ex102-01072009.htm


     

    
      

      

    

    

      EXHIBIT
10.2

       

      


       

      


       

      


       

      The
Shuffle Master, Inc.

       

      2004
Equity Incentive Plan For Non-Employee Directors

       

      (As
Amended and Restated on December 31, 2008)

       


      
        
           


        

        
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      THE
SHUFFLE MASTER, INC.

       

      2004
EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS

       

      (as
Amended and Restated on December 31, 2008)

      


      ARTICLE
1.                                

       

      ESTABLISHMENT,
PURPOSE, AND DURATION

       

      1.1) Establishment of the
Plan.

       

      This
plan, known as “The Shuffle Master, Inc. 2004 Equity Incentive Plan for
Non-Employee Directors,” (as Amended and Restated on December 31, 2008) was
established effective as of February 12, 2004, subject to approval by the
shareholders of Shuffle Master, Inc. for the grant of Nonqualified Stock
Options, Stock Appreciation Rights and Restricted Stock to Non-Employee
Directors of the Company, and was subsequently amended on December 31, 2008 to
solely incorporate various provisions to comply with Section 409A of the
Code.

       

      1.2) Purpose of the
Plan.

       

      The
purpose of the Plan is to promote the success of the Company and its
Subsidiaries by providing incentives to Non-Employee Directors by linking their
personal interests to the long-term financial success of the Company and its
Subsidiaries, and to growth in shareholder value.

       

      1.3) Duration of the
Plan.  The Plan will commence on the effective date set forth
in Section 1.1, and shall remain in effect, subject to the right of the Board of
Directors to terminate the Plan at any time, until all Shares subject to it have
been purchased or acquired according to the provisions herein.  No
Awards may be granted under the Plan after the tenth anniversary of the
effective date of the Plan.

       

      ARTICLE
2.                                

       

      DEFINITIONS
AND CONSTRUCTION

       

      2.1) Definitions.

       

      Whenever
used in the Plan, the following terms shall have the meanings set forth below
and, when the meaning is intended, the initial letter of the word is
capitalized:

       

      (a) “Award”
means, individually or collectively, a grant under this Plan of Options, Stock
Appreciation Rights or Restricted Stock.

       

      (b) “Beneficial
Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act.

       


      
        
           


        

        
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      (c) “Board”
or “Board of Directors” means the Board of Directors of the
Company.

       

      (d) “Cause”
shall include but not be limited to:  (i) willful breach of any
agreement entered into with the Company; (ii) misappropriation of the
Company’s property, fraud, embezzlement, breach of fiduciary duty, other acts of
dishonesty against the Company; or (iii) conviction of any felony or crime
involving moral turpitude.

       

      (e) “Change
in Control” shall mean:

       

      
        	
                (1)  

              	
                That
      any Person (other than the Company) has made a tender offer to acquire
      such number of shares of the Company’s Stock as shall constitute twenty
      percent (20%) or more of the Company’s outstanding
  Stock;

              


      

       

      
        	
                (2)  

              	
                That
      the Company has issued or the Company’s officers and directors have
      transferred (and/or assigned their voting rights related to) shares of
      Stock (or other securities convertible into or exchangeable for Stock)
      representing at least twenty percent (20%) of the outstanding Stock of the
      Company (including a series of similar transactions effected within six
      (6) months which, in the aggregate, result in the issuance and/or transfer
      of (and/or assignment of voting rights related to) at least twenty percent
      (20%) of the Company’s outstanding Stock) (the percentages set forth in
      this subsection to be computed after completion of the subject
      transactions and as though Shares “beneficially owned,” as defined in Rule
      13d-3 under the Exchange Act, were, in fact,
  owned);

              


      

       

      
        	
                (3)  

              	
                That
      a proxy statement, whether issued by the Company or another shareholder,
      proposes a vote at a shareholder meeting related to any merger of the
      Company, any sale of substantially all of the Company’s assets or any
      reorganization of the Company involving a change in beneficial ownership
      of the Company;

              


      

       

      
        	
                (4)  

              	
                That
      the individuals who constitute the Board of Directors on the effective
      date of the Plan cease for any reason to constitute at least a majority of
      the Board, provided that any person becoming a director subsequent to the
      effective date of the Plan whose election, or nomination for election by
      the Company’s shareholders, was approved by a vote of at least a majority
      of the directors comprising the Board on the effective date of the Plan
      will, for purpose of this subsection, be considered as though such persons
      were a member of the Board of Directors on the effective date of the
      Plan;

              


      

       

      
        	
                (5)  

              	
                A
      change in control of the Company of a nature that would be required to be
      reported pursuant to Section 13 or 15(d) of the Exchange Act, whether or
      not the Company is then subject to such reporting requirements, including,
      without limitation, such time as any Person becomes, after the effective
      date of the Plan, the “beneficial owner” (as defined in Rule 13d-3 under
      the Exchange Act), directly or indirectly, of forty percent (40%)
      or

              


      

       


      
        
           


        

        
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                (6)  

              	
                more
      of the combined voting power of the Company’s outstanding securities
      ordinarily having the right to vote at elections of directors;
      or

              


      

       

      
        	
                (7)  

              	
                Any
      other event which the Committee determines is of similar effect, such
      determination to be made by the Committee on an event-by-event
      basis.

              


      

       

      provided,
however, to the extent required for purposes of compliance with Section 409A,
Change of Control of the Company shall not be deemed to occur unless the
event(s) that causes such Change in Control also constitutes a “change in
control event” (as such term is defined in Code Section 409A and the regulations
issued thereunder), with respect to the Company.

       

      (f) “Code”
means the Internal Revenue Code of 1986, as amended from time to
time.

       

      (g) “Committee”
means a committee consisting solely of not less than three members of the Board
of Directors of the Company, each of whom is a director who satisfies each of
the following requirements:

       

      
        	
                (1)  

              	
                The
      director qualifies as a “non-employee director” within the meaning of, and
      to the extent required to comply with, Rule 16b-3 of the Exchange Act
      or any successor provision promulgated under the Exchange
    Act;

              


      

       

      
        	
                (2)  

              	
                The
      director qualifies as an “outside director” within the meaning of, and to
      the extent required to comply with, Code Section 162(m);
      and

              


      

       

      
        	
                (3)  

              	
                The
      director qualifies as an “independent director” as defined in Rule
      4200(a)(14) of the Rules of The National Association of Securities
      Dealers, Inc., as amended from time to
time.

              


      

       

      The term
“Committee” shall refer to the Board of Directors of the Company during such
times as no committee is appointed by the Board of Directors and during such
times as the Board of Directors is acting in lieu of the Committee.

       

      (h) “Company”
means Shuffle Master, Inc., a Minnesota corporation, or any successor thereto as
provided in Article 14.

       

      (i) “Disability”
means a physical or mental impairment which prevents a Participant from
performing his duties as a director (or, if the Participant has become an
employee as described in Sections 6.10, 7.9 and 8.11, from performing his
regularly-scheduled duties as an employee), and which is expected to be of long
duration or result in death.  All determinations as to a Participant’s
disability status shall be made by the Committee in its discretion and on the
basis of such evidence as it shall deem appropriate; provided, however that if a
Participant qualifies as disabled within the definition of Code Section 22(e)(3)
or qualifies for disability income benefits under a long-term disability benefit
plan or insurance policy maintained by the Company or a long-term disability
insurance policy maintained by the Participant individually, such qualification
shall be conclusive evidence of the Participant’s disability for purposes of
this Plan; further provided,

       


      
        
           


        

        
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      (j) however,
to the extent required for purposes of compliance with Section 409A, a
disability shall not be deemed to occur unless the disability constitutes a
“Disabilty” within the meaning of Code Section 409A(C).

