibles amortization                                                11,968                  ---                   11,968
      Goodwill amortization                                                    5,006                1,159                    6,165
    BALANCE SHEET DATA (AT END OF PERIOD):
      Segment assets                                                         896,010               42,150                  938,160
    CASH FLOW DATA:
      Capital expenditures                                                   136,804                   87                  136,891

   February 26, 2000
   -----------------
    OPERATING DATA:
      Revenues from external sources                                  $      956,054        $      54,744           $    1,010,798
      Net operating profit after income taxes                                113,651                1,528                  115,179
      Interest income                                                          3,466                   43                    3,509
      Equity in earnings of unconsolidated affiliates                          2,843                  ---                    2,843
      Depreciation                                                           167,446                  838                  168,284
      Intangibles amortization                                                10,839                  ---                   10,839
      Goodwill amortization                                                    5,094                1,159                    6,253
    BALANCE SHEET DATA (AT END OF PERIOD):
      Segment assets                                                         852,766               38,257                  891,023
    CASH FLOW DATA:
      Capital expenditures                                                   128,392                  226                  128,618


   74

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE N - BUSINESS SEGMENT AND GEOGRAPHIC DATA-(CONTINUED)

                                                                          Lottery             All Other              Consolidated
                                                                      --------------          ---------              ------------
                                                                                       (Dollars in thousands)
   February 27, 1999
   -----------------
    OPERATING DATA:
      Revenues from external sources                                  $      917,284          $    55,639           $      972,923
      Net operating profit after income taxes                                112,694                  608                  113,302
      Interest income                                                          3,968                  111                    4,079
      Equity in earnings of unconsolidated affiliates                          7,113                  ---                    7,113
      Depreciation                                                           184,003                  745                  184,748
      Intangibles amortization                                                 8,719                  ---                    8,719
      Goodwill amortization                                                    5,082                  772                    5,854
    BALANCE SHEET DATA (AT END OF PERIOD):
      Segment assets                                                         834,988               39,227                  874,215
    CASH FLOW DATA:
      Capital expenditures                                                   120,616                  582                  121,198

The following is a reconciliation of net operating profit after income taxes to
net income as reported on the Consolidated Income Statements:

                                                                               Fiscal Year Ended
                                                    ------------------------------------------------------------------
                                                    February 24, 2001        February 26, 2000       February 27, 1999
                                                    -----------------        -----------------       -----------------
                                                                          (Dollars in thousands)

Net operating profit after income taxes             $             89,278    $             115,179    $        113,302
   Reconciling items, net of tax:
   Interest expense                                              (16,571)                 (17,419)            (16,169)
   Special (charges) credit                                      (25,785)                     662              (8,850)
   Other                                                          (3,774)                  (4,837)                780
                                                    --------------------    ---------------------    ----------------
      Net income                                    $             43,148    $              93,585    $         89,063 
                                                    ====================    =====================    ================


The Company's geographic data is summarized below:

                                                                               Fiscal Year Ended
                                                    ------------------------------------------------------------------
                                                    February 24, 2001       February 26, 2000        February 27, 1999
                                                    -----------------       -----------------        -----------------
                                                                          (Dollars in thousands)
Revenues from external sources:
      United States                                 $            522,132    $             530,193    $         570,548
      Brazil                                                     127,015                  117,639              118,611
      Other foreign                                              287,396                  362,966              283,764
                                                    --------------------    ---------------------    -----------------
                                                    $            936,543    $           1,010,798    $         972,923
                                                    ====================    =====================    =================


Revenues are attributed to countries based on the location of the customer.


   75

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE N - BUSINESS SEGMENT AND GEOGRAPHIC DATA-(CONTINUED)


                                                                             Fiscal Year Ended
                                                    ------------------------------------------------------------------
                                                    February 24, 2001       February 26, 2000        February 27, 1999
                                                    -----------------       -----------------        -----------------
                                                                          (Dollars in thousands)
Systems, equipment and other assets relating to contracts:
      United States                                 $           185,717     $             216,498    $         260,585
      Brazil                                                     68,309                    58,104               63,015
      Other foreign                                             107,308                   101,316               73,961
                                                    -------------------     ---------------------    -----------------
                                                    $           361,334     $             375,918    $         397,561
                                                    ===================     =====================    =================


For fiscal 2001, 2000 and 1999, the aggregate revenues from Caixa Economica
Federal in Brazil represented 12.1%, 10.7% and 11.2% of the Company's
consolidated revenues, respectively. For fiscal 1999, the aggregate revenues
from the Company's lottery operations in the state of Texas represented 10.6% of
the Company's consolidated revenues. No other customer accounted for more than
10% of the consolidated revenues in such years.



   76

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE O - FINANCIAL INSTRUMENTS

Cash and cash equivalents

Cash equivalents are stated at cost that approximates fair value.

Debt

The carrying amounts of the Company's borrowings under the Credit Facility at
February 26, 2000 approximate fair value due primarily to its variable interest
rate characteristics and its short-term tenure. At February 24, 2001, the
Company had no outstanding borrowings under the Credit Facility. At February 24,
2001 and February 26, 2000, the estimated fair value of the Senior Notes as
determined by an independent investment banker approximated $305,732,000 and
$293,942,000, respectively.

Foreign Currency Exchange Contracts

At February 24, 2001, the Company had contracts for the sale of foreign currency
of $94,820,000 (primarily Spanish pesetas, Australian dollars, and pounds
sterling) and the purchase of foreign currency of $65,501,000 (primarily pounds
sterling), compared to contracts for the sale of foreign currency of $87,749,000
(primarily Spanish pesetas, South African rand, and Irish punts) and the
purchase of foreign currency of $66,675,000 (primarily pounds sterling) at
February 26, 2000. The fair values of the Company's foreign currency exchange
contracts are estimated based on quoted market prices of comparable contracts,
adjusted through interpolation when necessary for maturity differences. In the
aggregate, the carrying value of these contracts approximated fair value at
February 24, 2001 and February 26, 2000.

The Company had minimal exposure to loss from nonperformance by the
counterparties to its forward exchange contract agreements at the end of fiscal
2001 and does not anticipate nonperformance by counterparties in the periodic
settlements of amounts due. The Company currently minimizes this potential for
risk by entering into forward exchange contracts exclusively with major,
financially sound counterparties, and by limiting exposure with any one
financial institution.

Interest Rate Swaps

The Company uses various interest rate hedging instruments to reduce the risk
associated with future interest rate fluctuations. In February 2000, the Company
entered into two interest rate swaps with an aggregate notional amount of
$150,000,000 that provided interest rate protection over the period February 25,
2000 to May 15, 2007. The swaps were designated as fair value hedges and
effectively entitled the Company to exchange fixed rate payments for variable
rate payments. Accordingly, the fair value of the swaps was recorded as an asset
and the carrying value of the underlying debt was adjusted by an equal amount in
accordance with FAS 133. On February 1, 2001, the Company sold the two interest
rate swaps for $12,970,000. Under FAS 133, the carrying value of debt has been
increased by $12,970,000, the fair value of the swaps prior to termination. This
amount will be amortized as a reduction of interest expense over the period
February 2001 through May 2007 on an effective yield basis.



   77

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE P - SPECIAL CHARGES

In the fourth quarter of fiscal 1998, the Company recorded a $99,382,000 special
charge which consisted principally of costs to exit the electronic benefit
transfer (EBT) business conducted by the Company's Transactive subsidiary
("Transactive"), costs associated with a worldwide workforce reduction and
contractual obligations in connection with the departures of the Company's
former Chairman and Vice-Chairman from the Company.

In February 1998, the Company entered into an asset purchase agreement with
Citicorp Services, Inc. ("Citicorp"), to sell EBT contracts and certain related
assets held by Transactive. In July 1998, the U.S. Department of Justice
commenced a legal action seeking to enjoin the consummation of the transaction,
on anti-trust grounds, and in January 1999 Citicorp terminated the agreement
pursuant to a clause in the contract that permitted termination by either party
if the closing did not occur within a timeframe that has expired. As a result,
the Company recorded an additional special charge of $15,000,000 ($8,850,000
after-tax, or $.22 per diluted share) in the fourth quarter of fiscal 1999 in
order to write down the assets held for sale in connection with this transaction
to their net realizable value. Those assets consisted primarily of EBT contract
assets.

In fiscal 2001, the Company recorded special charges of $42,270,000 ($25,785,000
after-tax, or $0.74 per diluted share) in connection with certain contractual
obligations and a value assessment of the Company's business operations. The
major components of the special charges consisted of $13,958,000 for a workforce
reduction that eliminated approximately 255 Company positions worldwide,
$11,518,000 for contractual obligations in connection with the departures in
July 2000 of the Company's former Chairman and Chief Executive Officer and
former President and Chief Operating Officer, $8,536,000 for costs associated
with the exit of certain business strategies and product lines and $8,258,000
for the termination of consulting agreements and facility exit costs, net of
gains on the disposition of Company aircraft.


A summary of the special charge activity is as follows:
                                                                                    Exit of
                                                                                Certain Business
                                    Disposition      Worldwide     Executive       Strategies
                                       of EBT        Workforce    Contractual      and Product
                                      Business       Reduction    Obligations        Lines          Other         Total
                                    -----------     ----------    -----------   ----------------   --------     ----------
                                                                      (Dollars in thousands)

Balance at February 28, 1998        $     5,929     $   12,280     $     8,513     $      ---     $    6,909    $   33,631
Change in estimate                       13,601         (2,948)            (20)           ---          4,367        15,000
Cash expenditures                        (3,662)        (7,868)         (8,493)           ---         (6,082)      (26,105)
Noncash charges                         (14,241)           ---             ---            ---         (2,227)      (16,468)
                                    -----------     ----------     -----------     ----------     ----------    ----------
Balance at February 27, 1999              1,627          1,464             ---            ---          2,967         6,058
                                    -----------    -----------     -----------     ----------     ----------    ----------

Change in estimate                         (930)           (37)            ---            ---           (137)       (1,104)
Cash expenditures                          (697)        (1,427)            ---            ---         (2,830)       (4,954)
                                    -----------     ----------     -----------     ----------     ----------    ----------
Balance at February 26, 2000                ---            ---             ---            ---            ---           ---
                                    -----------     ----------     -----------     ----------     ----------    ----------

Special charges                             ---         13,958          11,518          8,536          8,258        42,270
Cash expenditures                           ---         (6,032)         (9,965)        (4,140)        (3,289)      (23,426)
Noncash charges                             ---            ---             ---         (4,396)        (4,017)       (8,413)
                                    -----------     ----------     -----------     ----------     ----------    ----------
Balance at February 24, 2001        $       ---     $    7,926     $     1,553     $      ---     $      952    $   10,431
                                    ===========     ==========     ===========     ==========     ==========    ==========



   78

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE Q - QUARTERLY RESULTS OF OPERATIONS - (UNAUDITED)


The following is a summary of the unaudited quarterly results of operations for
fiscal 2001 and 2000:

                                                     First             Second             Third            Fourth
                                                    Quarter            Quarter           Quarter           Quarter
                                                 -------------     --------------     -------------     -------------
                                                          (Dollars in thousands, except per share amounts)

Fiscal year ended February 24, 2001:
       Service revenues                           $  222,631         $  204,209        $  213,827        $   215,808
       Sales of products                              19,367             23,399             7,204             30,098
       Gross profit                                   83,424             55,371            68,421             90,388
       Net income (loss)                              20,229            (21,266)           18,287             25,898

       Basic earnings (loss) per share            $      .58         $     (.61)       $      .53        $       .76
       Diluted earnings (loss) per share          $      .58         $     (.61)       $      .53        $       .75

Fiscal year ended February 26, 2000:
       Service revenues                           $  211,158         $  209,843        $  221,093        $   218,325
       Sales of products                              27,502             45,546            28,473             48,858
       Gross profit                                   80,630             82,664            90,065            100,177
       Net income                                     18,935             21,754            22,779             30,117

       Basic earnings per share                   $      .50         $      .58        $      .65        $       .87
       Diluted earnings per share                 $      .50         $      .58        $      .65        $       .87

The Company recorded special charges of $40,018,000 and $2,252,000 in the second
and fourth quarters of fiscal 2001, respectively (See Note P).

Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly basic earnings per share in
fiscal 2001 and the sum of the quarterly basic and diluted earnings per share in
fiscal 2000 do not equal the total computed for the year.

Certain reclassifications have been made to the prior years' financial
statements to conform to the current year presentation. Goodwill amortization,
that was included in cost of services and selling, general and administrative
expense in prior periods has been presented as a single line item in the
Consolidated Income Statements.



NOTE R - SUBSEQUENT EVENT

On March 19, 2001, the Company repurchased 5,000,000 shares of its Common Stock
from its largest shareholder for $130,000,000.


   79

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

Not applicable.



   80


                                    PART III

INCORPORATED BY REFERENCE

The information called for by Item 10--"Directors and Executive Officers of the
Registrant" (other than the information concerning executive officers set forth
after Item 4 herein), Item 11--"Executive Compensation," Item 12--"Security
Ownership of Certain Beneficial Owners and Management" and Item 13--"Certain
Relationships and Related Transactions" of Form 10-K is incorporated herein by
reference Holdings' definitive proxy statement for its Annual Meeting of
Shareholders scheduled to be held in July 2001, which definitive proxy statement
is expected to be filed with the Commission not later than 120 days after the
end of the fiscal year to which this report relates.


   81


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K

(a)  Financial Statement Schedules and Exhibits:
                                                                        Page(s)
Report of Ernst & Young LLP, Independent Auditors


The following consolidated financial statements of GTECH Holdings Corporation
and subsidiaries are included in Item 8:

Consolidated Balance Sheets at
      February 24, 2001 and February 26, 2000

Consolidated Income Statements 
      Fiscal year ended February 24, 2001, 
      Fiscal year ended February 26, 2000, and 
      Fiscal year ended February 27, 1999

Consolidated Statements of Shareholders' Equity-- 
      Fiscal year ended February 24,2001, 
      Fiscal year ended February 26, 2000, and 
      Fiscal year ended February 27, 1999

Consolidated Statements of Cash Flows--
      Fiscal year ended February 24, 2001,
      Fiscal year ended February 26, 2000, and 
      Fiscal year ended February 27, 1999



Notes to Consolidated Financial Statements

SCHEDULES OMITTED:
All schedules are omitted as they are not applicable or the information is shown
in the financial statements or notes thereto.


   82


(3) EXHIBITS:
    -------- 


3.1     Restated Certificate of Incorporation of Holdings, as amended
        (incorporated by reference to Exhibit 3.1 to the Form S-l of Holdings
        and GTECH Corporation ("GTECH"), Registration No. 33-31867 (the "1990
        S-1").

3.2     Certificate of Amendment to the Certificate of Incorporation of Holdings
        (incorporated by reference to Exhibit 3.2 to the Form S-1 of Holdings,
        Registration No. 33-48264 (the "July 1992 S-1")).

3.3     Amended and Restated By-Laws of Holdings (incorporated by reference to
        Exhibit 3 of Holdings' 10-Q for the quarterly period ended August 26,
        2000).

4.1     Amended and Restated Credit Agreement, dated as of June 18, 1997, among
        GTECH, certain lenders and Bank of Montreal, Banque Paribas, Fleet
        National Bank, The Bank of Nova Scotia and BankBoston, N.A., as
        Co-Agents; The Bank of New York, as Documentation Agent, and
        NationsBank, as Administrative Agent (incorporated by reference to
        Exhibit 4.1 of Holdings' 10-Q for the quarterly period ended May 31,
        1997).

4.2     Amendment No. 1 to Amended and Restated Credit Agreement, dated as of
        February 26, 1999, among GTECH, certain lenders, and Bank of Montreal,
        Banque Paribas, Fleet National Bank, the Bank of Nova Scotia and Bank
        Boston, NA, as Co-Agents; The Bank of New York, as Documentation Agent
        and Nations Bank, as Administrative Agent (incorporated by reference to
        Exhibit 4.2 of Holdings' 1999 10-K).

4.3     Note and Guarantee Agreement, dated as of May 15, 1997, among GTECH
        Holdings and certain financial institutions (incorporated by reference
        to Exhibit 4.2 of Holdings' 10-Q for the quarterly period ended May 31,
        1997).

4.4     Amendment No. 1 to Note and Guarantee Agreement dated as of May 15,
        1997, dated as of February 22, 1999 (incorporated by reference to
        Exhibit 4.4 of Holdings' 1999 10-K).

4.5     Specimen Form of certificate of Common Stock (incorporated by reference
        to Exhibit 4.18 of the December 1992 S-1).

+10.1   Agreement dated March 5, 2001 between Holdings and Howard S. Cohen.*

+10.2   Amendment to Agreement dated March 28, 2001 between Holdings and Howard
        S. Cohen.*



   83

10.3    Agreement dated August 9, 2000 between Holdings and W. Bruce Turner
        (incorporated by reference to Exhibit 10.3 of Holdings' 10-Q for the
        quarterly period ended August 26, 2000).*

10.4    Amended and Restated Employment Agreement dated September 19, 1997
        between GTECH, Holdings and William Y. O'Connor (incorporated by
        reference to Exhibit 10.1 of Holdings' 10-Q for the quarterly period
        ended August 30, 1997).*

10.5    First Amendment to Employment Agreement dated as of April 6, 1998 by and
        among GTECH, Holdings and William Y. O'Connor. (incorporated by
        reference to Exhibit 10.11 of Holdings' 1998 10-K).*

10.6    Severance Agreement and Release dated as of July 5, 2000 by and among
        GTECH, Holdings and William Y. O'Connor (incorporated by reference to
        Exhibit 10.1 of Holdings' 10-Q for the quarterly period ended August 26,
        2000).*

10.7    Agreement dated January 15, 1999 by and between Steven P. Nowick and
        Holdings. (incorporated by reference to Exhibit 10.4 of Holdings' 1999
        10-K).*

10.8    Resignation and Acceptance dated July 5, 2000 by and between Steven P.
        Nowick and Holdings (incorporated by reference to Exhibit 10.2 of
        Holdings' 10-Q for the quarterly period ended August 26, 2000).*

10.9    Form of Agreement, relating to a potential change of control involving
        Holdings, entered into between Holdings and, respectively, certain
        members of senior management (incorporated by reference to Exhibit 10.5
        of Holdings' 2000 10-K).*

+10.10  List of signatories to Agreement relating to potential change of control
        involving Holdings and certain members of senior management, with the
        respective dates of such Agreements.*

10.11   GTECH Corporation Executive Perquisites Program (incorporated by
        reference to Exhibit 10.6 of Holdings' 2000 10-K).*

+10.12  List of participants in GTECH Corporation Executive Perquisites
        Program.*

10.13   Form of Executive Separation Agreement (incorporated by reference to
        Exhibit 10.18 of Holdings' 1996 10-K).*

+10.14  Schedule of Recipients of Executive Separation Agreement.

10.15   Supplemental Retirement Plan effective January 1, 1992 (incorporated by
        reference to Exhibit 10.8 of Holdings 2000 10-K).*

+10.16  List of Participants in Supplemental Retirement Plan.*


   84

10.17   Contract for the Texas Lottery Operator for the State of Texas between
        GTECH and the Texas Comptroller of Public Accounts--Lottery Division,
        dated March 7, 1992 (available through the Public Reference Branch of
        the Securities and Exchange Commission, Washington, D.C.).

10.18   Amendment to the Contract for the Texas Lottery Operator for the State
        of Texas between GTECH and the Texas Comptroller of Public
        Accounts--Lottery Division, dated June 1, 1994 (incorporated by
        reference to Exhibit 10 of Holdings' 10-Q for the quarterly period ended
        May 25, 1996).

10.19   Second Amendment to the Contract for the Texas Lottery Operator for the
        State of Texas between GTECH and the Texas Comptroller of Public
        Accounts--Lottery Division, dated May 28, 1996 (incorporated by
        reference to Exhibit 10.1 to the Form S-3 of Holdings, Registration No.
        333-3602).

10.20   Agreement between Caixa Economica Federale and RACIMEC Informatica
        Brasileira S.A. (predecessor to GTECH Brasil Holdings, S.A.) respecting
        the provision of goods and services for the Brazil National Lottery
        (incorporated by reference to Exhibit 10.12 of Holdings' 2000 10-K).

+10.21  Amendment to Agreement between Caixa Economica Federale and RACIMEC
        Informatica Brasileira S.A. (predecessor to GTECH Brasil Holdings,
        S.A.).

10.22   Amended and Restated Agreement of Limited Partnership by and among
        GTECH, GP Technology Associates, L.P. and GP Technology, Inc. dated
        August 26, 1993; Certificate of Limited Partnership of West Greenwich
        Technology Associates, L.P. dated August 26, 1993; Amended and Restated
        Indenture of Lease between GTECH and West Greenwich Technology
        Associates, L.P. dated August 26, 1993 (available through the Public
        Reference Branch of the Securities and Exchange Commission, Washington,
        D.C.).

10.23   Business Agreement dated December 28, 1990 between Digital Equipment
        Corporation and GTECH; Work Statement Number NED91188 dated March 11,
        1991 to GTECH from Digital Equipment Corporation; First Addendum dated
        March 19, 1991 to Digital Work Statement Number NED91188 dated March 11,
        1991 to GTECH from Digital Equipment Corporation (incorporated by
        reference to Exhibit 10.57 of the July 1992 S-1).

