SHFL Shfl Entertainment, Inc. (MM)

PROPOSAL 1: APPROVAL AND ADOPTION OF THE MERGER AGREEMENT

Effects of the Merger

Pursuant to the terms of the merger agreement, if the merger agreement is approved and adopted by SHFL’s shareholders and the other conditions to the closing are either satisfied or waived, at the effective time of the merger, Merger Sub will be merged with and into SHFL, with SHFL surviving the merger as an indirect wholly owned subsidiary of Bally. As a result of the merger, SHFL will cease to be a publicly traded company. If the merger is completed, you will not own any shares of the capital stock of the surviving corporation.

At the effective time of the merger, (i) each share of SHFL common stock issued and outstanding immediately prior to the effective time of the merger (other than the excluded shares, which are discussed below) will immediately be converted into the right to receive $23.25 in cash, without interest and less any applicable withholding taxes; (ii) each share of SHFL common stock owned by SHFL or any of its wholly owned subsidiaries (in each case, other than shares held in either a fiduciary or agency capacity that are beneficially owned by third parties), or Bally or Merger Sub or any other wholly owned subsidiary of Bally will be canceled and no payment will be made with respect to such shares; and (iii) each share of common stock, par value $0.01 per share, of Merger Sub that is issued and outstanding immediately prior to the effective time of the merger, will be converted into one fully paid and non-assessable share of common stock, par value $0.01 per share, of SHFL, as the surviving corporation in the merger.

At the effective time of the merger, each SHFL option granted pursuant to a Company plan that was outstanding and unexercised as of July 15, 2013 and remains outstanding and unexercised immediately prior to the effective time of the merger (whether vested or unvested) will be canceled in exchange for the right to receive an amount, in cash, equal to the excess, if any, of the merger consideration over the per-share exercise price of such option, multiplied by the number of shares of SHFL common stock subject to such option, less any applicable withholding taxes. It is contemplated that each SHFL option granted after July 15, 2013 to employees and consultants who are not named executive officers or directors will be converted pursuant to its terms into an option denominated in Bally common stock based on the incentive award exchange ratio. Any option granted to a named executive officer or director after July 15, 2013 will terminate and be of no effect immediately prior to the effective time if the merger occurs.

At the effective time of the merger, each performance unit granted pursuant to a Company plan that was outstanding as of July 15, 2013 and remains outstanding immediately prior to the effective time of the merger will be canceled in exchange for the right receive an amount, in cash, equal to the number of vested performance units as of the effective time of the merger (with unvested performance units to vest at the effective time based on the achievement of a certain level of “total shareholder return”, as calculated using the five-day trading average ending on the effective date of the merger) multiplied by $23.25, less any applicable withholding taxes. Any performance unit granted to employees and consultants who are not named executive officers or directors after July 15, 2013 will be converted pursuant to its terms into a performance unit denominated in Bally common stock based on the incentive award exchange ratio with equitable adjustments to any performance goals as may be determined by the compensation committee of the SHFL board of directors. Any performance unit granted to a named executive officer or director after July 15, 2013 will terminate and be of no effect immediately prior to the effective time if the merger occurs.

At the effective time of the merger, each restricted share of Company common stock granted pursuant to a Company plan and each Company restricted share unit (other than any performance unit) granted pursuant to a Company plan that is outstanding as July 15, 2013 and remains outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be canceled in exchange for the right to receive an amount, in cash, equal to $23.25, less any applicable withholding taxes. Each SHFL restricted share and restricted share unit (other than any performance unit) granted after July 15, 2013 to employees and consultants (other than named executive officers and directors) will be converted pursuant to its terms into a restricted share or restricted

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share unit, as applicable, in each case denominated in Bally common stock based on the incentive award exchange ratio. Any restricted share or restricted share unit granted to a named executive officer or director after July 15, 2013 generally will terminate and be of no effect immediately prior to the effective time if the merger occurs.

At the effective time of the merger, the restated articles of incorporation of SHFL will, by virtue of the merger, be amended in their entirety to read as set forth on Exhibit A of the merger agreement and the amended and restated bylaws of SHFL will, by virtue of the merger, be amended in their entirety to read as set forth on Exhibit B of the merger agreement.

Background of the Merger

The SHFL board of directors, together with certain members of SHFL senior management, regularly reviews and considers various strategic alternatives available to the Company, including whether the continued execution of SHFL’s strategy as a stand-alone company or the possible sale of SHFL to, or a combination of SHFL with, a third party would offer the best avenue to maximize shareholder value. In addition, the SHFL board of directors, together with certain members of SHFL senior management, periodically reviews and assesses the Company’s operations and financial performance, competitive position, industry trends and potential strategic initiatives, including potential acquisitions, dispositions, recapitalization transactions, stock buy-back and dividend alternatives and business combinations.

From time to time, certain members of SHFL senior management meet with investment banks with expertise in the gaming industry, including representatives of Macquarie Capital, to discuss developments and trends in the gaming industry and the overall domestic and international economy. In February 2013, the SHFL board of directors invited Macquarie Capital to meet to discuss Macquarie Capital’s view of the gaming industry and the advisability of pursuing strategic alternatives for SHFL. On February 27, 2013, representatives of Macquarie Capital provided the SHFL board of directors with their views of the gaming industry, the Company’s competitive position in the industry and strategic alternatives available to the Company to enhance shareholder value, including potential strategic acquisitions, recapitalization via share repurchase and a potential sale of the Company. Macquarie Capital and the Board also discussed the risks faced by and possibilities available to SHFL.

On February 28, 2013, the SHFL board of directors held a regularly scheduled meeting at the Company’s offices with certain members of SHFL senior management in attendance. A representative of Greenberg Traurig LLP, outside counsel to the Board and to which we refer as “Greenberg” in this proxy statement, also attended this meeting. The SHFL board of directors discussed whether Macquarie Capital should be engaged by the Company to assist it in exploring strategic alternatives. Certain members of SHFL senior management reported that the Company had received and informally discussed fee proposals with Macquarie Capital, which had indicated its willingness to assist the Company should the SHFL board of directors decide to explore strategic alternatives. The SHFL board of directors then discussed the relevant experience and qualifications of Macquarie Capital, including its recent experience representing WMS Industries Inc. in connection with its recently announced proposed sale to Scientific Games Corporation, and also discussed the fact that, as discussed more fully in the section entitled “Proposal 1: Approval and Adoption of the Merger Agreement—Opinion of SHFL’s Financial Advisor” beginning on page 46 of this proxy statement, Macquarie Capital had from time to time been engaged on other matters by the Company, and was familiar with the Company and its industry.

After due consideration of the risks faced by, and possibilities reasonably available to, the Company and its shareholders in the current economic environment, the SHFL board of directors decided to explore the Company’s strategic alternatives, and authorized certain members of SHFL senior management to engage Macquarie Capital to act as financial advisor to the Company in connection with such exploration on reasonable and customary terms.

On March 6, 2013, the SHFL board of directors met telephonically with certain members of SHFL senior management, Skadden, Arps, Slate, Meagher & Flom LLP, which we refer to as “Skadden” in this proxy

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statement, the Company’s outside special legal counsel, and Greenberg in attendance. At such meeting, representatives from Skadden provided an overview of the SHFL board of directors’ fiduciary duties in connection with the exploration of the Company’s strategic alternatives.

On March 11, 2013, SHFL engaged Macquarie Capital as its financial advisor in connection with SHFL’s exploration of strategic alternatives.

On March 14, 2013, following the Company’s annual meeting, the SHFL board of directors held a meeting at the Company’s offices, with certain members of SHFL senior management, Macquarie Capital, Skadden and Greenberg in attendance. The SHFL board of directors and certain members of SHFL senior management discussed the results of the annual meeting as well as the Company’s current business plan, industry trends and the potential for increasing shareholder value through implementation of the Company’s business initiatives. Thereafter, representatives of Skadden reviewed with the SHFL board of directors the fiduciary duties applicable to such directors, including in connection with the exploration of the Company’s strategic alternatives. Following such discussion, Macquarie Capital outlined an indicative timeline for the Company’s exploration of strategic alternatives and preliminarily identified for the SHFL board of directors certain third parties that, based on Macquarie Capital’s professional experience, Macquarie Capital thought could have an interest in discussing a potential transaction with the Company. This list, which included 10 potentially interested strategic parties and 16 potentially interested financial parties, was prepared by Macquarie Capital solely as an illustrative presentation of parties that the Company may wish to contact. Macquarie Capital, certain members of senior management and the SHFL board of directors discussed various strategic rationales that could impact the respective ability of each party identified by Macquarie Capital to deliver a bona fide proposal, including each party’s financial ability to consummate a transaction with the Company and capacity to obtain required regulatory approvals.

