-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U67XCL6y20h9UDF4BLz5+HgCEgNm3i+N1jIOleF89FEdaQGhzX0DK2T/NXSTjlKn lIdMJoU2UY+ebzL2ede1OA== 0001104659-04-015677.txt : 20040527 0001104659-04-015677.hdr.sgml : 20040527 20040527145834 ACCESSION NUMBER: 0001104659-04-015677 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20040430 FILED AS OF DATE: 20040527 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHUFFLE MASTER INC CENTRAL INDEX KEY: 0000718789 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS MANUFACTURING INDUSTRIES [3990] IRS NUMBER: 411448495 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20820 FILM NUMBER: 04834820 BUSINESS ADDRESS: STREET 1: 1106 PALMS AIRPORT DRIVE CITY: LAS VEGAS STATE: NV ZIP: 89119 BUSINESS PHONE: 7028977150 10-Q 1 a04-6489_110q.htm 10-Q

United States
Securities And Exchange Commission

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

	For the quarterly period ended April 30, 2004

OR

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

	For the transition period from to

Commission file number: 0-20820

SHUFFLE MASTER, INC.

(Exact name of registrant as specified in its charter)

Minnesota	41-1448495
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

1106 Palms Airport Drive, Las Vegas	NV	89119
(Address of Principal Executive Offices)	(State)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (702) 897-7150

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý

No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý

No o

As of May 14, 2004, there were 23,197,442 shares of our $.01 par value common stock outstanding.

SHUFFLE MASTER, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED APRIL 30, 2004

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item	1.	Financial Statements (unaudited):

			Condensed Consolidated Statements of Income Three and six months ended April 30, 2004 and 2003

			Condensed Consolidated Balance Sheets April 30, 2004 and October 31, 2003

			Condensed Consolidated Statements of Cash Flows Six months ended April 30, 2004 and 2003

			Notes to Condensed Consolidated Financial Statements

Item	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item	3.	Quantitative and Qualitative Disclosures About Market Risk

Item	4.	Controls and Procedures

PART II - OTHER INFORMATION

Item	1.	Legal Proceedings

Item	4.	Submission of Matters to a Vote of Securities Holders

Item	6.	Exhibits and Reports on Form 8-K

Signatures

PART I

ITEM 1. FINANCIAL STATEMENTS

SHUFFLE MASTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands, except per share amounts)

	Three Months Ended April 30,					Six Months Ended April 30,
	2004			2003		2004			2003

Revenue:
Utility products leases	$	4,755		$	4,337	$	9,352		$	8,560
Utility products sales and service	5,541			3,705		9,109			5,949
Entertainment products leases and royalties	6,016			5,241		11,155			10,404
Entertainment products sales and service	3,799			118		6,080			409
Other	45			62		69			68
Total revenue	20,156			13,463		35,765			25,390

Costs and expenses:
Cost of leases and royalties	1,726			1,604		3,428			3,254
Cost of sales and service	2,115			982		3,411			1,784
Selling, general and administrative	5,732			3,840		10,513			7,250
Research and development	1,770			880		2,930			1,594
Total costs and expenses	11,343			7,306		20,282			13,882

Income from operations	8,813			6,157		15,483			11,508
Other income (expense)	(607		)	46		(492		)	105
Income from continuing operations before tax	8,206			6,203		14,991			11,613
Provision for income taxes	2,872			2,234		5,247			4,184
Income from continuing operations	5,334			3,969		9,744			7,429
Discontinued operations, net of tax	168			63		1,612			(80		)
Net income	$	5,502		$	4,032	$	11,356		$	7,349

Basic earnings per share:
Continuing operations	$	0.21		$	0.16	$	0.39		$	0.29
Discontinued operations	0.01			—		0.07			—
Net income	$	0.22		$	0.16	$	0.46		$	0.29

Diluted earnings per share:
Continuing operations	$	0.21		$	0.16	$	0.38		$	0.29
Discontinued operations	—			—		0.06			(0.01		)
Net income	$	0.21		$	0.16	$	0.44		$	0.28

Weighted average shares outstanding:
Basic	24,856			24,840		24,827			25,274
Diluted	25,761			25,412		25,710			25,873

See notes to unaudited condensed consolidated financial statements

SHUFFLE MASTER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

	April 30, 2004			October 31, 2003

ASSETS

Current assets:
Cash and cash equivalents	$	57,472		$	2,674
Investments	27,214			7,751
Accounts receivable, net	8,989			10,007
Notes receivable	—			648
Investment in sales-type leases, net	3,110			2,075
Inventories	5,465			7,365
Prepaid income taxes	10,361			5,659
Deferred income taxes	781			833
Other current assets	829			242
Total current assets	114,221			37,254
Investment in sales-type leases, net	5,123			3,314
Products leased and held for lease, net	4,907			5,777
Property and equipment, net	1,644			2,047
Intangible assets, net	21,948			5,482
Goodwill, net	3,664			3,664
Deferred income taxes	—			1,551
Other assets	7,548			329
Total assets	$	159,055		$	59,418

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	3,001		$	5,477
Accrued liabilities	3,549			3,368
Customer deposits and unearned revenue	2,255			2,425
Note payable and current portion of long-term liabilities	4,105			175
Total current liabilities	12,910			11,445
Long-term liabilities, net of current portion	157,866			250
Deferred income taxes	141			—
Total liabilities	170,917			11,695
Contingencies
Shareholders’ equity:
Preferred stock, no par value; 338 shares authorized; none outstanding	—			—
Common stock, $0.01 par value; 101,250 shares authorized; 22,850 and 24,715 shares issued and outstanding	229			165
Additional paid-in capital	—			—
Retained earnings (deficit)	(12,091		)	47,558
Total shareholders’ equity (deficit)	(11,862		)	47,723
Total liabilities and shareholders’ equity	$	159,055		$	59,418

See notes to unaudited condensed consolidated financial statements

SHUFFLE MASTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Six Months Ended April 30,
	2004			2003
Cash flows from operating activities:
Net income	$	11,356		$	7,349
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	3,012			4,035
Provision for bad debts	155			47
Provision for inventory obsolescence	180			222
Deferred income taxes	1,744			(715		)
Tax benefit from stock option exercises	3,281			661
Net gain on slot disposition	(2,495		)	—
Changes in operating assets and liabilities:
Accounts receivable	988			(418		)
Notes receivable	648			573
Investment in sales-type leases	(2,969		)	(1,818		)
Inventories	(988		)	(1,478		)
Other current assets	(587		)	(368		)
Accounts payable and accrued liabilities	(3,510		)	757
Customer deposits and unearned revenue	(170		)	609
Prepaid income taxes	(4,702		)	181
Net cash provided by operating activities	5,943			9,637
Cash flows from investing activities:
Purchases of investments	(24,787		)	(7,397		)
Proceeds from sale and maturities of investments	5,324			15,432
Payments for products leased and held for lease	(1,895		)	(1,746		)
Purchases of property and equipment	(356		)	(270		)
Purchases of intangible assets	(612		)	(825		)
Acquisition of businesses	(6,144		)	(1,730		)
Proceeds from sale of slot assets	8,858			—
Other	(2,745		)	(6		)
Net cash provided (used) by investing activities	(22,357		)	3,458
Cash flows from financing activities:
Proceeds from issuance of convertible Notes	150,000			—
Repurchases of common stock	(78,661		)	(15,642		)
Debt issuance costs	(4,566		)	—
Proceeds from issuances of common stock	4,439			1,772
Net cash provided (used) by financing activities	71,212			(13,870		)
Net increase (decrease) in cash and cash equivalents	54,798			(775		)
Cash and cash equivalents, beginning of period	2,674			3,604
Cash and cash equivalents, end of period	$	57,472		$	2,829

Cash paid for:
Income taxes	$	5,792		$	3,826
Interest	$	6		$	6
Non-cash transaction:
Note payable and contingent consideration issued in connection with the acquisition of a business	$	11,616		$	—

See notes to unaudited condensed consolidated financial statements

SHUFFLE MASTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, in thousands, except per share amounts)

1. DESCRIPTION OF BUSINESS AND INTERIM BASIS OF PRESENTATION

Description of Business. Shuffle Master, Inc. develops, manufactures and markets technology-based products for the gaming industry. Our products primarily relate to our casino customers’ table game activities and are focused on increasing their profitability, productivity and security. These products include a full line of automatic card shufflers for use with the vast majority of card table games placed in casinos and other locations. We also market a line of live proprietary poker, blackjack, baccarat, and pai gow poker based table games.

We have acquired or are developing other products to automatically gather data and to enable casinos to track table game players, such as our Bloodhound™ and Intelligent Table System™ products. We are also re-engineering our multi-player video platform, Table Master™ (acquired in April 2003), to cost-effectively deliver to casinos and others our popular branded table game content on the choice of either a live table or a multi-player video platform. We expect to complete initial development or re-engineering of and to begin marketing certain of these products in late fiscal 2004.

We sell, lease or license our products. When we lease or license our products, we generally negotiate a month-to-month operating lease. When we sell our products, we offer our customers a choice between a sale or a longer-term sales-type lease. We sell our products worldwide in markets that are significantly regulated and manufacture our products at our headquarters and manufacturing facility in Las Vegas, Nevada.

Our internet address is www.shufflemaster.com. Through the “Investors” page at our internet website, our annual report on Form 10-K, proxy statement, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available free of charge, as soon as reasonably practical after such information has been filed or furnished to the Securities and Exchange Commission.

Basis of Presentation. The condensed consolidated financial statements of Shuffle Master, Inc. as of April 30, 2004, and for the three and six month periods ended April 30, 2004 and 2003, are unaudited, but, in the opinion of management, include all adjustments (consisting only of normal adjustments) necessary for a fair presentation of the financial results for the interim periods. Our results of operations for the three and six month periods ended April 30, 2004, are not necessarily indicative of the results to be expected for the year ending October 31, 2004. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in our annual report on Form 10-K for the year ended October 31, 2003.

In July 2000, we entered into multi-year agreements (the “IGT Alliance”) that granted licenses to International Game Technology (“IGT”) to develop and manufacture slot games. We purchased the games from IGT and recorded them at cost as products leased and held for lease. The agreements provided that revenues and specified expenses associated with the games were split equally and between us and IGT. Our consolidated statements of income include our share of these revenues and expenses through December 31, 2003. In January 2004, we terminated the IGT Alliance in connection with the sale of substantially all of our slot products assets to IGT. See Note 3.

Pro Forma Stock Based Compensation Expense. We account for employee and director stock options using the intrinsic value method. Under this method, no compensation expense was recorded in any period presented because all stock options were granted at an exercise price equal to the market value of our stock on the date of grant.

If compensation expense for our stock option grants had been determined based on their estimated fair value at the grant dates, our net income and earnings per share would have been as follows:

	Three Months Ended April 30,						Six Months Ended April 30,
	2004			2003			2004			2003

Net income, as reported	$	5,502		$	4,032		$	11,356		$	7,349
Deduct: Total stock-based employee compensation expense determined under the fair value method for all awards, net of related tax benefits	(4,380		)	(1,357		)	(5,674		)	(2,265		)
Pro forma net income	$	1,122		$	2,675		$	5,682		$	5,084

Earnings per common share, basic:
As reported	$	0.22		$	0.16		$	0.46		$	0.29
Pro forma	0.05			0.11			0.23			0.20

Earnings per common share, diluted:
As reported	$	0.21		$	0.16		$	0.44		$	0.28
Pro forma	0.04			0.11			0.22			0.20

Weighted average fair value of options granted during the period	$	15.33		$	11.62		$	15.27		$	12.62

The fair value of options granted was estimated on the date of grant using the Black-Scholes option-pricing model. Actual compensation, if any, ultimately realized by optionees may differ significantly from the amount estimated using an option valuation model.

In February 2004, we renewed our Chief Executive Officer’s employment agreement, extending his employment through October 2007. The agreement provided for the grant of 247 options, of which 165 options cliff vest on October 31, 2005 and 82 options which cliff vest on October 31, 2006. The option grants also provided for a vesting acceleration if our common stock prices exceed prices ranging from 30% to 50% over our common stock price on the date of grant. During April 2004, our common stock price exceeded the 50% increase threshold, and accordingly, the 247 options granted became fully vested. This resulted in the full Black-Scholes value of the grant of $3,441 being reflected as pro forma compensation expense during the three months ended April 30, 2004.

Reclassifications. Certain prior period amounts have been reclassified to conform to the current period presentation, including the following for all periods presented:

• We realigned our reportable segments; see Note 11.

• We have reclassified our slot products operations as discontinued; see Note 3.

• Our board of directors approved a three-for-two stock split, with new shares distributed in the form of a dividend on April 16, 2004, to shareholders of record on April 5, 2004. Share and per share amounts have been adjusted to reflect the three-for-two stock split; see Note 7.

2. ACQUISITIONS

CARD. On May 13, 2004, two of our Austrian subsidiaries acquired a 100% ownership interest in CARD Casinos Austria Research & Development GmbH & Co KG and its wholly-owned subsidiaries (“CARD”) from Casinos Austria AG.

The purchase price, paid at closing, consisted of a Euro-denominated cash payment of €25,931 and the issuance of 767 shares of our common stock. The cash payment was funded with a partial use of proceeds from $150,000 issuance, in April 2004, of contingent convertible senior notes. We are required to register the shares by November 17, 2004. Prior to the effective registration of the stock, Casinos Austria has the right to require us to purchase back the 767 shares at an aggregate price of €15,813.

The CARD acquisition will be accounted for as a business combination, and accordingly, we are in the process of valuing the purchase price and determining its allocation to the fair value of the acquired assets and liabilities. Although we have not yet completed its accounting for the acquisition, management estimates that the U.S. dollar equivalent of the combined cash and share payments will be approximately $50,000. CARD’s products have been assigned to our Utility products segment. Beginning May 1, 2004, CARD’s operating results will be included in our consolidated financial statements.

CARD, which is now a subsidiary of our newly formed Shuffle Master International subsidiary, provides us with a headquarters and direct sales force for European business centrally located in Vienna and a satellite office in New Zealand. CARD develops, manufactures and supplies innovative casino products including one2six^(R), a continuous shuffler that accommodates up to six decks of cards and can be used for almost every casino card game. In addition, CARD’s products under development include the Easy Chipper, a next-generation chip sorting device.

BTI. On February 24, 2004, we acquired certain assets of BET Technology, Inc. (“BTI”), a privately held corporation that develops and distributes table games to casinos throughout North America.

The acquired assets and operations, which have been assigned to our Entertainment Products segment, include the Fortune Pai Gow^®, Royal Match 21™ and Casino War^® table games and related patents, trademarks and other intellectual property, as well as the “BET Technology, Inc.” name. The acquired installed base of Fortune Pai Gow, Royal Match 21, and Casino War table games was 1090 units.

The acquisition price includes fixed installments and a promissory note, which is secured as set forth in the acquisition agreement (the “Agreement”), with contingent installment payments. The fixed installments comprise $6,000 that was paid on the closing date and, subject to the terms of the Agreement, $4,000 that is payable on August 24, 2004. Subject to other terms and conditions, the contingent installments are based on future revenue performance of Fortune Pai Gow. Beginning November 2004, we will pay monthly note installments based on a percentage of such revenue for a period of up to ten years, not to exceed $12,000. We have funded and expect to fund the acquisition price with existing cash and cash flow from operations.

The acquisition was accounted for under the purchase method of accounting and, accordingly, the acquired assets were recorded at their estimated fair values. All acquired intangible assets have definite lives and are being amortized on a straight-line basis over their estimated useful lives. The cash purchase price of $6,144 includes the initial installment payment to the sellers of $6,000 and other direct costs in the amount of $144. We have recorded an estimated liability of $7,616 for contingent installment payments computed as the excess fair value of the acquired assets over the fixed installments and other direct costs. Future amounts paid in excess of this estimate of contingent consideration, if any, will be recorded as goodwill. If future amounts paid are less than estimated contingent consideration, the remaining carrying value of the acquired assets will be reduced. A summary of the preliminary allocation of the acquisition cost follows:

Fair value of acquired assets:
Patents and games, average life of 11 years	$	17,500
Trademark and other, average life of 14 years	260
Total fair value of acquired assets, average life of 11 years	17,760
Fixed installment to seller due August 2004	(4,000		)
Contingent consideration	(7,616		)
Cash purchase price	$	6,144

Sega. In April 2003, we acquired certain product inventory and product intellectual property rights from Sega Corporation of Japan and its wholly owned subsidiary, Sega Gaming Technology (“Sega”), for $1,730 in cash. The intellectual property comprises worldwide rights (excluding Japan) to Sega’s multi-player games, including Royal Ascot, Royal Derby, Sega Blackjack, Bingo Party and Roulette Club (collectively, “Games License”), and a five year non-compete covenant covering certain games in North America. The Games License is exclusive in North America for ten years and non-exclusive thereafter. The acquired products were assigned to our Entertainment Products segment and are now marketed under the product name Table Master. We are in the process of expanding these products by incorporating our existing proprietary table game titles such as Let It Ride^®and Three Card Poker^® into the multi-player games.

3. DISCONTINUED OPERATIONS

In December 2003, our board of directors approved and we committed to a plan to divest our slot products operations and assets, based on our determination that this product line was no longer a strategic fit with our refocused core business strategy of providing products and services for the table game area of casinos. Revenues and costs associated with our slot products are reported as discontinued operations for all periods presented.

In January 2004, we entered into agreements pursuant to which we sold substantially all of our slot products assets to IGT. Significant terms of the agreements include:

• We sold our share of the IGT Alliance slot operations, related inventory and leased assets to IGT.

• We conveyed to IGT certain intellectual property rights, principally our slot operating system, patents and licenses.

• The IGT Alliance agreements were terminated and all amounts due to IGT under the IGT Alliance agreements were paid in full.