       

      (k)  “Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to
time.

       

      (l) “Fair
Market Value” means the price per Share of the common Stock of the Company
determined as follows:  (i) if the security is listed for trading on
one or more national securities exchanges or is quoted on the Nasdaq National
Market System (“Nasdaq NMS”), the reported last sales price on such principal
exchange or system on the date in question (if such security shall not have been
traded on such principal exchange or on the Nasdaq NMS on such date, the
reported last sales price on such principal exchange or on Nasdaq NMS on the
first day prior thereto on which such security was so traded);
or  (ii) if the security is not listed for trading on a national
securities exchange and is not quoted on Nasdaq NMS but is quoted on the Nasdaq
Small Cap System or is otherwise traded in the over-the-counter market, the mean
of the highest and lowest bid prices for such security on the date in question
(if there are no such bid prices for such security on such date, the mean of the
highest and lowest bid prices on the most recent day prior thereto (not to
exceed ten (10) days prior to the date in question) on which such prices
existed); or (iii) if neither (i) nor (ii) is applicable, by any means deemed
fair and reasonable by the Committee, which determination shall be final and
binding on all parties.  Fair Market Value relating to the exercise
price or base price of any Non-409A Option or SAR shall conform to requirements
under Code Section 409A.

       

      (m) “Family
Member” includes any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, any person sharing the employee’s household
(other than a tenant or employee), a trust in which these persons have more than
fifty percent of the beneficial interest, a foundation in which these persons
(or the employee) control the management of assets, and any other entity in
which these persons (or the employee) own more than fifty percent of the voting
interests.

       

      (n) “409A
Awards” means Awards that constitute a deferral of compensation under Code
Section 409A and regulations thereunder.  “Non-409A Awards” mean
Awards other than 409A Awards.  For purposes of this Plan, all Awards
are intended to be Non-409A Awards.

       

      (o) “Non-Employee
Director” means a member of the Board of Directors of the Company who, at the
time of grant, is not also an employee of the Company or a
Subsidiary.

       

      (p) “Option”
means a nonqualified option to purchase Stock, as granted under
Article 6.

       


      
        
           


        

        
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      (q) “Participant”
means a Non-Employee Director (or former Non-Employee Director) who has been
granted an Award under the Plan.

       

      (r) “Period
of Restriction” means the period during which the transfer or sale of Shares of
Restricted Stock by the Participant is restricted.

       

      (s) “Person”
shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group”
as defined in Section 13(d) thereof.

       

      (t) “Plan”
means this Shuffle Master, Inc. 2004 Equity Incentive Plan for Non-Employee
Directors, as amended.

       

      (u) “Restricted  Stock”
means an Award of Stock granted to a Participant pursuant to Article
8.

       

      (v) “Securities
Act” means the Securities Act of 1933, as amended from time to
time.

       

      (w) “Subsidiary”
means any company in an unbroken chain of companies beginning with the Company,
if, at the time of granting the Award, each of the companies other than the last
company in the chain owns stock possessing more than fifty percent (50%) of the
total combined voting power of all classes of stock in one of the other
companies in such chain.  The term shall include any Subsidiaries
which become such after adoption of this Plan.

       

      (x) “Stock”
or “Shares” means the common stock of the Company.

       

      (y) “Stock
Appreciation Right” or “SAR” means an Award designated as a Stock Appreciation
Right, granted to a Participant pursuant to Article 7.

       

      (z) “Voting
Stock” shall mean securities of any class or classes of stock of a corporation,
the holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors.

       

      2.2) Gender and
Number.

       

      Except
where otherwise indicated by the context, any masculine term used herein also
shall include the feminine, the plural shall include the singular, and the
singular shall include the plural.

       

      2.3) Severability.

       

      In the
event any provision of the Plan shall be held illegal or invalid for any reason,
the illegality or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.

       


      
        
           


        

        
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      ADMINISTRATION

       

      2.4) The
Committee.

       

      The Plan
shall be administered by the Committee, the members of which shall be appointed
from time to time by, and shall serve at the discretion of, the Board of
Directors.

       

      2.5) Authority of the
Committee.

       

      Subject
to the provisions of the Plan, the Committee shall have full power to construe
and interpret the Plan; to establish, amend or waive rules for its
administration; to accelerate the vesting of any Option or SAR or the
termination of any Period of Restriction under any Award agreement, or other
instrument relating to an Award under the Plan; and (subject to the provisions
of Article 12) to amend the terms and conditions of any outstanding Option, SAR
or Restricted Stock Award to the extent such terms and conditions are within the
discretion of the Committee as provided in the Plan, provided, however, that any
such modification would not result in penalties imposed by Code Section 409A and
that such actions may only be taken to the extent permitted by Code Section
409A.  Except as required by Section 4.3 and as provided in Article
12, in no event shall the Committee have the right to (i) cancel
outstanding Options or SARs for the purpose of replacing or regranting such
Options or SARs with an exercise price that is less than the original exercise
price of the Option or SAR or (ii) change the exercise price of an Option
or SAR to an exercise  price that is less than the original exercise
price without first obtaining the approval of shareholders of the
Company.  Notwithstanding the foregoing, as provided in Section 12.2,
no action of the Committee (other than pursuant to Section 4.3) may, without the
consent of the person or persons holding Restricted Stock or any outstanding
Option or Stock Appreciation Right, adversely affect the rights of such person
or persons.

       

      2.6) Selection of
Participants.

       

       Subject
to the provisions of Section 5.2, the Committee shall have the authority to
grant Awards under the Plan, from time to time, to such current Non-Employee
Directors as it may select.

       

      2.7) Decisions
Binding.

       

      All
determinations and decisions made by the Committee pursuant to the provisions of
the Plan and all related orders or resolutions of the Board of Directors shall
be final, conclusive and binding on all persons, including the Company and its
Subsidiaries, its shareholders, employees, and Participants and their estates
and beneficiaries, and such determinations and decisions shall not be
reviewable.

       

      2.8) Procedures of the
Committee.

       

      All
determinations of the Committee shall be made by not less than a majority of its
members present at the meeting (in person or otherwise) at which a quorum is
present.  A majority of the entire Committee shall constitute a quorum
for the transaction of business.  Any action required

       


      
        
           


        

        
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      or
permitted to be taken at a meeting of the Committee may be taken without a
meeting if a unanimous written consent, which sets forth the action, is signed
by each member of the Committee and filed with the minutes for proceedings of
the Committee.  Service on the Committee shall constitute service as a
director of the Company so that members of the Committee shall be entitled to
indemnification, limitation of liability and reimbursement of expenses with
respect to their services as members of the Committee to the same extent that
they are entitled under the Company’s Articles of Incorporation and Minnesota
law for their services as directors of the Company.

       

      2.9) Award
Agreements.

       

      Awards
under the Plan shall be evidenced by an Award agreement, which shall be signed
by an officer of the Company and by the Participant, and shall contain such
terms and conditions as are approved by the Committee.  Such terms and
conditions need not be the same in all cases.

       

      2.10) Conditions on
Awards.

       

      (a) Notwithstanding
any other provision of the Plan, the Board or the Committee may impose such
conditions on any Award (including, without limitation, impositions on the time
of exercise of Options and SARs to specified periods) as it deems
appropriate.

       

      2.11) Saturdays, Sundays and
Holidays.

       

      When a
date referenced in an Award agreement falls on a Saturday, Sunday or other day
when the Company’s general office is closed, the date referenced will revert
back to the day prior to such date.

       

      ARTICLE
3.                                

