CASINOVATIONS INCORPORATED


                        1999 DIRECTORS' STOCK OPTION PLAN
                                  AS ADOPTED ON
                               SEPTEMBER 13, 1999


1.       PURPOSE

         The Casinovations Incorporated 1999 Directors' Stock Option Plan (the
"Plan") is intended to promote the interests of Casinovations Incorporated (the
"Company") by encouraging members of the Board of Directors of the Company (the
"Board") who are not employed as regular salaried officers or employees of the
Company (hereinafter referred to as "Non-Employee Directors" or "Optionees") the
opportunity to participate in a stock option plan in order to encourage
Non-Employee Directors to take a long-term view of the affairs of the Company;
to attract and retain new, top-notch Non-Employee Directors; and to aid in
rewarding Non-Employee Directors for their services to the Company.

2.       ADMINISTRATION

         The Plan shall be administrated by a Committee (the "Committee") of not
less than two directors of the Company selected by, and serving at the pleasure
of, its Board. The Committee shall not have any discretion to determine or vary
any matters which are fixed under the terms of the Plan including, without
limitation, which individuals shall receive option awards, how many shares of
the Company's stock shall be subject to each such option award, what the
exercise price of stock covered by an option shall be, and what means of payment
shall be acceptable.

         The Committee shall have the authority to otherwise interpret the Plan
and make all determinations necessary or advisable for its administration.

         The Committee's decisions under the Plan shall be subject to the
approval of the Board.

3.       ELIGIBILITY

         Only Non-Employee Directors of the Company will be eligible to be
granted awards.

4.       STOCK SUBJECT TO THE PLAN

         The stock from which awards may be granted shall be the Company's,
$.001 par value, common stock ("Common Stock"). When options are exercised, the
Company may either issue authorized but unissued shares of Common Stock or
transfer issued Common Stock held in its treasury. The total number of shares of
Common Stock which may be granted as stock options shall not exceed 100,000. If
an option expires, or is otherwise terminated prior to its exercise, the Common
Stock covered by such option immediately prior to such expiration or other
termination shall continue to be available for grant under the Plan.

5.       GRANT AND AMOUNT OF OPTIONS

         The date of the initial option grant for a Non-Employee Director
serving his or her term shall be the date upon which the Plan is adopted by the
Board for submission to the stockholders for approval. The date of the initial
grant for a Non-Employee Director commencing his or her term shall be the date
that he or she is elected to the Board by the stockholders at any special or
annual meeting. The initial option grant shall be to purchase 1,000 shares of
Common Stock (subject to adjustment pursuant to Section 7).

<PAGE>

1999 DIRECTORS' STOCK OPTION PLAN
Page 2 of 7


         All annual awards of options shall be granted in January, of each year,
with the first annual grant effective January 1, 1999. Annual grants will be to
purchase 1,000 shares of Common Stock (subject to adjustment pursuant to Section
7).

6.       TERMS AND CONDITIONS OF OPTIONS

         Options shall be designated non-qualified options or not qualified as
Incentive Stock Options under Section 422A of the Internal Revenue Code of 1954,
as amended (the "Code"), and shall be evidenced by written instruments approved
by the Committee. Such instruments shall conform to the following terms and
conditions.

         6.1. OPTION PRICE

              The option price shall be 100% of the fair market value of the
Common Stock granted under the option on the date of grant. For purposes of this
section, the fair market value per share shall be (a) the last reported sale
price of the Common Stock on the NASDAQ National Market System, or on such other
stock exchange that the Common Stock may be listed from time-to-time, (the
"Reported Price") that day or, if no sale of Common Stock is recorded on that
day, then on the next preceding day on which there was such a sale or (b) if the
Common Stock is not listed on Nasdaq National Market System or on any other
stock exchange, the fair market value as determined by the Board or a committee
designated by the Board (the "Option Price"). The Option Price shall be paid (x)
in cash, (y) in shares of Common Stock having a fair market value equal to such
option price or (z) in a combination of cash and Common Stock. The fair market
value of shares of Common Stock delivered to the Company pursuant to the
immediately preceding sentence shall be determined on the basis of the Reported
Price on the day of exercise or, if there was no such sale on the day of
exercise, on the day next preceding the day of exercise on which there was such
a sale.