Macquarie Capital discussed the significant efforts that would be required by certain members of SHFL senior management in connection with the preparation of confidential marketing materials for use in connection with any such exploratory process. The SHFL board of directors also considered the possible disruption to the Company’s business that could result from the public announcement of an exploratory process and the resulting distraction of SHFL management and employees, and the SHFL board of directors concluded that such risks could be adequately managed by proceeding with such a process on a non-public basis. The SHFL board of directors and certain members of SHFL senior management also discussed risks associated with sharing competitively sensitive information with parties potentially interested in a transaction with SHFL for strategic reasons and determined that such risks, if managed through customary virtual data room procedures, would not preclude the inclusion of such parties in the Company’s exploratory process and, thereafter, instructed certain members of SHFL senior management in conjunction with representatives of Macquarie Capital to establish such a virtual data room. Furthermore, the SHFL board of directors, together with certain members of SHFL senior management and its legal and financial advisors, also discussed additional information control protocols intended to minimize the likelihood of a leak relating to the Company’s exploratory process. In light of these considerations, the SHFL board of directors then instructed Macquarie Capital to refine, with the assistance of certain members of SHFL senior management, the preliminary grouping of potential parties distributed to the SHFL board of directors in advance of the meeting. Macquarie Capital was further instructed not to contact any such potentially interested third parties at that time, whether on a confidential basis or otherwise. The SHFL board of directors also determined that it was not necessary to form a special negotiating committee in order to evaluate the Company’s strategic alternatives at such time as none of the directors had a conflict with respect to the potential transaction, and that if any such conflict should arise during the course of the Company’s exploration of its strategic alternatives, the SHFL board of directors would revisit the process in order to take appropriate steps in light of such potential or actual conflict at such time.

On March 28, 2013, the SHFL board of directors met telephonically with certain members of SHFL senior management and SHFL’s legal and financial advisors in attendance. During the course of this meeting, the SHFL board of directors and its advisors discussed a revised list, which was developed by Macquarie Capital for the Company with the assistance of certain members of SHFL senior management, of potential strategic and

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financial parties that might be interested in a potential transaction with the Company, as well as the financial ability of each such party to consummate a transaction with the Company, such party’s ability to obtain applicable regulatory approvals and the risk to the confidentiality of the Company’s exploratory process associated with including parties that were not reasonably capable of delivering a bona fide proposal. Following these discussions, the SHFL board of directors instructed Macquarie Capital to contact the potentially interested third parties discussed and included in the meeting list in order to assess such parties’ interest in holding further discussions regarding a transaction with the Company.

Following the March 28th meeting, at the instruction of certain members of SHFL senior management and the SHFL board of directors, representatives of Macquarie Capital contacted a total of 24 potentially interested third parties in April and May 2013, including 13 financial parties and 11 strategic parties. Following negotiations between counsel for certain of such parties and representatives of Skadden (in consultation with the general counsel of the Company), 16 of the parties (6 of which were strategic parties and the remainder of which were financial parties) contacted during that time period executed confidentiality agreements with the Company, including Bally, which did so on April 22, 2013. Each confidentiality agreement entered into by the Company in connection with its exploration of strategic alternatives contained a “standstill” provision pursuant to which the counterparty thereto agreed to limit certain activities for a period of at least twelve months following its entry into the confidentiality agreement, including, among other things, (i) seeking to acquire ownership of any securities of SHFL or seeking to enter into a business combination transaction with SHFL, (ii) soliciting proxies with respect to any voting securities of SHFL, (iii) forming a “group” (as defined in the Exchange Act) with respect to the Company and (iv) seeking to control or influence the management of SHFL. However, following the Company’s entry into a definitive sale agreement, such as the merger agreement, which provided for a merger, consolidation or other business combination involving the Company, the standstill restrictions contained in each of the confidentiality agreements ceased to apply to the extent the counterparty thereto was making a proposal to take any of the foregoing actions so long as such proposal would constitute an “acquisition proposal” under such definitive agreement or would otherwise constitute a proposal to acquire more than a majority of the outstanding voting securities or all or substantially all of the assets of the Company. Therefore, no third party that executed a confidentiality agreement with the Company in connection with the exploratory process described herein is prohibited by the standstill restrictions in its respective confidentiality agreement from making a proposal to acquire the Company.

On April 12, 2013, the SHFL board of directors held a special telephonic meeting to discuss a draft of the confidential marketing materials, a full copy of which had previously been provided to the SHFL board of directors. Certain members of SHFL senior management and representatives of Macquarie Capital, Skadden and Greenberg were present. During the course of this meeting, Macquarie Capital provided an update on its outreach to potentially interested third parties, and the SHFL board of directors and the Company’s legal and financial advisors also discussed the draft confidential marketing materials. Following such discussions, the SHFL board of directors requested that Macquarie Capital distribute the confidential marketing materials to interested third-parties that executed a confidentiality agreement with SHFL.

Beginning on April 15, 2013, Macquarie Capital began sending the confidential marketing materials, which contained more detailed information concerning SHFL’s business operations as well as certain non-public projected financial information and “phase I” due diligence materials through the virtual data room, as described more fully below under “Proposal 1: Approval and Adoption of the Merger Agreement—Certain Projections Prepared by the Management of SHFL” beginning on page 64 of this proxy statement, to interested third-parties after such parties executed a confidentiality agreement with SHFL.

Beginning on April 22, 2013, at the direction of the SHFL board of directors and following review and comment by certain members of SHFL senior management and the Company’s advisors, a process instruction letter was distributed by Macquarie Capital to the 16 parties that had previously executed a confidentiality agreement with SHFL to explore the possibility of a potential all-cash transaction as a means of providing the Company’s shareholders with certainty of value and liquidity for their shares of SHFL common stock, while eliminating

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long-term business and execution risk, as more fully described in the section entitled “Proposal 1: Approval and Adoption of the Merger Agreement—Reasons for the Merger” beginning on page 41 of this proxy statement. The process instruction letter requested preliminary, non-binding indications of interest regarding the potential acquisition of 100% of the Company in an all-cash transaction be submitted to Macquarie Capital on or before May 13, 2013 in order to more readily compare indications of interest.

Telephonic meetings of the SHFL board of directors were held on each of April 26, 2013 and May 10, 2013, with certain members of SHFL senior management and representatives of Macquarie Capital, Skadden and Greenberg in attendance. At each meeting, representatives of Macquarie Capital presented the SHFL board of directors with an update on Macquarie Capital’s outreach to potentially interested third-parties, each party’s ongoing diligence efforts and identifying parties who had executed confidentiality agreements or had indicated that they were not interested in participating in the process, and discussing the evolving timing of the process.

On May 13 and 14, 2013, four of the original 24 parties contacted by Macquarie Capital, consisting of one financial party, which we refer to as Company X in this proxy statement, Bally and two other strategic parties, which we refer to in this proxy statement as Company Y and Company Z, submitted preliminary, non-binding indications of interest at prices ranging from $18.50 per share to $21.50 per share of SHFL common stock. All of the indications of interest provided for consideration to be paid in cash. Company X submitted an indication of interest that contemplated a purchase price between $20.00 and $21.50 while Company Y submitted an indication of interest that contemplated a purchase price of $21.00 per share. Bally initially submitted a preliminary indication of interest that contemplated a purchase price in the range of $18.50—$20.50 per share, which included a request for a 45-day period of exclusivity. Company Z submitted a preliminary indication of interest that contemplated a purchase price of $19.00 per share.