• We terminated our initiative to develop retrofit games based on IGT’s S+ game platform.

• Net proceeds from the disposition of slot products assets to IGT were $8,447.

These transactions with IGT substantially completed our divestiture of slot products assets. During the three month period ended April 30, 2004, we liquidated additional slot products inventories, resulting in net proceeds of $411. Remaining slot products assets, including inventory, leased assets, and intangible assets, which do not meet the accounting criteria to classify these assets as “held for sale,” are recorded at their estimated net realizable value, and are not material.

Discontinued operations consisted of the following:

	Three Months Ended April 30,						Six Months Ended April 30,
	2004			2003			2004			2003

Revenues	$	426		$	2,782		$	1,947		$	5,052

Gain (loss) from operations before tax	$	259		$	(1	)	$	(15	)	$	(307	)
Income tax (expense) benefit	(91		)	64			5			227
Net income (loss) from operations	168			63			(10		)	(80		)

Gain on sale of slot assets	—			—			3,373			—
One-time termination benefits, contract termination costs, and other	—			—			(877		)	—
Income tax expense	—			—			(874		)	—
Gain on sale of slot assets, net	—			—			1,622			—

Discontinued operations, net	$	168		$	63		$	1,612		$	(80	)

The gain on sale of slot assets includes charges totaling $3,107 to adjust the carrying value of remaining slot products inventory, leased and available products, property and equipment and intangible assets to their estimated net realizable value.

In connection with the discontinuation of our slot products operations, we accrued expenses of $877 for termination of slot-related contracts, closure of our leased slot products research and development facility in Colorado, and termination of slot products personnel (collectively, “Exit Costs”). The charge for Exit Costs is included in discontinued operations, net of tax, on our consolidated statements of income. The following table summarizes the activity for our accrued Exit Costs during the six month period ended April 30, 2004:

	Contract Terminations			Facility Closure			Severance			Total

Exit costs accrued, initial balance	$	366		$	324		$	187		$	877
Cash payments	(51		)	(22		)	(95		)	(168		)
Balance, April 30, 2004	$	315		$	302		$	92		$	709

4. RECEIVABLES, INVENTORIES, AND LEASED PRODUCTS

	April 30, 2004			October 31, 2003
Accounts receivable, net:
Trade receivables	$	9,342		$	9,326
Accrued revenue	17			1,021
Less: allowance for bad debts	(370		)	(340		)
	$	8,989		$	10,007

Notes receivable	$	—		$	648

Accrued revenue represents estimated unbilled participation revenue from slot leases. The notes receivable related to sales to a foreign distributor, bore interest at 3% and were paid in full as of January 31, 2004.

	April 30, 2004			October 31, 2003
Investment in sales-type leases, net:
Minimum lease payments	$	9,365		$	6,155
Less: interest	(782		)	(541		)
Less: allowance for bad debts	(350		)	(225		)
Investment in sales-type leases, net	8,233			5,389
Less: current portion	(3,110		)	(2,075		)
Long-term portion	$	5,123		$	3,314

Investment in sales-type leases includes amounts receivable under capital lease arrangements. Sales-type leases are interest bearing, require monthly installment payments over periods ranging from 30 to 60 months and contain bargain purchase options. At April 30, 2004, one group of properties with some common ownership accounted for approximately 14% of our outstanding investment in sales-type leases.

We maintain provisions for bad debts for estimated credit losses that result from the inability of our customers to make required payments. The provisions for bad debts are estimated based on historical experience and specific customer collection issues.

	April 30, 2004			October 31, 2003
Inventories:
Raw materials and component parts	$	4,592		$	3,263
Work-in-process	418			374
Finished goods	1,316			1,727
	6,326			5,364
Less: allowance for inventory obsolescence	(861		)	(705		)
	5,465			4,659
Discontinued slot products, net	—			2,706
	$	5,465		$	7,365
Products leased and held for lease, net:
Utility products	$	12,495		$	11,241
Entertainment products	2,365			2,350
	14,860			13,591
Less: accumulated depreciation	(10,133		)	(9,595		)
	4,727			3,996
Discontinued slot products, net	180			1,781
	$	4,907		$	5,777

5. INTANGIBLE ASSETS AND GOODWILL

Intangible Assets. All of our recorded intangible assets are subject to amortization. Amortization expense was $513 and $536 for the three month periods ended April 30, 2004 and 2003, respectively, and $905 and $1,031 for the six month periods ended April 30, 2004 and 2003, respectively. Intangible assets are comprised of the following:

	April 30, 2004			October 31, 2003

Patents, games and products	$	23,342		$	5,642
Less: accumulated amortization	(2,686		)	(2,118		)
	20,656			3,524

Licenses and other	3,151			3,723
Less: accumulated amortization	(1,859		)	(1,897		)
	1,292			1,826

Slot products	—			3,370
Less: accumulated amortization	—			(3,238		)
	—			132
Intangible assets, net	$	21,948		$	5,482

Intangible assets include $17,760 of patents, games and trademark acquired from BTI in February 2004. The acquired intangible assets have definite lives. Estimated amortization expense for the year ending October 31, 2004, is $875 and $1,458 annually for each of the four fiscal years thereafter. See Note 2.

Goodwill. Goodwill originated from our acquisition of the QuickDraw^® shuffler product line, certain assets, liabilities and stock of a group of Australian companies in fiscal year 2001. There were no changes in the carrying amount of goodwill for the three and six month periods ended April 30, 2004 and 2003.

6. NOTE PAYABLE AND LONG-TERM LIABILITIES

Note payable and long-term liabilities are summarized as follows:

	April 30, 2004			October 31, 2003

Contingent Convertible Senior Notes, fixed interest at 1.25%, due 2024	$	150,000		$	—
Note Payable, fixed rate interest at 2.00%, due in installments through 2005	425			425
BTI Acquisition (see Note 2)
Fixed installment, non-interest bearing, due 2004	3,930
Contingent consideration	7,616			—
	161,971			425
Less: current portion	(4,105		)	(175		)
	$	157,866		$	250

Contingent Convertible Senior Notes. In April 2004, we issued $150,000 of contingent convertible senior notes due 2024 (the “Notes”) through a private placement under Rule 144A of the Securities Act of 1933. The Notes are unsecured and bear interest at a fixed rate of 1.25% per annum. Interest is payable semi-annually in arrears on April 15 and October 15 of each year, beginning October 15, 2004.

The Notes are convertible, at the holders’ option, into cash and shares of our common stock, under the following circumstances:

• during any fiscal quarter commencing after the date of original issuance of the Notes, if the closing sale price of our common stock over a specified number of trading days during the previous quarter is more than 120% of the conversion price of the Notes on the last trading day of the previous quarter;

• we have called the Notes for redemption and the redemption has not yet occurred;

• during the five trading day period immediately after any five consecutive trading day period in which the trading price of the Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of our common stock on such day multiplied by the number of shares of our common stock issuable upon conversion of $1,000 in principal amount of the Notes, provided that, if on the date of any conversion pursuant to this trading price condition, our common stock price on such date is greater than the conversion price but less than 120% of the conversion price, then the holder will be entitled to receive Conversion Value (defined below) equal to the principal amount of the Notes, plus accrued and unpaid interest including liquidated damages, if any; or

• upon the occurrence of specified corporate transactions.

Holders may convert any outstanding Notes into cash and shares of our common stock at an initial conversion price per share of $42.11. This represents a conversion rate of approximately 23.7473 shares of common stock per $1,000 in principal amount of Notes (the “Conversion Rate”). Subject to certain exceptions described in the indenture covering these Notes, at the time the Notes are tendered for conversion, the value (the “Conversion Value”) of the cash and shares of our common stock, if any, to be received by a holder converting $1,000 principal amount of the Notes will be determined by multiplying the Conversion Rate by the “Ten Day Average Closing Stock Price,” which equals the average of the closing per share prices of our common stock on the Nasdaq National Market on the ten consecutive trading days beginning on the second trading day following the day the Notes are submitted for conversion. We will deliver the Conversion Value to holders as follows: (1) an amount in cash (the “Principal Return”) equal to the lesser of (a) the aggregate Conversion Value of the Notes to be converted and (b) the aggregate principal amount of the Notes to be converted, and (2) if the aggregate Conversion Value of the Notes to be converted is greater than the Principal Return, an amount in shares (the “Net Shares”) equal to such aggregate Conversion Value less the Principal Return (the “Net Share Amount”). We will pay the Principal Return and deliver the Net Shares, if any, as promptly as practical after determination of the Net Share Amount. The number of Net Shares to be paid will be determined by dividing the Net Share Amount by the Ten Day Average Closing Stock Price.

We may redeem some or all of the Notes at any time on or after April 21, 2009, at a redemption price, payable in cash, of 100% of the principal amount of the Notes, plus accrued and unpaid interest and including liquidating damages, if any, up to but not including the date of redemption. In addition, the holders may require us to repurchase all or a portion of their Notes on April 15, 2009, 2014 and 2019, at 100% of the principal amount of the Notes, plus accrued and unpaid interest and including liquidating damages, if any, up to but not including the date of repurchase, payable in cash. Upon a change in control, as defined in the indenture governing the Notes, holders may require us to repurchase all or a portion of their Notes, payable in cash equal to 100% of the principal amount of the Notes plus accrued and unpaid interest and liquidated damages, if any, up to but not including the date of repurchase.

We incurred $4,566 of debt issuance costs in connection with the issuance of the Notes. Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized as interest expense using the effective interest method over the term of the Notes. Unamortized debt issuance costs are included in other assets on the condensed consolidated balance sheets.

Note Payable. In August 2002, we purchased a patent and the Bloodhound product (formerly, Blackjack Survey VoiceÔ) from Casino Software and Services, LLC for cash of $300 and a note payable for $600. The note bears interest at 2% annually, with principal due in installments of $175 and $250 on August 7, 2004 and 2005, respectively, subject to other terms and conditions.

Credit Facility. In connection with the contingent convertible senior notes issuance mentioned above, on April 13, 2004, we terminated our $15,000 revolving credit agreement that we had maintained with U.S. Bank, N.A.

7. SHAREHOLDERS’ EQUITY

The following table reconciles the changes in our shareholder’s equity during the six month period ending April 30, 2004:

						Additional Paid-in Capital		Retained Earnings			Total Shareholders’ Equity
	Common Stock
	Shares		Amount

Balance, October 31, 2003	24,715		$	165		$	—	$	47,558		$	47,723

Common stock repurchased	(2,543	)	(25		)	—		(78,636		)	(78,661		)
Common stock options exercised	680		7			—		4,570			4,577
Tax benefit from stock options	—		—			—		3,281			3,281
Stock split	(2	)	82			—		(220		)	(138		)
Net income	—		—			—		11,356			11,356

Balance, April 30, 2004	22,850		229			—		(12,091		)	(11,862		)

Common Stock Repurchases. Our board of directors periodically authorizes us to repurchase shares of our common stock. In May 2004, our board of directors authorized the repurchase of up to $30,000 of our common stock. Repurchases under all previous outstanding authorizations have been substantially completed.

Under our board authorizations, during the six month periods ended April 30, 2004 and 2003, we repurchased 672 and 1,272 shares of our common stock, respectively, at total costs of $21,161 and $15,642, respectively.

In addition, in April 2004, our board authorized and we repurchased, in private transactions, an additional 1,871 shares of our common stock at a total cost of $57,500 with funds provided from the issuance of our contingent convertible senior notes. See Note 6.

Tax Benefit from Stock Option Exercises. During the six month periods ended April 30, 2004 and 2003, we recorded income tax benefits of $3,281 and $661, respectively, related to deductions for employee stock option exercises. These tax benefits, which increased prepaid income taxes and additional paid-in capital by equal amounts, had no affect on our provision for income taxes.

Stock Split. On March 16, 2004, our board of directors approved a three-for-two common stock split, with new shares distributed in the form of a dividend on April 16, 2004, to shareholders of record on April 5, 2004. Share and per share amounts have been adjusted for all periods presented herein to reflect our three-for-two stock split. In connection with our stock split, we paid cash of $138 for fractional shares and reclassified to common stock the par value of $0.01 per newly issued share.

8. EARNINGS PER SHARE

Shares used to compute basic and diluted earnings per share from continuing operations are as follows (all share and per share amounts have been restated to reflect our three-for-two stock split in April 2004):

	Three Months Ended April 30,				Six Months Ended April 30,
	2004		2003		2004		2003

Income from continuing operations	$	5,334	$	3,969	$	9,744	$	7,429

Basic:
Weighted average shares, basic	24,856		24,840		24,827		25,274

Diluted:
Weighted average shares, basic	24,856		24,840		24,827		25,274
Dilutive impact of options outstanding	905		572		883		599
Weighted average shares, diluted	25,761		25,412		25,710		25,873

Basic earnings per share	$	0.21	$	0.16	$	0.39	$	0.29
Diluted earnings per share	$	0.21	$	0.16	$	0.38	$	0.29

9. EQUITY INCENTIVE PLANS

Stock Options. During the six month period ended April 30, 2004, our stock option activity and weighted average exercise prices were as follows:

	Shares		Weighted- Average Exercise Price

Outstanding, October 31, 2003	3,035		$	11.96
Granted	459		25.07
Exercised	(680	)	6.73
Forfeited	(92	)	15.11
Outstanding, April 30, 2004	2,722		15.37

Exercisable, April 30, 2004	1,170		$	14.03

Equity Incentive Plans. In February 2004, our board of directors adopted and, in March 2004, our shareholders approved the Shuffle Master, Inc. 2004 Equity Incentive Plan (the “2004 Plan”) and the Shuffle Master, Inc. 2004 Equity Incentive Plan for Non-Employee Directors (the “2004 Directors’ Plan”). These approved plans replaced our prior plans and no further options may be granted from the prior plans. Both the 2004 Plan and the 2004 Directors’ Plan provide for the grant of stock options, stock appreciation rights, and restricted stock, individually or in any combination (collectively referred to as “Awards”). Stock options may not be granted at an exercise price less than the fair market value of our stock at the date of grant.

The 2004 Plan provides for the grants of Awards to our officers, other employees and contractors. The maximum number of Awards which may be granted is 1,800, of which no more than 1,260 may be granted as restricted stock. The 2004 Directors’ Plan provides for the grants of Awards to our non-employee directors. The maximum number of Awards which may be granted is 750, of which no more than 525 may be granted as restricted stock. As of April 30, 2004, 1,800 and 678 shares are available for grant under the 2004 Plan and 2004 Directors’ Plan, respectively.

10. OTHER INCOME (EXPENSE)

Other income (expense) is comprised of the following:

	Three Months Ended April 30,						Six Months Ended April 30,
	2004			2003			2004			2003

Interest income	$	151		$	51		$	282		$	130
Interest expense	(55		)	(3		)	(58		)	(6		)
Foreign currency loss	(703		)	(2		)	(716		)	(9		)
Other	—			—			—			(10		)
	$	(607	)	$	46		$	(492	)	$	105

During the three month period ended April 30, 2004, we entered into foreign currency exchange contracts to fix the U.S. dollars estimated to be required to fund the Euro-denominated cash component of the CARD purchase price which resulted in a foreign currency exchange loss of $703. The contracts do not meet the accounting criteria for hedge accounting, and accordingly, the foreign currency exchange loss is included in our operating results for the three and six month periods ended April 30, 2004. As of April 30, 2004, we had outstanding two Euro - U.S. dollar foreign exchange contracts with exactly offsetting exchange rates and each with an underlying notional amount of €10,000.

11. OPERATING SEGMENTS

We currently have four product lines: Shufflers, Proprietary Table Games, Table Master, and Intelligent Table System (“ITS”). Our Shufflers and Proprietary Table Games are each significant to our operating results. Our Table Master and ITS product lines, while important to our strategic direction, consist primarily of research and development activities to date.

As a result of our redefined product strategy and the divestiture of our slot products, beginning in fiscal year 2004, we have realigned our reportable segments. We have two reportable segments which are classified as continuing operations, Utility Products and Entertainment Products. Utility Products includes our Shufflers and ITS product lines. Entertainment Products includes our Proprietary Table Games and Table Master product lines. Each segment’s activities include the design, development, acquisition, manufacture, marketing, distribution, installation and servicing of its product lines. All periods presented have been reclassified to conform to our current reportable segments.

Segment revenues include sale, lease or licensing of products within each reportable segment. Segment operating income includes revenues and expenses directly and indirectly associated with the product lines included in each segment. Direct expenses primarily include depreciation of leased assets, cost of products sold, shipping, installation, commissions, product approval costs, research and development and product related litigation. Indirect expenses include an activity-based allocation of other general product-related costs, the most significant of which are service and selling expenses and manufacturing overhead. Corporate general and administrative expenses are not allocated to segments.

The following provides financial information concerning our reportable segments of our continuing operations:

	Three Months Ended April 30,						Six Months Ended April 30,
	2004			2003			2004			2003
Revenue:
Utility Products	$	10,296		$	8,042		$	18,461		$	14,509
Entertainment Products	9,815			5,359			17,235			10,813
Corporate	45			62			69			68
	$	20,156		$	13,463		$	35,765		$	25,390
Operating Income (Loss):
Utility Products	4,968			4,324			8,368			7,751
Entertainment Products	7,366			4,469			13,355			8,856
Corporate	(3,521		)	(2,636		)	(6,240		)	(5,099		)
	$	8,813		$	6,157		$	15,483		$	11,508
Depreciation and Amortization:
Utility Products	$	570		$	513		$	1,103		$	980
Entertainment Products	453			158			654			333
Corporate	276			294			541			583
	$	1,299		$	965		$	2,298		$	1,896
Capital Expenditures:
Utility Products	$	1,056		$	1,018		$	1,800		$	1,781
Entertainment Products	484			289			610			298
Corporate	228			166			356			360
	$	1,768		$	1,473		$	2,766		$	2,439

12. COMMITMENTS AND CONTINGENCIES

Purchase Commitments. From time to time, we enter into commitments with our vendors to purchase inventory at fixed prices or in guaranteed quantities. These commitments are not material.