       

      STOCK
SUBJECT TO THE PLAN

       

      3.1) Number of
Shares.

       

      Subject
to adjustment as provided in Section 4.3, the aggregate number of Shares that
may be delivered under the Plan shall not exceed Five Hundred Thousand (500,000)
Shares, of which no more than Three Hundred Fifty Thousand (350,000) Shares may
be granted as Restricted Stock pursuant to Article 8.  For purposes of
determining at any time the number of shares that may be delivered pursuant to
this Section 4.1, the exercise of a Stock Appreciation Right, whether paid in
cash or Stock, shall be treated as a delivery of, and a reduction to remaining
available shares by, that number of Shares which corresponds to the number of
Shares with respect to which the Stock Appreciation Right is
exercised.

       

      3.2) Lapsed
Awards.

       

       If
any Award granted under this Plan terminates, expires, or lapses for any reason,
any Stock subject to such Award again shall be available for the grant of an
Award under the Plan, subject to Section 7.1.

       


      
        
           


        

        
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      Adjustments
in Authorized Shares.

       

      (a) In the
event that the outstanding Shares of the Company are changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another company by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split, reverse stock split,
combination of shares or dividends payable in capital stock, an appropriate
adjustment shall be made in the number and kind of Shares as to which Awards may
be granted under the Plan and as to which outstanding Options and SARs or
portions thereof then unexercised shall be exercisable, to the end that the
proportionate interest of the Participant shall be maintained as before the
occurrence of such event; such adjustment in outstanding Options and SARs shall
be made without change in the total price applicable to the unexercised portion
of such Awards and with a corresponding adjustment in the exercise price per
Share.  No such adjustment shall be made hereunder which shall, within
the meaning of any applicable sections of the Code, constitute a modification,
extension or renewal of an Award or a grant of additional benefits to a
participant.

       

      (b) If the
Company is a party to a merger, consolidation, reorganization, or similar
corporate transaction and if, as a result of that transaction, its Shares are
exchanged for:  (i) other securities of the Company and/or (ii)
securities of another company which has assumed the outstanding Awards under the
Plan or has substituted for such Awards its own awards, then each Participant
shall be entitled (subject to the conditions stated herein or in such
substituted awards, if any), in respect of that Participant’s Awards, to rights
with respect to such other securities of the Company or of such other company as
are sufficient in the determination of the Committee to ensure that the value of
the Participant’s Awards immediately before the corporate transaction is
equivalent to the value of such Awards immediately after the transaction, taking
into account the exercise price of Options and SARs before such transaction, the
Fair Market Value of Shares immediately before such transaction and the Fair
Market Value immediately after the transaction of the securities then subject to
that Award (or to the award substituted for that Award, if any).  The
Committee shall make the determinations specified in this subsection (b) in the
event of any transaction described in this subsection (b), and its
determinations shall be binding on all Participants.

       

      (c) Upon the
happening of any such corporate transaction, the class and aggregate number of
Shares subject to the Plan which have been heretofore or may be hereafter
granted under the Plan shall be appropriately adjusted to reflect the events
specified in this Section 4.3.

       

      ARTICLE
4.                                

       

      ELIGIBILITY
AND PARTICIPATION

       

      4.1) Eligibility.

       

      Awards
may be granted only to a person who on the date of grant is a Non-Employee
Director of the Company.  All Non-Employee Directors are eligible to
receive Awards under the Plan.  No

       


      
        
           


        

        
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      Non-Employee
Director shall have any right to be granted an Award under this Plan even if
previously granted an Award.

       

      4.2) Actual
Participation.

       

       Awards
shall be granted as follows:

       

      (a) Upon the
initial election or appointment of a Non-Employee Director, the Committee shall
grant an Award to such new Non-Employee Director with respect to such number of
Shares as the Committee shall determine, if any.  If more than one
Non-Employee Director is elected or appointed at the same time, the Committee
may vary the type and number of Awards granted to each.

       

      (b) Each
person who remains a Non-Employee Director immediately after the Company’s
annual shareholder meeting shall be granted an Award with respect to such number
of Shares as the Committee shall determine, if any.  If more than one
Non-Employee Directors is re-elected at the same time, the Committee may vary
the type and number of Awards granted to each.

       

      (c) In
addition to the granting of Awards pursuant to subsections (a) and (b) above,
the Committee may grant additional Awards to Non-Employee Directors at such
times as the Committee shall determine.  Awards granted under this
subsection shall contain such terms and conditions as determined by the
Committee at the time of grant.

       

      (d) The
maximum number of Shares with respect to which Awards may be granted to any
Participant for any fiscal year of the Company is Thirty Thousand (30,000)
Shares.  For purposes of these maximum limits, the grant of a Stock
Appreciation Right shall be treated as the grant of an Option for that number of
Shares which corresponds to the number of Shares with respect to which the Stock
Appreciation Right is or may become exercisable.  

       

      ARTICLE
5.                                

       

      STOCK
OPTIONS

       

      5.1) Grant of
Options.

       

      Subject
to the terms and provisions of the Plan, Options may be granted to Participants
at any time and from time to time as shall be determined by the
Committee.  The Committee shall have the sole discretion, subject to
the requirements of the Plan, to determine the actual number of Shares subject
to Options granted to any Participant.  The Committee may specify the
period of time over which vesting shall occur, and may in its discretion further
provide for the acceleration of vesting upon the attainment of such goals as the
Committee may determine in its discretion.

       

      5.2) Option
Agreement.

       

      Each
Option grant shall be evidenced by an Option agreement that shall specify the
Participant, the Option exercise price, the duration of the Option, the number
of Shares to which the Option

       


      
        
           


        

        
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      pertains,
and such other provisions, including vesting, as the Committee shall
determine.  If not specified by the Committee at the time an Option is
granted, such Option shall immediately vest on the date of the
grant.

       

      5.3) Option Exercise
Price.

       

      The
Option exercise price per share of Stock covered by the Option shall be
determined by the Committee, but may not be less than the Fair Market Value of
the Stock on the date the Option is granted.

       

      5.4) Duration of
Options.

       

      No Option
may be exercised after ten (10) years from the date on which the Option was
granted.  If an earlier expiration dates is not specified by the
Committee at the time of grant, each Option shall expire at the close of
business on the tenth (10th) anniversary of the date of grant.

       

      5.5) Exercise of
Options.

       

      Options
granted under the Plan shall be exercisable at such times and be subject to such
restrictions and conditions as the Committee shall in each instance approve,
which need not be the same for all Participants.  All Options within a
single grant need not be exercised at one time.