         6.2. EXERCISE AND TERM OF OPTIONS

              Each option shall be exercisable and shall vest in full six months
and one day following the later of either the date of grant or stockholder
approval of the Plan.

              Except in special circumstances, each option shall expire the
later of the tenth anniversary of the date of its grant or three months after
the Optionee ceases to serve as a member of the Board.

              After becoming exercisable, each installment shall remain
exercisable until expiration or termination of the option. After becoming
exercisable, an option may be exercised by the Optionee from time-to-time, in
whole or part, up to the total number of shares with respect to which it is then
exercisable. The Committee may provide that payment of the option exercise price
may be made following delivery of the certificate for the exercised shares.

              Upon the exercise of a stock option, the purchase price will be
payable in full in cash or its equivalent in property acceptable to the Company.
In the discretion of the Committee, the purchase price may be paid by the
assignment and delivery to the Company of shares of Common Stock or a
combination of cash and such shares equal in value to the purchase price. Any
shares of Common Stock so assigned and delivered to the Company in payment or
partial payment of the purchase price will be valued at Fair Market Value on the

<PAGE>

1999 DIRECTORS' STOCK OPTION PLAN
Page 3 of 7

exercise date. Upon the exercise of a non-qualified stock option, the Optionee
may (a) direct the Company to withhold from the shares of Common Stock to be
issued to the Optionee the number of shares necessary to satisfy the Company's
obligation to withhold Federal taxes, such determination to be based on the
shares' Fair Market Value on the date of exercise, (b) deliver to the Company
sufficient shares of Common Stock to satisfy the Company's withholding
obligations, based on the shares' Fair Market Value as of the date of exercise,
or (c) deliver sufficient cash to the Company to satisfy its Federal tax
withholding obligations. Optionees who elect to use the stock withholding
feature must make that election at the time and in the manner prescribed by the
Committee.

         6.3. TERMINATION OF DIRECTORSHIP

              If an Optionee ceases, other than by reason of death or retirement
after attaining the age of 72 years, to be elected to serve on the Board, all
options granted to such Optionee and exercisable on the date of termination of
Directorship shall expire on the earlier of (i) the tenth anniversary after the
date of grant (ii) three months after the day such Optionee's term ends or (iii)
as otherwise extended by the Board in its sole discretion.

         6.4. EXERCISE UPON DEATH OF OPTIONEE

              If an Optionee dies, the option may be exercised, to the extent of
the number of shares that the Optionee could have exercised on the date of such
death, if any, by the Optionee's estate, personal representative or beneficiary
who acquires the option by will or by the laws of descent and distribution. Such
exercise may be made at any time prior to the earlier of (i) the tenth
anniversary after the date of grant or (ii) the third anniversary of such
Optionee's death. On the earlier of such dates, the option shall terminate. The
Committee may approve all cash payments to the estate of an Optionee if
circumstances warrant such a decision.

         6.5. EXERCISE UPON RETIREMENT OF OPTIONEE

              If an Optionee retires from the Board after attaining the age of
72 years, the option may be exercised, to the extent of the number of shares
that the Optionee could have exercised on the date of such retirement, if any.
Such exercise may be made at any time prior to the earlier of (i) the tenth
anniversary after the date of grant or (ii) the third anniversary of such
Optionee's retirement. On the earlier of such dates, the option shall terminate.

         6.6. ASSIGNABILITY

              No option or other right under the Plan will be assignable or
transferable by any Optionee except by will or the laws of descent and
distribution, and no option shall be exercisable except by the Optionee or the
Optionee's legal representative.