10.24   Maintenance Agreement Number 117A dated December 1, 1989, between GTECH
        and Concurrent Computer Corporation (incorporated by reference to
        Exhibit 10.58 of the July 1992 S-1).

10.25   1994 Stock Option Plan, as amended and restated (incorporated by
        reference to Exhibit 10.1 of Holdings' 10-Q for the quarterly period
        ended May 31, 1997).*


   85

10.26   1996 Non-Employee Directors' Stock Option Plan (incorporated by
        reference to Exhibit 10.2 of Holdings' 10-Q for the quarterly period
        ended May 31, 1997).*

+10.27  First Amendment to the 1996 Non-Employee Directors' Stock Option Plan.*

10.28   1997 Stock Option Plan (incorporated herein by reference to the Appendix
        of Holdings' 1997 Notice of Annual Meeting and Proxy Statement).*

10.29   Holdings' 1998 Non-Employee Directors' Stock Election Plan (incorporated
        by reference to Exhibit 4.2 to the Form S-8 of Holdings, Registration
        Number 333-5781).

10.30   Income Deferral Plan - 1998 (incorporated by reference to Exhibit 10 of
        the Holdings' 10-Q for the quarterly period ended November 28, 1998).*

10.31   1999 Non-Employee Directors' Stock Option Plan (incorporated by
        reference to the Appendix of Holdings' 1999 Notice of Annual Meeting and
        Proxy Statement).*

+10.32  First Amendment to the 1999 Non-Employee Directors' Stock Option Plan.*

10.33   Trust Agreement, dated December 18, 1998, by and between Holdings and
        The Bank of New York, as Trustee, respecting the Income Deferral Plan -
        1998 (incorporated by reference to Exhibit 10.1 of the Holdings' 10-Q
        for the quarterly period ended November 28, 1998).*

10.34   Holdings' 2000 Restricted Stock Plan and Form of Restricted Stock
        Agreement (incorporated by reference to Exhibit 10.4 of Holdings' 10-Q
        for the quarterly period ended August 26, 2000).*

10.35   Holdings' 2000 Omnibus Stock Option and Long-Term Incentive Plan
        (incorporated by reference to Holdings' Proxy Statement filed on
        September 22, 2000).*

+21.1   Subsidiaries of the Company.

+23.1   Consent of Ernst & Young, LLP.


---------------------------
+    Filed herewith.

*    Indicates a management contract or compensatory plan or arrangement 
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.

Certain instruments defining the rights of holders of long-term debt have not
been filed pursuant to item 601(b)(4)(iii)(A) of Regulation SK. Copies of such
instruments will be furnished to the Commission upon request.


   86

(b)  Reports on Form 8-K:

The Company did not file any reports on Form 8-K during the last quarter of the
fiscal year covered by this report.



   87


                                   SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in West Greenwich, Rhode Island, on
April 23, 2001.

             GTECH HOLDINGS CORPORATION


             By:   /s/ Howard S. Cohen
                  -----------------------------------------------
                     Howard S. Cohen, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

SIGNATURE                                                                  TITLE                                          DATE

/s/ Howard S. Cohen                        Chief Executive Officer (principal executive officer) and Director        April 23, 2001
------------------------------------
Howard S. Cohen


/s/ Jaymin B. Patel                        Senior Vice President & Chief Financial Officer (principal financial      April 23, 2001
------------------------------------       officer)
Jaymin B. Patel                     



/s/ Robert J. Plourde                      Vice President and Corporate Controller (principal accounting             April 23, 2001
------------------------------------       officer)
Robert J. Plourde


   88


SIGNATURE                                                               TITLE                                          DATE


/s/ Willam Bruce Turner
-------------------------------------
Willam Bruce Turner                                       Director, Chairman of the Board                         April 23, 2001



/s/ Robert M. Dewey, Jr.                                              Director                                    April 23, 2001
------------------------------------
Robert M. Dewey, Jr.


/s/ Burnett W. Donoho                                                 Director                                    April 23, 2001
------------------------------------
Burnett W. Donoho


/s/ Philip R. Lochner, Jr.                                            Director                                    April 23, 2001
------------------------------------
Philip R. Lochner, Jr.


/s/ Moore                                                             Director                                    April 23, 2001
------------------------------------
The Rt. Hon. Lord Moore
 of Lower Marsh, P.C.

/s/ Emmett Paige
-------------------------------------
Lt. Gen. (Ret.) Emmett Paige, Jr.                                     Director                                    April 23, 2001


/s/ Anthony Ruys                                                      Director                                    April 23, 2001
------------------------------------
Anthony Ruys





EX-10.1
2
y48042ex10-1.txt
AGREEMENT


   1
                                                                    EXHIBIT 10.1
                                    AGREEMENT

      THIS AGREEMENT, dated as of March 5, 2001, by and between GTECH HOLDINGS
CORPORATION and GTECH CORPORATION, each a Delaware corporation (collectively,
the "Company"), and HOWARD S. COHEN ("Executive").

      WHEREAS, the Company desires to retain the services of
Executive on the terms and conditions provided in this Agreement;
and

      WHEREAS, Executive, understanding and accepting the terms and conditions
of employment set forth herein, desires to render such services on such terms
and conditions.

      NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto hereby covenant and agree as
follows:

      1. DEFINITIONS. Capitalized terms used in this Agreement and not otherwise
defined herein shall have the following meanings:

      "ACT" means the Securities Exchange Act of 1934, as amended to date.

      "AFFILIATE" shall mean any joint venture or other entity in which the
Company or any of its subsidiaries has an equity interest of at least 20%.

      "AVERAGE CASH COMPENSATION" means the average Base Salary and Performance
Bonus paid or payable to Executive annually (including in Base Salary for this
purpose any elective salary reductions made by the Executive and contributed by
the Company on Executive's behalf to the Company's retirement plans) for the
most recent full years of employment up to a maximum of three years.

      "BOARD" means the Board of Directors of GTECH Holdings Corporation.

      "CAUSE" means any of the following:

            (i) any willful failure by Executive to substantially perform his
      duties;

            (ii) Executive's engaging in serious misconduct which is injurious
      to the Company or breaching any of the Company's ethics and compliance
      policies (unless, in its sole discretion, the Board determines that the
      breach is immaterial, inadvertent and subject to cure under Section 8(b)
      hereof without harm to the Company) as from time to time implemented by
      the Company;

            (iii) any material breach by Executive of the terms of Sections
      4(c), 10, 11 or 14(a) hereof;

            (iv) Executive's having been convicted of, or pleading nolo
      contendere to, a crime that constitutes a felony or is a gaming or
      gambling-related offense; or
   2
            (v) Executive's abuse of illegal drugs or other controlled
      substances or his habitual intoxication.

      "CHANGE IN CONTROL" means the happening of any of the following:

            (i) any "person," including a "group" (as such terms are used in
      Sections 13(d) and 14(d) of the Act, but excluding the Company, any of its
      Affiliates, or any employee benefit plan of the Company or any of its
      Affiliates) is or becomes the "beneficial owner" (as defined in Rule
      13(d)(3) under the Act), directly or indirectly, of securities of the
      Company representing 30% or more of the combined voting power of the
      Company's then outstanding securities;

            (ii) the stockholders of the Company shall approve a definitive
      agreement (1) for the merger or other business combination of the Company
      with or into another corporation if (A) a majority of the directors of the
      surviving corporation were not directors of the Company immediately prior
      to the effective date of such merger or (B) the stockholders of the
      Company immediately prior to the effective date of such merger own less
      than 50% of the combined voting power in the then outstanding securities
      in such surviving corporation or (2) for the sale or other disposition of
      all or substantially all of the assets of the Company; or

            (iii) the purchase of 30% or more of the Stock pursuant to any
      tender or exchange offer made by any "person," including a "group" (as
      such terms are used in Sections 13(d) and 14(d) of the Act), other than
      the Company, any of its Affiliates, or any employee benefit plan of the
      Company or any of its Affiliates.

      "CHANGE OF CONTROL DATE" means the date on which a Change in Control
occurs, provided however that if a Change in Control occurs and if Executive's
employment with the Company is terminated prior to the date on which the Change
in Control occurs, and if it is reasonably demonstrated by Executive that such
termination of employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change in Control or (ii) otherwise
arose in connection with or in anticipation of a Change in Control, then the
"Change of Control Date" shall mean the date immediately prior to the date of
such termination.

      "CODE" means the Internal Revenue Code of 1986, as amended.

      "COMMITTEE" means the Compensation Committee of the Board.

      "COMMON STOCK" means the Common Stock, par value $.01 per share, of the
Company.

      "DISABILITY" means the inability (as determined by the Board in its sole
discretion after affording Executive a reasonable opportunity to present his
case) of Executive to render his agreed-upon, full-time services to the Company
due to physical and/or mental infirmity.

      "EFFECTIVE DATE" means March 12, 2001.



                                       2
   3
      "GOOD REASON" means any of the following events:

            (i) the Assignment to Executive of duties, responsibilities and/or
      reporting relationship that are materially inconsistent with those
      associated with Executive's position as stated in Sections 4(a) and 4(b)
      hereof, excluding any interim relieving of Executive's duties pursuant to
      Section 8(b);

            (ii) the Company's failure to pay Executive any amounts otherwise
      vested and due hereunder or under any plan or policy of the Company;

            (iii) a reduction in the title of Executive or in the authorities,
      duties or responsibilities of Executive;

            (iv) any material breach of this Agreement by the Company;

            (v) failure to extend this Agreement (for a minimum of one year on
      the same or better terms respecting annual compensation and benefits,
      excluding one-time awards of restricted stock or stock options) at least
      90 days prior to the end of the Term or the end of any extended term, as
      the case may be; or

            (vi) failure to appoint Executive to the Board within 30 days of the
      date hereof or removal or failure to reelect Executive as a director; or

            (vii) failure to obtain the shareholder approval contemplated by
      Section 6(c)(iii) by the completion of the next annual shareholder
      meeting.

      "PERFORMANCE BONUS" means the actual amount of a performance bonus awarded
by the Committee to Executive with respect to the relevant fiscal year in
accordance with Section 5(b) hereof, including the portion of the Performance
Bonus paid in stock equivalent (but excluding the portion of the stock award
representing a discount beyond the cash equivalent made in conjunction with the
payment of the Performance Bonus).

      "PRORATED PERFORMANCE BONUS" means the portion of the Performance Bonus,
if any, which becomes due after a termination of this Agreement under Sections
5(c) or 9(b) hereof. The Prorated Performance Bonus will be calculated as
follows: the Committee shall (a) determine the Performance Bonus to which
Executive would have been entitled, had Executive remained employed for the
entire fiscal year, in accordance with Section 5(b)(i) hereof; (b) divide that
amount by 52 to produce a Weekly Amount; and (c) multiply the Weekly Amount by
the number of weeks during the relevant fiscal year that Executive was employed
by the Company.

      "SENIOR EXECUTIVES" means the executives which sit on the Corporate
Leadership Council (i.e. senior vice presidents) of the Company.



                                       3
   4
      2.    EMPLOYMENT OF EXECUTIVE.

      The Company hereby agrees to employ Executive, and Executive agrees to be
employed by the Company, to render services to the Company and its subsidiaries,
affiliates and divisions for the period, at the rate of compensation and upon
the other terms and conditions set forth in this Agreement.

      3.    TERM.

      The term of Executive's engagement hereunder shall commence on Effective
Date, and shall continue for a term of three years (the "Term"). The Term is
subject to earlier termination as hereinafter provided in Section 8 hereof, and
the compensation, benefits, etc., if any, payable upon termination shall be as
set forth in Section 9 hereof.

      4.    POSITION AND DUTIES.

            (a) Position. During the Term, Executive shall be retained and shall
      serve as Chief Executive Officer of the Company. During the Term,
      Executive also agrees to serve, if elected, as a director and/or officer
      of any subsidiary or Affiliate of the Company.

            (b) Duties. During the Term, Executive shall have the authority and
      power to perform such duties consistent with his position as Chief
      Executive Officer as designated by the Board, and shall report only to the
      Board or any committees thereof at the request of the Board. Executive
      shall not be required without his consent to undertake responsibilities
      not commensurate with his position. Executive shall comply fully and
      promptly with the various policies, procedures and rules governing
      employees promulgated and/or as amended from time to time by the Company
      and any applicable subsidiary or Affiliate of the Company (including,
      without limitation, the Company's Ethical Conduct and Conflicts of
      Interest Policy and Government Affairs Policies and Procedures) and with
      any applicable disclosure and other requirements of any governmental
      authority and of any other entity with which the Company, its subsidiaries
      and Affiliates are doing or propose to do business. Except for illness,
      vacations, and holidays in accordance with then-current Company policy,
      and (subject to the approval of the Board) reasonable leaves of absence,
      Executive shall devote his full business time, attention, skill, undivided
      loyalty and best efforts to the faithful performance of his duties
      hereunder; provided, however, that Executive may (i) with the approval of
      the Board, serve on corporate, civic and charitable boards and committees,
      (ii) deliver lectures and fulfill speaking engagements, and (iii) manage
      personal investments, so long as such activities do not interfere with the
      performance of Executive's responsibilities.

            (c) Principal Place of Employment. Executive's principal place of
      employment shall be at the Company's principal offices (currently located
      in West Greenwich, Rhode Island) or at such other location as the Company
      hereafter reasonably may require. Executive agrees to reside within fifty
      (50) miles of the Company's principal offices. Within 120 days after the
      Effective Date of this Agreement, Executive 


                                       4
   5
      shall make his best efforts to move his family to his new residence as
      described in the preceding sentence, it being understood that such move
      must be accomplished not later than 180 days after the Effective Date.

            (d) Nomination as Director. Assuming the Term has not been
      terminated, the Board agrees to appoint Executive to the Board and it is
      contemplated that Executive will be nominated for election to the Board at
      the next Annual Meeting of the shareholders and will stand for reelection
      at each of the Company's subsequent Annual Meetings at which Executive's
      term as a director is scheduled to expire, and Executive agrees, subject
      to Section 8(d) hereof, to continue to serve as a director if elected.

      5.    COMPENSATION AND REIMBURSEMENT OF EXPENSES.

            (a) Base Salary. For all services rendered by Executive in all
      capacities with the Company, its subsidiaries and Affiliates during the
      Term, the Company shall pay or cause to be paid to Executive as
      compensation a salary at an annual rate of $525,000 (the "Base Salary"),
      payable in equal installments not less frequently than monthly.

            (b) Performance Bonus.

                  (i) With respect to each fiscal year of the Company during the
            Term commencing with fiscal year 2002 ending February 25, 2002,
            Executive shall be eligible to earn a Performance Bonus at the
            discretion of the Committee. The amount of the Performance Bonus, if
            any, for a given fiscal year shall be determined by the Committee in
            accordance with the performance metrics included in the GTECH
            Management Incentive Plan as approved annually by the Board in its
            sole discretion for all Senior Executives. Under the Plan,
            Executive's performance will be measured against an established set
            of targets for each fiscal year, and depending upon performance
            against those targets, Executive will be eligible to receive a bonus
            in the range of 0% to 200% of Base Salary. The annual target
            Performance Bonus will be 100% of Base Salary.

                  (ii) Any Performance Bonus awarded to Executive by the
            Committee shall be paid not later than 30 days following payment of
            bonus amounts to Senior Executives Bonus payments for GTECH are
            normally made in April/May of each year for the preceding fiscal
            year ending in February, and Executive shall receive his Performance
            Bonus not later than June 15 for such preceding fiscal year.
            Executive's Performance Bonus, if any, for any given fiscal year
            shall be paid by the Company in a mix of cash and discounted
            restricted stock, at the discretion of the Committee, which shall
            determine annually (a) the maximum amount of bonus allowed in
            discounted restricted stock, not to exceed 30% of the Performance
            Bonus (with the understanding that it will not exceed 20% for the
            fiscal year 2002), (b) the magnitude of the discount, and (c) the
            vesting terms under the Omnibus Stock Plan for GTECH, it being
            understood that the portion of the Performance Bonus paid in stock
            in lieu of the cash payment shall vest immediately, subject to
            transfer restrictions as established by the Committee that 


                                       5
   6
            apply generally to performance bonus stock awards for other Senior
            Executives, and the portion of any stock award representing a
            discount beyond the Performance Bonus equivalent shall cliff vest as
            established by the Committee (with the understanding that the
            vesting period will not exceed two years for fiscal year 2002).

                  (iii) Nothing contained in this Agreement constitutes a
            guarantee that the Committee will award Executive a Performance
            Bonus for any given fiscal year.

            (c) Change of Control.

                  (i) In the event Executive's employment is terminated by the
            Company for any reason other than Cause, or in the event Executive
            resigns for Good Reason, after the Change of Control Date, the
            Company will pay Executive, as liquidated damages, a lump sum cash
            payment in lieu of the severance payments provided under Section
            9(b) hereof, payable within ten (10) days of Executive's
            termination, equal to two and ninety-nine hundredths (2.99) times
            the sum of (A) Executive's current annual Base Salary in effect at
            the date of termination (including in base salary for this purpose
            any elective salary reductions made by the Executive and contributed
            by the Company on Executive's behalf to the Company's retirement
            plan, any non-qualified plan, or a plan meeting the requirements of
            Section 125 of the Code), plus (B) the total Performance Bonus paid
            or payable to the Executive from the Company for the most recent
            full fiscal year of the Company, plus (C) the maximum amount
            allowable under the Executive Perquisite Program during the most
            recent calendar year of the Company. In addition, Company shall pay
            Executive within 10 days after such termination (i) his Base Salary
            accrued through the date of such termination at the rate in effect
            immediately prior to such date; (ii) any accrued but unpaid
            Performance Bonus under Section 5(b) hereof for the prior fiscal
            year; (iii) any Prorated Performance Bonus up to the date of such
            termination calculated by reference to Executive's target
            Performance Bonus, as determined by the Committee for the current
            fiscal year; and (iv) any other amounts to which Executive is
            entitled under the terms of Sections 5 and 6 hereof up to the date
            of such termination. (If the date of such termination is within 12
            months of the Effective Date, the Performance Bonus will be the
            target Performance Bonus for fiscal year 2002 as set forth in
            Section 5(b)(i) hereof.) The payment of any Performance Bonus or
            Prorated Performance Bonus after such termination shall be made in
            cash, notwithstanding the provisions of Section 5(b)(ii) hereof.

                  (ii) In the event of a termination described in Section
            5(c)(i) above, Executive, together with Executive's dependents and
            beneficiaries, will become fully vested in and continue following
            Executive's termination to participate fully in, at no additional
            cost to Executive, all life insurance plans, accident and health
            plans and other welfare plans, maintained or sponsored by the
            Company immediately prior to the termination, at the same level and
            subject to terms at 


                                       6
   7
            least as favorable to Executive as in effect immediately prior to
            termination (or the full value thereof in cash) from the Company,
            until the third anniversary of termination. Executive will also
            become fully vested in the retirement plans, and all non-qualified
            plans, and within thirty (30) days of Executive's termination of
            employment, Company shall pay to Executive the sum of (i) all
            benefits accrued under the Non-Qualified Plans and (ii) an amount
            equal to 2.99 times the average benefit accrued and/or Company
            contributions made to the retirement plans and the non-qualified
            plans over the last three fiscal years.

                  (iii) Anything in this Agreement to the contrary
            notwithstanding and except as set forth below, in the event it shall
            be determined that any payment or distribution by the Company to or
            for the benefit of the Executive (whether paid or payable or
            distributed or distributable pursuant to the terms of this Agreement
            or otherwise (a "Payment") would be subject to the excise tax
            imposed by Section 4999 of the Code or any interest or penalties are
            incurred by the Executive with respect to such excise tax (such
            excise tax, together with any such interest and penalties, are
            hereinafter collectively referred to as the "Excise Tax"), then the
            Executive shall be entitled to receive an additional payment (a
            "Gross-Up Payment") in an amount such that after payment by the
            Executive of all taxes (including any interest or penalties imposed
            with respect to such taxes), including, without limitation, any
            income taxes (and any interest and penalties imposed with respect
            thereto) and Excise Tax imposed upon the Gross-Up Payment, the
            Executive retains an amount of the Gross-Up Payment equal to the
            Excise Tax imposed on the Payments.

                  (iv) All determinations required to be made under this Section
            5(c), including whether and when a Gross-Up Payment is required and
            the amount of such Gross-Up Payment and the assumptions to be
            utilized in arriving at such determination, shall be made by Ernst &
            Young LLP or such other nationally recognized certified public
            accounting firm as may be designated by the Executive (the
            "Accounting Firm") which shall provide detailed supporting
            calculations both to the Company and the Executive within 15
            business days of the receipt of notice from the Executive that there
            has been a Payment, or such earlier time as is requested by the
            Company. In the event that the Accounting Firm is serving as
            accountant or auditor for the individual, entity or group effecting
            the Change in Control, the Executive shall appoint another
            nationally recognized accounting firm to make the determinations
            required hereunder (which accounting firm shall then be referred to
            as the Accounting Firm hereunder. All fees and expenses of the
            Accounting Firm shall be borne solely by the Company. Any Gross-Up
            Payment, as determined pursuant to this Section 5(c), shall be paid
            by the Company to the Executive within five days of the receipt of
            the Accounting Firm's determination. Subject to the remainder of
            this Section 5(c), any determination by the Accounting Firm shall be
            binding upon the Company and the Executive. As a result of the
            uncertainty in the application of Section 2806 and Section 4999 of
            the Code at the time of the initial 


                                       7
   8
            determination by the Accounting Firm hereunder, it is possible that
            Gross-Up Payments which will not have been made by the Company
            should have been made ("Underpayment"), consistent with the
            calculations required to be made hereunder. In the event that the
            Company exhausts its remedies and the Executive thereafter is
            required to make a payment of any Excise Tax, the Accounting Firm
            shall determine the amount of the Underpayment that has occurred and
            any such Underpayment shall be promptly paid by the Company to or
            for the benefit of the Executive (so as to fully extinguish
            Executive's tax liability for the Payments including all interest
            and penalties).