Employment Agreements. We have entered into employment contracts with our corporate officers and certain other key employees with durations ranging from one to three years. Significant contract provisions include minimum annual base salaries, healthcare benefits, bonus compensation if performance measures are achieved, and non-compete provisions. These contracts are primarily “at will” employment agreements, under which the employee or we may terminate employment. If we terminate any of these employees without cause, then we are obligated to pay the employee severance benefits as specified in their individual contract. As of April 30, 2004, minimum aggregate severance benefits totaled $3,962.

Legal Proceedings. Our current material litigation and our current assessments are described below. Litigation is inherently unpredictable. Our current assessment of each matter may change based on future unknown or unexpected events. If any litigation were to have an adverse result that we did not expect, there could be a material impact on our results of operations or financial position. We believe costs associated with litigation will not have a material impact on our financial position or liquidity, but may be material to the results of operations in any given period. We assume no obligation to update the status of pending litigation, except as may be required by applicable law, statute or regulation.

Certain of our litigation relates to products or patents associated with our discontinued slot products operations. Legal expenses and settlement proceeds or payments, if any, are included in the Discontinued Operations caption on our consolidated statements of income.

Continuing Operations –

Vending Data – In March 2002, we filed a patent infringement lawsuit against VendingData Corporation, d/b/a Casinovations, and related entities. The suit was filed in the U.S. District Court for the District of Nevada, in Las Vegas, Nevada. The complaint alleges that the defendants have infringed two of our patents and seeks an unspecified amount of damages and a permanent injunction against the defendants’ infringing conduct. The defendants have denied liability, raised numerous affirmative defenses, and also filed a counterclaim alleging, among other causes of action, breach of a confidentiality agreement and patent invalidity. The counterclaim seeks an unspecified amount of damages. We completely deny each of the claims contained in defendants’ counterclaim, and believe we will prevail in our infringement action, including with respect to defendants’ counterclaim.

Awada – In September 2002, Yehia Awada and Gaming Entertainment, Inc. (“Awada”) sued us. The suit was filed in the Second Judicial District Court of the State of Nevada, in Clark County, Nevada. The defendants are us and Mark L. Yoseloff, our CEO and Chairman. The complaint alleges breach of contract and related theories and causes of action concerning the 1999 agreement between us and the plaintiffs, relating to the plaintiffs’ 3 Way Action^® table game. The complaint seeks an unspecified amount of damages. We have cross-complained against the plaintiffs, alleging fraud and related causes of action, and are seeking unspecified damages from the plaintiffs. We completely deny the plaintiffs’ allegations in the complaint. We also believe that we will prevail in our cross-complaint.

VendingData (LA) – In July 2003, we filed a complaint against VendingData Corporation and Casinovations, Inc., in the Central Court of Orleans Parish in New Orleans, Louisiana. The complaint alleges that the defendants are committing unfair sales and trade practices in violation of Louisiana state law, specifically related to the sales of certain VendingData shufflers to a casino customer in Louisiana. The complaint seeks a permanent injunction against the defendants’ conduct and an unspecified amount of damages. The defendants have denied liability, raised numerous affirmative defenses, and also filed a claim alleging that, should they prevail in the litigation, they are entitled to reimbursement of their attorney’s fees. We believe that we will prevail in this litigation. In February 2004, we dismissed our complaint and VendingData dismissed its counterclaim, and the litigation was ended. No amounts were paid by either party to the other. The sales transactions which were the subject of our complaint against VendingData have been reversed by the customer, and the customer has now replaced the VendingData shufflers with our shufflers.

Gaming Entertainment – In July 2003, we filed a patent infringement suit against Gaming Entertainment, Inc., in the U. S. District Court for the Northern District of Mississippi alleging that the defendant’s 3-5-7 Poker Game infringes a patent owned by us. In early March 2004, this litigation was dismissed without prejudice by us, pending settlement negotiations between the parties. No assurances can be given that these negotiations will be successful. At this time, there are no current settlement negotiations ongoing between the parties.

CARD - We were involved in continued litigation with Casinos Austria Research and Development (“CARD”) and its affiliates in the United States, Australia and the United Kingdom. On May 13, 2004, effective May 14, 2004, we completed our acquisition of CARD. As part of the acquisition, all litigation between the companies will be terminated and dismissed. We are also in the process of having returned to us the $1,000 cash security we posted in connection with the preliminary injunction that we obtained in the United States against CARD.

Discontinued Operations –

IGCA – In April 2001, we were sued by Innovative Gaming Corporation of America (“IGCA”), a Minnesota corporation. The suit was filed in the Second Judicial District Court of the State of Nevada, in Washoe County, Nevada. The defendants are us and Joseph J. Lahti, our former Chairman. The complaint alleges breach of contract, negligence, misrepresentation and related theories of liability, all relating to a confidentiality agreement with respect to what the plaintiff claims to be its intellectual property. The complaint seeks an unspecified amount of damages. We have answered the complaint by denying any liability and raising various affirmative defenses. We completely deny the plaintiff’s claims and believe we will prevail in this litigation.

Aim Management – In June 2003, AIM Management, Inc. and Douglas Okuniwiecz, filed a patent infringement suit against us and our affiliate, Shuffle Master of Mississippi, Inc., in the U. S. District Court for the Southern District of Mississippi. The complaint alleges that we are infringing two patents owned by the plaintiffs. The subject patents involve a certain hardware feature related to computer-based operating systems. The complaint seeks a permanent injunction and an unspecified amount of damages. At the end of April 2004, we settled this litigation by agreeing to pay AIM Management $100, without admitting any infringement or any other liability to AIM Management. The amount of the settlement was, in our view, less than the ongoing legal defense costs.

In the ordinary course of conducting our business, we are, from time to time, involved in other litigation, administrative proceedings and regulatory government investigations. We believe that the final disposition of any of these or other matters will not have a material adverse effect on our financial position, results of operations or liquidity.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS OVERVIEW
(In Thousands)

Shuffle Master, Inc. develops, manufactures and markets technology-based products for the gaming industry. Our products primarily relate to our casino customers’ table game activities and are focused on increasing their profitability, productivity and security. These products include a full line of automatic card shufflers for use with the vast majority of card table games placed in casinos and other locations. We also market a line of live proprietary poker, blackjack, baccarat, and pai gow poker based table games.

Management’s Discussion and Analysis contains forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in “Forward Looking Statements” elsewhere in this quarterly report.

ACQUISITIONS

The purchase price, paid at closing, consisted of a Euro-denominated cash payment of €25,931 and the issuance of 767 shares of our common stock. The cash payment was funded with a partial use of proceeds from our $150,000 issuance, in April 2004, of contingent convertible senior notes. We are required to register the shares by November 17, 2004. Prior to the effective registration of the stock, Casinos Austria has the right to require us to purchase back the 767 shares at an aggregate price of €15,813.

Sega. In April 2003, we acquired certain product inventory and product intellectual property rights from Sega Corporation of Japan and its wholly owned subsidiary, Sega Gaming Technology (“Sega”), for $1,730 in cash. The intellectual property comprises worldwide rights (excluding Japan) to Sega’s multi-player games, including Royal Ascot, Royal Derby, Sega Blackjack, Bingo Party and Roulette Club (collectively, “Games License”), and a five year non-compete covenant covering certain games in North America. The Games License is exclusive in North America for ten years and non-exclusive thereafter. The acquired products were assigned to our Entertainment Products segment and are now marketed under the product name Table Master. We plan to expand these products by incorporating our existing proprietary table game titles such as Let It Ride^®and Three Card Poker^® into the multi-player games.

DISPOSITIONS

In December 2003, our board of directors approved and we committed to a plan to divest of our slot products operations and assets, based on our determination that this product line was no longer a strategic fit with our refocused core business strategy of providing products and services for the table game area of casinos. As of January 31, 2004, our slot products divestiture was substantially complete. A more detailed discussion is included under the heading “Discontinued Operations.”

CONSOLIDATED RESULTS OF OPERATIONS

(In thousands, except per share amounts)

	Three Months Ended April 30,				Six Months Ended April 30,
	2004		2003		2004		2003

Total revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue	19.1	%	19.2	%	19.1	%	19.8	%
Gross margin	80.9	%	80.8	%	80.9	%	80.2	%
Selling, general and administrative	28.4	%	28.5	%	29.4	%	28.6	%
Research and development	8.8	%	6.5	%	8.2	%	6.3	%
Income from operations	43.7	%	45.8	%	43.3	%	45.3	%
Other income (expense), net	(3.0	)%	0.3	%	(1.4	)%	0.4	%
Income from continuing operations before tax	40.7	%	46.1	%	41.9	%	45.7	%
Provision for income taxes	14.2	%	16.6	%	14.7	%	16.4	%
Income from continuing operations	26.5	%	29.5	%	27.2	%	29.3	%
Discontinued operations, net of tax	0.8	%	0.4	%	4.5	%	(0.3	)%
Net income	27.3	%	29.9	%	31.7	%	29.0	%

Our revenue and results of operations are most affected by unit placements, through sale or lease, of our products; as such, we are a revenue-driven business. The number and mix of products placed and the average lease or sales price are the most significant factors affecting our gross margins. These factors are, in turn, affected by the gaming industry generally and our customers’ assessment of our products. To a lesser extent, our overall financial results are affected by fluctuations in selling, general and administrative expenses and our investment in research and development activities.

REVENUE AND GROSS MARGIN

	Three Months Ended April 30,						Six Months Ended April 30,
	2004			2003			2004			2003
Revenue:
Leases and royalties	$	10,771		$	9,578		$	20,507		$	18,964
Sales and service	9,340			3,823			15,189			6,358
Other	45			62			69			68
Total	$	20,156		$	13,463		$	35,765		$	25,390
Cost of revenue:
Leases and royalties	$	1,726		$	1,604		$	3,428		$	3,254
Sales and service	2,115			982			3,411			1,784
Other	—			—			—			—
Total	$	3,841		$	2,586		$	6,839		$	5,038
Gross margin:
Leases and royalties	$	9,045		$	7,974		$	17,079		$	15,710
Sales and service	7,225			2,841			11,778			4,574
Other	45			62			69			68
Total	$	16,315		$	10,877		$	28,926		$	20,352
Gross margin percentage:
Leases and royalties	84.0		%	83.3		%	83.3		%	82.8		%
Sales and service	77.4		%	74.3		%	77.5		%	71.9		%
Total	80.9		%	80.8		%	80.9		%	80.2		%

We earn our revenue in several ways. The largest percentage is by leasing or licensing our products to casino customers, generally under month-to-month fixed fee contracts. Product lease contracts typically include parts and servicing. We also offer most of our products for sale with an optional parts and service contract. A more detailed discussion of our revenue components and related revenue recognition policies is included under the heading “Critical Accounting Policies.”

Our overall revenue growth was primarily due to the increase in both leased and sold units in both our product segments. The increase in the number of units leased and sold resulted from the introduction of new products, greater placements of existing products and the expansion of legal gaming into new jurisdictions. In addition, our acquisition of BTI added 1,090 units to our table games installed base. A more detailed discussion of our revenue is included for each of our operating segments under the heading “Segment Operating Results.”

Total gross margin increased largely due to the increase in our revenue, and to a lesser extent, due to our higher-margin Entertainment products representing a greater percentage of the total revenue in the three and six month periods ended April 30, 2004 compared to the prior year fiscal periods.

Leases and royalties gross margin percentage for the three and six month periods ended April 30, 2004, increased slightly because indirect costs, primarily service, did not increase at the same rate as revenues. Sales and service gross margin percentage also increased, reflecting a change in the sold product mix in the three and six month periods ended April 30, 2004 compared to the prior year fiscal periods. Fiscal 2004 revenues include sales of lifetime licenses for our proprietary table games, which generally carry higher margins. We began selling lifetime licenses of proprietary table games in the third quarter of fiscal 2003. Accordingly, there were no comparable sales in the fiscal 2003 periods. The increase in sales and service gross margin percentage from table game sales was offset by a lower gross margin percentage from shuffler sales. The three month period ended April 30, 2004, included a greater percentage of lower-margin foreign sales than the comparable period.

OPERATING EXPENSES

	Three Months Ended April 30,						Six Months Ended April 30,
	2004			2003			2004			2003
Selling, general and administrative	$	5,732		$	3,840		$	10,513		$	7,250
Percentage of revenue	28.4		%	28.5		%	29.4		%	28.6		%

Research and development	$	1,770		$	880		$	2,930		$	1,594
Percentage of revenue	8.8		%	6.5		%	8.2		%	6.3		%

Selling, General and Administrative Expenses (“SG&A”). SG&A increased 49.3% and 45.0% for the three and six month periods ended April 30, 2004 and 2003, respectively, primarily due to the increase in legal fees associated with our various legal proceedings related to our intellectual property, which were $1,059 and $324 for the three month periods ended April 30, 2004 and 2003, respectively, and $2,267 and $584 for the six month periods ended April 30, 2004 and 2003, respectively. We expect that our legal fees will continue to vary from quarter to quarter depending on our level of legal proceedings activity. Our spending for other SG&A also increased as a result of greater business volume. However, these expenses did not increase as much as revenue increased, and as a result, SG&A as a percentage of revenue in the fiscal 2004 periods remained consistent with the prior year periods despite the increase in legal fees.

Research and Development Expenses (“R&D”). Our R&D spending increased for the three and six month periods ended April 30, 2004, primarily due to the re-engineering of our Table Master product line, which we acquired in April 2003.

OTHER INCOME (EXPENSE)

Other income (expense) is comprised of the following:

	Three Months Ended April 30,						Six Months Ended April 30,
	2004			2003			2004			2003

Interest income	$	151		$	51		$	282		$	130
Interest expense	(55		)	(3		)	(58		)	(6		)
Foreign currency loss	(703		)	(2		)	(716		)	(9		)
Other	—			—			—			(10		)
	$	(607	)	$	46		$	(492	)	$	105

Interest income increased primarily due to increases in our sales-type leasing activities over the past year which have resulted in a greater investment in sales-type lease balance as of April 30, 2004. Sales-type leases bear interest. The increase in interest expense is due to the issuance of $150,000 of contingent convertible senior notes in April 2004. A more detailed discussion of these notes is included below under the heading “Liquidity and Capital Resources.”

During the three month period ended April 30, 2004, we entered into foreign currency exchange contracts to fix the U.S. dollars required to fund the Euro-denominated cash component of the CARD purchase price resulting in a foreign currency exchange loss of $703. The contracts do not meet the accounting criteria for hedge accounting, and accordingly, the foreign currency exchange loss is included in our operating results for the three and six month periods ended April 30, 2004.

INCOME TAXES

Our effective tax rate for continuing operations for the three and six month periods ended April 30, 2004, was 35.0% compared to an effective tax rate of 36.0% for the prior fiscal year periods. Our fiscal 2003 annual rate includes a benefit from amended research and development credit claims. However, on a quarterly basis, our rate did not benefit until the third quarter of fiscal 2003, when we filed the claims. Looking forward, our annual effective tax rate may exceed 35.0%. Our estimate of our effective tax rate may fluctuate due to variation in our taxable income, changes in tax legislation, changes in our estimates of federal tax credits and other tax deductions and the related impact on our effective tax rate.

During the six month periods ended April 30, 2004 and 2003, we recorded income tax benefits of $3,281 and $661, respectively, related to deductions for employee stock option exercises. These tax benefits, which increased prepaid income taxes and additional paid-in capital by equal amounts, had no effect on our provision for income taxes.

EARNINGS PER SHARE

	Three Months Ended April 30,						Six Months Ended April 30,
	2004			2003			2004			2003

Income from continuing operations	$	5,334		$	3,969		$	9,744		$	7,429
Basic earnings per share	$	0.21		$	0.16		$	0.39		$	0.29
Diluted earnings per share	$	0.21		$	0.16		$	0.38		$	0.29

Weighted average shares data:
Basic	24,856			24,840			24,827			25,274
Dilutive impact of stock options	905			572			883			599
Diluted	25,761			25,412			25,710			25,873

Outstanding shares data:
Shares outstanding, beginning of period	24,888			25,200			24,715			25,914
Options exercised	507			214			680			312
Shares repurchased	(2,543		)	(460		)	(2,543		)	(1,272		)
Other	(2		)	—			(2		)	—
Shares outstanding, end of period	22,850			24,954			22,850			24,954

On March 16, 2004, our board of directors approved a three-for-two common stock split, with new shares distributed in the form of a dividend on April 16, 2004, to shareholders of record on April 5, 2004. Share and per share amounts have been adjusted for all periods presented herein to reflect our three-for-two stock split.

Diluted earnings per share from continuing operations increased 31.3% and 31.0% for the three and six month periods ended April 30, 2004, respectively, when compared to the prior year fiscal periods.

SEGMENT OPERATING RESULTS

(Dollars in thousands)

SEGMENT OVERVIEW

We have four product lines: Shufflers, Proprietary Table Games, Table Master, and Intelligent Table System (“ITS”). Our Shufflers and Proprietary Table Games are each significant to our operating results. Our Table Master and ITS product lines, while important to our strategic direction, consist primarily of research and development activities to date.

Segment revenues include sale, lease or licensing of products within each reportable segment. We measure segment revenue performance in terms of dollars and Installed Unit Base. Installed Unit Base is the sum of product units under lease or license agreements and inception-to-date sold units. We believe that Installed Unit Base is an important gauge of segment performance because it measures historical market placements of leased and sold units and it provides insight into potential markets for service and next-generation products. Some sold units may no longer be in use by our casino customers or may have been replaced by other models. Accordingly, we do not know precisely the number of units currently active in use.