              (a) A stock option shall not be assigned, alienated, pledged,
         attached, sold, transferred or encumbered by an Optionee other than by
         will or by the laws of descent and distribution, or,

                  (i) by transfer without consideration by an Optionee, subject
              to such rules as the Committee may adopt to preserve the purposes
              of the Plan (including limiting such transfers to transfers by
              Optionees who are directors or executive officers of the Company),
              to

<PAGE>

1999 DIRECTORS' STOCK OPTION PLAN
Page 4 of 7

                      (1) a member of his or her Immediate Family (as defined),

                      (2) a trust solely for the benefit of the Optionee and his
                  or her Immediate Family, or

                      (3) a partnership, limited liability company or
                  corporation whose only partners, members or shareholders are
                  the Optionee and/or his or her Immediate Family Members;

         (each transferee described in (i) is hereafter referred to as a
         "Permitted Transferee"), provided that the Committee is notified in
         advance in writing of the terms and conditions of any proposed transfer
         intended to be described in (i), and it determines that the proposed
         transfer complies with the requirements of the Plan and the applicable
         option agreement. Any purported assignment, alienation, pledge,
         attachment, sale, transfer or encumbrance that does not qualify under
         (i) shall be void and unenforceable against the Company. For purposes
         of the Plan, "Immediate Family" means, with respect to a particular
         Optionee, the Optionee's spouse, children or grandchildren (including
         adopted and step children and grandchildren).

                  (b) The terms of the stock option shall apply to the
         beneficiaries, executors and administrators of the Participant and of
         the Permitted Transferees of the Optionee (including the beneficiaries,
         executors and administrators of the Permitted Transferees), except that
         Permitted Transfers shall not transfer any stock option other than by
         will or by the laws of descent and distribution.

                  (c) A stock option shall be exercised only by the Optionee (or
         his or her attorney in fact or guardian) (including, in the case of a
         transferred option, by a Permitted Transferee), or, in the case of the
         Optionee's death, by the Optionee's executor or administrator
         (including, in the case of a transferred option, by the executor or
         administrator of the Permitted Transferee), and no shares of Common
         Stock shall be issued by the Company unless the exercise of a stock
         option is accompanied by sufficient payment, as determined by the
         Company, to meet its withholding tax obligations on such exercise or by
         other arrangements satisfactory to the Committee to provide for such
         payment.

7.       CAPITAL ADJUSTMENTS

         If the outstanding shares of Common Stock (or shares or securities
substituted therefore) are converted into or exchanged for a different number or
kind of shares of the Company or other securities of the Company or any other
corporation by reason of stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares or
other similar corporate change, the Committee, in its absolute discretion and on
such terms and conditions as it deems appropriate, may make an appropriate and
equitable adjustment in the number, option price and kind of shares or other
securities covered by all outstanding options or reserved for issuance under the
Plan. If the Company is the surviving corporation in any merger or
consolidation, any option shall thereafter be exercisable for the securities to
which a holder of the number of shares of Common Stock subject to the option
would have been entitled after the merger or consolidation.

<PAGE>

1999 DIRECTORS' STOCK OPTION PLAN
Page 5 of 7

8.       CHANGE OF CONTROL

         Notwithstanding the provisions of Section 7, in the event of a change
of control, all vesting on all unexercised stock options will accelerate to the
change of control date. For purposes of the Plan, a "Change of Control" of the
Company shall be deemed to have occurred at such time as (a) any "person" (as
term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act")), with the exception of Richard S. Huson and James E.
Crabbe, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
25.0% or more of the combined voting power of the Company's outstanding
securities ordinarily having the right to vote at the election of directors; or
(b) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by at least a majority of the directors comprising the Incumbent
Board, or whose nomination for election was approved by a majority of the Board
serving under an Incumbent Board, shall be, for purposes of this clause (b),
considered as if he or she were a member of the Incumbent Board; or (c) a
merger, consolidation or sale of all or substantially all the assets of the
Company occurs, unless such merger or consolidation shall have been
affirmatively recommended to the Company's stockholders by a majority of the
Incumbent Board; or (d) a proxy statement is distributed soliciting proxies from
stockholders of the Company by someone other than the current management of the
Company seeking stockholder approval of a plan or reorganization, merger or
consolidation of the Company with one or more corporations as a result of which
the outstanding shares of the Company's securities are actually exchanged for or
converted into cash or property or securities not issued by the Company unless
the reorganization, merger or consolidation shall have been affirmatively
recommended to the Company's stockholders by a majority of the Incumbent Board.

9.       APPROVALS

         The issuance of shares pursuant to this Plan is expressly conditioned
upon obtaining all necessary approvals from the Nevada Gaming Commission, if
any, and upon obtaining stockholder approval of the Plan.