                  (v) The Executive shall notify the Company in writing of any
            claim by the Internal Revenue Service that, if successful, would
            require the payment by the Company of the Gross-Up Payment. Such
            notification shall be given as soon as practicable but no later than
            ten business days after the Executive is informed in writing of such
            claim and shall apprise the Company of the nature of such claim and
            the date on which such claim is requested to be paid. The Executive
            shall not pay such claim prior to the expiration of the 30-day
            period following the date on which Executive gives such notice to
            the Company (or such shorter period ending on the date that any
            payment of taxes with respect to such claim is due). If the Company
            notifies the Executive in writing prior to the expiration of such
            period that it desires to contest such claim, the Executive shall:


                        (A) give the Company any information reasonably
                  requested by the Company relating to such claim,

                        (B) take such action in connection with contesting such
                  claim as the Company shall reasonably request in writing from
                  time to time, including, without limitation, accepting legal
                  representation with respect to such claim by an attorney
                  reasonably selected by the Company,

                        (C) cooperate with the Company in good faith in order
                  effectively to contest such claim, and

                        (D) permit the Company to participate in any proceedings
                  relating to such claim;

      provided, however, that the Company shall bear and pay directly all costs
      and expenses (including additional interest and penalties) incurred in
      connection with such contest and shall indemnify and hold the Executive
      harmless, on an after-tax basis, for any Excise Tax or income tax
      (including interest and penalties with respect thereto) imposed as a
      result of such representation and payment of costs and expenses. Without
      limitation on the foregoing provisions of this Section 5(c), the Company
      shall control all proceedings taken in connection with such contest and,
      at its sole option, may pursue or forgo any and all administrative
      appeals, proceedings, hearings and conferences with the taxing 


                                       8
   9
      authority in respect of such claim and may, at its sole option, either
      direct the Executive to pay the tax claimed and sue for a refund or
      contest the claim in any permissible manner, and the Executive agrees to
      prosecute such contest to a determination before any administrative
      tribunal, in a court of initial jurisdiction and in one or more appellate
      courts, as the Company shall determine; provided, however, that if the
      Company directs the Executive to pay such claim and sue for a refund, the
      Company shall advance the amount of such payment to the Executive, on an
      interest-free basis and shall indemnify and hold the Executive harmless,
      on an after-tax basis, from any Excise Tax or income tax (including
      interest or penalties with respect thereto) imposed with respect to such
      advance or with respect to any imputed income with respect to such
      advance; and further provided that any extension of the statute of
      limitations relating to payment of taxes for the taxable year of the
      Executive with respect to which- such contested amount is claimed to be
      due is limited solely to such contested amount. Furthermore, the Company's
      control of the contest shall be limited to issues with respect to which a
      Gross-Up Payment would be payable hereunder and the Executive shall be
      entitled to settle or contest, as the case may be, any other issue raised
      by the Internal Revenue Service or any other taxing authority.

                  (vi) If, after the receipt by the Executive of an amount
            advanced by the Company pursuant to Section 5(c), the Executive
            becomes entitled to receive any refund with respect to such claim,
            the Executive shall (subject to the Company's complying with the
            requirements of Section 5(c) promptly pay to the Company the amount
            of such refund (together with any interest paid or credited thereon
            after taxes applicable thereto). If, after the receipt by the
            Executive of an amount advanced by the Company pursuant to Section
            5(c), a determination is made that the Executive shall not be
            entitled to any refund with respect to such claim and the Company
            does not notify the Executive in writing of its intent to contest
            such denial of refund prior to the expiration of 30 days after such
            determination then such advance shall be forgiven and shall not be
            required to be repaid and the amount of such advance shall offset,
            to the extent thereof, the amount of Gross-Up Payment required to be
            paid.

                  (vii) Notwithstanding anything to the contrary contained
            herein, if Executive is dismissed by the Company for Cause,
            Executive will not be entitled to the payments or benefits provided
            under Section 5(c) hereof.

                  (viii) After a Change of Control occurs, if Executive resigns
            for Good Reason, Executive shall receive the compensation and
            benefits described in Section 9(b) hereof.

            (d) Reimbursement of Expenses. Consistent with the Company's
      established policies, the Company shall pay or reimburse Executive for all
      reasonable and necessary travel and other expenses of Executive incurred
      by Executive in performing his duties hereunder upon receipt of
      appropriate written substantiation of such expenses.


   10
            (e) Indemnification for Incremental Rhode Island Income Tax
      Liability. In the event Executive incurs incremental Rhode Island State
      income tax liability (as compared with that of Illinois) respecting
      deferred income Executive receives resulting from the sale of Peak
      Technologies to Moore Corporation as a direct result of Executive's
      relocation to Rhode Island, the Company shall make Executive whole with
      respect to such incremental Rhode Island income tax liability, including a
      gross-up amount necessary to offset any and all applicable federal, state
      and local excise, income or other taxes incurred by Executive by reason of
      the Company's payments pursuant to this Section 5(e). Within 10 days after
      the Effective Date, Executive shall provide Company with full
      documentation concerning the deferred income from the transaction
      described above.

      6.    BENEFITS.

            (a) Other Arrangements. The payments provided in this Section 6
      hereof are in addition to any benefits to which Executive may be, or may
      become, entitled under any benefit plan, program or arrangement (excluding
      any increase in salaries, generally) of the Company for which Senior
      Executives are or may become eligible.

            (b) Benefits. Except as otherwise expressly provided herein,
      Executive shall be entitled to receive, during the Term, benefits
      substantially similar to the level of benefits provided generally to
      Senior Executives under any such benefit plan, program or arrangement,
      subject to Executive's meeting the eligibility requirements of such plans,
      programs or arrangements, and in the case of benefit plans, programs or
      arrangements providing for discretionary grants or awards, to the
      discretion of the Board or applicable Committee.

            (c) Stock Options. Executive shall receive the following stock
      options in accordance with the following terms and conditions:

                  (i) On the Effective Date, the Company shall grant to
            Executive options to purchase 200,000 shares of Common Stock under
            the Company's 2000 Omnibus Stock Option and Long-Term Incentive Plan
            (the "2000 Plan"), subject to Executive's execution of the Company's
            standard option agreement as described below.

                  (ii) Executive shall be eligible for consideration by the
            Committee for annual grants of stock options under the 2000 Plan or
            any successor plan, in the sole discretion of the Committee. Nothing
            contained in this Agreement constitutes a guarantee that the
            Committee will award Executive additional stock options beyond those
            specifically described in Section 6(c)(i) of this Agreement.

                  (iii) All grants of options under this Agreement are subject
            to and conditioned upon the Company obtaining all necessary
            shareholder approvals, which Company shall use all reasonable
            efforts to obtain. Each time Executive receives a grant of stock
            options pursuant to this Section 6(c), he shall be asked to 


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            enter into the Company's standard Non-Qualified Stock Option
            Agreement (the "Option Agreement") which shall set forth the terms
            and conditions governing the grant and exercise of the Options
            including such terms as are set forth in this Section 6(c) and which
            Option Agreement with respect to the option grants under the 2000
            Plan shall be substantially similar to the Option Agreement attached
            hereto as Appendix D. The terms and provisions of the options
            provided for in this subsection (c) shall be essentially as set
            forth in Appendix A hereto. The Company shall use its best efforts
            to file, and cause to be effective under the Securities Act of 1933,
            as amended, a registration statement on Form S-8 (or a comparable
            form) with respect to the shares (or other rights) granted or issued
            as provided for or referenced in this Agreement or, if applicable,
            issuable upon exercise of rights so provided or referenced, but the
            Company shall not be obligated to register any such shares or rights
            for resale. The Company will also use its best efforts to ensure
            that each grant provided for under Appendix A or referenced above
            shall meet the requirements for exemption under Rule 16b-3 under the
            Act.

            (d) Restricted Stock. On the Effective Date, the Company shall grant
      to Executive 30,000 shares of Restricted Stock (the "Restricted Shares")
      under the Company's 2000 Restricted Stock Plan (the "Restricted Stock
      Plan"), subject to Executive's execution of the Company's Restricted Stock
      Agreement. The Restricted Shares shall vest as follows: 10,000 shares vest
      12 months after the Effective Date, 10,000 shares vest 24 months after the
      Effective Date and 10,000 vest 36 months after the Effective Date. The
      Restricted Shares, after vesting, may be transferred only in accordance
      with the terms and conditions of the Restricted Stock Plan.

            (e) Certain Specific Benefits and Arrangements. Without limiting the
      generality of subsection (a) and (b) above (except as may otherwise be
      specified in Appendix B hereto), Executive shall be entitled to the
      specific benefits and arrangements set forth in Appendix B hereto.

            (f) Indemnification. The Company shall defend and hold Executive
      harmless to the fullest extent permitted by applicable law in connection
      with any claim, action, suit, investigation or proceeding arising out of
      or relating to performance by Executive of services for, or action of
      Executive as a director, officer or employee of the Company or any parent,
      subsidiary or Affiliate of the Company, or of any other person or
      enterprise at the Company's request. Expenses incurred by Executive in
      defending a claim, action, suit or investigation or criminal proceeding
      shall be paid by the Company in advance of the final disposition thereof
      upon the receipt by the Company of an undertaking by or on behalf of
      Executive to repay said amount unless it shall ultimately be determined
      that Executive is entitled to be indemnified hereunder; provided, however,
      that this shall not apply to a non-derivative action commenced by the
      Company against Executive.



                                       11
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      7.    BENEFITS PAYABLE DURING TERM UPON DISABILITY.

            (a) Disability Benefits. In the event of Disability of Executive
      during the Term of his employment hereunder, the Company shall continue to
      pay Executive the compensation and extend to him the benefits provided in
      Sections 5 and 6 hereof during the period of Disability, subject to
      Section 9(c) hereof and to the extent permitted by applicable law,
      provided that in the event of Executive's Disability for an aggregate
      period of time exceeding 150 calendar days in any 12 consecutive month
      period during the Term, the Company, at its election, may terminate the
      Term of Executive's employment, and Executive shall receive the
      compensation as set forth in Section 9(b) hereof.

            (b) Services During Disability. During the Term, notwithstanding any
      Disability, Executive shall, to the extent that he is physically and
      mentally able to do so, furnish information and assistance to the Company,
      and, in addition, upon the reasonable request in writing on behalf of the
      Board, or a senior executive officer designated by the Board, from time to
      time, he shall make himself available to the Company, its subsidiaries and
      Affiliates to undertake reasonable assignments consistent with his
      position and his physical and mental health. In the event of such
      Disability, Executive shall resign from the Board.

      8.    TERMINATION OF EMPLOYMENT.

            (A) Expiration and Earlier Termination. Executive's Term of
      employment shall terminate upon expiration of the Term and shall be
      subject to earlier termination:

                  (i) upon the death of Executive;

                  (ii) at the election of the Company in the event of
            Executive's Disability (as provided in Section 7(a) hereof);

                  (iii) upon discharge of Executive by the Company for Cause;
            and

                  (iv) upon discharge of Executive without Cause or resignation
            of Executive.

            (b) Certain Obligations of the Company. The Company shall give the
      Executive not less than 60 days prior written notice of any intended
      termination of Executive's employment by the Company for Cause (other than
      for the reasons set forth in clauses (ii) and (iv) of the definition of
      Cause in Section 1 hereof) or without Cause. In the event of such a
      proposed termination for Cause, such notice shall specify the grounds for
      such termination, and the Company shall only be entitled to terminate the
      Executive for such Cause if the Executive shall have failed to cure the
      grounds for such termination within said 60-day notice period and
      Executive shall have been afforded an opportunity to address the Board,
      with legal counsel, to argue against such termination. However, after
      giving such notice and before Executive is afforded the opportunity to  


                                       12
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      address the Board, the Company may relieve Executive of his duties on an
      interim basis. The Company may immediately terminate Executive's
      employment by written notice in the event of the occurrence of any of the
      events set forth in clauses (ii) and (iv) of the definition of Cause in
      Section 1 hereof.

            (c) Certain Obligations of Executive. Executive shall give the
      Company not less than 60 days prior written notice of any intended
      termination by Executive of Executive's employment. In the event of a
      proposed resignation for Good Reason, such notice shall specify the
      grounds for such resignation, and Executive shall only be entitled to
      terminate his employment for Good Reason if the Company shall have failed
      to correct the specified grounds within said 60-day notice period and,
      upon cure thereof by the Company, such event shall no longer constitute
      Good Reason. Executive shall not be entitled to terminate for Good Reason
      unless he has given notice to the Company of his intention so to terminate
      within 60 days following the occurrence of the event alleged to constitute
      such Good Reason. Notwithstanding the foregoing, in the event that
      Executive has given the Company notice of his intention to resign, the
      Board may elect to have such resignation become effective immediately or
      at such other date, not later than the effective date specified in the
      notice, as the Board may determine.

            (d) Upon termination of the Term for any reason, Executive (unless
      otherwise requested by a majority of the independent directors of the
      Board) concurrently shall resign any directorships and officer or employee
      positions which he holds with the Company, its subsidiaries and
      Affiliates.

      9.    COMPENSATION, BENEFITS, ETC. UPON, AND EFFECTS OF, TERMINATION.

            (a) Death, Discharge for Cause and Resignation for Other than Good
      Reason. If the Term of Executive's employment is terminated by reason of
      his death, discharge for Cause or resignation for other than Good Reason,
      the Company shall pay or cause to be paid to Executive or his estate, as
      the case may be, at the time such payment is due (i) his Base Salary
      accrued through the effective date of such termination at the rate in
      effect immediately prior to such termination (ii) any accrued but unpaid
      Performance Bonus under Section 5(b) hereof for the prior fiscal year (to
      be paid at the same time Senior Executives receive performance bonuses for
      that fiscal year as set forth in Section 5(b)(ii) hereof) and (iii) any
      other amounts to which Executive is entitled under the terms of Sections 5
      and 6 hereof up to the effective date of such termination. In the event of
      such termination of employment for Cause or resignation for other than
      Good Reason under this Section 9(a), all unvested stock options and
      unvested shares of restricted stock, as they are scheduled to vest in
      accordance with Appendix A and Section 6(d) hereof, respectively, shall be
      forfeited by Executive.

            (b) Disability, Discharge Without Cause and Resignation for Good
      Reason. If the Term of Executive's employment is terminated by the Company
      by reason of his Disability as provided in Section 7(a) hereof, by the
      Company without Cause or by reason of Executive's resignation for Good
      Reason, the Company shall pay to Executive 


                                       13
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      or his estate, as the case may be, the following: (i) his Base Salary
      accrued through the effective date of such termination at the rate in
      effect immediately prior to such termination (ii) an amount equal to one
      year of Average Cash Compensation; (iii) any accrued but unpaid
      Performance Bonus under Section 5(b) hereof for the prior fiscal year;
      (iv) a Prorated Performance Bonus, if any; and (v) any other amounts to
      which Executive is entitled under the terms of Sections 5 and 6 hereof up
      to the effective date of such termination. If Executive's employment is
      terminated for any reason under this Section 9(b) within 12 months of the
      Effective Date, the Average Cash Compensation shall be the Base Salary
      plus the target Performance Bonus for fiscal year 2002 as set forth in
      Section 5(b)(i) hereof. The payments required under this Section 9(b)
      shall be made by the Company after such termination as follows: the Base
      Salary component of Average Cash Compensation shall be paid in equal
      bi-weekly installments over one year, the Performance Bonus component of
      Average Cash Compensation shall be paid within 14 days, and the Prorated
      Performance Bonus, if any, shall be paid at the same time Senior
      Executives are paid performance bonuses for the respective fiscal year.
      Any such Prorated Performance Bonus shall be paid in cash, notwithstanding
      the provisions of Section 5(b)(ii) hereof.

            (c) In the event this Agreement in terminated in accordance with
      Section 9(b) hereof, the Company shall continue, for a period of one year
      following such Termination, the benefits described in Sections 4, 6 and 8
      of Appendix B, and shall continue the medical benefits described in
      Section 5 of Appendix B for the Term, as if the agreement had not been
      terminated, plus continue such medical coverage for an additional period
      of one year. In addition, in the event this Agreement is terminated in
      accordance with Section 9(b) hereof, Executive shall become fully vested
      in the retirement plans, all non-qualified plans and in all benefits
      accrued under all other employee benefit plan (e.g., matches under the 401
      (k) plan). Executive also shall be entitled, to the extent not
      inconsistent with this Agreement, to receive such additional benefits, if
      any, as he may be entitled to under the express terms of the applicable
      benefit plans (other than bonus and severance plans) of the Company, its
      subsidiaries and Affiliates, and to whatever medical coverage, if any, as
      is required to be provided by applicable law.

            (d) Reductions, Forfeitures, etc. Notwithstanding the foregoing: (i)
      any payments or benefits required to be paid or provided to Executive
      pursuant to Section 7(a) in the event of Executive's Disability shall be
      reduced to the extent that comparable payments or benefits are received by
      Executive during such period under the Company's disability plan, as in
      effect from time to time, (ii) without limiting any other rights the
      Company may have, any payments or benefits required to be paid or provided
      to Executive under this Agreement shall be forfeited to the Company by
      Executive if Executive shall breach any of his obligations under Sections
      10(b) or 11 hereof, except as may otherwise be required by applicable law,
      and (iii) except as otherwise provided above, the payments and benefits
      required by this Section 9 shall be made or provided at such times as they
      would have been paid or provided if Executive's employment had not been
      terminated.



                                       14
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            (e) Full Settlement. In the event of the termination of Executive's
      employment, the payments and other benefits provided for by this Agreement
      (and as otherwise provided under the express terms of any compensation or
      benefit plans of the Company, its subsidiaries or Affiliates, to the
      extent not inconsistent with this Agreement, or as may otherwise be
      required by applicable law) shall constitute the entire obligation of the
      Company, its subsidiaries and Affiliates to Executive for compensation and
      benefits and shall also constitute full and complete settlement of any
      claim under law or in equity that the Executive might otherwise assert
      against the Company, its subsidiaries or Affiliates, for compensation and
      benefits. Executive has no duty to mitigate respecting other employment
      after the termination of this Agreement and shall be entitled to receive
      the amounts described in this Section 9 irrespective of whether Executive
      obtains other employment immediately following such termination.

      10.   CERTAIN OBLIGATIONS OF EXECUTIVE.

      Executive further covenants with the Company as follows and expressly
agrees that the provisions of Sections 10 and 11 are material obligations to the
Company and the breach of those provisions will constitute material breaches of
this Agreement. As used in Sections 10 and 11, the term the "Company" shall
include GTECH Holdings Corporation and its subsidiaries and Affiliates.

            (a) Assistance in Litigation. During the Term, and for a period of
      three years thereafter subject to reasonable accommodation of Executive's
      then business schedule, Executive, upon reasonable notice, shall furnish
      such information and proper assistance to the Company as may reasonably be
      required in connection with any litigation in which the Company is, or may
      become, a party or in connection with any investigation or review by any
      governmental agency of which the Company is or may become a subject. The
      Company shall compensate Executive at a reasonable hourly rate, plus
      reimburse all expenses incurred, for any such assistance provided by
      Executive after the Term.

            (b) Confidential Information. Executive shall not knowingly use for
      his own benefit or disclose or reveal to any unauthorized person, during
      or after the Term, any trade secret or other confidential information
      relating to the Company, including any customer lists, customer needs,
      price and performance information, processes, specifications, hardware,
      software, firmware, programs, devices, supply sources and characteristics,
      business opportunities, marketing, promotional, pricing and financing
      techniques, and other information relating to the business of the Company;
      provided that such restriction on confidential information shall not apply
      to information which is (i) proven to be generally available in the
      industry, (ii) disclosed in published literature or (iii) obtained by
      Executive after the Term from a third party without binder of secrecy.
      Executive agrees that, except as otherwise agreed by the Company, he will
      return to the Company, promptly upon the request of the Board or any
      executive officer designated by the Board, any physical embodiment of such
      confidential information. In the event Executive is requested by any legal
      process to disclose Confidential Information, Executive shall immediately
      inform the Company and shall permit the Company an 


                                       15
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      opportunity to oppose such process, it being understood that Executive's
      compliance with legal process, after the Company's reasonable opportunity
      to oppose such process, does not constitute a violation of this Section
      10(b).