Segment operating income includes revenues and expenses directly and indirectly associated with the product lines included in each segment. Direct expenses primarily include depreciation of leased assets, cost of products sold, shipping, installation, commissions, product approval costs, research and development and product related litigation. Indirect expenses include an activity-based allocation of other general product-related costs, the most significant of which are service and selling expenses and manufacturing overhead. Corporate general and administrative expenses are not allocated to segments.

UTILITY PRODUCTS SEGMENT OPERATING RESULTS

	Three Months Ended April 30,						Increase (Decrease)		Percentage Change
	2004			2003			Increase (Decrease)		Percentage Change
Utility Products segment revenue
Lease	$	4,755		$	4,337		$	418	9.6	%
Sales and service	5,541			3,705			1,836		49.6	%
Total	$	10,296		$	8,042		$	2,254	28.0	%

Utility Products segment operating income	$	4,968		$	4,324		$	644	14.9	%
Utility Products segment operating margin	48.3		%	53.8		%

Shufflers installed base (end of quarter)
Lease units	3,884			3,407			477		14.0	%

Sold units, inception-to-date
Beginning of quarter	7,788			6,397			1,391		21.7	%
Sold during quarter	499			322			177		55.0	%
Less trade-ins and exchanges	(29		)	(42		)	13		(31.0	)%
End of quarter	8,258			6,677			1,581		23.7	%
Total installed base	12,142			10,084			2,058		20.4	%

Utility products segment revenue is derived substantially from our shuffler product line. Revenue from our Bloodhound products is not material for the periods presented and our Intelligent Table System products are in the development stage.

The increase in shuffler lease revenue for our fiscal 2004 second quarter reflects the greater number of units on lease offset by a slight decline in overall average lease price. Although the average lease price of our various shuffler models has remained consistent or increased, our shuffler installed base during our fiscal 2004 second quarter includes a greater percentage of our lower-priced Deck Mate^® and MD1 multi-deck batch shuffler models, and, as a result, the overall shuffler average lease price slightly declined. Shuffler lease units increased by 350 during our fiscal 2004 second quarter, comprised of the net placement of 198 Deck Mate, 91 ACE^® and 127 multi-deck batch shufflers, offset by the net removal of 66 King shufflers and the conversion of 158 leased units to sold units (“conversion units”). Our shuffler lease units increased 5.2% during our fiscal 2004 second quarter, compared to 87 units or 2.6% during our fiscal 2003 second quarter.

The increase in shuffler sales and service revenue for our fiscal 2004 second quarter primarily reflects a greater number of units sold. During our fiscal 2004 second quarter, we sold 177 more shuffler units compared to the prior fiscal year second quarter. The average sales price per unit was $9.283 for our fiscal 2004 second quarter compared to $10.055 for the comparable prior year quarter. The average sales price per unit declined due to a greater percentage of lower-margin foreign sales in the fiscal 2004 second quarter.

Utility products segment operating income for the second quarter of fiscal 2004 increased when compared to the prior fiscal year; however, as a percentage of revenue, the Utility products operating margin declined due to the following factors. Shuffler gross margin percentage for the three month period ended April 30, 2004, was lower compared to the prior year period because the three month period ended April 30, 2004, included a greater percentage of lower-margin foreign sales. In addition, Utility product segment operating income was reduced by higher legal expenses associated with legal proceedings regarding patents and other intellectual property directly associated with the segments product lines. These declines were offset somewhat because sales and service expenses allocated to our Utility products segment did not increase at the same rate as Utility products revenue.

	Six Months Ended April 30,						Increase (Decrease)		Percentage Change
	2004			2003			Increase (Decrease)		Percentage Change
Utility Products segment revenue
Lease	$	9,352		$	8,560		$	792	9.3	%
Sales and service	9,109			5,949			3,160		53.1	%
Total	$	18,461		$	14,509		$	3,952	27.2	%

Utility Products segment operating income	$	8,368		$	7,751		$	617	8.0	%
Utility Products segment operating margin	45.3		%	53.4		%

For the six month period ended April 30, 2004, the factors that attributed to the increase in Utility product segment revenue and the decline in segment operating margin as a percentage of sales are the same as for the three month period ended April 30, 2004. The increase in shuffler lease units for the six month period ended April 30, 2004, includes the net placement of 553 units offset by 253 conversion units compared to net placements of 380 units offset by 210 conversion units during the prior year six month period. During the six month periods ended April 30, 2004 and 2003, we sold 787 and 508 shuffler units (including conversion units), respectively, at an average sales price per unit of $10.027 and $9.667, respectively.

ENTERTAINMENT PRODUCTS SEGMENT OPERATING RESULTS

	Three Months Ended April 30,						Increase (Decrease)			Percentage Change
	2004			2003			Increase (Decrease)			Percentage Change
Entertainment Products segment revenue
Royalties and leases	$	6,016		$	5,241		$	775		14.8	%
Sales and service	3,799			118			3,681			3119.5	%
Total	$	9,815		$	5,359		$	4,456		83.1	%

Entertainment Products segment operating income	$	7,366		$	4,469		$	2,897		64.8	%
Entertainment Products segment operating margin	75.0		%	83.4		%

Table games installed base (end of quarter)
Royalty units
Three Card Poker	1,051			931			120			12.9	%
Let It Ride Bonus and basic	512			637			(125		)	(19.6	)%
Royal Match 21	554			—			554			100.0	%
Fortune Pai Gow	521			—			521			100.0	%
Other games	228			53			175			330.2	%
Total	2,866			1,621			1,245			76.8	%
Sold units, inception-to-date
Let It Ride Bonus and basic	130			10			120			1,200.0	%
Three Card Poker	47			—			47			100.0	%
Other games	1			—			1			100.0	%
Subtotal	178			10			168			1,680.0	%
Total installed base	3,044			1,631			1,413			86.6	%

Entertainment products segment revenue is derived substantially from our proprietary table game products. Revenue from our Table Master products is not material for the periods presented.

Our table games installed base of royalty units increased 1,172 units during our fiscal 2004 second quarter, including 1,090 units acquired from BTI, compared to 53 units during the prior fiscal year second quarter. The royalty

revenue increase due to the increase in the installed units was partially offset by a decline in the average royalty rate for table games. The decline in average royalty rate is due to a change in the mix of games in the installed base from the higher-priced Let It Ride games to our newly acquired and other lower-priced table games. Our recently introduced Four Card Poker^® table game is the greatest contributor to the increase in other games units.

Entertainment products sales for our fiscal 2004 second quarter are primarily the sale of lifetime licenses for our proprietary table games, which we began selling in our fiscal 2003 third quarter.

During the second quarter of fiscal 2004, Entertainment products operating income increased consistent with the increase in Entertainment products revenue. However, as a percentage of revenue, the Entertainment products operating margin declined during our fiscal 2004 second quarter compared to the prior fiscal year second quarter. The decline was primarily due to amortization expense associated with intellectual property acquired from BTI. Estimated amortization expense for these acquired assets is $875 for the year ending October 31, 2004, and $1,458 annually for each of the four fiscal years thereafter. In addition, Entertainment Products segment operating profit reflects our continued research and development investment in our Table Master product line.

	Six Months Ended April 30,						Increase (Decrease)		Percentage Change
	2004			2003			Increase (Decrease)		Percentage Change
Entertainment Products segment revenue
Royalties and leases	$	11,155		$	10,404		$	751	7.2	%
Sales and service	6,080			409			5,671		1386.6	%
Total	$	17,235		$	10,813		$	6,422	59.4	%

Entertainment Products segment operating income	$	13,355		$	8,856		$	4,499	50.8	%
Entertainment Products segment operating margin	77.5		%	81.9		%

For the six month period ended April 30, 2004, the factors that contributed to the increase in Entertainment products segment revenue and the decline in segment operating margin as a percentage of revenue are the same as for the three month period ended April 30, 2004. Table royalty units increased 1,206 units during the six month period ended April 30, 2004 (including 1,090 units acquired from BTI) compared to an increase of 104 units during the prior year six month period. We sold 106 lifetime licenses for table games during the six month period ended April 30, 2004, compared to none in the prior year period.

DISCONTINUED OPERATIONS

In December 2003, our board of directors approved and we committed to a plan to divest our slot products, based on our determination that this product line was no longer a strategic fit with our refocused core business strategy of providing products and services for the table game area of casinos. In January 2004, we entered into agreements pursuant to which we sold substantially all of our slot products assets to International Game Technology (“IGT”). Significant terms of the agreements include:

• We sold our share of the IGT Alliance slot operations, related inventory and leased assets to IGT.

• We conveyed to IGT certain intellectual property rights, principally our slot operating system, patents and licenses.

• The IGT Alliance Agreements were terminated and all amounts due to IGT under the IGT Alliance Agreements were paid in full.

• We terminated our initiative to develop retrofit games based on IGT’s S+ game platform.

• Net proceeds from the disposition of slot products assets were $8,447.

criteria to classify these assets as “held for sale,” are recorded at their estimated net realizable value, and are not material.

Discontinued operations consists of the following:

	Three Months Ended April 30,						Six Months Ended April 30,
	2004			2003			2004			2003

Revenues	$	426		$	2,782		$	1,947		$	5,052

Gain (loss) from operations before tax	$	259		$	(1	)	$	(15	)	$	(307	)
Income tax (expense) benefit	(91		)	64			5			227
Net income (loss) from operations	168			63			(10		)	(80		)

Gain on sale of slot assets	—			—			3,373			—
One-time termination benefits, contract termination costs, and other	—			—			(877		)	—
Income tax expense	—			—			(874		)	—
Gain on sale of slot assets, net	—			—			1,622			—

Discontinued operations, net	$	168		$	63		$	1,612		$	(80	)

	Contract Terminations			Facility Closure			Severance			Total

Exit Costs accrued, initial balance	$	366		$	324		$	187		$	877
Cash payments	(51		)	(22		)	(95		)	(168		)
Balance, April 30, 2004	$	315		$	302		$	92		$	709

Our fiscal 2003 results have been reclassified to reflect our slot products as discontinued operations as follows:

	Year Ended October 31, 2003
	January 31,			April 30,			July 31,			October 31,			Total
Discontinued Operations:
Revenues	$	2,270		$	2,782		$	2,034		$	1,990		$	9,076

Loss from operations before tax	$	(306	)	$	(1	)	$	(488	)	$	(585	)	$	(1,380	)
Income tax benefit	163			64			228			280			735
Net income (loss) from operations	(143		)	63			(260		)	(305		)	(645		)

Earnings per share:
Continuing operations
Basic	$	0.13		$	0.16		$	0.20		$	0.21		$	0.70
Diluted	$	0.13		$	0.16		$	0.19		$	0.21		$	0.68

Discontinued operations
Basic	$	—		$	—		$	(0.01	)	$	(0.01	)	$	(0.02	)
Diluted	$	—		$	—		$	(0.01	)	$	(0.02	)	$	(0.02	)

Net income
Basic	$	0.13		$	0.16		$	0.19		$	0.20		$	0.68
Diluted	$	0.13		$	0.16		$	0.18		$	0.19		$	0.66

LIQUIDITY AND CAPITAL RESOURCES

(Dollars and Shares in thousands)

Our primary historical source of liquidity and capital resources has been cash flow generated by our profitable operations. We use cash to fund growth in our operating assets, including accounts receivable, inventory, and sales-type leases and to fund new products through both research and development and strategic acquisition of businesses and intellectual property.

In April 2004, we obtained additional capital resources, through the issuance of $150,000 of contingent convertible senior notes (“Notes”). Our net cash proceeds were approximately $145,400, after deducting note issuance costs. We have used these proceeds to fund approximately $31,100 for the cash component of our CARD purchase price and approximately $57,500 to repurchase our common stock in private transactions. The remainder is available for our general corporate purposes.

LIQUIDITY

Working Capital. The following summarizes our cash, cash equivalents and working capital:

	April 30, 2004		October 31, 2003		Increase (Decrease)		Percentage Change

Cash, cash equivalents, and investments	$	84,686	$	10,425	$	74,261	712.3	%
Working capital	$	101,311	$	25,809	$	75,502	292.5	%
Current ratio	8.8		3.3		5.5		166.7	%

The significant factors underlying the increase in cash, cash equivalents and investments during the six month period ended April 30, 2004, include net proceeds from the issuance of Notes of $145,434, net proceeds from the disposition of slot products assets of $8,858, cash flow provided by operations of $5,943, net proceeds from option exercise of $4,439, offset by common stock repurchases of $78,661, and aggregate capital expenditures of $2,863.

Cash Flows.

Operating Activities – Significant items included in cash flows from operating activities are as follows:

	Six Months Ended April 30,						Increase			Percentage
	2004			2003			(Decrease)			Change

Net income	$	11,356		$	7,349		$	4,007		54.5	%
Non-cash items	3,347			4,304			(957		)	(22.2	)%
Income tax related items	323			127			196			154.3	%
Net gain from disposition of slot products assets	(2,495		)	—			(2,495		)	100.0	%
Investment in sales-type leases	(2,969		)	(1,818		)	(1,151		)	63.3	%
Other changes in operating assets and liabilities	(3,619		)	(325		)	(3,294		)	1,013.5	%
Cash flow provided by operating activities	$	5,943		$	9,637		$	(3,694	)	(38.3	)%

Net income for the six month period ended April 30, 2004, includes the after-tax gain from the sale of our slot products assets of $1,622.

Non-cash items are comprised of depreciation and amortization, provision for bad debts, and provision for inventory obsolescence. The decrease in non-cash items is due to lower depreciation and amortization expense during the six month period ended April 30, 2004, primarily due to the January 2004 disposition of our slot products assets, offset somewhat by amortization of intangible assets acquired from BTI in February 2004.

Income tax related items include deferred income taxes, tax benefit from stock option exercises, and prepaid income taxes.

We utilize sales-type leases as a means to provide financing alternatives to our customers. It is our intent to continue offering a variety of financing alternatives, including sales, sales-type leases, and operating leases, to meet our customers’ product financing needs, which may vary from quarter to quarter. We expect that some of our customers will continue to choose sales-type leases as their preferred method of purchasing our products.

Concurrent with the sale of our fifty-percent interest in the IGT Alliance to IGT in January 2004, we paid IGT $2,184 in full payment of existing accounts payable to IGT. These accounts payable related to our purchase of slot machines from IGT and distribution of IGT’s share of IGT Alliance profits for the months prior to the January sale transaction. Both the payment of $2,184 and the pre-tax gain from the sale of $2,495 are reflected as uses of cash in the operating cash flow section of our cash flow statement. This use of cash offsets the net proceeds from the sale that we received from IGT of $8,447, which is reflected in the investing activities section of our statement of cash flows.

Investing Activities – Significant items included in cash flows from investing activities are as follows:

	Six Months Ended April 30,						Increase			Percentage
	2004			2003			(Decrease)			Change

Net maturities (purchases) of investments	$	(19,463	)	$	8,035		$	(27,498	)	(342.2	)%
Capital expenditures	(2,863		)	(2,841		)	(22		)	0.8	%
Business acquired	(6,144		)	(1,730		)	(4,414		)	255.1	%
Net proceeds from disposition of slot assets	8,858			—			8,858			100.0	%
Other	(2,745		)	(6		)	(2,739		)	45,650.0	%
Cash flow provided (used) by investing activities	$	(22,357	)	$	3,458		$	(25,815	)	(746.5	)%

Capital expenditures include purchases of product for lease, property and equipment, and intangible assets. Our largest use of cash for capital expenditures was for product that we manufacture and capitalize into our leased asset base. During the six month period ended April 30, 2004, we capitalized $1,895 of products that are leased or available to lease, compared to $1,746 in the comparable prior fiscal year period.

As discussed above, in February 2004, we acquired certain assets from BTI, for total fixed cash consideration of $10,000 and additional contingent consideration of up to $12,000 payable over the next ten years. Upon closing, we paid $6,000 of the fixed cash consideration and $144 of other direct acquisition expense. In April 2003, we acquired certain assets from Sega for cash of $1,730.

Net proceeds from the disposition of slot assets includes $8,447 from our sale of substantially all our slot products to IGT in January 2004 and other miscellaneous inventory sales for $411 during the three month period ended April 30, 2004.

Financing Activities – Significant items included in cash flows from financing activities are as follows:

	Six Months Ended April 30,						Increase			Percentage
	2004			2003			(Decrease)			Change

Proceeds from issuance of Notes, net of costs	$	145,434		$	—		$	145,434		100.0	%
Proceeds from stock option exercises	4,439			1,772			2,667			150.5	%
Repurchases of common stock	(78,661		)	(15,642		)	(63,019		)	402.9	%
Cash flow provided (used) by financing activities	$	71,212		$	(13,870	)	$	85,082		(613.4	)%

Our employees and directors exercised 680 options during the six month period ended April 30, 2004, at an average exercise price of $6.73 per share, compared to 312 options during the comparable prior year period at an average exercise price of $5.74 per share.

During the six month period ended April 30, 2004, we repurchased 2,543 shares of our common stock at an average cost of $30.93 compared to 1,272 at an average cost of $12.30 during the fiscal 2003 prior period. See discussion of “Stock Repurchase Authorizations” below.

LONG-TERM LIABILITIES

Contingent Convertible Senior Notes. In April 2004, we issued $150,000 of contingent convertible senior notes due 2024 (the “Notes”) through a private placement under Rule 144A of the Securities Act of 1933. The Notes are unsecured and bear interest at a fixed rate of 1.25% per annum. Interest is payable semiannually in arrears on April 15 and October 15 of each year, beginning October 15, 2004. After deducting Note issuance costs of $4,566, our net proceeds were $145,434.