On May 15, 2013, the SHFL board of directors held a special telephonic meeting to discuss the status of the strategic alternative review process and the indications of interest received from the four potential bidders, full copies of which had previously been provided to the SHFL board of directors. Certain members of SHFL senior management and representatives of Macquarie Capital, Skadden and Greenberg were present. Representatives of Macquarie Capital noted that they had contacted 24 parties, including 13 financial parties and 11 parties that may have had strategic interest in the Company. Of these 24 parties, 16 had executed a confidentiality agreement with SHFL and thereafter received confidential information about the Company. 16 parties had notified representatives of Macquarie Capital that they had formally withdrawn from the Company’s exploratory process, and representatives of Macquarie Capital reported to the SHFL board of directors that 4 parties had neither withdrawn nor submitted a non-binding indication of interest as of that date. After summarizing the status of the Company’s ongoing process, representatives of Macquarie Capital described each indication of interest in detail. The SHFL board of directors discussed the merits of each indication of interest, including the relative ability of the respective potential bidders to obtain the necessary financing, transaction completion risk and the anticipated timing to complete the transaction, including the risks related to obtaining the necessary approvals from gaming authorities, and the price or price ranges indicated by each potential bidder. Thereafter, representatives of Skadden again discussed with the SHFL board of directors the fiduciary duties of the directors, including in connection with evaluating the Company’s strategic alternatives. The SHFL board of directors discussed the likelihood of other potential interested parties engaging in the process. The SHFL board of directors then discussed other alternatives available to it with certain members of SHFL senior management and the Company’s legal and financial advisors, including remaining with the then-current business plan, possible modifications to the current business plan, recapitalization transactions, stock buy-back and dividend alternatives and business combinations. The SHFL board of directors also discussed a potential process timeline, which included scheduling management meetings with only those parties to be invited to the second round (i.e., “phase II”) of the Company’s exploratory process. The SHFL board of directors authorized the exploratory process to continue and instructed such members of SHFL senior management and Macquarie Capital that exclusivity was not to be granted to any of the potential bidders at this time. Based on a variety of factors, including the purchase prices indicated in the proposals that had been received, as well as the other terms and conditions set forth therein, as well as the time and resources required of SHFL’s management to manage and provide the necessary due

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diligence information, the SHFL board of directors directed that Macquarie Capital invite Company X and Company Y into the next round of the process. Furthermore, the SHFL board of directors instructed Macquarie Capital to inform Bally and Company Z that if such party wished to participate in the next round of the Company’s exploratory process, each would need to increase the valuation set forth in its non-binding indication of interest. At this meeting, the SHFL board of directors reaffirmed its position that the Company had been engaging in an exploration of its strategic alternatives, that it had not determined whether or not to pursue the sale of the Company and that it would not pursue a transaction that it believed did not reflect an appropriate value for the Company.

On May 15, 2013, following the meeting of the SHFL board of directors, representatives of Macquarie Capital contacted representatives of each of Bally and Company Z and informed each of them that if it wished to participate in the next round of the Company’s exploratory process, such party would need to increase the valuation set forth in its non-binding indication of interest.

On May 17, 2013, Goldman Sachs & Co., Bally’s financial advisor, which we refer to as “Goldman Sachs” in this proxy statement, informed representatives of Macquarie Capital that Bally was willing to increase the purchase price range set forth in its indication of interest to $20.50 – $21.50 per share and requested a 45-day period of exclusivity. Following receipt of this revised indication of interest, the Company determined to include Bally in “phase II” of the process on a nonexclusive basis. Company Z did not increase the valuation set forth in its non-binding expression of interest.

Beginning on May 19, 2013, the Company opened access to the “phase II” due diligence materials contained in the Company’s virtual data room to Bally, Company X and Company Y, with customary redactions (including with respect to potentially competitively sensitive information).

On May 29, 2013, the Company began presenting management presentations to the three continuing parties, as well as additional telephonic and in-person due diligence meetings and site visits. Company X participated in diligence meetings and attended a management presentation on May 29, 2013, Company Y participated in diligence meetings and attended a management presentation on June 3, 2013 and Bally participated in diligence meetings and attended a management presentation on June 10, 2013. Representatives of Macquarie Capital and Skadden also attended or participated telephonically in each of the management presentations, which were presented in Las Vegas, Nevada. Topics covered in the management presentations included Company and industry overviews, growth strategies, commercial overviews and financial information. After the management meetings, Macquarie Capital followed up with each of the three continuing parties to elicit feedback and discuss next steps in the process. Bally and each of the two other continuing parties reiterated their potential interest in acquiring the Company.

On May 30, 2013, the SHFL board of directors held a regularly scheduled board meeting to discuss the business and operations of the Company, which certain members of SHFL senior management, Greenberg and Macquarie Capital also attended. During a portion of this meeting, representatives from Macquarie Capital provided the SHFL board of directors with an update on discussions with the three parties participating in “phase II” of the Company’s exploratory process and discussed with the SHFL board of directors the content of, and schedule for, management presentations.

On June 5, 2013, representatives of Macquarie Capital, at the instruction of the SHFL board of directors, sent second round process letters to Bally, Company X and Company Y. Each of the parties was instructed to deliver a revised final binding all-cash offer to acquire 100% of the equity of the Company, together with a mark-up of the draft merger agreement that such party would be prepared to execute, by June 25, 2013. On June 11, 2013, Macquarie Capital sent a draft merger agreement and a notional capitalization table to each of Bally, Company X and Company Y.

On June 6, 2013, a telephonic meeting of the SHFL board of directors was held to discuss, among other things, the status of the Company’s ongoing exploration of its strategic alternatives. The meeting was attended by certain

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members of SHFL senior management and representatives of Macquarie Capital, Skadden and Greenberg. Macquarie Capital provided an update on its discussions with each of the three potential bidders since the previous meeting of the SHFL board of directors on May 30, 2013. Skadden then reviewed with the SHFL board of directors the key provisions of a draft merger agreement that would be distributed to the three continuing parties. A discussion ensued regarding various terms, including circumstances in which the Company and a potential buyer would be permitted to terminate the merger agreement, the efforts a potential buyer would agree to undertake in order to effect the closing, the scope and efforts required to obtain applicable regulatory approvals, the absence of any financing condition, the ability of the SHFL board of directors to change its recommendation and, subject to certain restrictions, the ability of the SHFL board of directors to terminate the merger agreement to accept a “superior proposal”.

After receiving the second round process letters, representatives of the three continuing parties engaged in numerous due diligence teleconferences and in-person meetings with certain members of SHFL senior management and representatives from the Company’s legal and financial advisors. During this period, Macquarie Capital worked with the Company to provide documents and information responsive to the continuing parties’ respective due diligence requests.

On June 20, 2013, the SHFL board of directors held a telephonic meeting to review the process to date, which was attended by certain members of SHFL senior management and representatives of Macquarie Capital, Skadden and Greenberg. Representatives from Macquarie Capital updated the SHFL board of directors on the current status of each of the three potential bidders in performing due diligence on the Company, arranging financing for their potential bids and expected ability to provide a final proposal in a timely manner. Representatives of Macquarie Capital informed the SHFL board of directors that certain members of SHFL senior management and advisors had been actively engaged with the three continuing parties regarding follow-up diligence requests, management meetings and financing updates.

On June 26, 2013, representatives of Bally delivered to the Company a mark-up of the draft merger agreement that had been provided to them earlier, as well as a proposed debt commitment letter and a letter contemplating an all-cash purchase of 100% of the Company’s outstanding equity at $22.50 per share. In addition, Bally requested a 30-day period of exclusivity during which it would complete its remaining due diligence.

On June 27, 2013, the SHFL board of directors held a meeting in Las Vegas with certain members of SHFL senior management and representatives of Macquarie Capital, Skadden and Greenberg in attendance. During this meeting, Skadden again presented the SHFL board of directors with a review of the fiduciary duties applicable to the directors, including in connection with evaluating the Company’s strategic alternatives, and representatives of Macquarie Capital discussed the time and efforts allocated by each of the three potential bidders invited to “phase II” of the Company’s exploratory process. Representatives from Macquarie Capital discussed the financial terms and financing proposal, contained in the proposal from Bally. Skadden provided an overview of the material issues raised in the letter and the mark-up of the draft merger agreement provided by Bally, including among other things: (i) the request for exclusivity, (ii) the efforts required to be undertaken by Bally to obtain applicable regulatory approvals, (iii) certain employee benefit related matters, (iv) limitations on the ability of the SHFL board of directors to change its recommendation with respect to the merger or to terminate the merger agreement in favor of a superior proposal and (v) the scope of acceptable limitations on the Company’s operation of its business pending consummation of the merger. Following this review, the SHFL board of directors, with its legal and financial advisors, discussed the principal issues raised by Bally’s proposal and mark-up of the draft merger agreement as well as the request for exclusivity that Bally had set forth in its proposal. Representatives of Macquarie Capital discussed the interest of each of Company X and Company Y in acquiring the Company, the concern stated by each such party with respect to the competitiveness of the price each such party could offer and the failure of each such party to submit a second round proposal by the deadline in accordance with the process letter. Following these discussions, the SHFL board of directors directed Macquarie Capital that the Company would only be willing to engage in continued discussions regarding a potential transaction if the purchase consideration were greater than $23.00 per share.