            (c) Proprietary Creations. All rights, title and interest in and to
      any ideas, inventions, technology, processes, know-how, works, hardware,
      software, firmware, programs, devices, trade secrets, trade names,
      trademarks or service marks, which Executive may conceive, create,
      organize, prepare or product during the period of his employment with the
      Company and which relate to the business of the Company, and all rights,
      title and interest in and to any patents, patent applications, copyright
      registrations and copyright applications resulting there from, shall be
      owned by the Company, and Executive agrees to execute instruments or
      documents, to provide evidence and testimony, and to otherwise assist the
      Company in establishing, enforcing and maintaining such rights, title and
      interest of the Company during and after the Term.

            (d) Authorization. Executive does hereby irrevocably constitute,
      authorize, empower and appoint the Company, or any of its officers, such
      Executive's true and lawful attorney (with full power of substitution and
      delegation) in Executive's name, and in Executive's place and stead, or in
      the Company's name, to take and do such action, and to make, sign,
      execute, acknowledge and deliver any and all instruments or documents
      which the Company, from time to time, may deem desirable or necessary to
      vest in the Company, its successors and assigns, any of the rights, title
      or interest granted pursuant to clause (ii) above for the use and benefit
      of the Company, its successors and assigns.

      11.   NON-COMPETITION.

            (a) During the Term and for two years following termination of
      Executive's employment (irrespective of the reason for such termination),
      Executive shall not engage or propose to engage, directly or indirectly
      (which includes owning, managing, operating, controlling, being employed
      by, acting as a consultant to, giving financial assistance to,
      participating in or being connected in any material way with any business
      or person so engaged) in any Lottery Business anywhere in the world,
      including without limitation in any business which competes or proposes to
      compete with any Lottery Business in which the Company was engaged or
      proposed to be engaged anywhere in the world; provided, that Executive's
      ownership as a passive investor of less than one percent of the issued and
      outstanding stock or equity, or $100,000 principal amount of any debt
      securities, of any corporation, partnership or other entity so engaged
      shall not by itself be deemed to constitute such engagement by Executive.
      As used herein, the "Lottery Business" shall mean the provision of
      products or services of every nature relating to the operation of all
      manner of lotteries however and wherever conducted, but does not include
      traditional gaming activities not of the type and nature customarily
      operated by governments.

            (b) Further, for a period of two years following termination of
      Executive's employment (irrespective of the reason for such termination),
      Executive shall not (i) 


                                       16
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      disturb or interfere with any business relationship between the Company
      and any of its customers, suppliers or other business associates, or (ii)
      solicit or cause to be solicited any officer, employee or customer of the
      Company to terminate such person's relationship with the Company or to
      take other action which is materially injurious to the Company.

      12.   TAX WITHHOLDING.

      The Company may withhold from any benefits payable under this agreement
all Federal, State, City, or other taxes as shall be required pursuant to any
law or governmental regulations or ruling.

      13.   EFFECT OF PRIOR AGREEMENTS.

      This Agreement, including the Exhibit and Appendices hereto, contains the
entire understanding between the parties hereto with respect, to the matters
covered herein and supersedes any prior agreement, condition, practice, custom,
usage and obligation with respect to such matters insofar as any such prior
agreement, condition, practice, custom, usage or obligation might have given
rise to any enforceable right.

      14.   GENERAL PROVISIONS.

            (a) Certain Representations and Warranties of Executive. Executive
      represents to the Company that (i) the execution and performance of this
      Agreement by Executive and his employment hereunder does not and will not
      constitute a breach of or violate any contract, agreement, obligation or
      understanding, oral or written, or order of any court or governmental
      authority to which he is a party or by which he is bound; (ii) the
      employment and other personal background information provided by Executive
      to Company is true and correct in all material respects and (iii) to the
      best of Executive's knowledge, there is no factor relating to him or his
      family not previously disclosed in writing to the Company which could
      reasonably be expected, if he were a senior executive officer or director
      of the Company, to disqualify the Company, its subsidiaries or Affiliates
      from, or materially jeopardize their chances of, obtaining lottery
      contracts or other contracts in the businesses in which they are engaged
      or propose to engage.

            (b) Non-assignability and Inurement. Neither this Agreement nor any
      rights or interest hereunder shall be assignable by Executive, his
      beneficiaries, or legal representatives without the Company's prior
      written consent (it being understood that all payments to which Executive
      is entitled hereunder shall inure to the benefit of his estate or legal
      heirs).

            (c) Binding Agreement. This Agreement shall be binding upon, and
      accrue to the benefit of, Executive and the Company and their respective
      heirs, executors, administrators, successors and permitted assigns,
      including, in the case of the Company, any person or entity acquiring all
      or substantially all of the Company's assets.



                                       17
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            (d) Amendment of Agreement. This Agreement may not be modified or
      amended except by an instrument in writing signed by the parties hereto.

            (e) Remedies. Executive acknowledges and agrees that the possible
      restrictions on his activities which may occur as a result of his
      performance of his obligations under Sections 10 and 11 hereof are
      required for the reasonable protection of the Company, its subsidiaries
      and Affiliates, and Executive expressly acknowledges and agrees that such
      restrictions are fair and reasonable for that purpose. Executive further
      expressly acknowledges and agrees that damages alone will be an inadequate
      remedy for any breach or violation by him of this Agreement and that the
      Company, its subsidiaries and Affiliates, in addition to all other
      remedies at law or in equity, shall be entitled as a matter of right to
      injunctive relief, including specific performance, with respect to any
      such breach or violation, in any court of competent jurisdiction
      including, without limitation, any state or federal court in Rhode Island.
      If any of the provisions of such Sections are held to be in any respect an
      unreasonable or unlawful restriction upon Executive, then they shall be
      deemed to extend only over the maximum period of time, geographic area,
      and/or range of activities as to which they may be enforceable.

            (f) Waiver. No term or condition of this Agreement shall be deemed
      to have been waived, nor shall there be any estoppel against the
      enforcement of any provision of this Agreement, except by written
      instrument of the party charged with such waiver or estoppel.

            (g) Severability. If, for any reason, any provision of this
      Agreement is held invalid, such invalidity shall not affect any other
      provision of this Agreement not so held invalid, and each such other
      provision shall to the full extent consistent with law continue in full
      force and effect.

            (h) Notices. For the purposes of this Agreement, notice and all
      other communications provided for in this Agreement shall be in writing
      and shall be deemed to have been duly given when hand delivered or mailed
      by United States certified or registered express mail, return receipt
      requested, postage prepaid, if to Executive, addressed to the address set
      forth on the signature page of this Agreement with a copy to his counsel,
      Michael Tuchman, Esq., Levelfeld Pearlstein Glassberg Tuchman Bright
      Goldstein & Schwartz LLC, 33 West Monroe Street, 21st Floor, Chicago,
      Illinois 60603; if to the Company, addressed to GTECH Holdings
      Corporation, 55 Technology Way, West Greenwich, Rhode Island 02817 and
      directed to the attention of the Board with a copy to the General Counsel
      of the Company; if to a member of the Board, addressed to each member at
      his respective address on file with the General Counsel of the Company
      with a copy to the Company, or to such other address as either party may
      have furnished to the others in writing in accordance herewith, except
      that notice of change of address shall be effective only upon receipt.



                                       18
   19
            (i) Counterparts. This Agreement may be executed by facsimile and in
      several counterparts, each of which shall be deemed to be an original but
      all of which together will constitute one and the same instrument.

            (j) Indulgences, Etc. Neither the failure nor any delay on the part
      of either party to exercise any right, remedy, power or privilege under
      this Agreement shall operate as a waiver thereof, nor shall any single or
      partial exercise of any right, remedy, power or privilege preclude any
      other or further exercise of the same or of any other right, remedy, power
      or privilege, nor shall any waiver of any right, remedy, power or
      privilege with respect to any occurrence be construed as a waiver of such
      right, remedy, power or privilege with respect to any other occurrence.

            (k) Headings. The headings of Sections and paragraphs herein are
      included solely for convenience of reference and shall not control the
      meaning or interpretation of any of the provisions of this Agreement.

            (1) Governing Law. This Agreement shall be governed by and construed
      in accordance with the laws of the State of Rhode Island, regardless of
      the laws that might otherwise govern under applicable principles of
      conflicts of laws thereof. In the event of any dispute hereunder, the
      prevailing party shall be entitled to recover all costs, including
      reasonable attorneys' fees, incurred in adjudicating such dispute.

            (m) Joint and Several Liability. Notwithstanding any other provision
      of this Agreement, each of GTECH Holdings Corporation and GTECH
      Corporation, and their successors and assigns, shall be jointly and
      severally liable for all obligations or any of them to Executive
      hereunder. In the event that a substantial portion of the assets of either
      Company are transferred to any other direct or indirect subsidiary or
      other Affiliate of the Company, whether in one transaction or a series of
      transactions, such Company, as applicable, shall cause (prior to or
      concurrently with each transfer) the transferee to become a signatory to
      this Agreement and to become jointly and severally liable for all
      obligations or any of them to Executive hereunder.

            (n) To the extent there is any conflict between the terms of this
      Agreement and the Option Agreement or the Restricted Stock Agreement
      respecting acceleration or vesting of stock options or restricted stock,
      the provisions of this Agreement shall supersede any other conflicting
      provisions in those agreements.



                                       19
   20
      IN WITNESS WHEREOF, GTECH Holdings Corporation has caused this Agreement
to be executed by their duly authorized officers, and Executive has signed this
Agreement, all as of the day and year first above written.



                                          GTECH HOLDINGS CORPORATION



Attest: /s/                                By: /s/
       _________________________              ________________________________
Name:                                      Name:
Title:                                     Title:
                                                                              




                                          GTECH CORPORATION



Attest: /s/                               By: /s/
       _________________________             ________________________________
Name:                                     Name:
Title:                                    Title:




Witness:                                  HOWARD S. COHEN


/s/                                       /s/
_________________________________         ___________________________________
                                          Address: 680 North Shore Drive
                                                    Chicago, Illinois 60611
   21
                                   APPENDIX A



SUMMARY OF TERMS OF STOCK OPTIONS

      The stock options to be granted under Section 6(c) of the Agreement are to
be granted pursuant to the 2000 Plan (or any successor plan, as the case may be)
and are subject to the terms and conditions of that plan and the terms and
conditions of the Option Agreement. The following is a summary of the provisions
of the stock options provided for in Section 6(c) of this Agreement:



Nature of Options -     Nonqualified unless otherwise determined by the
                        Committee.

Exercisability -        Options shall become exercisable (i.e. vest) in four
                        equal installments over four years (as set forth in the
                        2000 Plan) from the dates of grant of the particular
                        option or at the expiration of the Term under Section 3
                        of this Agreement, whichever is earlier, subject to
                        possible acceleration under the terms of the applicable
                        Stock Option Plan. In the event of a Change of Control
                        as set forth in Section 5(c) of the Agreement, his
                        outstanding options, whether or not they have vested on
                        the Change of Control Date, shall accelerate and become
                        vested in full on the Change of Control Date and shall
                        remain exercisable for a period of one year. In the
                        event of the Termination of this Agreement as a result
                        of Executive's death or Disability or his resignation
                        for Good Reason or termination without Cause, his
                        outstanding options shall accelerate and become vested
                        in full on the termination date and shall remain
                        exercisable for a period of one year.

Option Price -          Fair market value at the date of the grant of the
                        particular option.

Term -                  Ten years from the date of grant of the particular
                        option, subject to earlier termination in certain
                        circumstances under the terms of the 2000 Plan.

Termination of 
Employment -            In the event Executive's employment is terminated, his
                        outstanding options (i.e. options which have been
                        granted but have not been exercised or terminated and
                        have not expired), to the extent they are vested as of
                        the date of termination or accelerate and vest under
   22
                        this Agreement or the Applicable Stock Option Plan as a
                        result of the termination, shall remain exercisable for
                        a period of one year.

                        Notwithstanding the foregoing, (i) with respect to
                        Executive's options, if any, which may be incentive
                        stock options under the Code, the exercisability period
                        following termination of employment shall not exceed
                        that permitted by the Code, (ii) the period of
                        exercisability of options following termination of
                        employment specified above is subject to possible
                        reduction in certain circumstances under the terms of
                        the applicable Stock Option Plan, and (iii) in no event
                        shall any option be exercisable after the expiration of
                        its term. Except as expressly provide above, in the
                        Option Agreement or the Employment Agreement, upon
                        termination of Executive's employment, his options,
                        whether vested or unvested, shall immediately terminate
                        and be of no further force and effect.






                                       22
   23
                                   APPENDIX B



                  SUMMARY OF CERTAIN BENEFITS AND ARRANGEMENTS

      1. Relocation Expenses. The Company shall reimburse Executive for all
relocation costs incurred by him in moving to Rhode Island, in accordance with
the corporate relocation guidelines attached hereto as Appendix C. In addition,
in the event Executive's employment is terminated by the Company for any reason
other than Cause or Executive resigns with Good Reason, the Company shall
reimburse Executive for all relocation costs incurred by him in moving back to
Illinois, in accordance with Company policy, which shall be no less favorable
than current Company policy. Notwithstanding anything to the contrary herein, in
the event of a non-renewal of this Agreement after the natural expiration of the
Term or any extension thereof Executive shall be entitled to the benefits of
this Section.

      2. Vacation. During the Term, Executive shall be entitled to a paid
vacation of four weeks per year commencing to accrue on the date of Executive's
employment hereunder.

      3. Automobile Allowance. During the Term, the Company shall provide
Executive with an automobile allowance in the monthly amount of $1,250 in
accordance with the Company's automobile policy and in a manner consistent with
other Senior Executives.

      4. Life Insurance. During the Term (and thereafter as and to the extent
expressly provided in the Agreement), Executive shall receive life insurance
coverage in accordance with the Company's policy in a manner comparable to
Senior Executives.

      5. Medical. During the Term (and thereafter as and to the extent expressly
provided in the Agreement), the Company shall provide Executive with medical
insurance in a manner comparable to Senior Executives. Further, during the Term,
the cost of Executive's annual physical examination (not to exceed $1,500.00)
also shall be borne by the Company.

      6. Perquisite Plan. During the Term, Executive shall be entitled to
participate in the Company's Executive Perquisites Plan in a manner similar to
Senior Executives, provided that the amount available to Executive under the
Plan for calendar year 2001 ($27,500 before tax gross-up) shall be pro rated
based upon the portion of the year he was retained by the Company. Benefits
specifically numbered above in this Appendix B shall not be deemed to be
provided under the Plan or subject to the Plan's cap.

      7. Deferred Compensation; 401(k); SERP. During the Term, Executive shall
be entitled to participate in the Company's 401 (k) retirement plan, deferred
compensation plan and Supplemental Retirement Plan for Senior Executives Plan
("SERP") in a manner similar to Senior Executives.
   24
      8. Executive Tax Preparation. During the Term, Executive shall be entitled
to tax preparation and financial planning services, at the Company's expense, up
to a maximum annual expense of $5,000.00.

      9. Attorneys Fees. The Company shall reimburse Executive for all
reasonable attorneys fees incurred in the negotiation and finalization of this
Agreement.






                                       24
   25
                                   APPENDIX C

RELOCATION GUIDELINES CORPORATE
  OFFICER - HOMEOWNER
                                                                              

In order to qualify for GTECH Corporation's Relocation Policy the IRS 50 mile
differential requirement must be met. This means that the distance from your new
main job is at least 50 miles farther from your home than your old main job
location.

Prior approval from you Human Resources Regional Manager, for each relocation,
is required and will ensure reimbursement under the relocation policy. Once
approved all relocation services must be arranged through your Client Service
Manager (CSM) of GTECH's third party relocation service company. The intent of
the relocation policy is to provide reasonable financial assistance and
relocation service resulting in housing arrangement comparable to the employees
prior housing arrangements (e.g., house to house or apartment to apartment).

Since each case of employee relocation is in some way unique, the necessity for
guidelines and the use of individual discretion in applying them is required.
Any variation from these guidelines must receive prior approval.

EXECUTIVE HOMEOWNERS
New hires/transferring Corporate Officers, who are homeowners and are eligible,
will receive the following relocation assistance:

      1. Travel Covered Under Relocation

      House Hunting Trip - A one time, round trip transportation to the new
      location for house hunting purposes - employee and spouse or *significant
      other included.

      * (throughout this document "significant other" refers to any person who
      currently resides with the relocated employee and will also relocate due
      to the employee's transfer)

      Final Move - One way transportation - to the new location - for the
      employee and family or significant other.

      2. How to Arrange Your Air Travel, Hotel and Car Rental


            -     All travel plans must be arranged by the employee through
                  GTECH's designated travel agency

            -     American Express Travel Agency is located at Corporate
                  Headquarters in Rhode Island - Phone: 401-392-7575.

      Steps to take when booking a flight for House Hunting or for Final Move:

            -     Explain to the Travel Agent that you want to arrange your
                  flight for relocation.

            -     The Travel Agent will coordinate flight, hotel and car rental
                  with employee (Hotel and Car Rental will need to be secured
                  with a credit card).

            -     Once arrangements are complete, an itinerary will be faxed to
                  the CSM for approval.

            -     Once tickets have been approved, they will be mailed to
                  employee prior to departure.

      3. Pre-Move House Hunting Trip (Eligibility: Homeowner in current
      location. Requires prior approval.)

      Airfare:

            -     One round trip offered to the new location for the employee
                  and spouse or significant other

            -     Travel must be arranged through GTECH's designated travel
                  agency (see "How to arrange...")

            -     Mid-sized rental car included - arrangements made through
                  GTECH's designated travel agency
   26
      Automobile Travel:

            -     Reimbursed at the current mileage to and from the new location

      Hotel:

            -     Up to five night hotel stay for the employee and spouse or
                  significant other

            -     Hotel arrangements are to be made with GTECH's designated
                  travel agency

      Expenses:

            -     Expense Reports may be obtained through your CSM

            -     Hotel expense will be reimbursed for up to five nights

            -     Daily meal expenses will be reimbursed up to $45.00 per
                  day/per adult

            -     Reasonable costs for pet boarding/sitting will be reimbursed

            -     All receipts must be submitted with expense reports for
                  reimbursement to occur

      Real Estate/Broker Support:

            -     Your client Service will provide you with contact information.

      4. Final Transportation of Employee and Family to New Location (One Way)

            -     Automobile mileage allowance is reimbursed at the most current
                  corporate rate for travel to the new location.

            -     One way air travel for the employee and family or significant
                  other is covered by GTECH.

            -     Final flight arrangements must be booked through GTECH's
                  designated travel agency (see "How to Arrange...").

      5. Temporary Living

            -     Temporary Living will be arranged through the employees'
                  Client Service Manager.

            -     GTECH will reimburse temporary living for the employee (Not to
                  exceed 6 months).

            -     GTECH will cover storage costs, while in the employee is in
                  temporary living (Not to exceed 6 months).

            -     Weekly living expenses** may be reimbursed for the
                  family/significant other for a 6 month temporary living period
                  (**Guidelines and Restrictions...").

            -     CAR: GTECH will either bear the cost of shipping the
                  employee's car to the new location OR reimburse the employee
                  for a mid-sized rental car (Not to exceed 6 months).

      6. Incidental Expense Check

            -     Once the employee begins work at the new location, an
                  incidental expense check in the amount of one month of the
                  annual salary is issued.

            -     The incidental expense check is intended to cover any
                  additional expenses not covered under the relocation policy.

      7. Guidelines and Restrictions to Reimbursable Living Expenses

            -     Reimbursable living expenses must be submitted to the CSM on a
                  weekly expense report.

            -     Expense reports may be obtained through employee's CSM.

            -     Only those expenses that are accompanied by proper receipts
                  will be refunded.

            -     During the temporary living period, breakfast and lunch bills
                  will not be reimbursable.

            -     Lodging should be booked consecutively and recorded on the
                  weekly expense report.

            -     Monthly phone bills related to relocation should appear on the
                  expense report - unless they are direct billed.

            -     Entertainment expenses, such as cable or movie rentals, are
                  not covered under relocation.
   27
            -     Altering the original expense report in any way requires prior
                  approval from the CSM - any additions made on the original
                  expense report, without prior approval, will be subject to
                  rejection and may not be reimbursed - prior approval by the
                  Relocation Coordinator is advised.

            -     Please check with your CSM for deadline dates on weekly
                  expense reports.

      8. Transfer of Household Goods

      Contact the Client Service Manager at least three weeks prior to the date
      that employee plans to move. The CSM will discuss specific moving needs
      with employee and will contact a moving carrier who is under contract with
      GTECH. The preferred carrier will then coordinate the move directly with
      employee. Billing is handled completely by GTECH.

            -     GTECH will cover the cost of moving up to two operable
                  automobiles and pet shipment.

            -     Antiques (100 years +) and valuables are covered with a bona
                  fide professional appraisal (reasonable appraisal costs are
                  covered) completed and received by your CSM prior to the move.

            -     Taking pictures of high value items is recommended.

      9. Sale of a Home/Marketing Assistance

      Home Marketability Assistance will be provided by your CSM. All employees
      are eligible to receive a reasonably and customary commission (for the
      location) on the sale of their current home. Additionally an employee who
      is successful in finding a buyer for his/her home is eligible to receive
      an incentive payment of 2% of the selling price if the home is sold within
      90 days from being listed or 1% if sold within 91 to 150 days. In order to
      qualify, the employee must contact GTECH's third-party relocation services
      company prior to listing the home. Also, the sale must be sold and closed
      utilizing the amended sale program - your CSM can explain. The payment
      will be made after the sale closes with the buyer and will not be grossed
      up for tax purposes.