The Notes are convertible, at the holders’ option, into cash and shares of our common stock, under the following circumstances:

• we have called the Notes for redemption and the redemption has not yet occurred;

• upon the occurrence of specified corporate transactions.

BTI Liabilities. In connection with our acquisition of certain assets from BTI, we have a current liability for the remaining portion of the fixed installments of $4,000. In addition, we have recorded an estimated liability of $7,616 for contingent installment payments computed as the excess fair value of the acquired assets over the fixed installments and other direct costs. Future amounts paid in excess of this estimate of contingent consideration, if any, will be recorded as goodwill. If future amounts paid are less than estimated contingent consideration, the then carrying value of the acquired assets will be reduced.

CAPITAL RESOURCES

We believe our existing cash, investments, debt financing and projected cash flow from future operations will be sufficient to fund our operations, long-term obligations, capital expenditures, and new product development for the foreseeable future. Projected cash flows from operations are based on our estimates of revenue and expenses and the related timing of cash receipts and disbursements. If actual performance differs from estimated performance, projected cash flows could be positively or negatively impacted.

STOCK REPURCHASE AUTHORIZATIONS

Our board of directors periodically authorizes us to repurchase shares of our common stock. In May 2004, our board of directors authorized the repurchase of up to $30,000 of our common stock. Repurchases under all previous outstanding authorizations have been substantially completed.

The following table provides additional monthly detail regarding our share repurchases during the three month period ended April 30, 2004:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)
February 1 - February 29	—		$	—	—	$	30,000
March 1 - March 31	296		$	28.92	296	$	21,432
April 1 - April 30	2,247	(b)	$	31.20	376	$	8,839
Total	2,543		$	30.93	672

(a) On October 28, 2003, we announced that our board had authorized management to repurchase up to $30,000 of our common stock in the open market under a share repurchase program with no expiration. Amounts represent remaining authorizations as of the period end date.

(b) On April 21, 2004, our board authorized and we repurchased, in private transactions, 1,871 shares of our common stock with funds provided from the issuance of our contingent convertible senior notes.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

Contractual Obligations. The following table summarizes our material obligations and commitments to make future payments under certain contracts, including long-term debt obligations and operating leases.

	Payments Due by Year
	October 31,
Contractual Obligations:	2004		2005		2006		2007		2008		Thereafter

Long-term obligations:
Convertible notes	$	—	$	—	$	—	$	—	$	—	$	150,000
Fixed installment, BTI	3,930		—		—		—		—		—
Note payable	175		250		—		—		—		—
Operating leases	564		857		684		512		173		—
Total	$	4,669	$	1,107	$	684	$	512	$	173	$	150,000

BTI Contingent Consideration. In addition to the fixed installment payment associated with the BTI acquisition noted above, the Agreement includes contingent installments that are based on future revenue performance of Fortune Pai Gow. Beginning November 2004, we will pay monthly note installments based on a percentage of such revenue for a period of up to ten years, not to exceed $12,000.

Employment Agreements. We have entered into employment contracts, with durations ranging from one to three years, with our corporate officers and certain other key employees. Significant contract provisions include minimum annual base salaries, healthcare benefits, bonus compensation if performance measures are achieved, and non-compete provisions. These contracts are “at will” employment agreements, under which the employee or we may terminate employment. If we terminate any of these employees without cause, then we are obligated to pay the employee severance benefits as specified in their individual contract. As of April 30, 2004, minimum aggregate severance benefits totaled $3,962.

Purchase Commitments. From time to time, we enter into commitments with our vendors to purchase inventory at fixed prices or in guaranteed quantities. These commitments are not material. Certain of our intellectual property licenses require additional payments if we elect to renew the licenses. These renewal payments are not material. In addition, we may choose to negotiate and renew licenses upon their normal expiration. No assurances can be given as to the terms of such renewals, if any.

Off-Balance Sheet Arrangements. We do not have any material off-balance sheet arrangements with unconsolidated entities or other persons.

CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires that we adopt accounting policies and make estimates and assumptions that affect our reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and our reported amounts of revenue and expenses. We periodically evaluate our policies, estimates and related assumptions, including: revenue recognition; the amortization, depreciation, and valuation of long-lived tangible and intangible assets; inventory obsolescence and costing methods; provisions for bad debts; accounting for stock-based compensation; and contingencies. We base our estimates on historical experience and expectations of the future. Actual reported and future amounts could differ from those estimates under different conditions and assumptions.

We believe that the following accounting policies and related estimates are critical to the preparation of our consolidated financial statements.

Revenue Recognition. In general, we recognize revenue when the following criteria are met: persuasive evidence of an arrangement between us and our customer exists, shipment has occurred or services have been rendered, the sales price is fixed or determinable, and collectibility is reasonably assured. Specifically, we earn our revenue in a variety of ways. Shuffler and table equipment are both sold and leased. We also sell service and warranty contracts for our sold equipment. Proprietary table games are sold under lifetime licensing agreements or licensed on a monthly or daily fee basis.

Lease and Royalty Revenue – Shuffler lease revenue is earned and recognized monthly based on a monthly fixed fee, generally through indefinite term operating leases of shuffler equipment. Table royalties are earned and recognized monthly based on indefinite term, monthly rate license agreements for our proprietary table games. Lease and royalty revenue commences upon the completed installation of the leased equipment or table game.

Sales and Service Revenue – We generate sales revenue through the sale of equipment in each product segment, including sales revenue from sales-type leases and the sale of lifetime licenses for our proprietary table games. Sales-type leases include payment terms ranging from 30 to 60 months and include a bargain purchase option. Revenue from the sale of equipment is recorded upon shipment. If a customer purchases existing leased equipment, revenue is recorded on the effective date of the purchase agreement. Revenue on service and warranty contracts is recognized over the terms of the contracts, which are generally one year. Revenue from the sale of lifetime licenses, under which we have no continuing obligations, is recorded on the effective date of the license agreement.

Long-lived Assets. We have significant investments in long-lived assets, including products leased and held for lease, property and equipment, intangible assets, and goodwill. Significant accounting policies that affect the reported amounts for these assets include the determination of the assets’ estimated useful lives and the evaluation of the assets’ recoverability.

We estimate useful lives for our long-lived assets based on historical experience, estimates of products’ commercial lives, the likelihood of technological obsolescence, and estimates of the duration of commercial viability for patents, licenses and games. Should the actual useful life of an asset differ from the estimated useful life, future operating results could be positively or negatively affected.

We assess the recoverability of long-lived assets annually or when circumstances indicate that the carrying amount of an asset may not be fully recoverable. If undiscounted expected cash flows to be generated by a long-lived asset or asset group are less than its carrying amount, then we would record an impairment charge to write down the long-lived asset or asset group to its estimated fair value. An adverse change to the estimate of these undiscounted future cash flows could necessitate an impairment charge that could adversely affect operating results.

Inventory Obsolescence and Costing Methods. We value our inventory at the lower of cost or market and estimate a provision for obsolete or unsalable inventories based on assumptions about the future demand for our products and market conditions. If future demand and market conditions are less favorable than our assumptions, additional provisions for obsolete inventory could be required. Likewise, favorable future demand could positively impact future operating results if written-off inventory is sold.

Provisions for Bad Debts. We maintain provisions for bad debts for estimated credit losses that result from the inability of our customers to make required payments. Provisions for bad debts are estimated based on historical experience and specific customer collection issues. Changes in the financial condition of our customers could result in the adjustment upward or downward in the provisions for bad debts, with a corresponding impact to our operating results.

Stock Based Compensation. We account for employee and director stock options using the intrinsic value method. Under this method, no compensation expense was recorded in any period presented because all stock options were granted at an exercise price equal to the market value of our common stock on the date of grant. The notes to the consolidated financial statements disclose the pro forma impact to our net income and earnings per share as if we had elected the fair value method. Under the fair value method, compensation expense is determined based on the estimated fair value of stock options at the date of grant.

To estimate the fair value of stock options granted, we use the Black-Scholes option valuation model, which requires management to make assumptions. The most significant assumptions are the expected future volatility of our stock price and the expected period of time an optionee will hold an option (“Option Life”). We base these estimates primarily on our historical volatility and Option Life. If actual future volatility and Option Life differ from our estimates, disclosed amounts for pro forma net income and earnings per share could be significantly different. Further, actual compensation, if any, ultimately realized by optionees may differ significantly from that estimated using an option valuation model.

Contingencies. We assess our exposures to loss contingencies including legal and income tax matters and provide for an exposure if it is judged to be probable and estimable. If the actual loss from a contingency differs from our estimate, there could be a material impact on our results of operations or financial position. Operating expenses, including legal fees, associated with contingencies are expensed when incurred.

FORWARD LOOKING STATEMENTS

There are statements herein which are forward-looking statements that are based on management’s beliefs, as well as on assumptions made by and information available to management. We consider such statements to be made under the safe harbor created by the federal securities laws to which we are subject, and, other than as required by law, we assume no obligation to update or supplement such statements.

These statements can be identified by the fact that they do not relate strictly to historical or current facts, and are based on management’s current beliefs and expectations about future events, as well as on assumptions made by and information available to management. These forward-looking statements include statements that reflect management’s beliefs, plans, objectives, goals, expectations, anticipations, intentions with respect to our financial condition, results of operations, future performance and business, including statements relating to our business strategy and our current and future development plans. When used in this report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project,” “might,” “may,” “could,” “will” and similar expressions or the negative thereof, as they relate to us or our management, identify forward-looking statements.

Forward-looking statements reflect and are subject to risks and uncertainties that could cause actual results to differ materially from expectations. Factors that could cause actual results to differ materially from expectations include, but are not limited to, the following:

• changes in the level of consumer or commercial acceptance of our existing products and new products as introduced;

• advances by competitors;

• acceleration and/or deceleration of various product development, promotion and distribution schedules;

• product performance issues;

• higher than expected manufacturing, service, selling, administrative, product development, promotion and/or distribution costs;

• changes in our business systems or in technologies affecting our products or operations;

• reliance on strategic relationships with distributors and technology vendors;

• current and/or future litigation or claims;

• tax matters including changes in tax legislation or assessments by taxing authorities;

• acquisitions or divestitures by us or our competitors of various product lines or businesses and, in particular, integration of businesses that we may acquire;

• changes to our intellectual property portfolio, such as the issuance of new patents, new intellectual property licenses, loss of licenses, claims of infringement or invalidity of patents;

• regulatory and jurisdictional issues (e.g., technical requirements and changes, delays in obtaining necessary approvals, or changes in a jurisdiction’s regulatory scheme or approach, etc.) involving us and our products specifically or the gaming industry in general;

• general and casino industry economic conditions;

• the financial health of our casino and distributor customers, suppliers and distributors, both nationally and internationally;

• our ability to meet our debt service obligations and to refinance our indebtedness, which will depend on our future performance and other conditions or events and will be subject to many factors that are beyond our; and

• various risks related to our customers’ operations in countries outside the United States, including currency fluctuation risk, which could increase the volatility of our results from such operations.

Additional information on these and other risk factors that could potentially affect our financial results may be found in documents filed by us with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Annual Report on Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks, which arise during the normal course of business from changes in interest rates and foreign exchange rates. A discussion of our primary market risks are presented below.

Interest Rate Risk. Our current investment portfolio primarily consists of fixed income and investment grade securities. Our investment policy emphasizes return of principal and liquidity and is focused on fixed returns that limit volatility and risk of principal. Because of our investment policies, the primary market risk associated with our portfolio is interest rate risk. If interest rates were to change by 10%, the net hypothetical change in fair value of our investments would be $53.

Contingent Convertible Senior Notes. We estimated that the fair value of our Notes, as of April 30, 2004, is $154,300. The fair value of our Notes is sensitive to changes in both our stock and interest rates. Assuming interest rates are held constant, we estimate a 10% decrease in our stock price would decrease the fair value of our Notes by $7,500. Assuming our stock price is held constant, we estimate a 10% increase in interest rates would decrease the fair value our Notes by $1,500.

Foreign Currency Risk. We operate in numerous countries around the world. Historically, our business has been denominated in U.S. currency, and accordingly, our exposure to foreign currency risk has been immaterial. With our acquisition of CARD in May 2004, we expect to increase our volume of business that is denominated in foreign currency. As such, we expect an increase in the exposure to our cash flows and earnings that could result from fluctuations in foreign currency exchange rates. When appropriate, we may attempt to limit our exposure to changing foreign exchange rates by entering into foreign currency exchange contracts.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time period specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any control procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of April 30, 2004. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to accomplish their objectives.

There have been no changes in our internal control over financial reporting that occurred during our fiscal quarter ended April 30, 2004, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or our internal controls will prevent all error and all fraud. The design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be considered relative to their cost. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that we have detected all of our control issues and all instances of fraud, if any. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions.

PART II

ITEM 1. LEGAL PROCEEDINGS

For information on Legal Proceedings, see Note 12 to our condensed consolidated financial statements included in Part 1, Item 1 of this quarterly report.

Litigation is inherently unpredictable. Our current assessment of each matter may change based on future unknown or unexpected events. If any litigation were to have an adverse result that we did not expect, there could be a material impact on our results of operations or financial position. We believe costs associated with litigation will not have a material impact on our financial position or liquidity, but may be material to the results of operations in any given period. We assume no obligation to update the status of pending litigation, except as may be required by applicable law, statute or regulation. We believe that the final disposition of these matters will not have a material adverse effect on our financial position, results of operations or liquidity.

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

At the Annual Meeting of Shareholders held on March 17, 2004, the shareholders approved the following proposals by the indicated votes. A discussion of each proposal is included in the Company’s Proxy Statement dated February 23, 2004, previously filed with the Securities and Exchange Commission.

	Votes
Matter	For	Against	Abstained	Withheld

1) Proposal to elect four (4) directors to hold office until the next annual meeting or until their successors are elected.
Mark L. Yoseloff	15,325,986			248,897
Don Kornstein	14,724,595			850,291
Garry Saunders	14,703,642			871,241
Ken Robson	14,705,253			869,630

2) Proposal to approve the Shuffle Master, Inc. 2004 Equity Compensation Plan for employees and contractors.	7,985,434	3,112,897	80,890

3) Proposal to approve the Shuffle Master, Inc. 2004 Equity Compensation Plan for Non-Employee Directors.	9,158,651	1,933,734	86,836

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1		Articles of Amendment of Articles of Incorporation of Shuffle Master, Inc. dated March 16, 2004.
10.1		Purchase Agreement, dated May 13, 2004, by and between Casinos Austria AG and Cai Casinoinvest Middle East GMBH on the one hand and Shuffle Master Management – Service GMBH and Shuffle Master GMBH on the other hand.
10.2		Registration Rights Agreement dated May 13, 2004, by and between Casinos Austria AG and Shuffle Master, Inc. on the other hand.

10.3		Agreement and Guaranty dated May 12, 2004, by and between Casinos Austria AG and Cai Casinoinvest Middle East GMBH on the one hand and Shuffle Master, Inc. on the other hand.
10.4		Purchase Agreement, dated April 15, 2004, among Shuffle Master, Inc. and Deutsche Bank Securities, Inc. relating to the 1.25% Contingent Convertible Senior Notes due 2024.
10.5		Registration Rights Agreement dated April 21, 2004, among Shuffle Master, Inc. and Deutsche Bank Securities, Inc. and Goldman, Sachs & Co. relating to the 1.25% Contingent Convertible Senior Notes due 2024.
10.6		Indenture, dated as of April 21, 2004, between Shuffle Master, Inc. and Wells Fargo Bank, N. A. relating to the 1.25% Contingent Convertible Senior Notes due 2024.
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Exhibits 32.1 and 32.2 are furnished to accompany this report on Form 10-Q but shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise and shall not be deemed incorporated by reference into any registration statements filed under the Securities Act of 1933.

(b) Reports on Form 8-K

We filed a Current Report on Form 8-K dated February 24, 2004, disclosing our acquisition of certain assets from BET Technologies, Inc.

We filed a Current Report on Form 8-K dated February 26, 2004, that included our press release announcing our financial results for our fiscal first quarter ended January 31, 2004.

We filed a Current Report on Form 8-K dated April 15, 2004, disclosing recent developments and risk factors. Included as an exhibit was our audited financial statements for the year ended October 31, 2003, reclassified to reflect our slot products operations as discontinued and our change in reportable segments.

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SHUFFLE MASTER, INC.
(Registrant)

Date: May 27, 2004


/s/ Mark L. Yoseloff
Mark L. Yoseloff
Chairman and Chief Executive Officer


/s/ Gerald W. Koslow
Gerald W. Koslow
Senior Vice President, Chief Financial Officer and Secretary
(Principal Accounting Officer)

EX-3.1 2 a04-6489_1ex3d1.htm EX-3.1

Exhibit 3.1

ARTICLES OF AMENDMENT

ARTICLES OF INCORPORATION

SHUFFLE MASTER, INC.

The undersigned, the Chief Executive Officer of Shuffle Master, Inc., a Minnesota corporation (the “Company”), does hereby certify that, effective as of the 16^th day of March, 2004, the following resolution was adopted by the Board of Directors of the Company in accordance with the applicable provisions of Minnesota Statues:

Resolution Amending Articles of Incorporation

RESOLVED, that the undersigned, the members of the Board of Directors of the Company, pursuant to Minnesota Statutes Section 302A.402, hereby consent that Section 4:01 of Article IV of the amended Articles of Incorporation be amended by deleting it in full and inserting in its place the following Article IV, Section 4:01:

“Article IV

4.01 Number of Shares. The aggregate number of shares of Common Stock which this Company has the authority to issue is one hundred one million two hundred fifty thousand (101,250,000) shares, each with One Cent ($.01) par value. Such shares shall consist of one class and series of voting Common Stock (except for 337,606 shares of Class A Preferred Stock) with equal rights and preferences in all matters unless and until separate classes and/or series are authorized by the Board of Directors pursuant to Section 4:02 of these Articles of Incorporation.”