       

      5.6) Manner of Exercise of
Options.  An Option may be exercised in whole or in part, at
such time or times, and with such rights with respect to such Shares, as
provided in the applicable Option agreement.  An Option shall be
exercisable only by:  (i) written notice to the Company of intent
to exercise the Option with respect to a specified number of Shares;
(ii) tendering to the Company the original Option agreement (or a
replacement Option agreement satisfactory to the Committee); and
(iii) payment to the Company of the exercise price for the number of Shares
with respect to which the Option is then exercised.  Except as set
forth in the next sentence, payment of the exercise price may be made in any of
the following manners:

       

      (a) cash,
including certified check, bank draft or postal or express money
order;

       

      (b) personal
check (provided that if payment of the exercise price is made by personal check
and such personal check is not timely paid by the drawer’s bank, such payment
shall be deemed not to have been made and any Shares issued upon such exercise
shall be deemed void and never issued);

       

      (c) by
surrender for cancellation of Shares which:

       

      
        	
                (1)  

              	
                were
      acquired by the Participant (or person exercising the Option) other than
      by exercise of an Option;

              


      

       

      
        	
                (2)  

              	
                were
      acquired by the Participant (or person exercising the Option) upon
      exercise of an Option where the Option Shares being surrendered have been
      held by the Participant (or person exercising the Option) for at least six
      months after such exercise; or

              


      

       


      
        
           


        

        
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                (3)  

              	
                were
      acquired by the Participant (or person exercising the Option) upon
      exercise of an Option where the Option Shares being surrendered have been
      held by the Participant (or person exercising the Option) for six months
      or less after such exercise but only if the Participant (or person
      exercising the Option) has obtained prior approval of the specific
      surrender (such approval to specify at least the date of grant of the
      Option being exercised, the dates of grant and exercise of the Option
      pursuant to which Shares to be surrendered were acquired, and the number
      of Option Shares to be surrendered) by the
  Committee;

              


      

       

      and which
have a Fair Market Value equal to the exercise price of the Options being
exercised (if the Shares surrendered have a Fair Market Value in excess of the
exercise price of the Options being exercised, the Company shall promptly pay to
the Participant or person exercising the Option an amount equal to the excess of
such Fair Market Value over the exercise price, not to exceed the Fair Market
Value of one Share); or

       

      (d) by any
other method of payment which the Committee shall approve before, at, or after
the date of grant of such Options.

       

      An Option
shall be deemed to have been exercised immediately prior to the close of
business on the date the Company is in receipt of the original Option agreement,
written notice of intent to exercise the Option, and payment for the number of
Shares being acquired upon exercise of the Option.  The Participant
shall be treated for all purposes as the holder of record of the Option Stock as
of the close of business on such date, except where Shares are held for unpaid
withholding taxes.  As promptly as practicable on or after such date,
the Company shall issue and deliver to the Participant a certificate or
certificates for the Option Stock issuable upon such exercise; provided,
however, that such delivery shall be deemed effected for all purposes when the
Company, or the stock transfer agent for the Company, shall have deposited such
certificates in the United States mail, postage prepaid, addressed to the
Participant at the address specified in the written notice of
exercise.

       

      Notwithstanding
the foregoing listing of permissible manners of payment of exercise price, the
Committee shall have the right from time to time to cancel, limit or suspend as
to any one, some, or all Option(s) and as to any one, some, or all Participants,
the right to make payment under any one or more manners of payment (other than
the payment by cash, certified check, bank draft or postal or express money
order), including other methods of payment previously approved by the Committee
under the authority granted in subsection (d) of this Section 6.6.

       

      There
shall be no exercise at any one time for fewer than one hundred (100) Shares (or
such lesser number of Shares as the Committee may from time to time determine in
its discretion) or all of the remaining Shares then purchasable by the
Participant or person exercising the Option.

       

      When
Shares are issued pursuant to the exercise of an Option, the fact of such
issuance shall be noted on the Option agreement by the Company before the Option
agreement is returned.  When all Shares covered by the Option
agreement have been issued, or the Option shall expire, the Option agreement
shall be canceled and retained by the Company.

       


      
        
           


        

        
          12

          
            

          

        

        
           


        

      


      Restrictions
on Stock Transferability.

       

      The
Committee shall impose such restrictions on any Shares acquired pursuant to the
exercise of an Option under the Plan as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities law, under
the requirements of any stock exchange upon which such Shares are then listed
and under any blue sky or state securities laws applicable to such
Shares.

       

      5.7) Termination as Director Due
to Death or Disability.

       

      If a
Participant ceases to be a director (or an employee pursuant to Section 6.10) by
reason of death, any of such Participant’s outstanding Options which were not
vested and exercisable on his date of death shall immediately become 100%
vested, and all of the Participant’s outstanding Options shall be exercisable at
any time prior to the expiration date of the Options, but only within twelve
(12) months following the date of death, whichever period is
shorter.  Options may be exercised by such person or persons as shall
have acquired the Participant’s rights under the Option pursuant to Article 10
or, in the absence of an effective beneficiary designation, by will or by the
laws of descent and distribution.

       

      Subject
to Section 6.10, if a Participant ceases to be a director (or an employee
pursuant to Section 6.10) by reason of Disability, any of such Participant’s
outstanding Options which were not vested and exercisable on the date the
Committee determines that the Participant has incurred a Disability shall
immediately become 100% vested, and all of the Participant’s outstanding Options
shall be exercisable at any time prior to the expiration date of the Options,
but only within twelve (12) months following the date of Disability as
determined by the Committee, whichever period is shorter.

       

      Notwithstanding
the foregoing, the Committee may, for any Participant, in its sole discretion,
lengthen the exercise period of any Option for a period which does not exceed
the Option’s expiration date, if it deems this is in the best interest of the
Company.

       

      5.8) Termination as Director for
Other Reasons.

       

      If a
Participant ceases to be a director or an employee (pursuant to Section 6.10)
for any reason other than death, Disability or for Cause, any of such
Participant’s outstanding Options which were then vested and exercisable shall
be exercisable at any time prior to the expiration date of Options, but only
within twelve (12) months following the date of his termination as a director
(or as an employee pursuant to Section 6.10), whichever period is
shorter.  Any Options not then vested and exercisable shall be
forfeited back to the Company.

       

      If the
Participant’s position as an employee pursuant to Section 6.10 shall terminate
for Cause, all of the Participant’s outstanding Options, whether or not then
vested, shall be immediately forfeited back to the Company.

       

      5.9) If a Participant Becomes an
Employee.  A Participant who becomes an employee of the Company
or a Subsidiary, while also remaining a director, shall not be eligible to
receive a grant of Options under this Plan during any period that he is an
employee.  Any of the Participant’s Options outstanding at the time he
becomes an employee shall continue to vest and

       


      
        
           


        

        
          13

          
            

          

        

        
           


        

      


      5.10) be or
become exercisable under the terms of the Option agreement and the provisions of
this Article 6.

       

      If a
Participant who becomes an employee later ceases to be a director but remains an
employee:

       

      (a) his
period of employment shall be deemed to constitute service as a director for
purposes of this Article 6, and

       

      (b) he shall
be deemed to have incurred a termination as director for purposes of Sections
6.8 or 6.9 on the date that he is no longer either a director or an
employee.

       

      5.11) Nontransferability/Permitted
Transfers of Options.

       

      (a) Except as
permitted by subsection (b) below, each Option granted hereunder shall, by its
terms, not be transferable by the Participant and shall be, during the
Participant’s lifetime, exercisable only by the Participant or Participant’s
guardian or legal representative.  Except as permitted by subsection
(b) below, each Option granted under the Plan and the rights and privileges
thereby conferred shall not be transferred, assigned or pledged in any way
(whether by operation of law or otherwise), and shall not be subject to
execution, attachment or similar process.  Upon any attempt to so
transfer, assign, pledge, or otherwise dispose of the Option, or of any right or
privilege conferred thereby, contrary to the provisions of the Option or the
Plan, or upon levy of any attachment or similar process upon such rights and
privileges, the Option, and such rights and privileges, shall immediately become
null and void.

       

      
        	
                (b)  

              	
                Each
      Option granted hereunder shall, by its terms, be
    transferable:

              


      

       

      
        	
                (1)  

              	
                by
      the Participant to a Participant’s Family Member (or to a trust in which
      the Participant’s Family Member or Family Members have more than fifty
      percent (50%) of the beneficial interest) by a bona fide gift or pursuant
      to a domestic relations order in settlement of marital property
      rights;

              


      

       

      
        	
                (2)  

              	
                by
      will or pursuant to the laws of descent and distribution;
    or

              


      

       

      
        	
                (3)  

              	
                as
      otherwise permitted pursuant to the rules or regulations adopted by the
      Securities and Exchange Commission (“SEC”) under the Securities Act or the
      interpretations of such rules and regulations as announced by the SEC from
      time to time.