      10. Purchase of a Home

      Home Finding Assistance will be provided by your CSM. Under relocation,
      employee may receive home buying assistance up to six months after your
      relocation date. For instruction on reimbursement see "Good Faith
      Estimate" below. Coverage includes non-recurring closing fees such as:


            -     Maximum of two points (2% - including loan origination and
                  discount)

            -     State and Local transfer taxes

            -     Escrow Fee

            -     Title Costs

            -     Attorney's Fees

            -     Standard structural pest inspection required by lender

            -     Reasonable and customary general inspection costs for the area

            -     Reasonable and customary radon inspection costs for the area

            -     Appraisal Fee

            -     Credit Report Fee

            -     Any local one-time fee required for closing normally paid by
                  the buyer, provided it is not a mortgage cost

            -     VA Loan funding fee (reimbursed at the annual average rate)

            -     Real Estate commissions on the purchase of a home will not be
                  paid by GTECH

            -     Home Warranties and Buyer's Inspection will not be reimbursed

      11. Good Faith Estimate:

      Employees may receive an advance for covered closing costs by submitting a
      "Good Faith Estimate" to the CSM at least four weeks in advance. The Good
      Faith Estimate should be prepared by the title company or lender. 

      **The employee must clear the advance by submitting the final closing
      statement and expense report to the relocation company within 15 days of
      closing.
   28
      12. Early Equity

      In the event that the relocated employee needs funds for a down payment
      for purchasing a new home prior to the closing on the present one, and the
      employee has secured a contract of sale on the present home, GTECH's third
      party provider will review with Human Resources the employee's specific
      needs and timing.

      Upon approval, the third party company will provide a bridge loan, based
      on a percentage of the equity in the home for a maximum of sixty days.
      This 60-day bridge loan will be interest free to the employee. The maximum
      loan amount will be equal to 95% of the contracted sale price, less all
      outstanding encumbrances on the property. The loan is due and payable at
      the time you sell your property. The third party company will make all
      arrangements for the advance.

      13. Tax Treatment

      Employees will be tax protected on all covered relocation expenses (with
      the exception of the incentive payment offered as home marketing
      assistance) that result in taxable income to the employee. The initial tax
      protection will be computed at the supplemental wages rate. It is the
      employee's responsibility to keep receipts to substantiate deductible
      moving expenses on his/her tax return. The IRS requires all relocation
      expenses paid to on behalf of the employee be reported as income.

To initiate the relocation process, a Relocation Authorization Form must be
completed by the Hiring Manager and approval signed by the Department Vice
President and sent to the appropriate Human Resources Regional Manager. Please
understand, the purpose of GTECH's relocation policy is to provide assistance to
the transferring employee. If you choose not to work within the relocation
policy, follow the rules and/or recommendations, ALL relocation benefits will
cease immediately.
   29
RELOCATION POLICY

--------------------------------------------------------------------------------
                          CORPORATE OFFICER - HOMEOWNER
--------------------------------------------------------------------------------



Employee: ____________________________________________

Moving From: __________________ To: ___________________


Contact Information:

                               WEICHERT RELOCATION
                               1625 State Route 10
                         Morris Plains, New Jersey 07950


                               Michelle Falcinelli
                             Client Service Manager


Toll Free #                 Off: 973-397-3536       Res:  908-859-3181
888-855-3306, Ext. 3536     Fax: 973-267-4957       E-mail: MFalcinelli@wrci.com

      Please review your Relocation Policy. If you have any questions, please
contact your Client Service Manager from Weichert - GTECH's third party
Relocation Service Company (contact information listed above).

      Upon review, please initial each numbered section, sign all designated
areas and return to your Client Service Manager as soon as possible. Without a
signed agreement in your relocation file, the relocation process will not begin.
Therefore, GTECH will not incur or reimburse relocation expenses on your behalf.
   30
--------------------------------------------------------------------------------
                              RELOCATION AGREEMENT
                      CORPORATE OFFICER - HOMEOWNER STATUS
--------------------------------------------------------------------------------


1.    "Relocation Costs" include all house hunting trip; shipment of goods and
      other moving expenses; travel; meals; temporary living (lodging, meals,
      etc.); home purchasing assistance expenses; closing costs and commissions
      paid by GTECH Corporation on the sale of my home; the incentive bonus for
      selling to an outside buyer; and if I sell my home to a relocation firm
      contracted by GTECH Corporation; or if I process an amended value sale
      (i.e. sale to an outside buyer) through a relocation firm contracted by
      GTECH Corporation.

2.    If I remain a full-time GTECH Corporation employee for twenty-four (24)
      months, calculated from date of hire/transfer, I shall have no obligation
      to repay GTECH Corporation for the relocation costs incurred on my behalf.

3.    If I voluntarily terminate my employment with GTECH Corporation within
      twenty-four (24) months, calculated from date of hire/transfer, I agree to
      repay GTECH Corporation for the relocation costs prorated over twenty-four
      (24) months.

      Formula to be used for calculation of repayment:

      Repayment     =     24 - [number of months from Start      Relocation
      Amount                     Date to Termination Date]       X Costs
                          ---------------------------------
                                       24

4.    Repayment to GTECH Corporation is due and payable in full on my
      Termination Date. Upon notice of my termination, I hereby authorize GTECH
      Corporation to use one or more of the following methods to affect
      repayment: (a) cash payment; (b) deduction from my salary, wages or
      bonuses due to me upon or after termination; (c) deduction from any monies
      held in any GTECH stock purchases plan; or (d) deduction from any other
      sums due to me from GTECH.

5.    I understand that certain Home Sale Assistance Costs must be included in
      my gross income and are subject to taxes. I also understand that while I
      can deduct some of my expenses related to my relocation according to IRS
      guidelines, I must have receipts to show my actual expenses. 

      I UNDERSTAND THAT IT IS MY RESPONSIBILITY TO KEEP ALL RECEIPTS, IN ORDER
      TO RESPOND TO AUDITS AND PAY MY INCOME TAXES.

6.    I understand that this Relocation Agreement is not a contract of
      employment and does not guarantee future employment with GTECH
      Corporation.

7.    If GTECH Corporation initiates a lawsuit to collect any monies due
      hereunder, I agree to pay reasonable attorney's fees and costs awarded by
      the court.

8.    If I terminate involuntarily (except if a I am terminated for cause), I
      shall have no obligation to repay GTECH Corporation for these relocation
      costs.

9.    GTECH Corporation's Relocation Agreement and Relocation Policy represent
      GTECH and any subsidiary of the GTECH Corporation.

Please sign below and return to your Client Services Manager. Reimbursement will
not take place until the necessary paperwork has been signed and returned to the
relocation company.
   31
I, __________________, have read and understand GTECH Corporation's Relocation
   Please Print

Agreement and Guidelines.

Signature: _____________________________________     Date:_____________________



EX-10.2
3
y48042ex10-2.txt
AMENDMENT TO AGREEMENT


   1
                                                                    EXHIBIT 10.2

                             AMENDMENT TO AGREEMENT


This Amendment to Agreement is entered into this 28th day of March, 2001, by and
between GTECH HOLDINGS CORPORATION AND GTECH CORPORATION, each a Delaware
corporation (collectively, the "Company"), and HOWARD S. COHEN ("Executive").

WHEREAS, the parties have entered into an agreement dated March 5, 2001
regarding the employment by the Company of the Executive (the "Agreement"); and

WHEREAS, the parties desire to amend the Agreement as set forth herein;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto hereby agree as follows:

1. Section 6(d) of the Agreement is hereby deleted and replaced by the
following:

                  "(d) Restricted Stock. On the Effective Date, the Company
                  shall grant to Executive 30,000 shares of Restricted Stock
                  (the "Restricted Shares") under the 2000 Plan (as defined in
                  Section 6(c)(i) above), subject to Executive's execution of
                  the Company's Restricted Stock Agreement. The Restricted
                  Shares shall vest as follows: 10,000 shares vest 12 months
                  after the Effective Date, 10,000 shares vest 24 months after
                  the Effective Date and 10,000 vest 36 months after the
                  Effective Date. The Restricted Shares, after vesting, may be
                  transferred only in accordance with the terms and conditions
                  of the 2000 Plan."

2. The parties acknowledge that the Executive has been appointed as President
and Chief Executive Officer of the Company. The parties agree that in the event
that the title and position of President is removed by the Board of Directors of
the Company at any time during the Term of the Agreement, such removal shall not
be considered "Good Reason" as defined in Section 1 of the Agreement.

3. Exhibit B, Section 6 of the Agreement is hereby deleted and replaced by the
following:

                  6. Perquisite Plan. During the Term, Executive shall be
                  entitled to participate in the Company's Executive Perquisites
                  Plan in a manner similar to Senior Executives. Without
                  limiting the foregoing, Executive shall be entitled to full
                  perquisite benefits under the Plan during calendar year 2001.
                  Benefits specifically numbered above in this Appendix B shall
                  not be deemed to be provided under the Plan or subject to the
                  Plan's cap."
   2
4. Except as amended hereby, all other terms of the Agreement remain in full
force and effect, and are hereby ratified and affirmed.



IN WITNESS WHEREOF, GTECH Holdings Corporation and GTECH Corporation have caused
this Amendment to Agreement to be executed by their duly authorized officers,
and Executive has signed this Amendment to Agreement, all as of the day and year
first above written.


                                            GTECH HOLDINGS CORPORATION



Attest: /s/                                 By: /s/
      -----------------------------           ----------------------------------
      Name: Karen M. Connelly                 Name: Kathleen McKeough
      Title: Executive Assistant              Title: Sr. Vice President,
                                                     Human Resources



                                             GTECH CORPORATION



Attest: /s/                                 By: /s/
      -----------------------------           ----------------------------------
      Name: Karen M. Connelly                 Name: Kathleen McKeough
      Title: Executive Assistant              Title: Sr. Vice President,
                                                     Human Resources



Witness:                                    HOWARD S. COHEN



/s/                                         /s/
----------------------------------          ------------------------------------
Amy C. Fuller                               Howard S. Cohen

PVD 428118



EX-10.10
4
y48042ex10-10.txt
LIST OF SIGNATORIES TO AGREEMENT


   1
                                                                   EXHIBIT 10.10

              Signatories to Agreement Respecting Change of Control


Executive Officers                          Dates


Steven P. Nowick                    January 15, 1999

Donald Stanford                     July 29, 1997

Donald Sweitzer                     October 13, 1998

Jaymin B. Patel                     March 22, 2000

David J. Calabro                    April 14, 1999

Jean-Pierre Desbiens                October 13, 1998

Marc Crisafulli                     March 29, 2001

Antonio Carlos Rocha                April 2, 2001

Kathleen McKeough                   June 28, 2000



EX-10.12
5
y48042ex10-12.txt
LIST OF PARTICIPANTS IN EXECUTIVE PREREQUISITES


   1
                                                                   EXHIBIT 10.12


                           GTECH HOLDINGS CORPORATION
                   EXECUTIVE PERQUISITES PROGRAM PARTICIPANTS
                             (A CALENDAR YEAR PLAN)


David Calabro *
Howard Cohen ***
Marc A. Crisafulli ***
Stephen Davidson **
Jean-Pierre Desbiens *
James Hosker**
Jean Marc Lafaille *
Kathleen McKeough *
William Middlebrook *
Vino Mody **
Cynthia Nebergall **
Steven Nowick **
William O'Connor **
Jaymin Patel *
William Pieri *
Robert Plourde*
Frederick Reis **
Antonio Carlos Rocha ***
Donald Stanford *
Donald Sweitzer *
W. Bruce Turner *

* Participant for all or a portion of both calendar years 2000 and 2001.
**Participant for all or a portion of calendar year 2000, only.
*** Participant for all or a portion of calendar year 2001, only.



EX-10.14
6
y48042ex10-14.txt
SCHEDULE OF RECIPIENTS EXECUTIVE SEPARATION AGRMT.


   1
                                                                   EXHIBIT 10.14


           SCHEDULE OF RECIPIENTS OF EXECUTIVE SEPARATION AGREEMENT *


David Calabro
Marc A. Crisafulli
Jean-Pierre Desbiens
Kathleen McKeough
Jaymin Patel
Donald Sweitzer


* Schedule sets forth only Executive Officers of the Company who are recipients.



EX-10.16
7
y48042ex10-16.txt
LIST OF PARTICIPANTS IN SUPPLEMENT RETIREMENT PLAN


   1
                                                                   EXHIBIT 10.16


                           GTECH HOLDINGS CORPORATION
              SUPPLEMENTAL RETIREMENT PLAN FISCAL 2001 PARTICIPANTS
                              (A FISCAL YEAR PLAN)


David Calabro
Howard Cohen *
Marc A. Crisafulli *
Stephen Davidson
Jean-Pierre Desbiens
James Hosker
Kathleen McKeough
William Middlebrook
Jaymin Patel
William Pieri
Robert Plourde
Antonio Carlos Rocha *
Donald Stanford
Donald Sweitzer
W. Bruce Turner

* Eligible for participation after close of fiscal 2001.



EX-10.21
8
y48042ex10-21.txt
AGREEMENT


   1

                                                                   EXHIBIT 10.21


                        SERVICE RENDERING AGREEMENT MADE BETWEEN CAIXA ECONOMICA
                        FEDERAL ON THE ONE HAND AND, ON THE OTHER HAND, THE 
                        COMPANY GTECH BRASIL LTDA., AS FOLLOWS:



By the present instrument, the parties:


CAIXA ECONOMICA FEDERAL, a financial institution under the form of a public
company, founded and constituted according to the terms of the Decree-Law n
degrees 759 of 08.12.69, and Decree n degrees 66.303 of 03.06.70, being
presently ruled by the statute approved by the Decree n degrees 2943 of
01.20.1999, registered with the Federal Taxpayer identification number
00.360.305/0001-04, with headquarter at the SBS, Quadra 4, Lote 34, in
Brasilia/DF, here represented by the National Supply Manager Mr. ADAUTO BARBOSA
JUNIOR, Brazilian, married, Identification Number 292.752 - SSP/GO, and Tax
Payer identification number 148.888.311-49, henceforth named CAIXA or
CONTRACTOR, and

GTECH BRASIL LTDA., with headquarters at Alameda Araguacema, 78 - Barueri - Sao
Paulo, SP, registered with the Federal Taxpayer identification number
68.926.628/0001-00, here represented by its Director ANTONIO CARLOS LINO DA
ROCHA, Brazilian, married, identification number 02.172.548 - IFP/RJ and Tax
Payer identification number 098.425.197-91, resident and settled in the capital
city Sao Paulo, henceforth simply named GTECH or CONTRACTED PARTY,

Together named "Parties" or, separately, "Party",

CONSIDERING:

I.      That the CONTRACTED PARTY is registered for supplying and rendering
        services to CAIXA, and that it already maintains in the Lottery Units of
        the CAIXA an installed network of terminals and applications in which
        collection, processing and transmission of data relating to lottery
        systems and some financial services are carried out in on-line real-time
        mode;

II.     That the CAIXA wants to add new terminals to its network of Lottery 
        Units as well as to develop new applications, which will allow the
        availability of new financial services and the improvement of the
        existing lottery service system;

III.    That the interconnection of the teleprocessing network of the CAIXA with
        the network utilized by GTECH will allow the implementation of new
        products and/or applications in the area of lotteries and complementary
        financial services as well, specially the possibility to directly
        consult data and information contained in the network of the CAIXA;

IV.     That the CAIXA should maintain and optimize the services offered to its
        users, which can be done through making available an easy means of
        access to bank services via the 



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        network of Lottery Units, thus enhancing the presence of the CAIXA as a
        social integration factor;

V.      That the now contracted services give origin to an increase of revenues 
        for the CAIXA and allow cost reduction, yielding economic and strategic-
        corporate benefits, thus meeting the administrative principle of
        efficiency;

VI.     That the continuity, without interruption, of the performance of the now
        contracted services assures the maintenance of the contribution to
        increase the portion destined to subsidy for the development of social
        actions, thus accomplishing the administrative principle of public
        interest;

VII.    That the utilization of the network of Lottery Units as an alternative 
        channel of the CAIXA will make feasible a better positioning of this
        institution in the market as a Retail Bank;

VIII.   That the extension and modernization of the bank services in Lottery
        Units would place the CAIXA in highly competitive conditions in relation
        to the Brazilian bank sector, a market where competition is more and
        more stirred up, mainly as a result of the recent increase of foreign
        investments in the sector;

IX.     That the CAIXA has no short term alternative for supplying the services 
        presently foreseen and rendered by the CONTRACTED PARTY;

X.      That the estimated term for the complete substitution of the CONTRACTED 
        network by the winner of the competent bidding to be carried out, will
        be up to January 2003;

XI.     That the need for the CAIXA to avoid a sudden interruption of the
        presently rendered services, which would cause enormous losses of a
        strategic and financial nature and for the CAIXA, in addition to social
        and economic- financial disadvantages for its customers and for the
        Braziliand population in general, which enjoys the social services
        subsidized by a significant portion of the income resulting from lottery
        market;

XII.    That the CONTRACTED PARTY, due to the fact that it has already a
        terminal and application network installed and in operation in the
        Lottery Units of the CAIXA, is the only able to continue providing the
        services uninterruptedly and at the best price for the CAIXA, while the
        preparation of the bidding is not finished, which will promote the
        implementation of the new service rendering model to be introduced;

Decide to close the present Agreement of Service Rendering through direct
contract based on Art. 25, caput, of the Law No. 8.666 of 06.21.93, having
support on juridical opinion and justification as per Process No.
995303033/2000, and in view of the authorization by the Corporate Board of
Directors of the CAIXA of 05.25.00, Act No. , being subject to the norms
foreseen in the Law n degrees 8.666/93, in what it concerns, according to the
clauses and conditions:

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1.      DEFINITIONS

        Notwithstanding other significations which may be foreseen in this
        instrument, the terms listed below should be understood and interpreted
        as follows:

1.1     TRANSACTIONS TYPE 1

        Transactions Type 1 will be considered those transactions carried out by
        the CONTRACTED PARTY for collection of lottery games.

1.2     TRANSACTIONS TYPE 2

        Transactions Type 2 will be considered those transactions performed by
        the CONTRACTED PARTY to make payments of accounts of public service
        concessionaires, payments of collection blocks, residential instalment
        payment booklet, collection of INSS (social security contributions) and
        various conventions.

1.3     TRANSACTIONS TYPE 3

        Transactions Type 3 will be considered those indicated in the paragraph
        below "At Short Term", as well as those listed in the paragraph "At Long
        Term". The implementation of the new "At Long Term" financial
        transactions will occur on the bases agreed upon, provided their
        structure and development costs are similar to those of the new "At
        Short Term" financial transactions. It should be pointed out that the
        transactions listed here serve as a reference for the transaction types
        which may be migrating to the lottery channel, being at the discretion
        of the CAIXA the decision for inclusion and/or modification of
        transactions to migrate to the lottery channel, provided that the
        development complexity of the application software supporting such
        transactions are similar to those foreseen for the transactions
        described here.

        We give below a list of the new financial transactions which will
        migrate to the lottery channel, at short and long terms:

        AT SHORT TERM: UP TO SEPTEMBER 2000

        Draft with Card (Account Current and Savings Account)
        Deposit with Card (Account Current and Savings Account)
        Balance and Statement
        Payment of INSS (social security)
        Capitalization paper
        Easy Draft
        PIS - payment of bonus and profit - this financial transaction, at the
        discretion of the CAIXA, may be implemented along the year 2001.

        AT LONG TERM: STARTING FROM JANUARY 2001

        PIS - Inquiries through Card 
        FGTS - Draft 


                                      -3-

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        FGTS - Requisition for draft
        Unemployment insurance - Inquiries 
        FGTS - Balance of bound accounts
        Credit cards 
        FGTS - Register alteration forms 
        Transfer of values among accounts 
        Blocking/cancellation of astray/stolen card
        Savings account opening
        Pledge renewal
        Pledge - Payment of loan
        Electoral justification

1.4     TRANSACTION TYPE STATEMENT

        It is a transaction inserted into Type 3, the remuneration of which
        varies according to the number of lines to be printed.

1.5     TRANSACTION TYPE 4

        It is the transaction of declarations of those who are exempted from
        income tax, which are presented at the networkd of lottery houses, using
        the network of the CONTRACTED PARTY.

1.6     TRANSACTION TYPE 5

        It is the sales transaction of authorized numbers for the qualification
        of prepaids.

1.7     PERIOD OF SUBSTITUTION

        The substitution period will be defined as the time period in which the
        winner of the bidding to be carried out will begin the installation of
        his network and simultaneously the CONTRACTED PARTY will begin to remove
        the installation of his processing terminals and systems. This period
        will be defined a posteriori between the CAIXA and the CONTRACTED PARTY.