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Following this meeting of the SHFL board of directors, representatives of Macquarie Capital had a telephonic conference with Bally to request some additional information and clarification concerning Bally’s proposal, including with respect to the remaining due diligence to be performed. Macquarie Capital also indicated the terms on which the Company would be willing to continue discussions with representatives of Bally, including that Bally revise its offer to a purchase price greater than $23.00 per share.

On June 28, 2013, representatives of Bally indicated to Macquarie Capital that Bally would proceed on the basis of a last, best and final purchase price offer of $23.25 per share of SHFL common stock, but with the condition that Bally would only proceed if the Company agreed to an exclusivity agreement with Bally prior to June 30, 2013.

On June 29, 2013, Goldman Sachs, on behalf of Bally, sent Macquarie Capital a proposed binding exclusivity agreement to be provided to SHFL, providing for a 21-day exclusivity period for Bally to complete its due diligence and negotiate a definitive merger agreement to acquire all of the outstanding equity of SHFL. Bally’s proposed exclusivity agreement would, among other things, prevent SHFL from engaging in substantive discussions with other potential bidders during the period of exclusivity.

Following the June 27 meeting of the SHFL board of directors, representatives of Macquarie Capital, at the direction of the SHFL board of directors, also contacted Company X and Company Y. On June 29, 2013, representatives of each of Company X and Company Y responded to such contact, and, at such time, representatives of Macquarie Capital had separate telephonic conversations with Company X and Company Y, during which Macquarie Capital advised each such party of the terms on which the Company would be willing to engage in continued discussions with such party regarding a potential transaction, including that each such party be prepared to offer a price greater than $23.00 per share. During the course of such discussions, neither Company X nor Company Y expressed an interest in pursuing a transaction with the Company on such terms.

On June 29, 2013, a telephonic meeting of the SHFL board of directors was held, with certain members of SHFL senior management and representatives of Macquarie Capital, Skadden and Greenberg in attendance, to discuss Bally’s revised proposal and its requirement that the Company enter into an exclusivity agreement with Bally. At the direction of the SHFL board of directors, representatives of Macquarie Capital reviewed the history and current status of discussions with Bally. Representatives of Macquarie Capital noted Bally’s position that its proposed price of $23.25 per share was the highest price that it would be willing to pay and that Bally would only continue discussions with the Company if SHFL entered into an exclusivity agreement with Bally. After discussion between the SHFL board of directors and Skadden regarding Bally’s proposed exclusivity agreement, the SHFL board of directors directed the representatives of Macquarie Capital to communicate to Bally that a 21-day exclusivity period was not acceptable and requested that Skadden, Macquarie Capital and certain members of SHFL senior management negotiate the terms of an acceptable exclusivity agreement of more limited duration and, furthermore, asked Skadden, along with certain members of SHFL senior management, to engage with Bally’s legal advisors to negotiate the terms of Bally’s proposed merger agreement. In determining whether the Company should enter into an exclusivity agreement with Bally, the SHFL board of directors considered several factors, including, but not limited to: (i) the increased purchase price proposed by Bally on June 28, 2013 which Bally had stated was conditioned upon execution of an exclusivity agreement, (ii) certain strategic alternatives other than the then-current Bally proposal, including remaining with the then-current business plan, possible modifications to the current business plan, recapitalization transactions, stock buy-back and dividend alternatives and business combinations, (iii) the fact that the Company’s exploratory process involving a number of potential strategic and financial parties did not result in any final proposals, other than Bally’s, being made for the Company, (iv) the risk that Bally would terminate discussions if the Company did not enter into the proposed exclusivity agreement, (v) concerns regarding potential leaks if the exploratory process was prolonged, including the possible disruption to the Company’s business that could result therefrom, and (vi) negotiations conducted to date with Bally on the terms of the exclusivity agreement, including Bally’s willingness to provide for a shorter exclusivity period than its initial requirement. After discussing these matters, the SHFL board of directors authorized the execution of an exclusivity agreement with Bally substantially on the terms discussed at the meeting.

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On June 29, 2013, following the meeting of the SHFL board of directors and the telephonic conversations with representatives from each of Company X and Company Y, Skadden, Macquarie Capital, Goldman Sachs and Gibson, Dunn & Crutcher LLP, which we refer to as “Gibson” in this proxy statement, Bally’s outside legal counsel, negotiated the final terms of the exclusivity agreement and discussed certain of the material terms raised in the merger agreement, including those Skadden had previously raised with the SHFL board of directors.

On June 30, 2013, the Company executed an agreement with Bally pursuant to which it agreed, subject to receipt of revised commitment papers from Bally’s debt financing sources on or prior to July 1, 2013, to engage in exclusive discussions with Bally regarding a potential acquisition of the Company by Bally until the earlier of (i) July 15, 2013, (ii) Bally’s written notice of its intent to terminate negotiations and (iii) the execution of a definitive merger agreement. On July 1, 2013, Bally provided the Company with such revised commitment papers.

On June 30, 2013, Skadden and Gibson had a series of telephonic meetings to discuss various provisions of the draft merger agreement.

From June 30, 2013 to July 15, 2013, Bally, its financing sources, and its legal, accounting and financial advisors addressed confirmatory due diligence topics raised by Bally through teleconferences, emails and in-person meetings involving certain members of SHFL senior management. During this period, Skadden and Gibson exchanged mark-ups of the merger agreement and certain members of the respective senior management of SHFL and Bally, with the assistance of their respective advisors, continued to negotiate the terms of the draft merger agreement.

On July 11, 2013, Mr. Isaacs and Ms. Lever met with Ramesh Srinivasan, the president and chief executive officer of Bally, and Mark Lerner, the senior vice president, general counsel and secretary of Bally, and discussed the industry, certain remaining diligence-related matters and the current status of SHFL’s business.

On July 12, 2013, Skadden and Gibson, along with certain members of senior management from each of the Company and Bally, met in Las Vegas, Nevada, and discussed the mark-up of the draft merger agreement. During the period from July 12 to July 15, 2013, the Company and Bally, with input from their respective advisors, continued negotiations of the terms of the proposed transaction, including (i) the appropriate level of efforts Bally would agree to undertake in connection with obtaining applicable regulatory approvals, (ii) the amount of the Company termination fee and the instances in which any such fee would be payable, (iii) the scope of acceptable limitations on the Company’s operation of its business pending consummation of the merger, (iv) limitations on the ability of the SHFL board of directors to change its recommendation with respect to the merger or to terminate the merger agreement in favor of a superior proposal and (v) certain employee benefit matters during the period between the signing of a definitive agreement and the consummation of the merger.

On the evening of July 13, 2013, in advance of the meeting of the SHFL board of directors to be held on July 14, 2013, members of the SHFL board of directors received discussion materials via e-mail, which included, among other items, a then-current draft of the merger agreement and a summary of the terms thereof, together with certain draft board resolutions.

On the afternoon of July 14, 2013, the SHFL board of directors held an in-person meeting, with certain members of SHFL senior management as well as representatives of Macquarie Capital, Skadden, Greenberg and Leonard Street & Deinard, the Company’s Minnesota counsel, which we refer to as “Leonard Street” in this proxy statement, in attendance. During the meeting, presentation materials prepared by Macquarie Capital were distributed to the directors. At the meeting, representatives of Macquarie Capital and Skadden reviewed with the SHFL board of directors the proposed terms of the transaction and discussed the outstanding issues in the draft merger agreement. Representatives of Skadden and Leonard Street then reviewed with the SHFL board of directors its fiduciary duties in considering the transaction.