              


      

       

      Any
permitted transfer shall be effective only when accepted by the Company subject
to the Company receiving documentation reasonably satisfactory to it of such
gift, transfer pursuant to domestic relations order, or transfer pursuant to
will or pursuant to the laws descent and distribution.  Upon
effectiveness of any permitted transfer, the rights under any Option shall be
exercisable only by the permitted transferee or such transferee’s guardian or
legal representative.  Except as permitted by this subsection, each
Option granted under the Plan and the rights and privileges thereby conferred
shall not be further transferred, assigned or pledged in any way (whether by
operation of law or otherwise),

       


      
        
           


        

        
          14

          
            

          

        

        
           


        

      


      and shall
not be subject to execution, attachment or similar process.  Upon any
attempt to so further transfer, further assign, pledge, or otherwise further
dispose of the Option, or of any right or privilege conferred thereby, contrary
to the provisions of the Option or the Plan, or upon levy of any attachment or
similar process upon such rights and privileges, the Option, and such rights and
privileges, shall immediately become null and void.  No permitted
transfer shall cause any change in the terms of any Option except the identity
of the person(s) entitled to exercise such Option and to receive the common
Stock issuable upon exercise of the Option.  Without limiting the
generality of the foregoing, any Option shall be subject to termination upon the
termination as director, death or Disability of the Optionee to whom the Option
was originally granted by the Company without reference to the employment, death
or Disability of any permitted transferee.  In the event of any
transfer of an Option, the obligations of the Company owed to the Participant
shall be owed to the transferee and references in this Plan or in any Option
Agreement to the Participant shall, unless the context otherwise requires, refer
to the transferee.

       

      ARTICLE
6.                                

       

      STOCK
APPRECIATION RIGHTS

       

      6.1) Grant of Stock Appreciation
Rights.

       

      Subject
to the terms and provisions of the Plan, Stock Appreciation Rights may be
granted to Participants, at the discretion of the Committee, exercisable in any
of the following forms as designated by the Committee at the time of
grant:

       

      (a) in lieu
of Options;

       

      (b) in
addition to Options;

       

      (c) independent
of Options; or

       

      (d) in any
combination of (a), (b), or (c).

       

      The
Committee shall have the sole discretion, subject to the requirements of the
Plan, to determine the actual number of Shares subject to SARs granted to any
Participant.  The Committee may specify the period of time over which
vesting shall occur, and may in its discretion further provide for the
acceleration of vesting upon the attainment of such goals as the Committee may
determine in its discretion.  The exercise price of a SAR shall not,
however, be less than the Fair Market Value of a share of Stock on the date of
grant.

       

      6.2) Stock Appreciation Rights
Agreement.  Each grant of a SAR, and the terms and conditions
governing the exercise of the SAR, shall be evidenced by a SAR
agreement.  If not specified by the Committee at the time a SAR is
granted, such SAR shall vest immediately on the date of grant.

       

      Option
Stock with respect to which a SAR shall have been exercised may not be subject
again to an Award under the Plan.

       


      
        
           


        

        
          15

          
            

          

        

        
           


        

      


      Exercise
of Stock Appreciation Rights.

       

      SARs
granted in lieu of Options may be exercised for all or part of the
Shares  subject to the related Option upon the surrender of the
related Options representing the right to purchase an equivalent number of
Shares.  The SAR may be exercised only with respect to the Shares for
which its related Option is then exercisable.

       

      (a) SARs
granted in addition to Options shall be deemed to be exercised upon the exercise
of the related Options.  

       

      (b) Subject
to Section 7.1, SARs granted independently of Options may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon the SARs, including, but not limited to, a corresponding proportional
reduction in previously granted Options.

       

      6.3) Payment of Stock
Appreciation Right Amount.

       

      Upon
exercise of the SAR, the holder shall be entitled to receive payment of an
amount determined by multiplying:

       

      (a) The
difference between:  (i) the Fair Market Value of a Share on the date
of exercise and (ii) the exercise price established by the Committee on the date
of grant; by

       

      (b) The
number of Shares with respect to which the SAR is exercised.

       

      6.4) Form and Timing of
Payment.

       

      Payment
to a Participant, upon SAR exercise, will be made in cash or stock, at the
discretion of the Committee, as soon as administratively possible after
exercise.

       

      6.5) Term of Stock Appreciation
Rights.

       

      The term
of a SAR granted under the Plan shall be determined by the Committee, but shall
not exceed ten (10) years.  If not specified by the Committee at the
time of grant, each SAR shall expire at the close of business on the date
preceding the tenth (10th) anniversary of the date of grant.

       

      6.6) Termination as Director Due
to Death or Disability.

       

      If a
Participant ceases to be a director (or an employee pursuant to Section 7.9) by
reason of death, any of such Participant’s outstanding SARs which were not
vested and exercisable on his date of death shall immediately become 100%
vested, and all of the Participant’s outstanding SARs shall be exercisable at
any time prior to the expiration date of the SARs, but only within twelve (12)
months following the date of death, whichever period is shorter.  SARs
may be exercised by such person or persons as shall have acquired the
Participant’s rights under the SAR pursuant to Article 10 or, in the absence of
an effective beneficiary designation, by will or by the laws of descent and
distribution.

       


      
        
           


        

        
          16

          
            

          

        

        
           


        

      


      Subject
to Section 7.9, if a Participant ceases to be a director (or an employee
pursuant to Section 7.9) by reason of Disability, any of such Participant’s
outstanding SARs which were not vested and exercisable on the date the Committee
determines that the Participant has incurred a Disability shall immediately
become 100% vested, and all of the Participant’s outstanding SARs shall be
exercisable at any time prior to the expiration date of the SARs, but only
within twelve (12) months following the date of Disability as determined by the
Committee, whichever period is shorter.

       

      Notwithstanding
the foregoing, the Committee may, for any Participant, in its sole discretion,
lengthen the exercise period of any SAR for a period which does not exceed the
SAR’s expiration date, if it deems this is in the best interest of the
Company.

       

      6.7) Termination as Director for
Other Reasons.  If Participant ceases to be a director (or an
employee pursuant to Section 7.9) for any reason other than death, Disability or
for Cause, any of such Participant’s outstanding SARs which were then vested and
exercisable shall be exercisable at any time prior to the expiration date of
such SARs, but only within twelve (12) months following the date of his
termination as a director (or as an employee pursuant to Section 7.9), whichever
period is shorter.  Any SARs not then vested and exercisable shall be
forfeited back to the Company.

       

      If the
Participant’s position as an employee pursuant to Section 7.9 shall terminate
for Cause, all of the Participant’s outstanding SARs, whether or not then
vested, shall be immediately forfeited back to the Company.

       

      6.8) If a Participant Becomes an
Employee.  A Participant who becomes an employee of the Company
or a Subsidiary, while also remaining a director, shall not be eligible to
receive a grant of Stock Appreciation Rights under this Plan during any period
that he is an employee.  Any of the Participant’s SARs outstanding at
the time he becomes an employee shall continue to vest and be or become
exercisable according to the terms and conditions of such SARs and the
provisions of this Article 7.

       

      If a
Participant who becomes an employee later ceases to be a director but remains an
employee:

       

      (a) his
period of employment shall be deemed to constitute service as a director for
purposes of this Article 7, and

       

      (b) he shall
be deemed to have incurred a termination as director for purposes of Section 7.7
on the date that he is no longer either a director or an employee.