1.8     PRESENT TRANSACTIONS

        They are transactions which are presently being collected at the Lottery
        Units by the Gtech network. We give below the listing of such
        transactions:

        LOTTERY PRODUCTS:
        Megasena
        Quina
        Supersena
        Lotomania
        Loteria Esportiva
        Bolao Federal
        Bolsa Federal
   
                                      -4-
     
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        Control of prize-winning tickets of Federal Lottery
        Control of prize-winning tickets of Instantaneous Lottery

        FINANCIAL PRODUCTS:
        Conventions with:
        Municipalities
        Concessionaires of public services (water, power, telephone...)
        Government Entities (IPVA, IPTU, DPVAT) 
        Passwords for prepaid cards Bingo and similar games 
        Capitalization titles (X-CAP) 
        Declaration of those who are exempted from income tax 
        GPS 
        Habitation 
        Bank collection PCI 
        Savings account deposit

1.9     SERVICE SHOPS

        They are shops for technical service to the Lottery Units, and they are
        distributed all over the national territory, under the responsibility of
        the CONTRACTED PARTY.

2.      PURPOSE

2.1     The present Contract purpose is to render following services: (i)
        development, implementation and operationability of the systems of
        Lotteries of the CAIXA in the "On-Line Real Time" mode; (ii)
        development, implementation and operationability of new products and
        services delegated by or agreed with the CAIXA; (iii) services relating
        to prize tickets of the Brazilian Federal Lottery and the Brazilian
        Federal Instantaneous Lottery; (iv) receipt of accounts of public
        service concessionaires and other payments made at the network of
        resellers; (v) collection, transmision and processing of financial
        transactions collected at the lottery units; (vi) services of receiving
        declarations of exempted from income tax; (vii) services of sales of
        authorized numbers for qualification of prepaids.

3.      PRICE

        For the perfect execution of the services object of this Contract the
        CAIXA will pay to the CONTRACTED PARTY following values:

3.1     As a compensation for the performance of transactions Type 1, carried
        out in the CAIXA channel and transmitted and processed by the CONTRACTED
        PARTY, the CAIXA will pay to the CONTRACTED PARTY a commission
        equivalent to 5.75% (five point seventy-five per cent) of the collected
        gross value, deducted the additionals foreseen in law, calculated
        weekly.

                                      -5-

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3.2     As a compensation for the accomplishment of each financial transaction
        of the Tipe 2, as defined in item 1.2 of DEFINITIONS, carried out in the
        CAIXA channel and transmitted and processed by the CONTRACTED PARTY, the
        CAIXA will pay to the CONTRACTED PARTY a fixed tariff of R$ 0.15
        (fifteen cents of Real) per transaction.

3.3     As a compensation for the accomplishment of each financial transaction 
        of the Tipe 3, as defined in item 1.3 of DEFINITIONS, carried out in the
        CAIXA channel and transmitted and processed by the CONTRACTED PARTY, the
        CAIXA will pay to the CONTRACTED PARTY a decreasing tariff, following
        scale being observed: 

        Up to 134,000,000 transactions per year:                       R$ 0.15 per transaction 
        From 134,000,000 to 201,000,000 transactions per year:         R$ 0.14 per transaction 
        Over 201,000,000 transactions per year:                        R$ 0.13 per transaction

3.4     Invoicing will be issued weekly.

3.5     After the installation of the 6500 terminals mentioned in clause 7.1.1
        has been concluded, and the qualification of same for the achievement of
        the financial transactions requested by the CAIXA, the counting of the
        term will start, during which the CAIXA assumes the obligation to assure
        the minimum remuneration equivalent to 100 million transactions Type 3
        per year.

3.6     During the period mentioned in item 3.5 above, the CAIXA assumes the
        obligation to remunerate the transactions Type 3 according to the
        remuneration table mentioned in item 3.3 until conclusion of one year
        period, when the counting of the volumes of transactions Type 3 will
        start again.

3.7     Should it be found out that, at the end of the annual result
        calculation, duly homologated by the CAIXA, the remuneration to the
        CONTRACTED PARTY has been inferior to the 100 (hundred) million
        financial transactions of Type 3 (according to the paragraph
        DEFINITIONS), the CAIXA will assure to the CONTRACTED PARTY, for that
        annual period, the complement of its remuneration, for it to obtain a
        value equivalent to a volume of 100 (hundred) million financial
        transactions Type 3 in the period referred to.

3.8     The concession of the guaranty referred to in previous item will be
        rendered effective only out of the substitution period (observed the
        provision of the ATTACHMENT V) and provided that: (a) the 6500 (six
        thousand and five hundred) financial terminals mentioned in
        subparagraphs "i" and "ii" of subitem 7.1.1 below are duly installed in
        the present agents; (b) the CONTRACTED PARTY is complying with all
        obligations under this Contract, without limiting itself to the
        execution of all contracted services; (c) the terminals are installed
        and qualified to carry out all financial transactions, the technical
        specifications of which have been given to the CONTRACTED PARTY within
        the terms foreseen in this instrument.

        3.8.1  During the period of the network substitution, the CAIXA will
               assure a Type 3 transaction volume proportional to the number of
               terminals of the CONTRACTED PARTY which are still operating the
               collection of these 


                                      -6-
   7

               transactions, taking as a base the 100 million transactions
               warranted to the whole network of installed financial terminals.

        3.8.2  From the 100 million Type 3 transactions warranted by the CAIXA
               will be deducted the transaction volumes which have not been
               carried out due to problems under responsibility of the the
               CONTRACTED PARTY.

3.9     As a compensation for the accomplishment of each financial transaction
        of the Tipe 4, as defined in item 1.5 of DEFINITIONS, carried out in the
        CAIXA channel and transmitted and processed by the CONTRACTED PARTY, the
        CAIXA will pay to the CONTRACTED PARTY a fixed tariff of R$ 0.20 (twenty
        cents of Real) per transaction, taking into consideration that a
        reduction or total elimination of critical transactions will be
        negotiated with the federal revenue.

3.10    As a compensation for the accomplishment of each financial transaction
        of Tipe 5, as defined in item 1.6 of DEFINITIONS, carried out in the
        CAIXA channel and transmitted and processed by the CONTRACTED PARTY, the
        CAIXA will pay to the CONTRACTED PARTY a fixed tariff of R$ 0.25
        (twenty-fice cents of Real) per transaction, and the parties, in the
        interest of the CAIXA, will be engaged in negotiating a decreasing
        tariff table in terms of volume.

3.11    For statement type transactions, the remuneration will take into
        consideration the number of lines to be printed, as follows:

               up to 10 printed lines       R$ 0.15 per statement;
               over 10 printed lines        R$ 0.15 per statement, plus 0.0056 
                                            every three additional lines.


        3.11.1 The CONTRACTED PARTY is obliged to assure/make available a
               maximum of (30) lines per statement.

3.12    The prices are unadjustable, an annual re-agreement being permitted
        which should have, as basic parameters, the quality and the prices in
        force in the market for the performance of the contracted services,
        under the legally accepted criteria.

3.13    The CONTRACTED PARTY remuneration will be calculated based exclusively
        on the transactions collected in the data communication network
        installed by the CONTRACTED PARTY itself.

4.      PAYMENT FORM

4.1     The CAIXA will make weekly payment to the CONTRACTED PARTY, on the 3rd
        (third) working day subsequent to each week of effectively performed
        services.

        4.1.1  The payment referred to in this item will be made through credit
               to the CONTRACTED PARTY account current in an agency of the
               CAIXA.

                                      -7-
   8

        4.1.2  The payment referred to in this item will only be made if the
               CONTRACTED PARTY is fully complying with all its contractual
               obligations and after proper checking and respective
               homologation, by the CAIXA, of following documents to be
               submitted by the CONTRACTED PARTY:

               (i)    bill-invoice to be weekly issued by the CONTRACTED PARTY,
                      corresponding to the total services rendered during the
                      same period, concomitantly to the sales closing of the
                      lottery games of each week;

               (ii)   weekly reports generated by the lottery system; and

               (iii)  documents proving acquittance of the liabilities to INSS
                      (Social Security) and FGTS (Fund for Work Time), relating
                      to the month immediately previous to the data foreseen for
                      the payment referred to in this item.

               (iv)   No payment will exempt the CONTRACTED PARTY from its
                      liabilities and obligations, nor will it imply a
                      definitive acceptance of the services.

        4.2    In the case the payment term established in the previous subitem
               will be surpassed, the due value will be financially updated
               based on the financial index in force, from the date foreseen for
               payment up to the date of the effective payment.

        5.     PERIOD OF VALIDITY OF THE CONTRACT

        5.1    The Contract will be in effect up to January 13, 2003, as from 
               the date of its signature.

        5.2    The term foreseen in item 5.1 can be extended at the exclusive
               discretion of the CAIXA, respected the limitations of legal
               nature, by a period necessary for the complete substitution of
               the CONTRACTED PARTY network with the network of the winner of
               the bidding to be carried out.

        5.3    During the entire period of an eventual term extension, the same
               contractual conditions as described in this contract will be
               applied.

6.      BUDGET RESOURCES

               The expenses resulting from the act of contracting will be
               charged on account of the budget allowance foreseen in the rubric
               "Expenses with Execution of Data Processing Services" - Account
               No. 53.03.11.

7.      PERFORMANCE OF THE SERVICES

        7.1    INSTALLATION OF THE TERMINALS

        7.1.1  The CONTRACTED PARTY will supply and completely install following
               terminals:

                                      -8-
   9

               (i)    1,700 (one thousand and seven hundred) new terminals
                      having the capacity to achieve lottery and financial
                      transactions (as described in item "Definitions"),
                      provided with optical readers, according to technical
                      specifications presented in the ATTACHMENT I of this
                      Contract, to be installed in the already existing Lottery
                      Units;


               (ii)   4,800 (four thousand and eight hundred) new terminals
                      without optical readers, according to technical
                      specifications presented in the ATTACHMENT I of this
                      Contract, having the capacity to achieve financial
                      transactions (described in item "Definitions"), to be
                      installed in the already existing Lottery Units;


               (iii)  800 (eight hundred) new terminals having the capacity to
                      achieve lottery and financial transactions (as described
                      in item "Definitions") in new Lottery Units, in cities
                      already attended by the network, observed the provision in
                      the ATTACHMENT I below, to be installed in new Lottery
                      Units;


               (iv)   2,000 (two thousand) new terminals having the capacity to
                      achieve lottery and financial transactions (as described
                      in item "Definitions"), provided with optical readers,
                      according to technical specifications presented in the
                      ATTACHMENT I of this Contract, to be installed in the new
                      Lottery Units, in conformity with the installation
                      schedule presented in the ATTACHMENT 11 B.


        7.1.2  The execution of the works of supply and installation of
               terminals referred to in subitems 7.1.1 above, should strictly
               observe the beginning and end terms specified in the
               "Installation Schedule of the Terminals" mentioned in ATTACHMENT
               II of this Contract.

        7.1.3  The CONTRACTED PARTY, observed the provision of the ATTACHMENT
               VI, will develop and implement the physical connection of its
               processing center with the processing center of the CAIXA, so as
               to assure that the financial transactions can be carried out
               through the terminals to be installed in the data communication
               network of the CONTRACTED PARTY.

        7.1.4  The CONTRACTED PARTY will develop and make available all
               application software necessary for the performance of the
               financial transactions of items 1.1, 1.2 and 1.3 of
               "DEFINITIONS", in up to 80 (eighty) net days starting from the
               date in which it receives the specifications of each new
               financial transaction, and the CAIXA will have an up to 10 (ten)
               net days term for the homologation of the applications software
               developed by the CONTRACTED PARTY.


                                      -9-
   10

        7.1.5  The CONTRACTED PARTY will also make available a pilot terminal,
               according to the technical specifications given in the ATTACHMENT
               I of this Contract, until June 10, 2000, for the beginning:

               (i)    of the homologation process for the application software 
                      which are being developed;
               (ii)   of the training of Lottery Undertakers, as established in 
                      this Contract.  

        7.1.6  The penalty imposed for eventual delays in the installation terms
               foreseen in this item will be proportional to the number of days
               in delay, and will be applied according to the provision of
               Clause 11 below.

        7.1.7  Delays in the implementation of the connections between the Data
               Processing Center of the CONTRACTED PARTY and that of the CAIXA,
               which would delay the beginning of the operation of the terminals
               to be installed and/or impair the qualification of lottery or
               financial transactions, will subject the CONTRACTED PARTY to the
               same fine foreseen in the previous subitem.

        7.1.8  Delays resulting from non-forwarding of addresses in a due time
               according to schedule attached, and from the agent unavailability
               to install and maintain, provided this is duly proved, will
               exempt the CONTRACTED PARTY from whatsoever responsibilities
               and/or penalties.

7.2     SYSTEM DEVELOPMENT

        7.2.1  The CONTRACTED PARTY will develop its terminals for financial and
               lottery transactions collection according to specifications
               described in the ATTACHMENT I of this Contract, meeting the terms
               stipulated in the "Installation Schedule of the Terminals",
               presented in the ATTACHMENT II of this Contract.

        7.2.2  The CONTRACTED PARTY will assure that the terminals developed
               according to previous item will be able to achive all financial
               and lottery transactions specified in item "DEFINITIONS" of this
               Contract.

        7.2.3  The CONTRACTED PARTY will develop all necessary applications for
               the terminals to be qualified to perform desired transactions
               according to item "DEFINITIONS" of this Contract.

        7.2.4  The CONTRACTED PARTY will assure that the terminals to be
               installed will be qualified to perform, in the maximum term of 90
               (ninety) net days starting from the signature of this Contract,
               any of the financial and lottery transactions which are already
               presently carried out in the Lottery houses.

              7.2.4.1 The CONTRACTED PARTY will also assure that the terminals
                      to be installed will be qualified to perform financial
                      transactions which present a structure similar to that of
                      the transactions Type 1, 2, 3, 4, and 5, being 
    

                                      -10-
   11


                      sure that such terminals should be able to perform such
                      transactions in up to 90 (ninety) net days starting from
                      the date of presentation, by the CAIXA, of the
                      specifications of the product to be developed.

              7.2.4.2 Any alterations, which may cause a substantial impact on
                      the time of development of the product specifications to
                      be made available referred to in previous item, will imply
                      a new term counting to be negotiated between the Parties,
                      which can not exceed 90 (ninety) days.

              7.2.4.3 The CONTRACTED PARTY will have a 10 (ten) net days term
                      from the date of presentation of the technical
                      specifications by the CAIXA, to express its opinion about
                      the data sufficiency for the respective application
                      development. Non-pronouncement by the CONTRACTED PARTY
                      within this specified term will be considered, for
                      contractual effect, as an indication of information
                      sufficiency for the achievement of the application
                      development works.

        7.2.5  The penalty imposed for eventual delays in the terms for the
               development of foreseen applications will be proportional to the
               number of days in delay, and will be applied according to the
               provision of Clause 11 below.

        7.2.6  Eventual problems or technical failures in the applications
               developed by the CONTRACTED PARTY, which may hinder their correct
               function and prevent the accomplishment of lottery or financial
               transactions, will be subjected to penalties according to Clause
               11 below.

        7.2.7  The CONTRACTED PARTY will carry out due corrections of the
               software applications, which may be deemed necessary to meet any
               legal or regulation obligation, within the term specified in the
               respective norm, with no additional cost for the CAIXA, during
               the period of validity of this Contract.

7.3     TRAINING

        7.3.1  The CONTRACTED PARTY will give complete training to the Lottery
               Undertakers, according to the training program mentioned in the
               ATTACHMENT III, in the houses of the Lottery Units, at the time
               of the terminal installation, for them to be able and prepare
               their employees to operate the terminals and the applications to
               be developed.

              7.3.1.1 Training should be given in a maximum term of 2 (two) net
                      days starting from the installation date of the new
                      terminals.

        7.3.2  The penalty imposed to eventual delays in the schedule foreseen
               in previous item will be proportional to the number of days in
               delay, and will be applied according to provision in Clause 11
               below.

        7.3.3  Any failure caused by the CONTRACTED PARTY in the qualification
               training of the CAIXA and/or Lottery Undertakers for them to
               operate the terminals and 

                                      -11-
   12

               applications, will be considered as a delay in the terminal 
               installation, and will be subject to penalty as described in 
               subitem 7.1.6 above.

7.4     SUPPORT AND MAINTENANCE SERVICES

        7.4.1  The CONTRACTED PARTY will offer to the CAIXA and Lottery
               Undertakers, during the whole period of validity of this
               Contract, permanent suuport services and maintenance of the
               terminals and applications according to the Attachment IV, both
               for the already installed terminals as well as for those to be
               installed.

        7.4.2  The penalty for eventual delays in the term foreseen in this item
               will be proportional to the number of days in delay, and will be
               applied according to provision in Clause 11 below.

7.5     SYSTEM PERFORMANCE

        7.5.1  The CONTRACTED PARTY assures to the CAIXA that the network
               response time will meet the technical specifications mentioned in
               the ATTACHMENT VII.

        7.5.2  The system performance deterioration, as per item 7.5.1, will
               subject the CONTRACTED PARTY to penalty to be calculated based on
               the number of days that the network performance (defined in the
               ATTACHMENT VII) has impaired a determined activity, in terms of
               volume of bets and/or financial transactions, compared with the
               normal collection volumes, based on the reality resulted for
               previous periods according to Clause "Penalties and
               Administrative Sanctions".

7.6     NETWORK DEACTIVATION AND SUBSTITUTION

        7.6.1  The CONTRACTED PARTY will begin the deactivation process of the
               services of collection and processing of lottery and financial
               transactions, according to a term to be agreed upon by the
               Parties.

        7.6.2  During the whole network deactivation and substitution process,
               the CONTRACTED PARTY will assure to the CAIXA the continuity,
               support, maintenance and perfect execution of all contracted
               services, until the network and system of the service rendering
               company which will replace it are duly installed and fully in
               operation.

        7.6.3  The CONTRACTED PARTY undertakes to supply all consolidated data
               of the transactions Type 1, 2, 4 and 5 collected in its network
               to the service rendering company which will replace it, or to the
               CAIXA at discretion of this, according to a term to be agreed
               upon between the Parties.

        7.6.4  The non-accomplishment of the provision of subitem 7.6.3 will
               subject the CONTRACTED PARTY to a fine equivalent to the totality
               of the remuneration calculated based on the totality of the
               transactions collected during the entire period in delay.


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        7.6.5  The CAIXA may suspend or interrupt the remuneration of the
               CONTRACTED PARTY, without detriment to the commination of the
               fines foreseen in Clause 11, legal penalties and indemnification
               from losses and damages, in the case the CONTRACTED PARTY
               obstructs or tries to obstruct, in any way, the transition
               process to the new service rendering company, regardless of the
               effective process implementation.

        7.6.6  The specifications for the interconnection of the networks
               belonging to the CAIXA and to the CONTRACTED PARTY are detailed
               in the ATTACHMENT VI of this Contract.

        7.6.7  Notwithstanding the provision of item 7.6.3 above, the CONTRACTED
               PARTY should supply, whenever requested by the CAIXA, and
               immediately after each of these requests, all the history base of
               files relating to data of lottery and financial services
               processed by the CPNTRACTED PARTY for the CAIXA, in the already
               practiced formats, with no additional charge for the CAIXA.

7.7     NECESSARY INVESTMENTS

        The CONTRACTED PARTY will make all necessary investments for the
        faithful implementation and performance of the contracted services,
        including the costs for the supplying of terminals, development of
        applications, and for the respective installation and infrastructure
        services, development, operation, support and maintenance, as well as
        for all the adjustments necessary for the full and appropriate system
        functioning.