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Certain members of SHFL senior management then discussed with the SHFL board of directors the Company’s exploratory process and provided an overview of SHFL senior management’s views with respect to certain other strategic alternatives (including possible modifications to the current business plan, recapitalization transactions, stock buy-back and dividend alternatives and business combinations) that the Company could pursue. Certain members of SHFL senior management then provided their assessment of the proposed transaction and provided their recommendation that the Company continue to pursue the proposed transaction with Bally. Representatives of Macquarie Capital then reviewed with the directors a presentation it prepared, including its review of the Company’s exploratory process since its engagement as financial advisor and its financial analysis of the proposed merger consideration of $23.25 per share. Following this presentation, representatives of Macquarie Capital indicated that, on the basis of the terms set forth in the current draft merger agreement, Macquarie Capital would, if requested by the SHFL board of directors, be prepared to deliver a fairness opinion to the SHFL board of directors.

Following questions from and discussion among the directors and their legal and financial advisors, representatives of Skadden discussed the detailed terms of the proposed merger agreement with the SHFL board of directors, including the history of negotiations of the material transaction terms, and the material terms of the Bally’s financing commitment.

Throughout July 15, 2013, the Company and Bally had a series of telephonic negotiations, in which certain of each party’s respective senior management teams and legal and financial advisors participated, to continue negotiating the remaining open issues in the draft merger agreement, including, among other matters, the size of the Company termination fee, limitations on the ability of the SHFL board of directors to change its recommendation with respect to the merger or to terminate the merger agreement in favor of a superior proposal, the provisions relating to the restrictions on the Company’s interim operations pending the consummation of the merger and certain employee benefit matters.

On the afternoon of July 15, 2013, the SHFL board of directors held a telephonic meeting to consider the proposed acquisition of SHFL by Bally, with certain members of SHFL senior management as well as representatives of Macquarie Capital, Skadden and Greenberg in attendance. Representatives of Skadden and Macquarie Capital provided the SHFL board of directors with an update on the progress made with Bally on the outstanding issues in the draft merger agreement and on discussions with Bally and its advisors. Skadden reviewed with the SHFL board of directors the changes in the proposed merger agreement since the previous meeting of the SHFL board of directors and the proposed resolutions to be adopted. At the request of the SHFL board of directors, Macquarie Capital reviewed with the SHFL board of directors its financial analysis of the proposed merger consideration of $23.25 per share. Macquarie Capital rendered to the SHFL board of directors its oral fairness opinion, which was confirmed by delivery of a written opinion dated July 15, 2013, that, as of July 15, 2013, and based on and subject to the assumptions made, matters considered and qualifications and limitations on the scope of the review undertaken by Macquarie Capital, as described in its opinion, the $23.25 per share to be received by the holders of shares of SHFL’s common stock pursuant to the merger agreement was fair from a financial point of view to such holders. Skadden further reviewed with the SHFL board of directors their fiduciary duties, including in connection with the evaluation of the proposed transaction with Bally, and the provisions of the Minnesota anti-takeover laws concerning the formation of a limited purpose committee of disinterested directors for certain purposes (see the section entitled “Proposal 1: Approval and Adoption of the Merger Agreement—Committee of Disinterested Directors—Business Combination Act/ Control Share Acquisition Act” beginning on page 46 of this proxy statement for a further description of the committee of disinterested directors).

Following these presentations and further discussion and deliberation, and after considering all of the factors that it deemed relevant, the SHFL board of directors unanimously determined that the merger agreement, including the plan of merger, and the transactions contemplated by the merger agreement, including the merger, are advisable, fair to and in the best interests of SHFL and its shareholders, and the SHFL board of directors and a committee of disinterested directors formed for purposes of compliance with Minnesota anti-takeover laws

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unanimously approved the merger agreement, including the plan of merger, and the transactions contemplated by the merger agreement, including the merger. Later that evening, certain members of senior management of each of SHFL and Bally, along with Skadden and Gibson, finalized the provisions of the merger agreement and all ancillary documents, and execution versions of the merger agreement and the ancillary documents were circulated reflecting the agreement reached earlier that day. After execution of the debt commitment letter, a copy of which was provided to SHFL and its financial and legal advisors, each of SHFL, Bally and Merger Sub executed and delivered the merger agreement, effective as of July 15, 2013.

On the morning of July 16, 2013, the Company issued a press release announcing the transaction. On July 16, 2013, the Company filed a Current Report on Form 8-K with the SEC disclosing the execution of the merger agreement and filing the press release as an exhibit. On July 18, 2013, the Company filed a Current Report on Form 8-K with the SEC summarizing the material terms of the merger agreement and filing the merger agreement as an exhibit.

Reasons for the Merger

The SHFL board of directors evaluated, with the assistance of certain members of SHFL senior management and its legal and financial advisors, the merger agreement, including the plan of merger, and the transactions contemplated by the merger agreement, including the merger. In unanimously determining that the merger agreement, including the plan of merger, and the transactions contemplated thereby, including the merger, were advisable, fair to and in the best interests of the Company and its shareholders, and in reaching its unanimous decision to approve and recommend to the SHFL shareholders the merger agreement, including the plan of merger, and the transactions contemplated by the merger agreement, including the merger, the SHFL board of directors considered the following positive factors relating to the merger agreement, including the plan of merger, and the transactions contemplated thereby, including the merger, each of which the directors believed supported their decision (but which are not intended to be exhaustive and are not presented in any relative order of importance):

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The SHFL board of directors also considered and balanced against the potentially positive factors enumerated above a variety of risks and other potentially negative factors, including the following:

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In addition, the SHFL board of directors was aware that certain of SHFL’s directors and executive officers may receive certain benefits that are different from, or in addition to, those of SHFL’s other shareholders as described under “Proposal 1: Approval and Adoption of the Merger Agreement—Interests of SHFL’s Directors and Executive Officers in the Merger” beginning on page 56 of this proxy statement. The SHFL board of directors, however, observed that the majority of the value of such different or additional interests relates to change in control benefits that arise from equity-based compensation, which the SHFL board of directors felt to a significant extent aligned the interests of the directors and executive officers with those of the shareholders in seeking to maximize the per-share merger consideration.

After considering the foregoing potentially negative and potentially positive factors, the SHFL board of directors concluded that the potentially positive factors relating to the merger agreement and the merger substantially outweighed the potentially negative factors.

The foregoing discussion of the information and factors considered by the SHFL board of directors is not exhaustive but is intended to reflect the material factors considered by the SHFL board of directors in its consideration of the merger. In view of the complexity and the large number of the factors considered, the SHFL board of directors, both individually and collectively, did not quantify or assign any relative or specific weight to the various factors and individual directors may have given different weights to different factors. Rather, the SHFL board of directors based its unanimous recommendation on all these factors as a whole, including discussions with, and questioning of, certain members of SHFL senior management and its financial and legal advisors, and overall considered the factors to be favorable to, and in support of, its determination.

The foregoing discussion of the information and factors considered by the SHFL board of directors is forward-looking in nature and, therefore, this information should be read in light of the factors described under the section entitled “Cautionary Statement Concerning Forward-Looking Information” beginning on page 22 of this proxy statement.

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Committee of Disinterested Directors—Business Combination Act / Control Share Acquisition Act

We are governed by the provisions of Section 302A.673 (the Business Combinations Act) of the MBCA, which in some cases may discourage a negotiated acquisition of SHFL and thus deprive our shareholders of an opportunity to sell their shares at a premium over the market price. In general, Section 302A.673 prohibits a public Minnesota corporation from engaging in a business combination with an interested shareholder for a period of four years after the date of the transaction in which the person became an interested shareholder, unless the business combination is approved in a prescribed manner. The term “business combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested shareholder, and an “interested shareholder” is a person who is the beneficial owner, directly or indirectly, of 10% or more of a corporation’s voting stock, or who is an affiliate or associate of the corporation and, at any time within four years before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the corporation’s voting stock. The restrictions of Section 302A.673 do not apply to any transaction if a committee of a Minnesota corporation’s board of directors consisting solely of one or more disinterested directors (excluding the corporation’s current and former officers) approves the proposed transaction or the interested shareholder’s acquisition of shares before the interested shareholder becomes an interested shareholder.