FURTHER RESOLVED, that the amendment of the amended Articles of Incorporation will not adversely affect the rights or preferences of the holders of outstanding shares of any class or series and will not result in the percentage of authorized shares that remains un-issued after the division or combination exceeding the percentages of authorized shares that were un-issued before the division or combination; and

FURTHER RESOLVED, that the Chief Executive Officer, President, or Secretary of the Company is hereby authorized and directed to execute a Certificate of Amendment attesting to the adoption of the foregoing amendment

and to cause such Certificate of Amendment to be filed in the office of the Secretary of State of the State of Minnesota.

IN WITNESS WHEREOF, I have hereto subscribed my name this 24th day of March, 2004.

	/s/ Mark Yoseloff
	Mark L. Yoseloff
	Chief Executive Officer

EX-10.1 3 a04-6489_1ex10d1.htm EX-10.1

Exhibit 10.1

PURCHASE AGREEMENT

BY AND BETWEEN

CASINOS AUSTRIA AKTIENGESELLSCHAFT

AND

CAI CASINOINVEST MIDDLE EAST GMBH

ON THE ONE HAND

AND

SHUFFLE MASTER MANAGEMENT-SERVICE GMBH

AND

SHUFFLE MASTER GMBH

ON THE OTHER HAND

DATED AS OF May 13, 2004

INDEX OF EXHIBITS

I.
Agreements to be signed or handed over at Closing

Exhibit A		Patents Transfer Agreement
Exhibit B		Application to Commercial Register

II.
Other Exhibits

Exhibit I		Closing Financial Statements
Exhibit II		Latest Financial Statements

INDEX OF SCHEDULES

Schedule 6.3		Capitalization
Schedule 6.5		Subsidiaries; Investments
Schedule 6.6		Absence of Conflicts
Schedule 6.8		Absence of Undisclosed Liabilities
Schedule 6.9		Absence of Certain Developments
Schedule 6.10(b)		Title to Properties, Sufficiency of Assets (Real Property; Leases)
Schedule 6.10(c)		Title to Properties, Sufficiency of Assets (Personal Property)
Schedule 6.11		Accounts Receivable
Schedule 6.12		Taxes
Schedule 6.13		Contracts and Commitments
Schedule 6.14(a)		Material Proprietary Rights
Schedule 6.14(b)		Material Licensed Proprietary Rights
Schedule 6.14(c)		Material Limitations regarding Proprietary Rights
Schedule 6.18		Litigation, Proceedings
Schedule 6.20		Governmental Licenses and Permits
Schedule 6.21		Employees
Schedule 6.22		Employee Benefit Plans
Schedule 6.23		Environmental, Health and Safety Matters
Schedule 6.24		Insurance
Schedule 6.25		Officers and Directors; Bank Accounts
Schedule 6.26		Affiliate Transactions
Schedule 6.28		Powers of Attorney; Guarantees
Schedule 6.29		Product Warranties
Schedule 7.6		Sellers’ Assets
Schedule 10.11		Settlement of Mutual Claims

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT (this “Agreement”) is made as of May 13, 2004, by and between Casinos Austria Aktiengesellschaft, a stock corporation organized, duly established and validly existing under the laws of Austria, with the corporate seat in Vienna and business address at Dr. Karl Lueger Ring 14, A-1010 Vienna, Austria, registered with the Commercial Register under FN99639d (“CASAG”), and CAI Casinoinvest Middle East GmbH, a limited liability company organized, duly established and validly existing under the laws of Austria with corporate seat in Vienna and business address at Dr. Karl Lueger Ring 14, A-1010 Vienna, Austria, registered with the Commercial Register under FN196567w (“CAI”) on the one hand and Shuffle Master Management-Service GmbH, a limited liability company organized, duly established and validly existing under the laws of Austria with corporate seat in Vienna and business address at Dr. Karl Lueger Ring 14, A-1010 Vienna, Austria, registered with the Commercial Register under FN247570z (“SHFMMS”) and Shuffle Master GmbH, a limited liability company organized, duly established and validly existing under the laws of Austria with corporate seat in Vienna and business address at Dr. Karl Lueger Ring 14, A-1010 Vienna, Austria, registered with the Commercial Register under FN247566v (“SHFM”) on the other hand. (CASAG and CAI are collectively referred to herein as the “Sellers” and individually as “Seller”. SHFMMS and SHFM are collectively referred to herein as the “Buyers” and individually as “Buyer”). The Sellers and the Buyers are collectively referred to herein as the “Parties” and individually as a “Party.”

CASAG is the only limited partner (“Kommanditist”) and holds the limited partnership interest (“Kommanditanteil”) of one million Euros (€1,000,000) (the “Limited KG Share”) representing the entire share capital (“Gesellschaftskapital”) in CARD Casinos Austria Research & Development GmbH & Co KG, a limited partnership duly established and validly existing under the laws of Austria with corporate seat in Vienna and business address at Dr. Karl Lueger Ring 14 A-1015 Vienna, Austria, registered with the Commercial Register under FN 247789x (the “Company”; for purposes of definition, and unless expressly stated otherwise herein, the term “Company” also includes its predecessor CARD, as defined below). CAI is the only general partner (“Komplementär”) of the Company and holds the general partnership interest (“Komplementäranteil”) (the “Unlimited KG Share”) The Company has been established by way of a transformation (“errichtende Umwandlung”) of CARD Casinos Austria Research & Development GmbH, a limited liability company organized, duly established and validly existing under the laws of Austria with corporate seat in Vienna and business address at Dr. Karl Lueger Ring 14 A-1015 Vienna, Austria, registered with the Commercial Register under FN 75379b (“CARD”).

SHFMMS desires to acquire from CASAG, and CASAG desires to sell to SHFMMS, the Limited KG Share. SHFM desires to acquire from CAI, and CAI desires to sell to SHFM, the Unlimited KG Share. (The Limited KG Share and the Unlimited KG Share are collectively referred to hereinafter as the “Shares”). In consideration for the Shares, Buyers shall pay the Sellers cash as well as common stock of Buyers’ indirect parent Shuffle Master, Inc., a

Minnesota corporation, with its corporate business address at 1106 Palms Airport Drive, Las Vegas, Nevada 89119, USA (“SMI”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions For purposes of this Agreement, the following terms shall have the meanings set forth below:

“Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities or otherwise. In the case of the Buyers, Affiliates, inter alia, include SMI. Any Subsidiary shall also be deemed an Affiliate.

“Austrian GAAP” means Austrian generally accepted accounting principles in accordance with Austrian law, in particular Section 189 et sequ of the Austrian Commercial Code (Handelsgesetzbuch).

“Closing Financial Statements” means the unaudited balance sheet of the Company, as of 30 April 2004 and the related statements of income and notes, if any, (“Anhang”) thereto, for the four months then ended, that have been prepared in accordance with Austrian GAAP. The Closing Financial Statements also mean the unaudited report for CARD Casinos Austria Research and Development Limited (“CARD NZ”), the Company’s New Zealand Affiliate, for the month of April 2004. The Closing Financial Statements are attached to this Agreement as Exhibit I.

“Commercial Register” means the commercial register (“Firmenbuch”) of the Commercial Court Vienna (“Handelsgericht Wien”).

“Company” means collectively (i) CARD Casinos Austria Research & Development GmbH & Co KG and (ii) its predecessor, CARD, unless expressly stated otherwise.

“Contract” means any contract, license, sublicense, franchise, mortgage, hypothecation, purchase order, indenture, loan agreement, lease, sublease, agreement, contractual obligation, instrument or other arrangement or any commitment to enter into any of the foregoing (in each case in writing, unless explicitly stated otherwise) to which the Company or any of its Subsidiaries are a party or by which any of their assets are bound.

“Environmental, Health, and Safety Requirements” means, with respect to Austria and any other relevant jurisdictions, all federal, state, local, and foreign statutes,

regulations, ordinances, and other provisions having the force or effect of law, all judicial and administrative orders and determinations, (and all common law in the United Kingdom) concerning public health and safety, worker health and safety, and pollution or protection of the environment, including, without limitation, all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances, or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, or radiation, each as amended and as now or hereafter in effect. In the case of Austria, Environmental, Health and Safety Requirements shall include the following statutes and all rules, regulations and interpretations thereunder: Trade Code (“Gewerbeordnung”), Water Protection Act (“Wasserrechtsgesetz”), Law on the Control of Waste (“Abfallwirtschaftsgesetz”), provincial laws on the protection of nature (“Naturschutzgesetze”), the Act on the Clean-Up of Contaminated Sites (“Altlastensanierungsgesetz”), as well as any and all administrative ordinances (“Verordnungen”) issued thereunder.

“Indebtedness” means (i) any indebtedness for borrowed money or issued in substitution for or exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced by any note, bond, debenture or other debt security, (iii) any indebtedness for the deferred purchase price of property or services with respect to which a Person is liable, as obligor or otherwise, (iv) any commitment by which a Person assures a creditor against Loss (including, without limitation, contingent reimbursement Liabilities with respect to letters of credit), (v) any indebtedness guaranteed in any manner by a Person (including, without limitation, guarantees in the form of an agreement to repurchase or reimburse), (vi) any Liabilities under capitalized leases with respect to which a Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or with respect to which Liabilities a Person assures a creditor against Loss, (vii) any indebtedness secured by a Lien on a Person’s assets (including, without limitation, any mortgage), (viii) any amounts owed to any Person under any consulting arrangements; (ix) any Intercompany Liabilities; and (x) any prorated amounts due any of the Company’s employees prior to May 1, 2004, 09:00 a.m. Vienna time.

“Intercompany Liabilities” means any amounts, if any owed by the Company or any of its Subsidiaries to the Sellers or to any Subsidiary of the Sellers.

“International Trade Laws and Regulations” means, with respect to Austria and any other relevant jurisdictions, all federal, state, local and foreign statutes, executive order, decrees, proclamations, regulations, rules, directives, ordinances and similar provisions having the force or effect of law and all judicial and administrative orders , rulings, determinations and common law concerning the importation of merchandise, the export or reexport of products, services and technology.

“Knowledge” as used in the phrases “to the Knowledge of the Sellers” “to the Sellers’ Knowledge” or phrases of similar import shall mean and be deemed to exist, for all purposes under this Agreement and under Austrian law and under the laws of any jurisdiction in the world, if, on or prior to Closing (i) any TWO of the managing directors of CASAG or ONE of the managing directors of CASAG AND Mr. Josef Leutgeb had actual knowledge, or (ii) both the following TWO managing directors of CARD (i.e. jointly): Mr. Ernst Blaha (“Blaha”) PLUS

Mr. Ewald Kirschenmann, (“Kirschenmann”) had actual knowledge, or (iii) if either Blaha OR Kirschenmann had actual knowledge, PLUS the existence of a written document (including but not limited to electronic versions thereof) which existed in electronic or hardcopy form prior to Closing and which evidences that one of these two managing directors had such actual knowledge prior to Closing. Knowledge as used in the phrases “to the Knowledge of the Buyers,” “to the Buyers’ Knowledge” or phrases of similar import shall mean and be deemed to exist for all purposes under this Agreement and under Austrian law and under the laws of any jurisdiction in the world, if, on or prior to Closing, (i) any two of the following four persons had actual knowledge: Paul Meyer, Jerry Smith, Jerry Koslow, or Dana Kelley; or (ii) the documents, information and materials that are disclosed on the Schedules hereto. Any information contained in the Schedules and Exhibits attached hereto (for the avoidance of doubt, this also includes the documents mentioned in any of the Schedules which documents are contained in the disclosure bundle which was initialed by the Parties at Closing) are disclosed and shall be deemed Knowledge of Buyers.

“Latest Financial Statements” means the unaudited, balance sheet plus profit and loss statement and notes, of the Company as of December 31, 2003 and the related statements of income and any notes thereto for the year ended which have been prepared according to Austrian GAAP. The Latest Financial Statements also include the Annual Report for CARD NZ for the year ended December 31, 2003. The Latest Financial Statements are attached as Exhibit II.

“Letter of Intent” means that certain letter of intent, dated February 20, 2004, by and among CARD, CASAG and SMI including the amendment thereof, dated February 23, 2004.

“Liability” means any liability, debt, obligation, deficiency, Tax, penalty, fine, claim, cause of action or other loss, cost or expense of any kind or nature whatsoever, including without limitation, any Intercompany Liabilities, which, under Austrian GAAP, should have been disclosed on the Company’s Closing Financial Statements.

“Liens” means any ownership rights of third parties, mortgage, hypothecation (“Hypothek”), pledge (“Pfandrecht”), assignment of rights (“Sicherungsabtretung”), assignment of ownership (“Sicherungsübereignung”), and any security interest, encumbrance, right of first refusal, adverse claim, Tax, lien or charge or restriction of any kind or right of others of any nature (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof) or any agreement to file any of the foregoing.

“Material” means any matter that, in the aggregate with all other related matters, has resulted in or might result in costs, expenses, damages, payments or other Liabilities of, to or involving, or claims by or against the Company involving €50.000 or more or in a decrease in the earnings, cash flow, net worth or value of the Company involving €50,000 or more.

“Material Adverse Effect” means an event, transaction, condition or change which has a material adverse effect on the business of the Company in the amount of €50.000 or more (a “Material Adverse Effect”).

“Ordinary Course of Business” means in the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency) or usual in the trade.

“Person” means a physical or legal person (“juristische Person”) or a person legally treated as such (e.g., partnership, association).

“Proprietary Rights” means all of the following: (i) patents, patent applications (including continuations, continuations-in-part and divisionals), inventions (whether or not reduced to practice); (ii) utility models (“Gebrauchsmuster”), utility models applications (including continuations, continuations-in-part and divisionals); (iii) registered trademarks, service marks, industrial designs, trade dress, trade names, corporate names, logos and slogans (and all translations, derivations and combinations of each of the foregoing) and Internet domain names (together with all good-will associated with all foregoing); (iv) copyrights and copyrightable works; (v) registrations and applications for any of the foregoing; (vi) trade secrets and confidential information (including, without limitations, ideas, inventions (whether or not reduced to practice), formulae, compositions, know-how, manufacturing and production processes and techniques, research and development information, drawings, designs, plans, proposals, technical data, financial, business and marketing plans, costumer supplier lists and related information); (vii) computer software and software systems (including, without limitation, source code, executable code, data, databases and documentation).

“SMI” means Shuffle Master, Inc., a Minnesota corporation located at 1106 Palms Airport Drive, Las Vegas, Nevada 89119, USA.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons shall be allocated a majority of partnership, limited liability company, association or other business entity gains or losses or shall be or control the managing director or general partner of such partnership, limited liability company, association or other business entity.

“Tax” or “Taxes” means, with respect to Austria and other relevant jurisdiction, any federal, state, provincial, local tax and any income, gross receipts, capital gains, franchise, alternative or add-on minimum, estimated, sales, use, goods and services, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, environmental, customs, duties, personal property, capital stock, social security, unemployment, employment, disability, payroll, license, employee tax, social security contributions or other withholding, contributions, Austrian real estate transfer tax (“Grunderwerbsteuer”), capital duty

(“Gesellschaftsteuer”), stamp duty (“Gebühren”) or other tax, of any kind whatsoever, including any fines, interest, penalties or additions to tax.

“Tax Returns” means returns, declarations, reports, claims for refund, information returns or other documents filed or required to be filed in connection with the determination, assessment or collection of Taxes of the Company and its Subsidiaries.

“Transaction Documents” means this Agreement, the Lease Agreements and the Patent Transfer Agreement.

“US GAAP” means United States generally accepted accounting principles as in effect from time to time.

ARTICLE II

PURCHASE AND SALE OF SHARES

2.1 Purchase of Shares, of rights to the name CARD and certain Company Proprietary Rights 2.1.1 On and subject to the terms and conditions set forth in this Agreement, including without limitation the representations and warranties contained in Article VI, Article VII and Article VIII, simultaneously and with economic effect as of May 1, 2004, 9:00 a.m. Vienna time (a) SHFM herewith purchases, acquires and accepts the transfer of the Unlimited KG Share from CAI, and CAI herewith sells, assigns and transfers to SHFM, all of the right, title and interest in the Unlimited KG Share, including all rights pertaining thereto, free and clear of any Liens or other rights of third parties; and (b) SHFMMS herewith purchases, acquires and accepts the transfer of the Limited KG Share from CASAG, and CASAG sells, assigns and transfers to SFMMS all of the right, title and interest in the Limited KG Share, including all rights pertaining thereto, including without limitation the balance standing to the credit of the capital account (“Kapitalkonto”) as of May 1, 2004, 9:00 a.m. Vienna time as well as any rights CASAG may have in relation to the name CARD and any Company Proprietary Rights owned or controlled by CASAG, all free and clear of any Liens or other rights of third parties; and (c) in consideration of the sale of the Shares as set forth herein the Buyers shall deliver to the Sellers the consideration specified in Section 2.3 (the “Limited KG Payment”) and Section 2.4 (the “Unlimited KG Payment”) (collectively, the “Purchase Price”).

2.1.2 CASAG herewith also grants its written consent to the sale and transfer of the Unlimited KG Share, as contemplated herein, under Article VII(1) of the articles of incorporation (“KG-Vertrag”) of the Company .

2.1.3 Title to the Shares shall transfer from the respective Seller to the respective Buyer as specified herein against (i) receipt by the Sellers of the full and unreduced amounts of the Limited KG Payment and the Unlimited KG Payment, as defined above and as set forth in Sections 2.3 and 2.4, and (ii) registration of the Buyers as holders of the Shares in the Commercial Register, whichever is later.