8.      OBLIGATIONS OF THE CONTRACTED PARTY

        Following are the obligations of the CONTRACTED PARTY:

I.      maintain the whole lottery and financial services system "on-line real 
        time", integrally delivering to the CAIXA all intelligence and
        respective logical and physical projects, and make it operational
        together with technicians of the CAIXA;

II.     assume all supplies necessary to the operation, such as leaflets, paper 
        reels, printing tapes, etc., as well as operate and maintain the system
        implemented by it;

III.    maintain terminals, for purpose of audit and system follow-up, in the 
        places indicated by the CAIXA;

IV.     maintain terminals and printers in the Head Office and Lottery Units of 
        the Business Offices of the CAIXA;

V.      allow unrestricted access of employees indicated by the CAIXA to the 
        intelligence and operation of the system, for purpose of audit;

VI.     maintain an attendance office, accredit technical representatives or 
        assign resident technicians, so as to perform maintenance services and
        technical assistance to 

                                      -13-
   14

        equipment which will be assigned for the service execution, in the terms
        and conditions established in this Contract;

VII.    immediately and in writing notify the CAIXA about any abnormality which 
        may be found in the service execution;

VIII.   give the explanations which may be requested by the CAIXA, whose claims 
        should be promptly attended to;

IX.     print on the leaflets, in all contests and with no charge to the CAIXA,
        the advertising determined by it;

X.      install the equipment and software necessary for the work development;

Xl.     install and maintain a safe communication network for terminal 
        connection with the Data Processing Center of the CONTRACTED PARTY;

XII.    train the lottery undertakers and their employees, up to the limit of 06
        (six) people per shop, in the operationality of the terminals;

XIII.   maintain assigned personnel in the Data Processing Center of the 
        CONTRACTED PARTY and in the attendance shops, train and supply field
        services to the lottery undertakers;

XIV.    render marketing advisory service relating to new games, new software, 
        administration in general and operation of the "on-line real time"
        system, the adoption of eventually suggested measures and attitudes
        being at the exclusive discretion of the CAIXA;

XV.     payment to its employees on due date and supply to the CAIXA, whenever 
        requested, copy of the payrolls and of the collection bills of social
        security contribution, FGTS, PIS, tax withdrawn at source, if any, thus
        proving the inclusion of the employees assigned to the execution of the
        contracted services;

XVI.    take care that its employees behave with politeness and courtesy towards
        the CAIXA personnel, customers, visitors and other contracted people,
        being at the discretion of the CAIXA to require the removal and/or
        substitution of those whose behavior is deemed inconvenient;

XVII.   observe and have accomplished the work safety and medicine standards 
        foreseen in the pertinent legislation and bank norms in force at the
        CAIXA;

XVIII.  maintain a head office or representation office in Brasilia/DF, and this
        condition should be proved in up to 10 (ten) days after the date of the
        Contract signature;

XIX.    maintain its superior in each place and shifts where the services will 
        be performed, to coordinate, supervise and command the personnel
        assigned and resolve any questions pertinent to the execution of the
        services, for correction of adverse situations and for the immediate
        attendance to claims/requests of the CAIXA;


                                      -14-
   15


XX.     assume total responsibility for the equipment, furniture and utensils 
        eventually placed at disposal for the service performance, assuring
        their integrity and indemnifying the CAIXA for the expenses for
        corrective maintenance resulting from misuse of same;

XXI.    supply to the CAIXA, observed the specifications indicated by it, 
        formatted files for purposes of audit, whenever requested;

XXII.   inform the CAIXA, for the purpose of control of access to its buildings,
        the name and respective identification card number of the employees
        assigned to the service rendering;

XXIII.  inform the CAIXA, also for the purpose of control of access to its 
        buildings, all occurrences of definitive removals and new employee
        engagements, those being informed within a term of 24 (twenty-four)
        hours and these up to the day of working beginning;

XXIV.   maintain its employees duly identified with name badge when in service 
        in the CAIXA buildings;

XXV.    optimize the "on-line real time" system according to the instructions 
        and folow-up of the System Area of the CAIXA;

XXVI.   answer for the losses, undue reproductions and/or adulterations which 
        may occur in the magnetic documents and files during the period these
        are under its safekeeping;

XXVII.  supervise the perfect accomplishment of the services it is obliged to,
        being integrally up to it the resulting charges, this supervision being
        done independently from that which will be carried out by the CAIXA;

XXVIII. accept the most comprehensive inspection from the CAIXA through its 
        superior representatives, at any time during the period of validity of
        the Contract, being sure this inspection can be made in its
        installations, for the purpose of a strict accomplishment of the
        contractual obligations;

XXIX.   assume all expenses relative to the personnel and to the object of this 
        Contract, excepting those foreseen in it as being on the responsibility
        of the CAIXA;

XXX.    assume all measures and obligations established in the specific 
        legislation of work accidents when, on ocurrences of this kind, its
        employees are victims in the performance of the services or in
        connection with them, even though occurred in the buildings of the
        CAIXA;

XXXI.   provide necessary personnel for the operation of the Data Processing 
        Centers of the Contracted Party and offer field services to repair the
        equipment installed in the "online real time" sales points;

XXXII   carry out the system tests with participation of the CAIXA;



                                      -15-
   16

XXXIII. train CAIXA employees indicated by it as regards the operation and 
        safety of the software system;

XXXIV.  maintain a subsystem which allows control and entry of ticket prizes of
        the Brazilian Federal Lottery and Brazilian Instantaneous Federal
        Lottery, according to conditions established by the CAIXA, and the
        receipt of accounts of public concessionaires and other payments and
        bank services made in the lottery channels;

XXXV.   promote and participate in meetings called together for discussion of 
        points of view about work techniques and methods;

XXXVI.  operate the Date Processing Center of the CONTRACTED PARTY on days   
        and times defined by the CAIXA;

XXXVII. carry out preventive and corrective system equipment maintenance, so as 
        to keep them in a perfect operation condition;

XXXVIII.       carry out maintenance of all software, including installation and
        tests of eventual alterations, according to modifications requested by
        the CAIXA;

XXXIX.  prepare, maintain and provide to the CAIXA operation information
        throughreports and magnetic means, in a periodicity to be defined, of
        all the activities relating to collected lottery transactions; same will
        eventually apply to the management information relating to the
        transactions Type 1, 2, 4 and 5;

XL.     maintain files and records to facilitate at any time inspections and 
        audits of transactions and sales;

XLI.    maintain the system, user and operation manuals up-to-date, having them 
        available for the CAIXA and accredited lottery people;

XLII.   install the new terminals, mentioned in the installation schedule in the
        Attachment II, in the addresses specified by the CAIXA, in the maximum
        term of 60 (sixty) net days starting from the information date by the
        CAIXA;

XLIII.  assume all expenses resulting from removal of goods from the buildings 
        of the CAIXA, Business Offices and sales points for eventual
        substitution of the network of the CONTRACTED PARTY with that of the
        winner of the bidding to be carried out;

XLIV.   faithfully accomplish all contractual stipulations, specially the
        obligations foreseen in Clause 7 above, indemnifying the CAIXA from all
        and whatever loss which may be caused by it, its directors, employees,
        subcontractors or superiors, resulting from non-accomplishment of any
        contractual obligation, without detriment to imposed legal and
        contractual comminations;

XLV.    expand the data communication network, whenever the average response 
        time exceeds the initially established;



                                      -16-
   17

XLVI.   treat the information (data) of the CAIXA in its computer environment, 
        if so defined by the Contractor, for making feasible new products and
        services, assuring a high safety level and absolute secret;

XLVII.  maitain, during the whole execution of the Contract, all the 
        qualification conditions required by law, in compatibility with the
        obligations assumed by it;

XLVIII. at the request of the CAIXA, re-assign already installed lottery agents,
        with no charge, including to the lottery undertakers, observed the
        interstice of a 12 (twelve) month term;

XLIX.   be responsible for the re-assignment of terminals during the 
        installation process of the terminals listed in the ATTACHMENT II,
        according to a composition plan of the platforms of the Lottery Units to
        be defined by the CAIXA;

L.      incorporate new financial services into its system, according to 
        technical specifications provided by the CAIXA;

LI.     as from the receiving confirmation and validation of the numbers 
        authorized for qualification of prepaid telephones in the "off-line"
        category, by the CONTRACTED PARTY to the Telecommunication Operators,
        such telephone numbers will be under the exclusive responsibility of the
        CONTRACTED PARTY, which will assure their integrity both in the central
        system maintenance as well as in the supply to the customer, having also
        to control the already commercialized PINS, of which the
        Telecommunication Operators will be informed through the CAIXA in the
        form foreseen in the own technical specification manual. At the time of
        making the "on-line" category available, this obligation will no more
        apply;

LII.    The CONTRACTED PARTY undertakes to install up to 446 equipment for bet
        collection existing in the network, until February 28, 2001, in
        locations to be defined by the CAIXA and in cities which take part in
        the presently installed network, with no charge to the CAIXA and its
        licencees.

LIM     The CONTRACTED PARTY undertakes to re-install the equipment mentioned in
        item 11.14 below in the maximum term of 30 (thirty) net days after the
        address comunication by the CAIXA.

9.      RESPONSIBILITIES OF THE CONTRACTED PARTY

9.1     FOLLOWING ARE RESPONSIBILITIES OF THE CONTRACTED PARTY:

I.      be responsible for all and whatever damage caused to the CAIXA or to
        third parties, by itself, its directors, employees, subcontractors or
        superiors, resulting from the non-accomplishment of the contractual
        obligations, improper service performance, or failures in the system of
        equipment safety and rendered services, this responsibility not
        excluding or reducing the inspection or follow-up of the services by the
        CAIXA; and

                                      -17-
   18

II.     be responsible as regards the CAIXA for any kind of sanction, fine,
        penalty or any lawsuit which it may be subjected to due to the service
        rendering, as well as due to the laabor contracts of its employees,
        including social, work and social security charges, in addition to tax
        duties, even in the cases involving eventual judicial decisions,
        releasing the CAIXA from any solidarity or responsibility.

9.2     The CONTRACTED PARTY authorizes the CAIXA to deduct the value
        corresponding to the damages referred to directly from the invoices
        pertinent to payments which may be owed, or from the contractual
        guarantee, regardless of whatsoever judicial or extrajudicial procedure.

10.     OBLIGATIONS OF THE CAIXA

        The CAIXA assumes the obligation to:

I.      make the due payments in the conditions established in this Contract;

II.     notify the CONTRACTED PARTY about any irregularity found in the 
        execution of the services;

III.    give or withdraw credentials for sales points, establishing in contract,
        and at its discretion, the terms and conditions for credentials for each
        sales point;

IV.     inform the CONTRACTED PARTY the location addresses for the installation 
        of the terminals in the lottery units;

V.      inspect the sales points for them to be legally licenced for the game 
        sales and rendering of financial services through the terminals and
        communication equipment installed in its shop;


VI.     collect the sales product from each sales point;

VII.    promote the lottery games at its own discretion so as to keep the bettor
        interest, aiming at sales maximization;

VIII.   pay the due prizes of the lottery system;

IX.     provide the technical specifications of new financial products to be 
        incorporated into the data comunication network of the CONTRACTED PARTY;

X.      accomplish the Installation Schedule of the Terminals supplied by the 
        CAIXA, as established in the ATTACHMENT II, the CAIXA having the
        prerogative to modify the schedule referred to according to its
        operation requirements, provided that the installation in the altered
        locations has not yet been requested from the CONTRACTED PARTY;

XI.     homologate the applications developed by the CONTRACTED PARTY in the 
        maximum term of 10 (ten) net days starting from their presentation by
        the CONTRACTED PARTY, under penalty that such applications be considered
        as tacitly homologated;



                                      -18-
   19

XII.    provide the necessary information to authorize the financial 
        transactions, under the penalty of being obliged to pay for the
        transactions which are not concluded due to such contractual
        non-accomplishment by the CAIXA;

XIII.   delay in payment referred to in proposition I of this Clause will imply
        financial updating of the owed value according to the applicable
        legislation in force;

XIV.    inspect the sales point that they are equipped with alternating electric
        current dedicated line and adequate space for the installed terminals to
        regularly function;

XV.     inspect the sales point that they observe the timetable of attendance to
        the public as established by the CAIXA, observed the local municipal
        attitudes.

11.     PENALTIES AND ADMINISTRATIVE SANCTIONS

11.1    For the full or partial Contract non-fulfillment, the CONTRACTED PARTY
        will be subjected to following sanctions, with no detriment to further
        applicable comminations:

1.      admonition;

II.     fine;

Ill.    rescission of the Contract;

IV.     temporary suspension from participating in bidding and temporary 
        impediment to bid with the CAIXA, for a term up to 02 (two) years;

V.      declaration of unability to participate in bidding and contract with the
        Public Administration.



                                      -19-
   20


11.2    The admonition will be optionally applied, at the exclusive discretionof
        the CAIXA, as a censure warning preceding the fine, in the cases of
        infringements considered light, according to the exclusive
        interpretation and convenience of the CAIXA.

        11.2.1 The CONTRACTED PARTY will be subjected to the fine of 3% (three
               per cent) on the value of his weekly remuneration, when occurring
               the third application of the admonition penalty.

11.3    The fines due to delay in the execution of the services will be applied
        based on the number of transactions which have not been completed as a
        result of the respective contractual non-fulfillment, the calculation
        forms described in the ATTACHMENT V of this Contract being observed,
        without detriment to the penalty application foreseen in subitem 7.6.4
        above.

        11.3.1 The fine referred to in this item will be composed of following
               parcels:

               (i)    R$ 0,075 (seventy-face tenths of cents of Real) per
                      foreseen and not performed financial transaction, observed
                      the provision in the ATTACHMENT V; and

               (ii)   2,875% (two point eight hundred and seventy-five per cent)
                      of the value, in Reais, corresponding to the amount of
                      lottery games foreseen and not performed each day,
                      observed the provision in the ATTACHMENT V.

11.4    The fines due to delays over 24 (twenty-four) hours in attending calls
        for corrective maintenance of the equipment assigned in the CAIXA or in
        the sales points will subject the CONTRACTED PARTY to a fine equal to
        50% (fifty per cent), calculated on the total sales average of the last
        4 (four) weeks of the sales point, and it will be collected double as
        much in the cases of relapse within 30 (thirty) net days.

11.5    The fines due to delays over 2 (two) working hours in attending calls
        for corrective maintenance in the Base Radio Stations (ERBs) will
        subject the CONTRACTED PARTY to a fine equal to 17% (seventeen per
        cent), calculated on the total sales average of the last 4 (four) weeks
        of the sales point, and it will be collected double as much in the cases
        of relapse within 30 (thirty) net days.

11.6    For the remote Base Radio Stations, the same attendance terms described
        in the item 11.5 above are at first agreed upon, the parties undertaking
        to later discuss longer terms for the attendance to such Base Radios.

11.7    The system standstill for any reason during more than 2 (two) working
        hours, due to a fault not imputable to the CAIXA, will imply a fine
        application corresponding to 4% (four per cent) per standstill day,
        calculated on the total amount of weekly collection of the damaged
        lottery sales points, settled in the immediately previous week.

11.8    If a 20 (twenty) net days delay occurs in the execution of any
        contractual obligation due to a fault of the CONTRACTED PARTY, folloing
        may occur at the exclusive discretion 


                                      -20-
   21

        of the CAIXA: (i) rescission of the Contract, without detriment to the
        legal and contractual comminations; or (ii) guarantee loss in favor of
        the CAIXA.

11.9    If eventual total or partial standstills of the equipment occur,
        involving hardware or software failures, which may cause eventual
        alterations of the times of drawing of lots and/or the non-inclusion
        into the system of the already made bets, due to a fault imputable to
        the CONTRACTED PARTY, this will assume all the charges supported by the
        CAIXA as a result of such adverse situations.

11.10   The fine collection will be made through deduction from the invoice
        payment, if this is presented after its application, or from the
        guarantee itself, or also directly collected from the CONTRACTED PARTY.

11.11   The sanctions foreseen in the propositions I (admonition), IV (temporary
        impediment to bid) and V (declaration of unability), of item 11.1, do
        not prevent the commination of the contractual fines, indemnification
        for losses and damages or penal sanctions of a legal nature.
11.12   Penalties will only be applicable to the CONTRACTED PARTY as regards the
        non-accomplishment of the obligations related to the implementation
        services of the connections between the DPC of the CONTRACTED PARTY and
        that of the CAIXA, causing delay in the beginning of the new terminal
        operation and/or in the new transaction qualification, in the case such
        delay is due to an act exclusively imputable to the CONTRACTED PARTY.

11.13   The delay in the implementation of the terminals considered in the
        schedule of the ATTACHMENT II B will subject the CONTRACTED PARTY to a
        fine corresponding to 6% (six per cent) of the average monthly
        collection of the already installed terminals, calculated based on the
        data of the last 6 (six) months.

11.14   The standstill, single or exclusively relating to the sales services of
        numbers of prepaid cards qualification, for more than 2 (two) hours, due
        to whatever reason which can evidently be imputable to the CONTRACTED
        PARTY, excepting the cases of acts of God, will imply a fine payment
        corresponding to 20% (twenty per cent) per standstill day, applied on
        the total amount of remuneration of the CONTRACTED PARTY for these
        services at the damaged lottery sales points, collected in the same day
        of the immediately previous week.

12.     PENAL ILLICIT ACTS

12.1    The penal infringements, typefied in the Law No. 8.666/93, will be
        object of administrative and judicial procedure in the legally foreseen
        form, without detriment to the other applicable comminations.

13.     CONTRACTUAL GUARANTEE


                                      -21-
   22

13.1    For the purpose of this Contract execution, the CONTRACTED PARTY
        provides a guarantee in the form of caution money, in the amount of R$
        20,000,000.00 (twenty million Reais).

13.2    On the provided caution money will solely be applied the updating
        corresponding to the variation index of the savings account book for the
        lst day of the month, excluding the interest, proportionally calculated,
        when it is the case, counting from the deposit date up to its effective
        calculation.

13.3    The guarantee should be completed to its integrity, if it is the case,
        whenever a value relating to a contractual fine is deducted from it.

13.4    The guarantee will be released after the perfect accomplishment of the
        Contract, provided that all contracted terms, clauses and conditions are
        fulfilled.

13.5    The total or partial guarantee loss in favor of the CAIXA, due to
        non-fulfillment of the contractual obligations, will be made in full
        right, regardless of any fudicial or extrajudicial notice.

13.6    At any time, through communication to the CAIXA, the substitution of the
        guarantee may be accepted, under observation of the modalities foreseen
        in the Law No. 8666, of June 21, 1993.

14.     INSPECTION

14.1    During the service execution, the CAIXA, directly or through the person
        indicated by it, has the right to inspect the faithful fulfillment of
        the Contract provisions.

        14.4.1 The CAIXA will record in a report the deficiencies found in the
               service execution, notifying the CONTRACTED PARTY for the
               immediate correction of found irregularities, without detriment
               to the application of the penalties foreseen in this Contract and
               in the Law No. 8.666/93.

15.     FISCAL INCIDENCES, CHARGES, INSURANCES, ETC.

Following charges are exclusive responsibility of the CONTRACTED PARTY:

I.      all duties, taxes, improvement contributions, rates and prices owed to 
        Federal, State and Municipal Treasury Revenues, resulting from the
        execution of the services object of this Contract;

II.     the contributions owed to the Social Security, INSS, FGTS, labor 
        charges, insurance premia and charges resulting from work accidents,
        emoluments and other expenses which may be necessary for the execution
        of the services object of this Contract;

III.    all and whatever rate or emolument owed to any federal, state or 
        municipal entity, resulting from the execution of the services object of
        this Contract.


                                      -22-
   23

16.     NON-FULFILLMENT AND RESCISSION OF THE CONTRACT

16.1    The total or partial non-fulfillment of the contract gives occasion to
        the Contract rescission, with the contractual consequences and those
        foreseen in Law.

16.2    Following motives give occasion to Contract rescission, regardless of
        notification or judicial or extrajudicial interpretation:

I.      total or partial non-fulfillment, by the CONTRACTED PARTY, of any of the
        obligations/responsibilities foreseen in this Contract;

II.     total or partial transfer of the Contract without the previous consent 
        of the CAIXA;

III.    reiterated faults or defects in the execution of the services;

IV.     bankruptcy of the CONTRACTED PARTY;

V.      company dissolution;

VI.     the social alteration or the modification of the company objective or 
        structure which, in the judgment of the CAIXA, may impair the execution
        of the Contract;

VII.    the slowness in its accomplishment, which brings the CAIXA to presume 
        the nonexecution of the service;

16.3    Should the contractual rescission occur based on the provisions I and
        VII above, the Guarantee will revert in favor of the CAIXA, without
        detriment to further applicable indemnifications.

16.4    Independently of any judicial or extrajudicial procedure by the CAIXA,
        the rescission of the Contract will imply the retention and assumption
        of the credits resulting from Contract, up to the limit of the damages
        caused to the CAIXA, without detriment to the sanctions foreseen in this
        Contract and in Law, until complete indemnification from caused damages.

17.     CONFIDENTIALITY

17.1    The CAIXA and the CONTRACTED PARTY are aware that they should, by
        themselves, their directors, employees, subcontractors or superiors,
        keep the most complete and absolute SECRET, as regards the data, about
        information or documents of any nature shown, handled or by any form or
        way they may take notice of, by reason of the services now contracted,
        therefore remaining, by force of law, civilly and criminally responsible
        for their undue disclosure, negligent or incorrect utilization, without
        detriment to the responsibility for losses and damages they may cause
        and the imposed contractual comminations.

                                      -23-
   24

18.     FINAL PROVISIONS

18.1    In the counting of the terms established in this Contract the beginning
        day will be excluded and the due day will be included.

18.2    The terms referred to in this Contract begin and expire only in working 
        day of the CAIXA.

18.3    Any and whatever work achieved by the assigned people, directly or
        indirectly related with the signed Contract object, will be repassed to
        the CAIXA concomitantly to the development of its steps or phases, duly
        documented, on headletter paper of the CONTRACTED PARTY, in usual
        language and standard of the CAIXA.

18.4    During the period of validity of the Contract the CAIXA will have
        unrestricted access to the system, and the CONTRACTED PARTY should
        notify all details of the development, implementation and
        operationability, for purposes of management of the services object of
        the Contract.

18.5    In case of Contract rescission for a reason not assigned to the CAIXA,
        this reserves the right to keep the possession and continue utilizing
        the system with all the resources necessary for the lottery services
        maintenance, including the network and all hardware and software
        equipment which have been implemented by the CONTRACTED PARTY, for the
        necessary and sufficient period of time for the new contracting process,
        with no charges to the CAIXA.

18.6    The CONTRACTED PARTY is forbidden to use the Contract as caution or
        utilize it for any financial operation without previous and express
        authorization by the CAIXA.

18.7    The CAIXA will define an exclusive representative for interlocution with
        the CONTRACTED PARTY, who will be the SOLE authorized to negotiate
        questions relating to the supply comprehended by this Contract.

19.     ACKNOWLEDGE OF THE RIGHTS OF THE CAIXA

19.1    The CONTRACTED PARTY acknowledges the rights of the CAIXA, in the case 
        of administrative rescission foreseen in Art. 77 of the Law No.
        8.666/93.

20.     COURT

        The Judicial Section of the Federal Justice of the Federal District
        shall be competent to settle the questions resulting from this Contract.