10.      EFFECTIVE DATE OF PLAN

         The effective date of the Plan is September 13, 1999. The Plan will
become effective as of that date provided that the Plan receives the approval of
the holders of a majority of the outstanding shares of Common Stock at the
Company's 2000 Annual Meeting of Stockholders.

11.      TERM: AMENDMENT OF PLAN

         This Plan shall expire on December 31, 2009 (except to options
outstanding on that date). The Board may terminate the Plan at any time. The
Board may amend the Plan at any time; provided, however, the provisions of
Section 5 pertaining to the amount of options to be granted and the timing of
such option grants and the provisions of Section 6.1 pertaining to the option
price of the Common Stock under option shall not be amended more than once every
six months other than to comport with changes in the Code or the regulations
promulgated thereunder. Further provided, however, that without the approval of
the holders of a majority of shares of outstanding Common Stock; the total
number of shares that may be sold, issued or transferred under the Plan may not
be increased (except by adjustment pursuant to Section 7); the provisions of
Section 3 regarding eligibility may not be modified; the purchase price at which

<PAGE>

1999 DIRECTORS' STOCK OPTION PLAN
Page 6 of 7

shares may be offered pursuant to options may not be reduced (except by
adjustment pursuant to Section 7); and the expiration date of the Plan may not
be extended, and no change may be made which would cause the Plan not to comply
with Rule 16b-3 under the Exchange Act, as amended from time to time. No action
of the Board or stockholders, however, may, without the consent of an Optionee,
alter or impair such Optionee's rights under any option previously granted.

12.      WITHHOLDING TAXES

         The Company shall have the right to deduct withholding taxes from any
payments made pursuant to the Plan or to make such other provisions as it deems
necessary or appropriate to satisfy its obligations to withhold Federal, state
or local income or other taxes incurred by reason of payments or the issuance of
shares of Common Stock under the Plan. Whenever, under the Plan, shares of
Common Stock are to be delivered the exercise of an option, the Committee shall
be entitled to require as a condition of delivery that the Optionee remit an
amount sufficient to satisfy all Federal, state and other government withholding
tax requirements related thereto.

13.      PLAN NOT A TRUST

         Nothing contained in the Plan and no action taken pursuant to the Plan
shall create or be construed to create a trust of any kind, or a fiduciary
relationship, between the Company and any Optionee, the executor, administrator
or other personal representative, or designated beneficiary of such Optionee, or
any other persons. Any reserves that may be established by the Company in
connection with the Plan shall continue to be part of the general funds of the
Company, and no individual or entity other than the Company shall have any
interest in such funds until paid to an Optionee. If, and to the extent that,
any Optionee or such Optionee's executor, administrator or other personal
representative, as the case may be, acquires a right to receive any payment from
the Company pursuant to the Plan, such right shall be no greater than the right
of an unsecured general creditor of the Company.

14.      NOTICES

         Each Optionee shall be responsible for furnishing the Committee with
the current and proper address for the mailing of notices and delivery of
agreements, shares of Common Stock and cash pursuant to the Plan. Any notices
required or permitted to be given shall be deemed given if directed to the
person to whom addressed at such address and mailed by regular United States
mail, first-class and prepaid. If any item mailed to such address is returned as
undeliverable to the addressee, mailing will be suspended until the Optionee
furnishes the proper address. This provision shall not be construed as requiring
the mailing of any notice or notification if such notice is not required under
the terms of the Plan or any applicable law.

15.      SEPARABILITY OF PROVISIONS

         If any provision of this Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such provisions had
not been included.

16.      PAYMENT TO MINORS, ETC.

         Any benefit payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be deemed paid
when paid to such person's guardian or to the party providing or reasonably
appearing to provide for the care of such person, and such payment shall fully
discharge the Committee, the Company and other parties with respect thereto.

<PAGE>

1999 DIRECTORS' STOCK OPTION PLAN
Page 7 of 7

17.      HEADINGS AND CAPTIONS

         The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.

18.      CONTROLLING LAW

         This Plan shall be construed and enforced according to the laws of the
State of Nevada to the extent not preempted by Federal law, which shall
otherwise control.