       

      6.9) Nontransferability of Stock
Appreciation Rights.

       

      No SAR
granted under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, and all SARs granted to a Participant under the Plan
shall be exercisable during his lifetime only by such Participant.

       


      
        
           


        

        
          17

          
            

          

        

        
           


        

      


      


       

      RESTRICTED
STOCK

       

      6.10) Grant of Restricted
Stock.

       

      Subject
to the terms and provisions of the Plan, the Committee, at any time and from
time to time, may grant Shares of Restricted Stock under the Plan to such
Participants, in such amounts, with such purchase price (if any) and under such
other conditions as it shall determine.  The Committee shall specify
the period of time over which the lapse of a Period of Restriction established
pursuant to Sections 8.2, 8.3, and 8.4 (i.e., the period of time over which such
Shares of Restricted Stock shall vest) shall occur, and may in its discretion
further provide for the acceleration of the lapse of a Period of Restriction
upon the attainment of such goals as the Committee may determine in its
discretion.  Restricted Stock shall at all times for purposes of the
Plan be valued at its Fair Market Value without regard to
restrictions.

       

      6.11) Restricted Stock
Agreement.

       

      Each
Restricted Stock grant shall be evidenced by a Restricted Stock agreement that
shall specify the Period(s) of Restriction, the number of Shares of Restricted
Stock granted, and such other provisions as the Committee shall
determine.  If not specified by the Committee at the time of grant of
Restricted Stock, the Period of Restriction shall be 12 months from the date of
grant for 50% of the number of Shares of Restricted Stock granted, and 24 months
from the date of grant for 50% of the number of Shares of Restricted Stock
granted.

       

      6.12) Transferability.

       

      Except as
otherwise provided in this Article 8, the Shares of Restricted Stock granted
hereunder may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the termination of the applicable Period of
Restriction.  Upon any attempt to transfer, assign, pledge, or
otherwise dispose of Shares of Restricted Stock, or any right or privilege
conferred thereby, contrary to the provisions of the Restricted Stock agreement
or the Plan, upon levy of any attachment or similar process upon such rights or
privileges, the Shares of Restricted Stock shall immediately become forfeited to
the Company.  All rights with respect to the Restricted Stock granted
to a Participant under the Plan shall be exercisable during his lifetime only by
such Participant.

       

      6.13) Other
Restrictions.

       

      The
Committee may impose such other restrictions on any Shares of Restricted Stock
granted pursuant to the Plan as it may deem advisable, and the Committee may
legend certificates representing Restricted Stock to give appropriate notice of
such restrictions.

       

      6.14) Certificate
Legend.

       

      In
addition to any legends placed on certificates pursuant to Section 8.4, each
certificate representing Shares of Restricted Stock granted pursuant to the Plan
shall bear the following, or substantially similar, legend:

       


      
        
           


        

        
          18

          
            

          

        

        
           


        

      


      “The sale
or other transfer of the shares of stock represented by this certificate,
whether voluntary, involuntary, or by operation of law, is subject to certain
restrictions on transfer set forth in The Shuffle Master, Inc. 2004 Equity
Incentive Plan for Non-Employee Directors, in the rules and administrative
procedures established pursuant to such Plan, and in a Restricted Stock
agreement dated __________.  A copy of the Plan, such rules and
procedures, and such Restricted Stock agreement may be obtained from the
Secretary of Shuffle Master, Inc.”

       

      6.15) Removal of
Restrictions.

       

      Except as
otherwise provided in this Article 8, Shares of Restricted Stock granted under
the Plan shall become freely transferable by the Participant after the last day
of the Period of Restriction.  Once the Shares are released from the
restrictions, the Participant shall be entitled to have the legend required by
Section 8.5 removed from his Stock certificate.

       

      6.16) Voting Rights; Shareholder
Rights Plan.

       

      During
the Period of Restriction, Participants holding Shares of Restricted Stock
granted hereunder may exercise full voting rights with respect to those Shares,
and shall be covered by the provisions of Company’s Shareholder Rights
Plan.

       

      6.17) Dividends and Other
Distributions.

       

      During
the Period of Restriction, Participants holding Shares of Restricted Stock
granted hereunder shall be entitled to receive all dividends and other
distributions paid with respect to those Shares while they are so
held.  If any such dividends or distributions are paid in Shares,
those Shares shall be subject to the same restrictions on transferability as the
Shares of Restricted Stock with respect to which they were paid.

       

      6.18) Termination as Director Due
to Death or Disability.

       

      If a
Participant ceases to be a director (or an employee pursuant to Section 8.11)
because of his death or his Disability during a Period of Restriction, any
remaining period of the Period of Restriction applicable to the Restricted Stock
shall automatically terminate and, except as otherwise provided in Section 8.4,
the Shares of Restricted Stock shall thereafter be free of restrictions and be
fully transferable.

       

      6.19) Termination as Director for
Other Reasons.

       

      If a
Participant ceases to be a director (or an employee pursuant to Section 8.11)
for any reason other than for death or Disability during a Period of
Restriction, then all Shares of Restricted Stock still subject to restrictions
as of the date of such termination shall automatically be forfeited and returned
to the Company and any amounts paid by the Participant to the Company for the
purchase of such Shares shall be returned to the Participant; provided, however,
that the Committee, in its sole discretion, may waive or modify the automatic
forfeiture of any or all such Shares of Restricted Stock as it deems
appropriate.

       

      6.20) If a Participant Becomes an
Employee.  A Participant who becomes an employee of the Company
or a Subsidiary, while also remaining a director, shall not be eligible to
receive a

       


      
        
           


        

        
          19

          
            

          

        

        
           


        

      


      6.21) grant of
Shares of Restricted Stock under this Plan during any period that he is an
employee.  Any Shares of Restricted Stock which are subject to a
Period of Restriction at the time he becomes an employee shall continue to be
subject to such Period of Restriction and to the provisions of this Article
8.

       

      If a
Participant who becomes an employee later ceases to be a director but remains an
employee:

       

      (a) his
period of employment shall be deemed to constitute service as a director for
purposes of this Article 8, and

       

      (b) he shall
be deemed to have creased to be a director for purposes of Sections 8.9 and 8.10
on the date that he is no longer either a director or an employee.

       

      6.22) Election Under Code Section
83(b).  As a condition to the receipt of Restricted Stock, the
Participant shall be deemed to have agreed, and shall confirm such agreement in
writing as requested by the Committee, that he will not exercise the election
permitted under Code Section 83(b) without informing the Company of his election
within ten (10) days of such election.  If a Participant fails to give
timely notification to the Company, the Committee may, in its discretion, cause
the forfeiture of some portion of the Shares of Restricted Stock with respect to
which the election was made.

       

      ARTICLE
7.                                

       

      CHANGE IN
CONTROL

       

      7.1) Acceleration of Vesting;
Termination of Period of Restriction. Notwithstanding any requirements
for vesting, time of exercisability or Period of Restriction of any Award as set
forth in any Award agreement or as otherwise determined by the Committee, any
Award granted under this Plan, to the extent not already terminated, shall
become vested and immediately exercisable, and any Period of Restriction shall
terminate, upon a Change in Control.

       

      7.2) No Limitation on Exercise
Period.  Nothing in Section 9.1 shall limit or shorten the
period during which any Option or SAR is exercisable.  If an Option or
SAR provides for exercisability during a limited period after a contingency is
satisfied, and the initial exercisability of the Option or SAR is accelerated by
means of Section 9.1, the expiration of such Option or SAR shall be delayed
until the contingency has been satisfied and the Option or SAR shall thereafter
remain exercisable for the balance of the period initially contemplated by the
grant.  (For example, if an Option or SAR is granted providing that it
shall be exercisable for a period of twelve (12) months after a triggering
event, and such Option or SAR is subject to the provisions of Section 9.1
providing that it shall become immediately exercisable, it shall thereafter
remain exercisable until such triggering event has occurred and twelve (12)
months has passed.)