While our board of directors had determined that it was not necessary to form a special negotiating committee in order to evaluate the Company’s strategic alternatives (see the section entitled “Proposal 1: Approval and Adoption of the Merger Agreement—Background of the Merger” beginning on page 32 of this proxy statement), the consideration and approval of a binding merger proposal triggered technical requirements under the MBCA. In order to ensure that Section 302A.673 of the MBCA would not be triggered by our entry into the merger agreement and the completion of the merger, and to prevent Bally and Merger Sub from becoming an “interested shareholder” (as defined in Section 302A.011, subd. 49 of the MBCA) as a result of the merger, our board of directors formed a committee of disinterested directors comprised of all of our directors other than Mr. Isaacs (who was excluded because of his status as a former officer of Bally), each member of such committee being a “disinterested director” (as defined in Section 302A.673 of the MBCA). This committee approved the merger agreement, including the plan of merger, and the transactions contemplated thereby, including the merger, all for the purposes of exempting the merger agreement, including the plan of merger, and the transactions contemplated thereby, including the merger, and the respective parties thereto, from the restrictions and limitations of Section 302A.673 of the MBCA, and rendering the restrictions and limitations set forth in Section 302A.673 of the MBCA inapplicable to the merger agreement, including the plan of merger, and the transactions contemplated thereby, including the merger, and the respective parties thereto.

Recommendation of Our Board of Directors

Our board of directors, after considering all factors that our board of directors deemed relevant, and after consultation with independent legal and financial advisors, unanimously determined that the merger agreement, including the plan of merger, and the transactions contemplated thereby, including the merger, are advisable and fair to and in the best interests of the Company and its shareholders, and unanimously approved the merger agreement, including the plan of merger, and the transactions contemplated thereby, including the merger. Certain factors considered by the SHFL board of directors in reaching its decision to approve the merger agreement and the merger can be found in the section entitled “Proposal 1: Approval and Adoption of the Merger Agreement—Reasons for the Merger” beginning on page 41 of this proxy statement.

The SHFL board of directors recommends that the SHFL shareholders vote “FOR” the approval and adoption of the merger agreement, including the plan of merger, thereby approving the merger.

Opinion of SHFL’s Financial Advisor

Macquarie Capital was engaged on March 11, 2013 to act as exclusive financial advisor to the SHFL board of directors in connection with the exploration of strategic alternatives. On July 15, 2013, Macquarie Capital rendered its oral opinion, subsequently confirmed in writing, to the SHFL board of directors, to the effect that, as

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of such date, and based upon and subject to various factors, assumptions, qualifications and limitations set forth in the written opinion, the merger consideration to be paid to the holders of SHFL common stock (other than excluded shares), in the merger transaction was fair, from a financial point of view, to such holders of SHFL common stock.

The full text of the written opinion of Macquarie Capital, dated July 15, 2013, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken in connection with the opinion, is included as Annex B to this proxy statement and is incorporated herein by reference. Holders of shares of SHFL common stock are encouraged to and should read the opinion carefully and in its entirety. Macquarie Capital’s opinion was provided to the SHFL board of directors in connection with its evaluation of the merger consideration provided for in the merger transaction from a financial point of view. The opinion of Macquarie Capital does not address any other aspect of the merger transaction and does not constitute a recommendation to any holder of SHFL common stock as to whether such holder should act or vote in connection with the merger transaction or any other matter. The summary of the opinion of Macquarie Capital set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion.

In connection with rendering its opinion, Macquarie Capital, among other things:

For purposes of its analysis and opinion, Macquarie Capital assumed and relied upon, without undertaking responsibility for independently verifying, the accuracy and completeness of the information reviewed by Macquarie Capital or reviewed for Macquarie Capital. With respect to the financial projections of the Company

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which were furnished to Macquarie Capital, Macquarie Capital assumed that such financial projections were reasonably prepared by the Company on bases reflecting the best currently available estimates and good faith judgments of the future competitive, operating and regulatory environments and related financial performance of the Company. Macquarie Capital expressed no view as to any such financial projections or the assumptions on which they were based.

For purposes of rendering its opinion, Macquarie Capital assumed, with the consent of the SHFL board of directors, that the representations and warranties of each party contained in the merger agreement were true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the merger agreement and that all conditions to the consummation of the merger will be satisfied without waiver or modification thereof. Macquarie Capital further assumed, with the consent of the SHFL board of directors, that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the merger will be obtained without any delay, limitation, restriction or condition that would have an adverse effect on the Company or the consummation of the merger and that the merger will be consummated in accordance with the terms set forth in the merger agreement without material modification, waiver or delay.

Macquarie Capital did not make, nor assumed any responsibility for making, any independent valuation or appraisal of the assets or liabilities (contingent or otherwise) of the Company or any of its subsidiaries, nor was Macquarie Capital furnished with any such valuations or appraisals, nor did Macquarie Capital evaluate the solvency or fair value of the Company or any of its subsidiaries under any state or federal laws relating to bankruptcy, insolvency or similar matters. Macquarie Capital’s opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to Macquarie Capital as of July 15, 2013. It is understood that subsequent developments may affect Macquarie Capital’s opinion, and Macquarie Capital has no obligation to update, revise, reaffirm or withdraw its opinion.

Macquarie Capital was not asked to opine upon, and expressed no opinion with respect to, any matter other than the fairness from a financial point of view, as of July 15, 2013, to the holders of SHFL common stock (other than holders of excluded shares), of the merger consideration to be paid to such holders of SHFL common stock in the proposed transaction. Macquarie Capital did not express any view on, and its opinion does not address, any other term or aspect of the merger agreement or transaction or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger transaction, including, without limitation, the fairness of the merger transaction to, or any consideration received in connection therewith by, the holders of any other class of securities or options, creditors or other constituencies of the Company; nor does it address the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or class of such persons, in connection with the merger transaction, whether relative to the merger consideration in cash to be paid to the holders of SHFL common stock (other than holders of excluded shares) pursuant to the merger agreement or otherwise. Macquarie Capital’s opinion does not address the relative merits of the merger transaction as compared to other business or financial strategies that might be available to the Company nor does it address the underlying business decision of the Company to engage in the merger transaction. Macquarie Capital is not a legal, regulatory, accounting or tax expert and has assumed the accuracy and completeness of assessments by the Company and its advisors with respect to legal, regulatory, accounting and tax matters. Macquarie Capital did not express any opinion as to the impact of the merger transaction on the solvency or viability of the Company, Bally or Merger Sub or the ability of the Company, Bally or Merger Sub to pay its obligations when they come due.

The following is a summary of the material financial analyses presented by Macquarie Capital to the SHFL board of directors in connection with rendering its opinion. The following summary, however, does not purport to be a complete description of the financial analyses performed by Macquarie Capital. The order of the analyses described and the results of these analyses do not represent relative importance or weight given to these analyses by Macquarie Capital. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before July 15, 2013, and is not necessarily indicative of current market conditions.

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The following summary of financial analyses includes information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Macquarie Capital’s financial analyses.

Historical Stock Price Discussion

Macquarie Capital presented historical trading prices of SHFL common stock over the one-year period ending July 12, 2013, calculated the volume-weighted average daily closing prices for SHFL common stock over various time periods and noted the closing stock price on selected dates prior to and including July 12, 2013, including the 52-week high and low closing stock prices. SHFL’s common stock price per share ranged from $12.66 to $18.32 over the one-year period ending on July 12, 2013. This analysis indicated that the $23.25 per share cash consideration to be paid to holders of SHFL common stock represented a premium of:

Selected Public Company Trading Comparables Analysis

Macquarie Capital reviewed and compared the financial and operating performance of the Company with certain publicly available information of selected gaming equipment companies, as set forth below:

Macquarie Capital chose the selected companies for the purposes of this analysis utilizing its professional judgment and experience, taking into account several factors, including, among other things, the size of the Company and the selected companies, the operational and financial characteristics of the Company compared with the selected companies, the competitive landscape in which the Company and the selected companies operate and the product offerings of the Company and the selected companies. Although none of the selected public companies is directly comparable to the Company, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar in certain respects to the Company’s business.

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For each selected company, using actual publicly reported results for the most recently reported last twelve-month (“LTM”) period and Wall Street research consensus estimates for the years ending December 31, 2013 and 2014, Macquarie Capital calculated enterprise value (which we refer to as “EV” in this proxy statement) to earnings before interest, taxes, depreciation and amortization, which we refer to in this proxy as “EBITDA”, and such ratio, “EV/EBITDA”, and the price to earnings ratio, which we refer to in this proxy as the “P/E” ratio. The results of these analyses are summarized below.