2.2 Closing Transactions.

(a) Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) takes place both at the offices of Deutsche Bank, 280 Park Ave, New York, USA, and at the offices of Fiebinger, Polak, Leon & Partners, Am Getreidemarkt 1, A-1060 Vienna, Austria, commencing at 08:00 a.m., Vienna time on May 13, 2004 and continuing in New York City at 9:00 a.m., New York time. The date and time of the Closing are herein referred to as the “Closing Date.”

(b) Closing Transactions. The Parties shall consummate the following “Closing Transactions” on the Closing Date in the following chronological order:

(i) Signing of this Agreement (in Vienna).

(ii) Signing of an application and filing with the Commercial Register, the application substantially in the form of Exhibit B (both in Vienna).

(iii) Payment and receipt of the full and unreduced amounts of (x) the Limited KG Payment as set forth in Section 2.3 which shall consist of the Cash Payment, and the Shares Payment, and (y) the Unlimited KG Payment as set forth in Section 2.4.

The Limited KG Payment, is set forth in Section 2.3 and shall be delivered by SHFMMS to CASAG as follows:

(A) SHFMMS shall deliver the Cash Payment by intra-bank funds transfer of immediately available funds from an Austrian bank account of SHFMMS with ERSTE Bank der oesterreichischen Sparkassen AG, Vienna, to an account designated by CASAG with ERSTE Bank der oesterreichischen Sparkassen AG, Vienna ; and

(B) SHFMMS shall cause the delivery, in New York of the Shares Payment by delivery of a stock certificate registered in the name of CASAG.

The Unlimited KG Payment is set forth in Section 2.4 and shall be delivered by SHFM by intra-bank funds transfer of immediately available funds to an account or accounts designated by CAI;

(iv) The Lease Agreements and the Patent Transfer Agreement, shall be signed by all respective parties to such agreements.

(v) The Sellers shall deliver to the Buyers evidence that Mr. Ernst Blaha has resigned as managing director of CAI and of CAST Casinos Austria Sicherheitstechnologie GmbH, Vienna, Austria, and as holder of a special power of attorney (“Prokurist”) of CASAG, effective on or before the Closing Date.

(vi) Registration of the Buyers as shareholders of the Company in the Commercial Register.

All Closing transactions described herein are part of the Closing of this Agreement and the transactions contemplated thereby and shall be deemed simultaneously occurred.

2.3 The Limited KG Payment.

The Limited KG Payment shall equal forty one million seven hundred forty-four thousand Euros (€41,744,000). The Limited KG Payment shall consist of the Cash Payment and the Shares Payment and shall be paid free of any bank charges, transfer fees, similar transfer taxes and free of any other withholdings, costs or reductions of any kind. For the avoidance of doubt it is explicitly agreed that the Sellers will be responsible for their own income taxes, but under no circumstances will the Buyers be entitled to make any deductions or withholdings for Sellers’ income taxes.

(a) The Cash Payment shall be twenty five million nine hundred thirty one thousand Euros (€25,931,000) The Cash Payment shall be payable by intra-bank transfer at Closing.

(b) The Shares Payment is 767,076 (seven hundred sixty seven thousand and seventy six) shares of SMI common stock (hereinafter referred to as the “SMI Stock” or “SMI Shares”) (which was determined based on the following agreed formula: the number of shares of SMI Stock obtained when fifteen million eight hundred thirteen thousand Euros (EUR 15,813,000), translated into an equivalent amount of U.S. dollars based on the conversion rate of 1 Euro equals $1.2289, is divided by the Average Price, where the “Average Price” equals the sum of (i) 50% of the average closing price of SMI’s Stock during the ten (10) trading days prior to the third business day prior to the Closing Date; and (ii) 50% of the average closing price of SMI’s Stock during the ten trading days prior to SMI’s issuance of its press release announcing the signing of the Letter of Intent; provided, however, that in no event shall the Average Price exceed twenty-five dollars and thirty tree cents ($25.3333) per share for purposes of determining the number of shares of common stock of SMI. The Parties acknowledge that the Shares Payment and the “Average Price” have been adjusted for the 3 for 2 stock split of SMI’s common stock which occurred on April 16, 2004.)

2.4 The Unlimited KG Payment

The Unlimited KG Payment shall equal four thousand Euros (EUR 4,000). The Unlimited KG Payment shall be payable by funds transfer at Closing.

2.5 Late Payment

In the event of late payment of the Limited KG Payment or the Unlimited KG Payment, or any parts thereof by more than two business days from Closing, without prejudice to any other remedies which Sellers may have under applicable law, Sellers shall be entitled to default interest at a rate of 6 months’ EURIBOR plus 2% (two per cent) per year for any unpaid amount of Purchase Price starting as from the day after the Closing until full payment.

ARTICLE III

DELETED

ARTICLE IV

PRE-CLOSING COVENANTS AND AGREEMENTS

Each of the Parties (as applicable) agrees as follows that, except as otherwise expressly noted, with respect to the period between December 31, 2003 and the Closing:

4.1 General Since February 20, 2004, the Buyers and the Sellers agree that they shall not have taken (and Sellers agree that the Company has not taken) any action which would require disclosure under Articles VI, VII and VIII below, or which would violate any of their respective representations and warranties contained therein.

4.2 Allocation of Profits On a contractual basis, the Buyers and the Sellers agree that all rights and obligations and the economic risk connected with the Shares shall pass from Sellers to Buyers on May 1^st, 2004, 9:00 a.m. Vienna time. SHFMMS shall, however, be entitled to receive any profits or dividends attributable to the share in CARD or the Limited KG Share, which are attributable to or which have been resolved to be distributed or withdrawn after December 31, 2003, 12:00 p.m.

The legal title in the Shares shall pass, subject to (i) registration of the Buyers in the Commercial Register and (ii) receipt by the Sellers of the payment of the Limited KG Payment and the Unlimited KG Payment, from the Sellers to the Buyers on the Closing Date. Therefore, the Buyers shall only become shareholders of the Company when the registration of the Buyers in the Commercial Register shall have been effected and the Limited KG Payment and the Unlimited KG Payment shall have been received by the Sellers.

The Sellers shall not be entitled nor obligated to participate in any business of the Company which is pending at December 31, 2003, 12:00 p.m. Vienna time (“schwebende Geschäfte”).

ARTICLE V

TRANSFER OF RESTRICTED SECURITIES

5.1 General Provisions Subject to Section 5.2, the SMI Stock issued under this Agreement may not be offered for sale, sold, reoffered, resold, transferred, assigned, pledged or otherwise disposed of, except (A) pursuant to (i) an effective registration statement under the U.S. Securities Act of 1933, as amended (including the rules and regulations promulgated thereunder, the “Securities Act”), (ii) an offshore transaction complying with Regulation S under the Securities Act (or any similar rule or rules then in force) if such regulation is available and if the prospective acquiror thereof makes available to CASAG in advance of such transfer information demonstrating compliance with Regulation S or (iii) Rule 144 or Rule 144A under the Securities Act (or any similar rule or rules then in force) if such rule is available and, as applicable, if the prospective acquiror thereof makes available to CASAG in advance of such transfer information demonstrating compliance with Rule 144 or Rule 144A, respectively, and (B) in accordance with all applicable securities laws of the states of the United States and other jurisdictions.

5.2 Holding Period Notwithstanding Section 5.1, and notwithstanding any registration of the SMI Stock, CASAG agrees that it will not offer for sale, sell, transfer, assign, pledge or otherwise dispose of more than 50% of the SMI Stock prior to November 13, 2004; and the remaining 50% of the SMI Stock prior to May 13, 2005. Thereafter, CASAG may offer, sell, pledge, transfer or otherwise dispose of the common stock of SMI Stock; provided that any such offer for sale, sale, transfer, assignment, pledge or disposition will be subject to and must be made in compliance with the Securities Act (including without limitation, if applicable, Rule 144, Rule 144A and Regulation S) and any other applicable securities laws of the states of the United States and other jurisdictions of which such compliance shall be CASAG’s sole responsibility and shall be at CASAG’s sole expense.

5.3 Right of First Refusal.

(a) Provided that the registration agreement regarding the SMI Stock shall have become effective by November 30, 2004, CASAG shall not sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration) (with the exception of transfers between CASAG and its Affiliates, provided that the transferee agrees, also vis-à-vis SMI, to be bound by this right of first refusal, i.e. contract for the benefit of SMI; “echter Vertrag zugunsten Dritter”) by way of a private placement or offshore transaction or a sale executed through NASDAQ NMS) any interest in any SMI Stock (a “Transfer”) without first delivering to SMI written notice (the “Sale Notice”). The Sale Notice shall disclose in reasonable detail the number of shares to be Transferred, the identity of the purchaser (unless for sales through NASDAQ NMS or another stock exchange), the price or price formula (including all relevant criteria for calculating the price) and any other terms and conditions of the proposed Transfer. Any such proposed Transfer shall be bona fide and to a bona fide purchaser. The Sale Notice shall constitute a binding offer to sell all, but not less than all, of the subject shares to SMI on the same terms and conditions specified in the Sale Notice. Unless CASAG shall have received (i) SMI’s

Election Notice (i.e., the written acceptance of CASAG’s offer) within five New York business days after the Sale Notice was delivered to SMI, (or two New York business days after the Sales Notice, if for a sale through NASDAQ, as the case may be) and (ii) the full and unreduced purchase price for the SMI stock specified in the Sale Notice from SMI within five New York business days, CASAG shall be free to sell the SMI stock specified in the Sale Notice.

(b) SMI may elect to purchase all (but not less than all) of the shares of SMI stock to be transferred pursuant to the Sale Notice and at the exact conditions described in the Sale Notice by delivering a written notice of such election (the “Election Notice”) to SMI within five (or two, if for a sale through NASDAQ) New York business days after the Sale Notice has been delivered to SMI, provided that the Election Notice shall be valid and effective only if it contains an express, unconditional and irrevocable undertaking of SMI to pay the full and unreduced purchase price stated in the Sale Notice, free of any withholdings, set-offs or reductions, within five New York business days from delivery of the Election Notice to CASAG. Within five New York business days after receipt of the Election Notice, SMI shall pay the full and unreduced purchase price stated in the Sale Notice, free of any withholdings, set-offs or reductions, concurrently with and against delivery of the share certificates of the SMI stock specified in the Sale Notice.

(c) If within such five (or two, if for a sale through NASDAQ) New York business days, SMI does not elect to purchase all of the shares of SMI stock specified in the Sale Notice, or fails to pay the full and unreduced purchase price for such shares, to be calculated as defined in the Sale Notice, to CASAG, CASAG may Transfer the shares of SMI stock, subject to the provisions of Section 5.2 hereof (e.g., the remaining holding period, if any, needs to be observed) without any restrictions and for any consideration determined by CASAG whenever CASAG so desires. If SMI has elected to purchase shares of SMI stock specified in the Sale Notice, the sale of such shares, against full and unreduced payment of the respective purchase price, shall be consummated as soon as practical after the delivery of the Election Notice to CASAG, but in any event within five New York business days after SMI delivers to CASAG the Election Notice.

If SMI shall have delivered an Election Notice, but shall subsequently fail to pay the full and unreduced purchase price for the SMI stock in time, CASAG shall alternatively be entitled, at its discretion, to demand payment of the applicable purchase price under the Election Notice against transfer of the SMI stock; in such case, SMI shall be obliged to pay to CASAG the applicable purchase price under the Election Notice plus default interest at a rate of 6-months EURIBOR plus two per cent per year. If SMI should fail to pay the full and unreduced purchase price for the SMI stock plus default interest, CASAG, notwithstanding any other right or remedy available under applicable law and this Agreement, shall also be entitled to rescind the sale to SMI by giving at least five New York business days’ prior written notice; and in the event of such rescission, SMI shall hold CASAG harmless for any Loss which CASAG may incur due to SMI’s failure to pay the purchase price for the SMI shares.

(d) All rights under this Section 5.3 shall be for the exclusive benefit of SMI as a third party beneficiary (“echter Vertrag zugunsten Dritter”), and, therefore only SMI, but not the Buyers nor any third parties shall have any rights under this Section 5.3.

5.4 Restrictive Legends Unless the stock of SMI is registered prior to the execution of this Agreement, each certificate or instrument representing the common stock shall be imprinted with a legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR IN COMPLIANCE WITH REGULATION S, RULE 144A OR RULE 144 UNDER THE SECURITIES ACT OR PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. THE SECURITIES ARE SUBJECT TO A HOLDING PERIOD AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF FOR A PERIOD OF ONE YEAR FROM MAY 13, 2004, PURSUANT TO A PURCHASE AGREEMENT.”

5.5 Legend Removal When the common stock becomes eligible for sale (including, without limitation, pursuant to Rule 144 under the Securities Act), SMI shall, upon the request of the holder of such common stock, remove the legend set forth in Section 5.4 from the certificates or instruments representing such common stock.

5.6 CASAG’s Put Option of SMI Stock

At any time prior to the effective date of the registration of the SMI Stock (i.e. Sellers are free to sell the SMI Stock, but for the right of first refusal and the agreed holding period), CASAG shall have the right to request SHFMMS to cause SMI or to directly request SMI to buy back all, but not less than all, of the SMI Stock based on a share price of USD 25.3333 (twenty five dollars and thirty three point thirty three cents) per share, for a total price of EUR 15,813,000 (fifteen million eight hundred thousand and thirteen thousand Euros) (i.e. based on a fixed and agreed exchanged rate of 1 Euro equals USD 1.2289). After the registration of the SMI Stock, CASAG’S rights and SHFMMS’s obligations under this Clause 5.6 shall fully terminate.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO THE COMPANY AND ITS SUBSIDIARIES

With respect to the Company and its Subsidiaries, each Seller hereby jointly and severally represents and warrants to the Buyers that:

6.1 Organization and Corporate Power The Company is a limited partnership (“Kommanditgesellschaft”) being duly organized and validly existing and in good standing under the laws of Austria and is qualified to do business in and holds all necessary material licenses in those jurisdictions where the Company conducts its business. The Company has full corporate power and authority and all material public licenses, public permits and public authorizations necessary to own and operate its properties, to carry on its business as now conducted. All of the Company’s and its Subsidiaries’ organizational documents reflect all amendments made thereto at any time prior to the date of this Agreement and are correct and complete. Neither the Company nor any Subsidiary of the Company is in default under or in violation of any provision of their respective organizational documents.

6.2 Authorization of Transactions The Company has full corporate power and authority to consummate the transactions contemplated by the Transaction Documents. The shareholders (“Gesellschafter”) of the Company have duly approved all Transaction Documents to which the Company is a party and have duly authorized the execution and delivery of all Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby. No other corporate proceedings are necessary to approve and authorize the execution and delivery of this Agreement or the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby. Upon execution by the Sellers, this Agreement and each of the other Transaction Documents shall have been duly executed and delivered by the respective Seller and shall constitute valid and binding obligations upon the Sellers, enforceable in accordance with their terms and applicable law.

6.3 Capitalization The authorized, issued and outstanding share capital, and ownership thereof, of the Company, as well as the ownership of the Shares are as set forth on Schedule 6.3 respectively. The Shares are validly existing and nonassessable, are not subject to, nor issued in violation of, any preemptive rights or rights of first refusal, and are owned of record and beneficially by Sellers free and clear of all options, warrants, rights, Contracts, calls, puts, rights to subscribe, conversion rights and other Liens. There are no outstanding or authorized options, warrants, rights, Contracts, calls, puts, rights to subscribe, conversion rights or other agreements or commitments to providing for the issuance, disposition or acquisition of any interest in the Company. There exists no obligation to contribute further funds, with the exception of the statutory obligations of an unlimited partner in a limited partnership to be personally liable, without any limits of liability. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company (other than this Agreement). There are no voting trusts, proxies or any other agreements or understandings with respect to the Shares (other than this Agreement). The Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any interest in the Company. The Company has not violated any applicable federal, provincial or state securities

laws of Austria or any other jurisdiction in connection with the offer, sale or issuance of any shares, including the offer and sale of the Shares. Since registration of the Company as a limited partnership in the Commercial Register, the shareholders have not made any withdrawal (“Entnahme”) from the accounts (“Kapitalkonten”) or other accounts (“Verrechnungskonten”, “Privatkonten”). .. For clarification purposes, it is explicitly stated and agreed that the Company has paid, prior to Closing, the Intercompany Liabilities.

6.4 Transformation of CARD The Limited KG Share has been fully contributed by the Seller in the course of the transformation (“errichtende Umwandlung”) of CARD into the Company as a limited partnership. In the course of the transformation of CARD into the Company as a limited partnership, , the whole business, all contracts and all rights and entitlements of CARD have been lawfully and fully transferred to the Company, and thereby, to the Knowledge of the Sellers, no contracts have been or will be terminated.

It is explicitly agreed that the Sellers shall not be responsible for any negative consequences, costs, expenses, Losses or Taxes which may have occurred or will occur due to such transformation which may or may not qualify as a non-recognition transaction for Austrian tax purposes. In the course of the transformation of CARD into the Company as a limited partnership all form and other requirements of applicable law have been complied with in all material respects. In particular the shares in the Subsidiaries, all Company Proprietary Rights, and all Licenses have been validly and duly transferred from CARD to the Company in such transformation by universal succession.

With the exception of the registration of the transformation in the Commercial Register, which was effected by the Sellers and the Company, it will be the Buyers’ obligation to make all applications, notifications and filings and to obtain all consents in this respect which might be necessary due to applicable law, such that all assets including all rights, Proprietary Rights, privileges and Licenses shall lawfully and fully, without restrictions or Liens, be vested in the Company. The Sellers make no respective representations and warranties and assume no respective liability with respect to such Buyers’ obligations and the results thereof as mentioned in this paragraph.