       

      7.3) No Extension of Exercise
Period.  Any acceleration or extension of exercisability
pursuant to Section 9.1 shall not extend such exercisability beyond the
expiration or maximum term set forth in the Award agreement.

       


      
        
           


        

        
          20

          
            

          

        

        
           


        

      


      7.4) Limitation on
Payments.  Notwithstanding anything in this Article 9 to the
contrary, if the Company is then subject to the provisions of Code
Section 280G, and if the acceleration of the vesting of an Option or SAR,
the termination of a Period of Restriction or the payment of cash in exchange
for all or part of an Option or SAR (which acceleration or payment could be
deemed a “payment” within the meaning of Code Section 280G(b)(2)), together
with any other payments which the Participant has the right to receive from the
Company or any company that is a member of an “affiliated group” (as defined in
Code Section 1504(a) without regard to Code Section 1504(b)) of which
the Company is a member, would constitute a “parachute payment” (as defined in
Code Section 280G(b)(2)), then the payments to the Participant shall be
reduced to the largest amount as will result in no portion of such payments
being subject to the excise tax imposed by Code Section 4999 (with payments
scheduled later in time being reduced first, and those scheduled earlier in time
being reduced last); provided, however, that if such Participant is subject to a
separate agreement with the Company or a Subsidiary which specifically provides
that payments attributable to one or more forms of employee stock incentives or
to payments made in lieu of employee stock incentives will not reduce any other
payments under such agreement, even if it would constitute an excess parachute
payment, then the limitations of this Section 9.4 will, to that extent, not
apply.

       

      ARTICLE
8.                                

       

      BENEFICIARY
DESIGNATION

       

      Each
Participant under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively and who may include
a trustee under a will or living trust) to whom any benefit under the Plan is to
be paid in case of his death.  Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his lifetime.  In the absence of any such
designation or if all designated beneficiaries predecease the Participant,
benefits remaining unpaid at the Participant’s death shall be paid pursuant to
the Participant’s will or by the laws of descent and distribution.

       

      ARTICLE
9.                                

       

      RIGHTS OF
PARTICIPANTS

       

      9.1) Participation.

       

      No
director shall have a right to be selected as a Participant, or, having been so
selected, to be selected again as a Participant.

       

      9.2) No Implied
Rights.

       

      Neither
the establishment of the Plan nor any amendment thereof shall be construed as
giving any Participant, beneficiary, or any other person any legal or equitable
right unless such right shall be specifically provided for in the Plan or
conferred by specific action of the Committee in accordance with the terms and
provisions of the Plan.  Except as expressly provided in this
Plan,

       


      
        
           


        

        
          21

          
            

          

        

        
           


        

      


      neither
the Company nor any of its Subsidiaries shall be required or be liable to make
any payment under the Plan.

       

      9.3) No Right to Company
Assets.

       

      Neither
the Participant nor any other person shall acquire, by reason of the Plan, any
right in or title to any assets, funds or property of the Company or any of its
Subsidiaries whatsoever including, without limiting the generality of the
foregoing, any specific funds, assets, or other property which the Company or
any of its Subsidiaries, in its sole discretion, may set aside in anticipation
of a liability hereunder.  Any benefits which become payable hereunder
shall be paid from the general assets of the Company or the applicable
subsidiary.  The Participant shall have only a contractual right to
the amounts, if any, payable hereunder unsecured by any asset of the Company or
any of its Subsidiaries.  Nothing contained in the Plan constitutes a
guarantee by the Company or any of its Subsidiaries that the assets of the
Company or the applicable subsidiary shall be sufficient to pay any benefit to
any person.

       

      ARTICLE
10.                                

       

      AMENDMENT,
MODIFICATION, AND TERMINATION

       

      10.1) Amendment, Modification, and
Termination.

       

      This Plan
shall terminate at such time as the Board of Directors may determine; provided,
however, that no Award may be granted under the Plan after the tenth anniversary
of its effective date.  Any termination shall not affect any Awards
then outstanding under the Plan.  At any time and from time to time,
the Board may amend or modify the Plan.  However, if the approval of
the shareholders of the Company is required by the Code, by the insider trading
rules of Section 16 of the Exchange Act, by any national securities exchange or
system on which the Stock is then listed or reported (such as Nasdaq), or by any
regulatory body having jurisdiction with respect hereto, no amendment or
modification which:

       

      (a) increases
the total amount of Stock which may be issued under this Plan, except as
provided in Section 4.3; or

       

      (b) changes
the class of Persons eligible to participate in the Plan;

       

      (c) materially
increases the cost of the Plan or materially increase the benefits to
Participants;

       

      (d) extends
the maximum period after the date of grant during which Options or Stock
Appreciation Rights may be exercised; or

       

      (e) re-prices
any previously granted Award by lowering the exercise price or canceling any
previously granted Award with a subsequent replacement or re-grant of that same
Award with a lower exercise price, except as provided in Section
4.3;

       

      shall be
effective prior to the date that such amendment or modification has been
approved by both the Board and the shareholders of the Company.

       


      
        
           


        

        
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      Awards
Previously Granted.

       

      No
termination, amendment or modification of the Plan shall, other than pursuant to
Section 4.3 hereof, in any manner adversely affect any Award theretofore granted
under the Plan, without the written consent of the
Participant.  Except as required pursuant to Section 4.3, no
previously granted Option shall be re-priced by lowering the exercise price
thereof, nor shall a previously granted Option be cancelled with a subsequent
replacement or re-grant of that same Option with a lower exercise price, without
prior approval of the shareholders of the Company.

       

      ARTICLE
11.                                

       

      GOVERNMENT
REGULATION AND REGISTRATION OF SHARES

       

      11.1) General  The
Plan, and the grant and exercise of Awards hereunder, and the Company’s
obligations under Awards, shall be subject to all applicable Federal and state
laws, rules and regulations and to the approvals of any regulatory or
governmental agency as may be required.

       

      11.2) Compliance as an SEC
Registrant  The obligations of the Company with respect to
Awards shall be subject to all applicable laws, rules and regulations and such
approvals by any governmental agencies as may be required, including without
limitation, the Securities and Exchange Commission, and the rules and
regulations of any securities exchange or association on which the Company’s
common stock may be listed or quoted.  For so long as the common stock
of the Company is registered under the Exchange Act, the Company shall use its
reasonable efforts to comply with any legal requirements (a) to maintain a
registration statement in effect under the Securities Act with respect to all
Shares of the applicable class or series of Stock that may be issued to
Participants under the Plan and (b) to file in a timely manner all reports
required to be filed by it under the Exchange Act.

       

      ARTICLE
12.                                

       

      SUCCESSORS

       

      All
obligations of the Company under the Plan, with respect to Awards granted
hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.

       

      ARTICLE
13.                                

       

      MISCELLANEOUS

       

      13.1) Rights as
Shareholder.  A Participant granted a SAR under the Plan shall
not by reason thereof have any rights of a shareholder of the Company, and a
Participant granted an Option under the Plan shall not by reason thereof have
any right of a shareholder of the Company with respect to the Shares covered by
such Option until the exercise of such Option is effective.