Macquarie Capital selected a range of multiples to apply to the Company’s estimates, as well as Wall Street research consensus estimates of the Company’s Adjusted EBITDA and Adjusted Net Income for the twelve months ended April 30, 2013 and the calendar years ending December 31, 2013 and 2014. Based upon Macquarie Capital’s professional judgment and experience, and taking into account the analysis of trading comparables described above, Macquarie Capital derived a range of implied values of SHFL common stock of between $16.69 and $18.71 per share. Macquarie Capital noted that the merger consideration was above the resulting implied ranges per the public company trading comparables analysis. Implied values for SHFL common stock were calculated as follows: (i) for EV/EBITDA ratios, the relevant derived enterprise value less debt plus cash and cash equivalents as of May 31, 2013, as estimated by SHFL management, divided by fully diluted shares outstanding as of May 31, 2013, as provided by SHFL management, and (ii) for P/E ratios, the relevant derived equity value divided by fully diluted shares outstanding as of May 31, 2013, as provided by SHFL management.

The following table presents the ranges of multiples and implied values of SHFL common stock calculated by Macquarie Capital based upon the trading comparables.

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Note: Management projections (P) provided by SHFL management. Research estimates (E) based on Wall Street consensus estimates from Capital IQ. CY refers to the period between January 1 and December 31.

Selected Precedent Transactions Analysis

Macquarie Capital reviewed publicly available information relating to the following selected transactions within the gaming equipment industry announced since January 2001. Macquarie Capital calculated the implied Purchase Price/EBITDA multiples of each target company for the LTM period prior to the announcement of the relevant transaction and then calculated means and medians for the transactions. The results of these calculations are set forth in the table below.

Macquarie Capital chose the selected transactions for purposes of this analysis based on its professional judgment and experience. No transaction reviewed was directly comparable to the proposed transaction. Accordingly, this analysis involved complex considerations and judgments concerning differences in financial and operating characteristics of the Company relative to the targets in the selected transactions and other factors that would affect the acquisition values in the selected precedent transactions.

Based on Macquarie Capital’s professional judgment taking into account the median Purchase Price/LTM EBITDA multiple referenced above, and the differences between the Company’s business and the businesses of the target companies in the selected precedent transactions, Macquarie Capital derived a range of implied equity values of SHFL common stock of between $9.78 and $11.38. Macquarie Capital noted that, per the selected precedent transaction analysis, the merger consideration considerably exceeded the resulting implied range.

Discounted Cash Flow Analysis

Macquarie Capital performed a discounted cash flow analysis to produce a range for the implied present value per share of SHFL common stock, assuming the Company continued to operate as an independent entity. The valuation range was determined by adding (i) the net present value of the unlevered free cash flows for the

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second half of fiscal year 2013 and fiscal years 2014 through 2015 and (ii) the present value of the terminal value of the Company as of October 31, 2015. Macquarie Capital’s analysis used the financial projections provided by SHFL management for the six months ending October 31, 2013, and the fiscal years ending October 31, 2014, and October 31, 2015. For purposes of Macquarie Capital’s analysis, unlevered free cash flow, a non-GAAP metric used to measure operating performance, was calculated as Adjusted EBITDA, less stock-based compensation, less taxes, less capital expenditures.

Macquarie Capital estimated the range for the implied present value per share of SHFL common stock by using the following assumptions, which Macquarie Capital selected based on its professional judgment: (i) a range of terminal multiples applied to projected 2015 Adjusted EBITDA of 6.25x to 8.25x, (ii) a range of perpetuity growth rates applied to projected 2015 unlevered free cash flow of 4.0% to 5.0% and (iii) a range of discount rates of 12.0% to 14.0% taking into account the Company’s current cost of debt and the capital asset pricing model. Macquarie Capital also assumed the following: fully diluted shares using the treasury stock method, and $34.7 million of cash and cash equivalents and $2.8 million of debt as of May 31, 2013, as estimated by SHFL management. In order to determine the ranges of discount rates to use, Macquarie Capital first prepared estimates of the Company’s weighted average cost of capital, which we refer to as “WACC” in this proxy statement, as summarized in the tables shown below. This calculation resulted in an estimated WACC of 12.89%, which, in the exercise of its professional judgment, Macquarie Capital used as a midpoint in selecting a range of discount rates. The discounted cash flow analysis resulted in a range for the implied present value per share of SHFL common stock of between $22.17 and $30.28. Macquarie Capital noted that the merger consideration was within the resulting implied ranges per the discounted cash flow analysis. Projected changes in working capital were not prepared by SHFL management. While the calculation of unlevered free cash flow does not adjust for changes in working capital, because SHFL management indicated that changes in working capital were expected to be a use of cash throughout the forecast period, this is a more conservative presentation for purposes of rendering an opinion as to the fairness, from a financial point of view, of the merger consideration to be paid to the holders of SHFL common stock (other than excluded shares).

The following tables present the results of these analyses in a range of implied present values:

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The following WACC table prepared by Macquarie Capital in connection with its analysis support the range of discount rates selected:

General

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Macquarie Capital’s opinion. In arriving at its fairness opinion, Macquarie Capital considered the results of all of its analyses and, except as expressly stated above, did not attribute any particular weight to any factor or analysis considered by it. Rather, Macquarie Capital made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or the merger transaction. Macquarie Capital prepared these analyses for purposes of providing its opinion to the SHFL board of directors as to the fairness from a financial point of view, to the holders of shares of SHFL common stock (other than excluded shares), of the merger consideration to be paid to such holders in the merger transaction. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Bally, Merger Sub, Macquarie Capital or any other person assumes responsibility if future results are materially different from those forecast.

The merger consideration was determined through arm’s-length negotiations between the Company and Bally and was approved by the SHFL board of directors by unanimous vote following a presentation to the board of directors. Macquarie Capital provided advice to the SHFL board of directors during these negotiations. Macquarie Capital did not, however, recommend any specific amount of consideration to the board of directors or that any specific amount of consideration constituted the only appropriate consideration for the merger transaction. As described above, Macquarie Capital’s opinion to the SHFL board of directors was one of many factors taken into consideration by the SHFL board of directors in making its determination to approve the merger transaction. The foregoing summary does not purport to be a complete description of the analyses performed by Macquarie Capital in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Macquarie Capital, which is included as Annex B to this proxy statement and is incorporated herein by reference.

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Macquarie Capital’s opinion was approved by a committee of Macquarie Capital professionals in accordance with its customary practice.

Macquarie Capital and its affiliates are engaged in a broad range of securities activities and financial advisory services. Macquarie Capital and its affiliates carry on a range of businesses for their own account and for their customers, including providing stock brokerage, investment advisory, investment management, proprietary financings and custodial services. In the ordinary course of business, Macquarie Capital or its affiliates may actively trade in the bank loans or debt and equity securities, or options on securities, of (i) the Company and affiliates of the Company, (ii) Bally and affiliates of Bally and (iii) any other company that may be involved in the merger transaction, for its and their own accounts and for the accounts of its and their customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Macquarie Capital and its affiliates have in the past five years provided financial advisory services to the Company and affiliates of the Company, and in the future may provide financial advisory services to the Company, affiliates of the Company and to Bally and its affiliates, for which Macquarie Capital or such affiliates have received, and/or would expect to receive, compensation. Over the past five years, Macquarie Capital has received approximately $200,000 from the Company for a fairness opinion rendered in the Company’s fiscal year 2012 in connection with an acquisition pursued by the Company; in addition, Macquarie Capital holds non-beneficial ownership of the Company constituting less than 0.5% of the outstanding SHFL common stock and non-beneficial ownership of Bally constituting less than 0.5% of its outstanding common stock. Macquarie Capital has not provided advisory services to Bally in the preceding five years, is not currently providing any advisory services to Bally or its affiliates and did not provide any such services to any of them in connection with the merger transaction.

Macquarie Capital has acted as exclusive financial advisor to the SHFL board of directors in connection with the merger transaction. The SHFL board of directors selected Macquarie Capital as its financial advisor because it is an internationally recognized financial advisory firm that has substantial experience in the industries in which the Company operates. Macquarie Capital is expected to receive a fee of $2,000,000 as a result of the delivery of its fairness opinion. If the merger transaction is consummated, Macquarie Capital will receive an additional fee of approximately $11,600,000. In addition, the Company agreed to reimburse certain of Macquarie Capital’s reasonable expenses and to indemnify Macquarie Capital and related persons against certain liabilities arising out of its engagement. In certain circumstances, if the merger agreement is terminated or abandoned and SHFL or any of its affiliates receives any judgment for damages or amount in settlement of any dispute as a result of such termination or any other failure to consummate the merger (in each case, as more fully described in the section entitled “Terms of the Merger Agreement—Termination Fee; Effect of Termination” beginning on page 98 of this proxy statement), Macquarie Capital will be entitled to a portion of such judgment or amount in settlement, as applicable.