        So, having as just and contracted, the CAIXA and the CONTRACTED PARTY
        sign the present term in 04 (four) copies of equal content and form, in
        the presence of the below signed witnesses.


                                      -24-
   25


                                            Brasilia-DF May 26, 2000

                                            (Signed)

                                            ----------------------------
                                            by CAIXA ECONOMICA FEDERAL




                                            (Signed)

                                            ----------------------------
                                            by     GTECH BRASIL LYDA.




WITNESSES:





























                                   ATTACHMENTS




                                      -25-
   26


TECHNICAL SPECIFICATIONS OF THE NEW TERMINALS

        Installation Schedule of the Terminals



        Training Schedule

        Maintenance Period

        Fine Calculation Form

        Connection with the Data Processing Center of the CAIXA

        Network Response Time

        Projections of the Transaction Volumes

ATTACHMENT I

        TECHNICAL SPECIFICATIONS OF THE NEW TERMINALS
                               HARDWARE COMPONENTS
                               -------------------
        CPU
Processor:                          AMD K6-lI 450 MHz
Memory:                             64 MB
Hard disk:                          4.3 GB
Ports:                              1 parallel, 3 serial
Boards:                             1 multi-serial card with 3 ports
Feed source:                        110/220 Volts
Dimensions:                         420 mm (length = L) x 150 mm (width = W) x 350 mm
(height = H)
Weight:                                     6.0 kg
        Printer
Characters:                         Bidirectional impact and authenticating printer,
                                    modified by the manufacturer to meet specific
                                    requirements such as reel width 3.25" and specific
                                    characters implemented in the firmware.
Interface:                          Serial DB-9
Feed source:                        110/220 Volts
Dimensions:                         220 mm L x 206 mm W x 120 mm H

                                      -26-
   27


Weight:                                     2.7 kg



OMR (OPTICAL MARK READER)
-------------------------
Reader:                             with: 3.25 inches, 12 channels, spacing among channels
                                       '/."
Interface:                          Serial DB-9
Feed source:                        110/220 Volts
Dimensions:                         185 mm L x 170 mm W x 105 mm H
Weight:                             4.1 kg (including source)

        No-break
Capacity:                                   500 VA
Interactive technology
Input voltage:                      110 or 220 Volts

        Monitor
Features:                                   9" monochromatic
Feed source:                        110/220 Volts
Dimensions:                         245 mm L x 235 mm W x 220 mm H
Weight:                                            3.5 kg

        Barcode Reader and CMC-7
Features:                                   Half-automatic reader of CMC-7 and Barcode
Interface:                                  Serial RJ-45
Feed source:                        110/220 Volts
Dimensions:                         220 mm L x 70 mm W x 90 mm H (without tray for
documents)
Weight:                                     480 grams

        Keyboards
1)  Operator:                       84 configurable keys
    Interface:                      Serial MINI DIM
    Dimensions:                     270 mm L x 230 mm W x 80 mm H
    Weight:                         535 grams

2)  Customer:                       Keyboard PIN 12 keys with display LCD 2 x 16, Magnetic
                                    Card Reader Track 1-2, Serial Communication (DB-9),
                                    Triple Cryptograpgy DES and Smart Card Reader EMV
                                    compatible.
Feed source:                        110/220 Volts



                                      -27-
   28


                               FINANCIAL TERMINAL



PRINTER
--------
Graphic, matricial printer 46/56
Document authentication                                   CPU
                                                          ---
                                            Operation System Windows NT
                                            workstation
Gtech.                                      Microprocessor AMD K6-II 450 MHz

64 Mbytes memory

                                    4.3 Gbytes HD
                                    4 ports multiserial board
                                    Total of ports
                                    Parallel - 01                BARCODE AND CMC
                                                                 ---------------
7
                                    Serial - 07                  READER
                                                                 ------
OPTICAL MARK READER                                              
-------------------                                              Half-automatic
                                                                 Barcode CMC-7
                                                                 Reader, Interface
                                                                 RS-232C RJ-45
                                                                 Feed source full range




                            Monitor 9" monochromatic
                            ------------------------




MAGNETIC CARD
       READER                                                    KEYBOARD





                                      -28-
   29




                                 ATTACHMENT II A

                     INSTALLATION SCHEDULE OF THE TERMINALS



-------------------------------------------------------------------------------------------------
     Region       D+90       D+120       D+150      D+180       D+210      D+240       Total
-------------------------------------------------------------------------------------------------
       AC                                                               5                      5
-------------------------------------------------------------------------------------------------
       AL                                                              52                     52
-------------------------------------------------------------------------------------------------
       AM                                                              44                     44
-------------------------------------------------------------------------------------------------
       AP                                                               2                      2
-------------------------------------------------------------------------------------------------
       BA                           100        100         102                     37        339
-------------------------------------------------------------------------------------------------
       CE                                      100          62                     20        182
-------------------------------------------------------------------------------------------------
       DF                                                                                      0
-------------------------------------------------------------------------------------------------
       ES                            50         65                                 13        128
-------------------------------------------------------------------------------------------------
       GO                           100        150         100         19          45        414
-------------------------------------------------------------------------------------------------
       MA                                                              61           8         69
-------------------------------------------------------------------------------------------------
       MG                                      450         357                    109      1,016
-------------------------------------------------------------------------------------------------
       MS                                                              61           8         69
-------------------------------------------------------------------------------------------------
       MT                                                              57           8         65
-------------------------------------------------------------------------------------------------
       PA                                                   52         34          10         96
-------------------------------------------------------------------------------------------------
       PB                                                              64           8         72
-------------------------------------------------------------------------------------------------
       PE                            50        100          35                     22        207
-------------------------------------------------------------------------------------------------
       PI                                                              47                     47
-------------------------------------------------------------------------------------------------
       PR                                      250         248                     61        559
-------------------------------------------------------------------------------------------------
       RJ                           100        231         332                     79        742
-------------------------------------------------------------------------------------------------
       RN                                                              47           8         55
-------------------------------------------------------------------------------------------------
     

                                      -29-
   30
-------------------------------------------------------------------------------------------------
       RO                                                              25                     25
-------------------------------------------------------------------------------------------------
       RR                                                               3                      3
-------------------------------------------------------------------------------------------------
       RS                                                  239        206          59        504
-------------------------------------------------------------------------------------------------
       SC                                      220                                 25        245
-------------------------------------------------------------------------------------------------
       SE                                                   30         26                     56
-------------------------------------------------------------------------------------------------
       SP               980       1,029                                           280      2,289
-------------------------------------------------------------------------------------------------
       TO                                                              15                     15
-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------
     TOTAL/
     month              980       1,429      1,666       1,657        768        8000      7,300
-------------------------------------------------------------------------------------------------
  Accumulated
     Total              980       2,409      4,075       5,732      6,500       7,300
-------------------------------------------------------------------------------------------------



REMARK: We consider D as the contract signature date.


                                      -30-
   31


                                 ATTACHMENT II B

-------------------------------------------------------------------------------------------------
                      INSTALLATION SCHEDULE OF THE LOTTERY UNITS
-------------------------------------------------------------------------------------------------
                                          2000                                Total
-------------------------------------------------------------------------------------------------
  REGION     JUN      JUL      AUG      SEP      OCT       NOV     DEC
-------------------------------------------------------------------------------------------------
  AC                     4                 4                                     8
----------------------------------------------------------------------------------------------
  AL                    10                17        14                 15       56
----------------------------------------------------------------------------------------------
  AM                     6                11         9                  5       31
----------------------------------------------------------------------------------------------
  AP                                       3         4                  1        8
----------------------------------------------------------------------------------------------
  BA                    47       67                 66      62                 242
----------------------------------------------------------------------------------------------
  CE                    25                31        33      27                 116
-------------------------------------------------------------------------------------------------
  ES                    10        9                  9       4                  32
-------------------------------------------------------------------------------------------------
  GO                    20                22         9                 19       70
-------------------------------------------------------------------------------------------------
  MA                    18                20        35                 22       95
-------------------------------------------------------------------------------------------------
  MG                             64                 55      65         74      258
-------------------------------------------------------------------------------------------------
  MS                    15       10                  4                  3       32
-------------------------------------------------------------------------------------------------
  MT                    17                13        11                 13       54
-------------------------------------------------------------------------------------------------
  PA                    21                22        23                 22       88
-------------------------------------------------------------------------------------------------
  PB                    15       17                 18      23                  73
-------------------------------------------------------------------------------------------------
  PE                    28       24       37                25                 114
-------------------------------------------------------------------------------------------------
  PI                    18       10                 10                 11       49
-------------------------------------------------------------------------------------------------
  PR                    19       29       40                           30      118
-------------------------------------------------------------------------------------------------
  RJ                              3                  2       1          5       11
-------------------------------------------------------------------------------------------------
  RN                    13                18        15      24                  70
-------------------------------------------------------------------------------------------------
  RO                     2                 4         2                  4       12
-------------------------------------------------------------------------------------------------


                                      -31-
   32



-------------------------------------------------------------------------------------------------
  RR                                       3         2                           5
-------------------------------------------------------------------------------------------------
  RS                    15       29       23                30         10      107
-------------------------------------------------------------------------------------------------
  SC                             18       18                35         22       93
-------------------------------------------------------------------------------------------------
  SE                    13       14                  8                  7       42
-------------------------------------------------------------------------------------------------
  SP                             31       48                39         66      184
-------------------------------------------------------------------------------------------------
  TO                    15        6                  5                  6       32
-------------------------------------------------------------------------------------------------

  TOTAL                331      331      334       334     335        336     2000
-------------------------------------------------------------------------------------------------







                                      -32-
   33



                                 ATTACHMENT III

                                TRAINING SCHEDULE

The Field Technician of the CONTRACTED PARTY should give instructions about the
use of all peripherals, handling and operation cares of the new equipment. The
instructions which the technician will give relating to this type of training
take into account that the Undertaker has already knowledge of the lottery
environment.

According to this project, the training will take place immediately after the
installation of the new equipment in the Lottery Unit, for up to 6 (six)
employees, provided they are present on the installation date.

DIDACTIC MATERIAL

        -      Manual (it will be sent together with the equipment and
               delivered by the technician at the moment of the
               installation/training)

        -      The Terminal itself installed in the Shop (with a stand-alone
               program, which will be deleted by the technician after the
               instructions have been concluded)

PROPOSED PROGRAM

        -       Presentation of the Terminal

        -       Presentation of the Peripherals

        -       Instructions for Printer Handling

        -       Operation of the Keyboard (functions of the keys) - Operation of
                the Optical Reader

        -       Operation of the Barcode and CMC-7 Reader

        -       Operation of the Magnetic Card Reader
 
        -       Guidelines for Receiving and Storing Consumables

        -       Access to the Call Center Service

OTHERS

        -       After the training has been concluded, the Field Technician
                should run a deactivation routine of the stand-alone program,
                which will automatically enable the on-line program, letting the
                sales point ready to perform the transactions.

        -       The Manual will be the support and consultation material for the
                lotttery undertaker durante his day by day work.



                                      -33-
   34


                                  ATTACHMENT IV

                               MAINTENANCE PERIOD

Mondays to Fridays           from 9:00 a.m. to 5:00 p.m.

Saturdays                    from 9:00 a.m. to 2:00 p.m.





















                                      -34-
   35




                                  ATTACHMENT V

                              FINE CALCULATION FORM

In the case of the installation of new terminals and development of applications
for the new financial transactions, the non-implementation within the terms
agreed upon will imply a fine to be calculated based on the transactions which
will be carried out in these terminals after their implementation. However, if
the delay period is more than 30 net days, the transaction volume to be taken as
a reference to be utilized for penalty purpose will be the transactions
projected in the Attachment VIII.

For the purpose of calculation of the fine to be applied, following three
transaction types will be added:

- Transactions of lottery games

- Transactions of account payments

- New financial transactions

The fine calculation will be as follows:

1 .     Firstly, all the terminals which have been affected by the problem are 
        identified.

2.      Then, the period of the day and of the week is identified, during which 
        each of these terminals remained inoperative.

3.      Next, we will check to see how many transactions these terminals have
        performed in similar periods of the previous week, if in this week
        exceptional standstills for whatever reason have not been found. In the
        case exceptional standstills have occurred, we proceed back one week
        more until we find a week with no abnormality.

4.      In the case it is a new terminal, a comparative calculation will be 
        applied from already installed terminals in the same lottery house, or 
        in the nearest lottery house, if we are speaking of a new lottery sales 
        point.

5.      Since all lottery and financial transactions have been accounted, which
        have been collected in the terminals referred to in the period used for
        comparison, then we will apply the fines specified in item "Penalties to
        the CONTRACTED PARTY".



                                      -35-











EX-10.27
9
y48042ex10-27.txt
FIRST AMENDMENT TO 1996 SOTCK OPTION PLAN


   1


                                       FIRST AMENDMENT
                                            TO THE
                                  GTECH HOLDINGS CORPORATION
                                 1996 NON-EMPLOYEE DIRECTORS'
                                      STOCK OPTION PLAN

        WHEREAS, GTECH Holdings Corporation (the "Corporation") adopted the 
GTECH Holdings Corporation 1996 Non-Employee Directors' Stock Option Plan (the
"Plan") as a means whereby the Corporation may, through the grant of
non-qualified stock options to purchase common stock of the Corporation to
Non-Employee Directors, attract and retain capable outside directors;

        WHEREAS, the Plan may be amended by resolution of the Board of Directors
 of the Corporation (the "Board") in accordance with Section 9 of the Plan;

        WHEREAS, the Board has by resolution authorized the amendment of the 
Plan to extend the term of the options granted under the Plan.

        NOW, THEREFORE, the Plan is hereby amended as follows:

        1.     Section 6 (c) is amended in its entirety to read as follows:

               (c)    Term.  Subject to earlier termination as provided in 
        Sections 6(e), (f) and (g) and in Section 8 hereof, the term of each 
        option shall be ten (10) years from the date of grant.

        2.     Except as amended above, the Plan remains in full force and 
effect and is in all other respects ratified and confirmed.


        IN WITNESS WHEREOF, the Corporation has executed this First Amendment 
as of the ____ day of __________, 2001.


                                            GTECH HOLDINGS CORPORATION



                                            By:_______________________________
                                            Title:______________________________


                             





EX-10.32
10
y48042ex10-32.txt
FIRST AMENDMENT TO 1999 STOCK OPTION PLAN


   1
                                                                   EXHIBIT 10.32



                                 FIRST AMENDMENT
                                     TO THE
                           GTECH HOLDINGS CORPORATION
                          1999 NON-EMPLOYEE DIRECTORS'
                                STOCK OPTION PLAN

         WHEREAS, GTECH Holdings Corporation (the "Corporation") adopted the
GTECH Holdings Corporation 1999 Non-Employee Directors' Stock Option Plan (the
"Plan") as a means whereby the Corporation may, through the grant of
non-qualified stock options to purchase common stock of the Corporation to
Non-Employee Directors, attract and retain capable outside directors;

         WHEREAS, the Plan may be amended by resolution of the Board of
Directors of the Corporation (the "Board") in accordance with Section 9 of the
Plan;

         WHEREAS, the Board has by resolution authorized the amendment of the
Plan to extend the term of the options granted under the Plan.

         NOW, THEREFORE, the Plan is hereby amended as follows:

         1. Section 6 (c) is amended in its entirety to read as follows:

                  (c) Term. Subject to earlier termination as provided in
         Sections 6(e), (f) and (g) and in Section 8 hereof, the term of each
         option shall be ten (10) years from the date of grant.

         2. Except as amended above, the Plan remains in full force and effect
and is in all other respects ratified and confirmed.


         IN WITNESS WHEREOF, the Corporation has executed this First Amendment
as of the ____ day of __________, 2001.


                                            GTECH HOLDINGS CORPORATION



                                            By:
                                              ----------------------------------
                                            Title:
                                                 -------------------------------



EX-21.1
11
y48042ex21-1.txt
SUBSIDIARIES


   1
                                                                    EXHIBIT 21.1

                   GTECH HOLDINGS CORPORATION AND SUBSIDIARIES


                           GTECH Holdings Corporation





                                GTECH Corporation




                         GTECH Corporation Subsidiaries

                    Affiliated Marketing Solutions, LLC (75%) 
                    Data Transfer Systems, Inc.
                    DataTrans Sp. z.o.o. (Poland)(52% effective control)
                    Dreamport, Inc.
                    Dreamport International, Inc.            
                    Dreamport do Brasil Ltda. (Brazil)
                    Dreamport Turfway LLC
                    Dreamport Suffolk Corporation
                    Environmental Paper Products, Inc.
                    Cam Galaxy Group Ltd. (UK) (80%)  40%  Europrint Holdings
                    JSJ Ltd. (UK) (80%)               60%  Ltd. (UK)
                    GameScape, Inc.
                    Gana De Mexico S.A. de C.V. (Mexico)
                    GRYTEK Co. Ltd. (Poland)
                    GTECH Asia Corporation
                    GTECH Australasia Corporation
                    GTECH Brasil Ltda (Brazil)
                    GTECH Canada Computer Systems Corporation (Canada)
                    GTECH Child Care Center
                    GTECH Communicaciones Colombia Ltd.  (99.99%)
                    GTECH Computer Systems Sdn Bhd (Malaysia)
                    GTECH Corporation (Utah)
                    GTECH Cote d'Ivoire (Ivory Coast)
                    GTECH Czech Republic Corporation
                    
   2
                    GTECH Corporation Subsidiaries (Cont.)
                    GTECH Eastern Europe Sp. z o.o
                    GTECH Eesti A.S. (Estonia)
                    GTECH Espana Corporation
                    GTECH Europe S.A. (Belgium)
                    GTECH Far East Pte Ltd (Singapore)
                    GTECH Foreign Holdings Corporation                     
                    Online Transaction
                    Technologies SARL
                    a Associe Unique
                    (Morocco)
                    GTECH France S.A.R.L. (France)
                    GTECH Gaming Subsidiary 2 Corporation
                    GTECH Global Services Corporation Ltd. (Cyprus)
                    GTECH GmbH (Germany)
                    GTECH Ireland Corporation
                    GTECH Italia Srl (Italy)
                    GTECH Italy Corporation
                    GTECH Latin America Corporation
                    GTECH LIT Corporation (Lithuania)
                    GTECH Management P.I. Corporation
                    GTECH Mexico S.A. de C.V. (Mexico)
                    GTECH Nevada Corporation
                    GTECH Northern Europe Corporation
                    GTECH Rhode Island Corporation
                    GTECH South Africa Corporation
                    GTECH Southern Africa (Pty) Ltd. (South Africa)
                    GTECH Sweden AB
                    GTECH Sweden Corporation
                    GTECH Taiwan Corporation
                    GTECH U.K. Limited (UK)
                    GTECH U.K. Corporation
                    GTECH Ukraine (Ukraine)
                    GTECH Worldserv, Inc.
                    GTECH Worldserv International, Inc.
                    GTECH Worldwide Services Corporation
                    LAC Corporation
                    On-Line Lottery License and                                 
                       Lease B.V. (Netherlands)                                 
                    GTECH Avrasya Teknik
                    Hizmetler ve Musavialik
                    A.S. (Turkey)
                    Oy GTECH Finland
                    SB Industria E Comercio Ltd. (Brazil)
                    Secure Gaming Technologies, LLC (67%)
                    Siam GTECH Company Limited (Thailand)


                                      -2-
   3
                     GTECH Corporation Subsidiaries (Cont.)


                    Technology Risk Management Services, Inc.
                    Transaction Strategies Inc.
                    Transactive Corporation


                    Uwin Corporation

                    Uwin R&D Ltd. (Ireland)
                    
                    Uwin Network Operations
                    Ltd. (Ireland)

                    Uwin Ireland Operations
                    (Ireland)

                    VideoSite, Incorporated
                    Watson Land Company


                                      -3-







EX-23.1
12
y48042ex23-1.txt
CONSENT OF ERNST & YOUNG, LLP


   1
                                                                    Exhibit 23.1



                        CONSENT OF INDEPENDENT AUDITORS


We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-56106) pertaining to the GTECH Holdings Corporation 2000 Omnibus
Stock Option and Long-Term Incentive Plan and the GTECH Holdings Corporation
1999 Non-Employee Directors' Stock Option Plan, in the Registration Statement
(Form S-8 No. 333-42932) pertaining to the GTECH Holdings Corporation 2000
Restricted Stock Plan, in the Registration Statement (Form S-8 No. 333-64167)
pertaining to the 1998 Employee Stock Purchase Plan, in the Registration
Statement (Form S-8 No. 333-57781) pertaining to the 1997 Stock Option Plan and
the 1998 Non-Employee Directors' Stock Election Plan, in the Registration
Statements (Forms S-8 No. 33-88426 and No. 333-27835) pertaining to the 1994
Stock Option Plan and in the Registration Statement (Form S-8 No. 333-27831)
pertaining to the 1996 Non-Employee Directors' Stock Option Plan and the 1992
Outside Directors' Director Stock Unit Plan, of GTECH Holdings Corporation of
our report dated March 27, 2001, with respect to the consolidated financial
statements of GTECH Holdings Corporation included in the Annual Report (Form
10-K) for the fiscal year ended February 24, 2001.


                                        ERNST & YOUNG LLP


Boston, Massachusetts
April 19, 2001