       


      
        
           


        

        
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      13.2) No Obligation to Exercise
Option or SAR; Maintenance of Relationship.  The granting of an
Option or SAR shall impose no obligation upon the Participant to exercise such
Option or SAR. Nothing in the Plan or in any Award agreement entered into
pursuant hereto shall be construed to confer upon a Participant any right to
employment, service as a consultant, consultant or as a member of the Company's
Board of Directors or interfere in any way with the right of the Company to
terminate his relationship with the Company at any time.

       

      13.3) Withholding
Taxes.  Whenever, under the Plan, Shares are to be issued upon
exercise of the Options granted hereunder and prior to the delivery of any
certificate or certificates for said shares by the Company, and whenever a
Period of Restriction lapses with respect to Restricted Stock, the Company shall
have the right to require the Participant to remit to the Company an amount
sufficient to satisfy any federal and state withholding or other taxes resulting
therefrom.  In the event that withholding taxes are not paid by the
date of exercise of an Option or the lapse of a Period of Restriction, to the
extent permitted by law, the Company shall have the right, but not the
obligation, to cause such withholding taxes to be satisfied by reducing the
number of Shares deliverable upon the exercise of the Option, by forfeiting
Shares of Restricted Stock, or by offsetting such withholding taxes against
amounts otherwise due from the Company to the Participant as director’s fee or
otherwise.  If withholding taxes are paid by reduction of the number
of Shares deliverable to Participant or the forfeiture of Shares of Restricted
Stock, such Shares shall be valued at the Fair Market Value as of the business
day preceding the date of exercise of the Option or the lapse of the Period of
Restriction.

       

      13.4) Purchase for Investment;
Rights of Holder on Subsequent Registration.  Unless the Shares
to be issued upon exercise of an Option or granted as Restricted Stock have been
effectively registered under the Securities Act, the Company shall be under no
obligation to issue any such Shares unless the Participant shall give a written
representation and undertaking to the Company which is satisfactory in form and
scope to counsel for the Company and upon which, in the opinion of such counsel,
the Company may reasonably rely, that he is acquiring the Shares to be issued to
him for his own account as an investment and not with a view to, or for sale in
connection with, the distribution of any such Shares, and that he will make no
transfer of the same except in compliance with any rules and regulations in
force at the time of such transfer under the Securities Act, or any other
applicable law, and that if Shares are issued without such registration a legend
to this effect may be endorsed on the securities so issued and a “stop transfer”
restriction may be placed in the stock transfer records of the
Company.  In the event that the Company shall, nevertheless, deem it
necessary or desirable to register under the Securities Act or other applicable
statutes any such Shares, or to qualify any such Shares for exemption from the
Securities Act or other applicable statutes, then the Company shall take such
action at its own expense and may require from each participant such information
in writing for use in any registration statement, prospectus, preliminary
prospectus, or offering circular as is reasonably necessary for such purpose and
may require reasonable indemnity to the Company and its officers and directors
from such holder against all losses, claims, damages, and liabilities arising
from such use of the information so furnished and caused by any untrue statement
of any material fact required to be stated therein or necessary to make the
statement therein not misleading in light of the circumstances under which they
were made.

       

      15.5)                      Modification of Outstanding
Awards.  The Committee may accelerate the exercisability of an
outstanding Option or SAR or reduce the Period of Restriction of
outstanding


      
        
           


        

        
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      Restricted
Stock, and may authorize modification of any outstanding Award with the consent
of the Participant when and subject to such conditions as are deemed to be in
the best interests of the Company and in accordance with the purposes of the
Plan; provided however, that except as provided in Section 4.3 hereof, no
previously granted Option will be repriced by lowering the exercise price
thereof, nor will a previously granted Option be cancelled with a subsequent
replacement or regrant of that same Option with a lower exercise price, without
the prior approval of the shareholders of the Company, and further provided that
such modifications may only be taken to the extent permitted by Code Section
409A.  

      


      15.6)                      Liquidation.  Upon
the complete liquidation of the Company, any unexercised Options or SARs
theretofore granted under this Plan shall be deemed canceled, except as
otherwise provided in Section 4.3 in connection with a merger,
consolidation or reorganization of the Company.

      


       

      15.7)                      Restrictions on Issuance of
Shares.  Notwithstanding provisions of this Plan to
the

       

       contrary,
the Company may delay the issuance of Shares covered by the exercise of any
Option and the delivery of a certificate for such Shares until one of the
following conditions shall be satisfied:

       

      (a) The
Shares with respect to which the Option has been exercised are at the time of
the issue of such Shares effectively registered under applicable Federal and
state securities acts as now in force or hereafter amended; or

       

      (b) A
no-action letter in respect of the issuance of such Shares shall have been
obtained by the Company from the Securities and Exchange Commission and any
applicable state securities commissioner; or

       

      (c) Counsel
for the Company shall have given an opinion, which opinion shall not be
unreasonably conditioned or withheld, that such Shares are exempt from
registration under applicable federal and state securities acts as now in force
or hereafter amended.  It is intended that all exercise of Options
shall be effective, and the Company shall use its best efforts to bring about
compliance with the above conditions within a reasonable time, except that the
Company shall be under no obligation to cause a registration statement or a
post-effective amendment to any registration statement to be prepared at its
expense solely for the purpose of covering the issue of Shares in respect of
which any Option may be exercised.

       

      15.8)
                      Certain Limitations on
Awards to Ensure Compliance with Code Section 409A.  For
purposes of this Plan, references to an award term or event (including any
authority or right of the Company or a Participant) being "permitted" under Code
Section 409A mean, for a 409A Award, that the term or event will not cause the
Participant to be liable for payment of interest or a tax penalty under Code
Section 409A and, for a Non-409A Award, that the term or event will not cause
the Award to be treated as subject to Code Section 409A.  Other
provisions of the Plan notwithstanding, the terms of any 409A Award and any
Non-409A Award, including any authority of the Company and rights of the
Participant with respect to the Award, shall be limited to those terms permitted
under Code Section 409A, and any terms not permitted under Code


      
        
           


        

        
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      Section
409A shall be automatically modified and limited to the extent necessary to
conform with Code Section 409A.  For this purpose, other provisions of
the Plan notwithstanding, the Company shall have no authority to accelerate
distributions relating to 409A Awards in excess of the authority permitted under
Code Section 409A, and any distribution subject to Code Section 409A(a)(2)(A)(i)
(separation from service) to a "key employee" as defined under Code Section
409A(a)(2)(B)(i), shall not occur earlier than the earliest time permitted under
Code Section 409A(a)(2)(B)(i).  Notwithstanding any other provisions
of the Plan, the Company does not guarantee to any Participant or any other
person that any Award intended to be exempt from Section 409A of the Code shall
be so exempt, nor that any Award intended to comply with Section 409A of the
Code shall so comply, nor will the Company indemnify, defend or hold harmless
any individual with respect to the tax consequences of any such
failure.

      


       

      ARTICLE
14.                                

       

      REQUIREMENTS
OF LAW

       

      14.1) Requirements of
Law.

       

      The
granting of Awards and the issuance of Shares under this Plan shall be subject
to all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be
required.

       

      14.2) Governing
Law.

       

      The Plan,
and all agreements hereunder to the extent not covered by Federal law, shall be
construed in accordance with and governed by the laws of the State of Minnesota
without giving effect to the principles of the conflicts of laws.

       


      
        
           


        

        
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                APPROVED:

              	 
      	 
      
	
                 

                SHUFFLE
      MASTER, INC.

              	 
      	 
      
	
                 

                 

                BY:   /s/ Jerry
      Smith

              	 
      	 
      
	
                 

                ITS:  Executive Vice President, General
      Counsel and Corporate Secretary

              	 
      	 
      


      

      


      



      
        
           


        

        
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