Delisting and Deregistration of Our Common Stock

SHFL common stock is registered as a class of equity securities under the Exchange Act and is quoted on the NASDAQ under the symbol “SHFL”. As a result of the merger, we will become an indirect wholly owned subsidiary of Bally, with no public market for our common stock. After the merger, our common stock will cease to be traded on the NASDAQ, and price quotations with respect to sales of shares of our common stock in the public market will no longer be available. In addition, we will no longer be required to file periodic reports with the SEC after the effective time of the merger with respect to our common stock.

Financing of the Merger

The merger is not conditioned on Bally obtaining the proceeds of any financing, including the financing contemplated by the debt commitment letter. We anticipate that the total amount of funds necessary to complete the merger and the other transactions contemplated by the merger agreement, including the funds needed to (i) pay our shareholders (including equity award holders) the amount due under the merger agreement; (ii) refinance, repay or repurchase certain of our outstanding indebtedness; and (iii) pay customary fees and expenses in connection with the transactions contemplated by the merger agreement, will be approximately $1,380,000,000.

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In connection with entering into the merger agreement, Bally entered into a commitment letter with Wells Fargo, J.P. Morgan, Merrill Lynch, Bank of America, Goldman Sachs Bank USA and Union Bank. Pursuant to the commitment letter, among other things, each of the initial lenders has agreed to provide debt financing to Bally. See the section entitled “Terms of the Merger Agreement—Financing of the Merger” beginning on page 93 of this proxy statement for additional information with respect to the debt financing.

We believe the amounts described in the debt commitment letter, together with cash-on-hand at the Company and at Bally, will be sufficient to complete the merger, but we cannot assure you of that. Those amounts might be insufficient if, among other things, we have substantially more debt or Bally receives substantially lower net proceeds from the debt financing than we currently expect.

Debt Financing

Pursuant to the debt commitment letter, as reduced by the written notice described below pursuant to Section 1(c) of the debt commitment letter, Wells Fargo Bank, JPMorgan Chase, Bank of America, Goldman Sachs Bank USA and Union Bank have agreed on a several and not joint basis to provide, in the aggregate, 100% of an approximately $1,300 million term loan facility through an amendment to Bally’s Second Amended and Restated Credit Agreement dated April 19, 2013 (which facility, as reduced by the written notice described below, we refer to as the “incremental debt facility” in this proxy statement), the proceeds of which are to be used to pay amounts due under the merger agreement, refinance all of SHFL’s existing indebtedness under its current Credit Agreement, dated as of October 29, 2010, pay fees and expenses incurred in connection with the foregoing, and to fund ongoing working capital requirements and other general corporate purposes of Bally and its subsidiaries.

Pursuant to section 1(c) of the debt commitment letter, Bally gave written notice to Wells Fargo, J.P. Morgan, Bank of America, Merrill Lynch, Goldman Sachs Bank USA and Union Bank on August 1, 2013 that Bally was exercising its option to reduce the incremental debt facility by $200 million. In accordance with the terms of the debt commitment letter, the commitments were automatically and permanently reduced upon receipt of such written notice. Bally does not believe that such reduction materially adversely affects its ability to pay the merger consideration at the effective time of the merger.

On August 27, 2013, Bally entered into Amendment No. 1 to the Second Amended and Restated Credit Agreement (the “Amendment”) with Bank of America, N.A., as administrative agent (the “Agent”) and the other lenders party thereto. The Amendment amended Bally’s current Second Amended and Restated Credit Agreement dated as of April 19, 2013, to, among other things: (i) permit the acquisition of SHFL by Bally and (ii) allow for the incremental debt facility. The amendments to the Second Amended and Restated Credit Agreement will become effective when specified conditions precedent, including the consummation of the acquisition of SHFL, are met.

The debt commitment letter expires on the earliest of (i) the consummation of the merger with or without the debt financing; (ii) the termination of the merger agreement; and (iii) July 10, 2014 if the closing of the merger shall not have happened by such time. The commitments of the initial lenders to provide the debt financing are subject to the satisfaction of a number of customary conditions, including the following:

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Interests of SHFL’s Directors and Executive Officers in the Merger

In considering the recommendation of the SHFL board of directors with respect to the merger, SHFL shareholders should be aware that the executive officers and directors of SHFL have certain interests in the merger that may be different from, or in addition to, the interests of SHFL shareholders generally. The SHFL board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the merger and making its recommendation that the SHFL shareholders approve the merger agreement and the merger. These interests are described below.

Potential New Employment Arrangements

As of the date of this proxy statement, none of our executive officers has entered into any amendments or modifications to existing employment or compensation arrangements with us or our subsidiaries in anticipation of the merger, nor has any executive officer entered into any agreement, arrangement or understanding with Bally or its affiliates regarding employment with, or the right to purchase or participate in any equity incentive compensation programs of, Bally or the surviving company. Although no such agreement, arrangement or understanding currently exists, it is generally expected that several of our executive officers will remain employed after the merger is completed, which means that such executive officers may, prior to the closing of the merger, enter into new arrangements with Bally or its affiliates regarding employment with, or the right to purchase or participate in the equity of, Bally or the surviving company.

Mr. Isaacs and/or Mr. Fox may not be employed with the Company following the merger closing date.

Treatment of Outstanding Equity Awards

SHFL equity awards held by its executive officers and directors that are outstanding immediately prior to the closing of the merger will be subject to the following treatment. There are certain restrictions under the merger

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agreement relating to the grant of new equity incentive compensation awards after July 15, 2013, including that any awards granted to directors or named executive officers (who as of the date of this proxy statement constitute all of our executive officers) generally must provide that they will terminate and be of no effect immediately prior to the merger closing if the merger occurs, except for certain restricted share units which may be granted to Messrs. Snow and Castle pursuant to existing contractual obligations (as described in detail below).

Options

The merger agreement provides that upon the effective time of the merger, each option granted pursuant to a Company plan that was outstanding and unexercised as of July 15, 2013 and remains outstanding and unexercised immediately prior to the effective time of the merger (whether vested or unvested) will be canceled in exchange for the right to receive an amount, in cash, equal to the excess, if any, of the merger consideration over the per-share exercise price of such option, multiplied by the number of shares of SHFL common stock subject to such option, less any applicable withholding taxes.

Restricted Share Units / Restricted Shares

At the effective time of the merger, each restricted share of Company common stock granted pursuant to a Company plan and each Company restricted share unit (other than any performance unit) granted pursuant to a Company plan that was outstanding as of July 15, 2013 and remains outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be canceled in exchange for the right to receive $23.25, less any applicable withholding taxes.

Performance Units

Similarly, at the effective time of the merger, each performance unit granted pursuant to a Company plan that was outstanding as of July 15, 2013 and remains outstanding immediately prior to the effective time of the merger will be canceled in exchange for the right to receive an amount, in cash, equal to the number of vested performance units as of the effective time of the merger (with unvested performance units eligible to vest at the effective time based on the achievement of a certain level of “total shareholder return” on SHFL common stock, as calculated using the five-day trading average ending on the effective date of the merger) multiplied by $23.25, less any applicable withholding taxes.

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Summary Table

The following table shows, for each executive officer and each director, as applicable, (i) the number of shares subject to vested options held by him or her, (ii) the cash consideration that he or she will receive for such vested options upon completion of the merger, (iii) the number of shares subject to unvested options held by him or her, (iv) the cash consideration that he or she will receive for such options upon completion of the merger, (v) the number of shares subject to restricted share units and performance units and the number of shares of restricted stock held by him or her, which we refer to as “Other Equity Awards” in this proxy statement, (vi) the cash consideration that he or she will receive for the Other Equity Awards upon completion of the merger (assuming that all performance units vest at the maximum level), (vii) the total cash consideration he or she will receive for all unvested equity awards upon completion of the merger, and (viii) the total cash consideration he or she will receive for all outstanding equity awards upon completion of the merger, in each case as of an assumed merger closing date of December 31, 2013, based on applicable holdings on the date hereof and assuming continued employment or service through the assumed merger closing date, December 31, 2013 (and as such without regard to any grants that may be made, including those that may be contractually required to be made, after the date hereof).