6.5 Subsidiaries; Investments Schedule 6.5 sets forth a complete and accurate list of all of the direct or indirect Subsidiaries of the Companies and the jurisdiction of organization of each such Subsidiary. Each such Subsidiary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is qualified to do business in its respective jurisdiction of incorporation, except where the failure to so qualify has not had or would not reasonably be expected to have a Material Adverse Effect. All jurisdictions in which each Subsidiary is registered or holds trade or other licenses are set forth on Schedule 6.5. All of the outstanding shares of capital stock of each such Subsidiary are validly issued, fully paid and nonassessable, and all such shares are owned by the Company as set forth on Schedule 6.5, free and clear of any Lien and not subject to any option or right to purchase any such shares. Except as set forth on Schedule 6.5, none of the Company or its Subsidiaries own or hold any stock, units or any other security or interest in any other Person or any rights to acquire any such stock, units or other security or interest, and none of the Company or its Subsidiaries has ever owned any further Subsidiary.

6.6 Absence of Conflicts Except as set forth on Schedule 6.6 , the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby by each of the Company and/or Sellers do not and shall not (a) conflict with or result in any breach of any of the Material terms, conditions or provisions of, (b) constitute a Material default under, (c) result in a Material violation of, (d) give any third party the right to modify, terminate or accelerate any Material obligation under, (e) result in the creation of any Lien upon the Shares or the assets of the Company and its Subsidiaries, or (f) limited to aspects of corporate existence and organization, require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any court or administrative or other governmental body or agency, under the organizational documents of the Company or any Subsidiary or any Contract to which the Company or any Subsidiary are bound or affected, or any law, statute, rule or regulation to which the Company or any Subsidiary are subject or any judgment, order or decree to which the Company or any Subsidiary are subject.

6.7 Financial Statements The Sellers have furnished Buyers with copies of (i) the “Closing Financial Statements” and (ii) the “Latest Financial Statements”. Each of the foregoing financial statements (including in all cases the notes thereto, if any) (the “Financial Statements”) (i) have been prepared to be accurate and complete in all Material respects; (ii) have been prepared to be consistent with the Company’s books and records (which, in turn, are accurate and complete in all Material respects); (iii) have been prepared to present fairly in all Material respects the Company’s financial condition and results of operations as of the times and for the periods referred to therein; and (iv) have been prepared in accordance with Austrian GAAP consistently applied (The Latest Financial Statements were also prepared in accordance with US GAAP for purposes of information only. Nothing contained herein or therein shall be construed as a warranty of any of the foregoing under US GAAP).

6.8 Absence of Undisclosed Liabilities All Liabilities of the Company, to the extent that such Liabilities must be reflected on the Closing Financial Statements under Austrian law and Austrian GAAP, are reflected on the Closing Financial Statements and the Company has no additional Material current Liabilities other than the current Liabilities which have arisen after the date of the Closing Financial Statements in the Ordinary Course of Business or otherwise in accordance with the terms and conditions of this Agreement (none of which is a Material liability for breach of contract, breach of warranty, tort or infringement or a claim or lawsuit or an environmental liability)and the Company has those additional Liabilities disclosed on Schedule 6.8; provided, however, that no liabilities or Indebtedness of the Company at the Closing Date shall include any Intercompany Liabilities or any amounts or obligations owed or due Clarence Rudd. Notwithstanding the foregoing, Buyers shall be solely responsible for the payment of any Distributor Termination Fees (irrespective of whether or not such fees become due and owing as a result of termination decisions made by Buyers). . The Company’s reserves for severance payments (“Abfertigung”) were calculated and funded in accordance with Austrian laws; any additional warranty or liability of the Sellers with respect to such severance payments is excluded.

6.9 Absence of Certain Developments Except as set forth on Schedule 6.9 and except as expressly contemplated by this Agreement, since December 31, 2003, neither the Company nor any of their Subsidiaries, other than in the Ordinary Course of Business:

(a) suffered a Material Adverse Effect or suffered any theft, damage, destruction or casualty loss in excess of €25,000, to its assets, with the exclusion of damages covered by insurance, or suffered any substantial destruction of the Company’s books and records;

(b) redeemed or repurchased, directly or indirectly, any interest in the Company or declared, set aside, paid or resolved to pay any withdrawal (“Entnahme”) or any dividend with respect to the Company, or any distributions or made any other dividends (whether in cash or in kind) with respect to any shares of capital stock or other equity security of the Company, no matter for which period and for the avoidance of doubt also covering the period prior to the transformation of CARD into a limited partnership; for the avoidance of doubt, any of these acts shall under no circumstances be considered to be in the Ordinary Course of Business;

(c) issued, sold or transferred any notes, bonds or other debt securities, any equity securities, any securities convertible, exchangeable or exercisable into any interest in the Company or other equity securities, or warrants, options or other rights to acquire any interest in the Company;

(d) borrowed any amount or incurred or become subject to any Indebtedness or other Liabilities, except current Liabilities incurred in the Ordinary Course of Business;

(e) discharged or satisfied any Lien or paid any Liability (other than current Liabilities paid in the Ordinary Course of Business or other than Intercompany Liabilities) or prepaid any amount of Indebtedness;

(f) subjected any portion of their properties or assets to any Lien;

(g) sold, leased, licensed, assigned or transferred (including, without limitation, transfers to Sellers or any Insider) a portion of its tangible (corporeal) or intangible (incorporeal) assets (including, without limitation, any Company Proprietary Rights), except for sales of inventory (or replacement of fixed assets with a value of less than EUR 10,000) in the Ordinary Course of Business, or canceled without fair consideration any debts or claims (of more than EUR 10,000) owing to or held by them, or disclosed any confidential information (other than pursuant to agreements requiring the party to whom the disclosure is made to maintain the confidentiality of and preserving all rights of the Company and its Subsidiaries in such confidential information);

(h) suffered any Material extraordinary losses or waived any rights of Material value, unless in the Ordinary Course of Business;

(i) entered into, amended in a Material respect, or terminated any Material Contract or taken any other Material action or entered into any other Material transaction other than in the Ordinary Course of Business;

(j) entered into any other Material transaction or Materially changed any business practice;

(k) made or granted or promised any bonus or any wage, salary or compensation increase (other than the required increases (none of which are Material) under the collective

bargaining agreement for white collar trade employees) in excess of EUR 5.000 per year to any director, officer, employee or sales representative, group of employees or consultant or made or granted or promised any increase in any employee benefit plan or arrangement, or amended or terminated any existing employee benefit plan or arrangement or adopted any new employee benefit plan or arrangement;

(l) made any other change in employment terms for any of their directors, officers, and employees outside the Ordinary Course of Business or entered into any transaction with any Insider, or except as specifically contemplated by this Agreement, entered into any Contract, agreement or transaction, other than in the Ordinary Course of Business and at arm’s length, with Persons who are Affiliates or Insiders;

(m) incurred Intercompany Liabilities or conducted its cash management customs and practices other than in the Ordinary Course of Business (including, without limitation, with respect to maintenance of working capital balances, collection of accounts receivable and payment of accounts payable); all Intercompany Liabilities were cleared as per April 30, 2004 and no Material Intercompany Liabilities were incurred since then;

(n) made any Material capital expenditure;

(o) made any loans or advances to, or guarantees for the benefit of, any Persons (other than (a) guarantees to customers in the Ordinary Course of Business and consistent with the policies and practices disclosed to Buyers or SMI and (b) a loan of EUR 3.000 granted to one employee of the Company);

(p) made any charitable contributions, pledges, or paid any association fees or dues in excess of EUR 25,000;

(q) changed or authorized any change in its organizational documents other than CARD’s transformation into a limited partnership as per December 31, 2003;

(r) materially delayed or postponed the repair and maintenance of its properties or the payment of accounts payable, accrued Liabilities and other Liabilities;

(s) instituted any court proceeding or settled any claim pending in court or lawsuit involving equitable or injunctive relief or involving more than EUR 10,000 in the aggregate;

(t) granted any performance guarantees to their customers other than in the Ordinary Course of Business and consistent with the policies and practices within the Knowledge of Buyers or SMI;

(u) acquired any other business or entity (or any significant portion or division thereof), whether by merger, consolidation or reorganization or by the purchase of its assets or stock or acquired any other Material assets, with the exception of the transformation of CARD into a limited partnership;

(v) engaged in any transaction with Sellers or its Affiliates other than on arm’s-length terms;

(w) lost, had suspended, conditioned or revoked any License; or

(x) committed or agreed to any of the foregoing.

6.10 Title to Properties; Sufficiency of Assets

(a) Neither the Company nor any of its Subsidiaries owns any real property.

(b) The real property leases and subleases described on Schedule 6.10(b) are valid, binding, enforceable and in full force and effect and have not been modified (except within the Knowledge of Buyers), and the Company or a Subsidiary holds valid and existing rights and interests as lessee under such leases or subleases for the term set forth on Schedule 6.10(b). The leases and subleases described on Schedule 6.10(b) (the “Leased Properties”) constitute all of the leases and subleases under which the Company or any Subsidiary hold rights and interests as lessee in real property. The Sellers have delivered to Buyers and Buyers have Knowledge of complete and accurate copies of each of the leases or subleases described on Schedule 6.10(b). The Leased Properties constitute all of the real property used or occupied by the Company and its Subsidiaries. With respect to each lease and sublease listed on Schedule 6.10(b):

(i) the lease or sublease shall continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing (with the exception of landlords’ potential rights to increase the rent following a change of ownership, as provided in § 12a of the Austrian Rental Act or similar provisions of laws other than Austrian laws);

(ii) neither the Company (nor any of its Subsidiaries) nor any other party to the lease or sublease is in Material breach or Material default, and no event has occurred which, with notice or lapse of time, would constitute such a Material breach or default or permit termination, modification or acceleration under the lease or sublease;

(iii) no party to the lease or sublease has repudiated any provision thereof and there are no disputes, Material oral agreements or forbearance programs in effect as to the lease or sublease;

(iv) neither the Company nor any of its Subsidiaries has assigned, transferred, conveyed, mortgaged, hypothecated, deeded in trust or encumbered any of its rights and interests in the leases or subleases;

(v) such leases or subleases do not prohibit the transactions contemplated hereunder and under the other Transaction Documents.

(c) Except as set forth on Schedule 6.10(c), the Company and its Subsidiaries own good and marketable title to, or a valid leasehold interest in, free and clear of all Liens, all of the personal property and assets which are shown on the Latest Financial Statements or acquired thereafter by them.

(d) The personal properties, vehicles and other tangible (corporeal) assets of the Company owned by the Company are operated in conformity with all Material applicable laws and regulations, are in the condition and repair which is in line with the value attributed to these assets in the Latest Financial Statements, reasonable wear and tear excepted. The Company or a Subsidiary own or lease under valid leases all Material buildings, machinery, equipment and other Material tangible assets necessary for the conduct of their business.

(e) The assets and properties (whether real (immoveable) or personal (moveable), tangible (corporeal) or intangible (incorporeal)), including but not limited to, Proprietary Rights owned or leased by the Company or a Subsidiary constitute all of the assets and properties used for the unimpaired operation of the business presently conducted by the Company.

6.11 Accounts Receivable Except as set forth on Schedule 6.11, all of the notes and accounts receivable of the Company and its Subsidiaries reflected on the Closing Financial Statements are good, valid and fully collectible receivables (subject to no counterclaims or offset) and shall be collected (net of the allowance for doubtful accounts recorded on the applicable Closing Financial Statements) within 2004 at the aggregate amount recorded therefore on the Latest Financial Statements. There are no individual accounts receivable which are over EUR 10,000 and 60 days past due, except as set forth on Schedule 6.11. As of the Closing Date, no Person shall have any Lien on such receivables or any part thereof, and no agreement for deduction, free goods, discount or other deferred price or quantity adjustment shall have been made with respect to any such receivables. However, there are commissions and compensations payable to the inventors, as disclosed on Schedule 6.21 and Schedule 6.14(c).

6.12 Taxes (i) all Tax Returns which are required to be filed with respect to the Company and its Subsidiaries have been timely filed or shall be timely filed on or before the Closing Date, and all such Tax Returns are true, complete and accurate, and complete and correct copies of all such returns and other documents filed in respect of the three fiscal years of the Company and its Subsidiaries ending prior to the date hereof have been provided to Buyers; as for the Corporate Tax Returns required to be filed by the Company and its Subsidiaries under the applicable law for fiscal year 2003 (and for the New Zealand Subsidiary, for the FY ending March 31, 2004), the Sellers undertake to and Buyers agree that the Sellers will prepare and file the Tax Returns of the Company by June 30, 2004 at the latest and the Tax Returns of the Subsidiaries no later than September 30, 2004, if such filing deadline, as regards the Subsidiaries, is feasible under applicable law but no later than the earliest point of time when such Tax Returns can be filed under applicable law.

(ii) all Taxes due and payable or required to be collected or remitted by or on behalf of the Company and its Subsidiaries on or before the Closing Date, whether or not shown on a Tax Return, have been paid, collected or remitted or shall be paid, collected or remitted by the Company and its Subsidiaries or Sellers on or before the Closing Date in an amount pursuant to and in line with Austrian tax law or – as the case may be – foreign tax law - and all Taxes incurred prior to the Closing Date, but not due and payable prior to or on the Closing Date have been determined pursuant to and in line with Austrian tax law or – as the case may be – foreign tax law and accrued but not yet due are shown on the Closing Financial Statements and no Taxes are delinquent;

(iii) with respect to any periods for which Tax Returns have not yet been required to be filed or for which Taxes have been incurred but are not yet due and payable, the Company and its Subsidiaries have incurred Liabilities for Taxes only in the Ordinary Course of Business and in a manner consistent with prior periods; it being understood that such Liabilities for Taxes incurred in prior years were incurred based upon an accurate, diligent and lawful application of the applicable tax law and recognition and determination of the relevant tax base on which such taxes were levied, provided that any tax consequence out of or in connection with the transformation of CARD into a limited partnership shall be for the account of the Buyers;

(iv) with respect to any period before the Closing Date including but not limited to periods for which Tax Returns have or have not yet been required to be filed or for which Taxes have been due and payable or have been incurred but are not yet due and payable including but not limited to the period January 1, 2004 through the Closing Date the Company and its Subsidiaries (i) have accurately and diligently recorded all of their business transactions in their books thereby duly considering Austrian GAAP and – as the case may be – foreign GAAP and (ii) have fully complied with Austrian tax law and - - as the case may be - foreign tax law and (iii) have paid or accrued for any Austrian or foreign tax for which the Company and its Subsidiaries can be held liable pursuant to Austrian and – as the case may be — foreign tax law;

(v) no deficiency for any amount of Tax has been asserted or assessed by a taxing authority against the Company and its Subsidiaries and the Company and its Subsidiaries do not reasonably expect that any such assertion or assessment of Tax liability will be made,

(vi) Austrian corporate income tax assessments have been issued to the Company covering all past periods up to and including the fiscal year ended December 31, 2002,

(vii) the Company and its Subsidiaries have withheld from each amount paid or credited to any Person the amount of Taxes required to be withheld therefrom and has remitted such Taxes to the proper Tax or other governmental authorities within the time required under applicable law,

(viii) there is no investigation, action, suit, proceeding or audit or any notice of inquiry of any of the foregoing pending against or with respect to the Company and its Subsidiaries regarding Taxes and, to the Knowledge of Sellers, no investigation, action, suit, proceeding or audit has been threatened against or with respect to the Company and its Subsidiaries regarding Taxes,

(ix) the Company and its Subsidiaries have not consented to extend or otherwise waive the time in which any Tax may be assessed or collected by any taxing authority,

(x) the Company and its Subsidiaries have not been a member of an affiliated group for tax purposes,

(xi) no pending claim has been made by a taxing authority in a jurisdiction where the Company and its Subsidiaries do not file Tax Returns that the Company and its Subsidiaries is or may be subject to Taxes assessed by such jurisdiction,

(xii), deleted

(xiii) the Company and its Subsidiaries have withheld and paid all Taxes required to have been withheld and paid before Closing, in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party,

(xiv) deleted

(xv) the Company and its Subsidiaries have not made any agreement with any taxing authority adversely affecting the treatment of Taxes of the Company and its Subsidiaries,

(xvi) the Company and its Subsidiaries will not be required (A) as a result of a change made by the Company or its Subsidiaries prior to the Closing in method of accounting for a taxable period ending on or prior to the Closing Date, to include any adjustment in taxable income for any taxable period (or any portion thereof) or (B) as a result of a tax ruling or similar agreement reached prior to Closing with a competent tax office of the Company or its Subsidiaries to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date and

(xvii) for the period prior to Closing the Company and its Subsidiaries have collected from each receipt from any of the past and present customers (or other persons paying amounts to the Company and its Subsidiaries) the amount of all Taxes (including VAT) required to be collected and have remitted such Taxes when due, in the form required under the appropriate legislation or made adequate provision for the payment of such amount to the proper receiving

authorities; the Company and its Subsidiaries have accurately calculated any deducted input VAT and fulfilled all legal prerequisites to claim such input VAT.

(xviii) Schedule 6.12 contains a list of states, provinces, territories and jurisdictions (whether foreign or domestic) in which the Company and its Subsidiaries have been required to file Tax Returns prior to Closing. The Company and its Subsidiaries have not at any time benefited from a forgiveness of debt or entered into any transaction or arrangement (including conversion of debt into shares of their share capital) which could have resulted in penalties under Austrian tax law (or comparable provisions under any applicable provincial statute).

(xix) The Company and its Subsidiaries have not acquired property from or rendered services to, or disposed of property or provided services to a Person with whom they do not deal at arm’s length for an amount that is other than the fair market value of such property or services, or has been deemed to have done so for purposes of all applicable tax laws. There are no contingent Liabilities or any grounds that could prompt an assessment or reassessment of Taxes, including, but without limitation, aggressive treatment of income, expenses, deductions, credits or other amounts in the filing of Tax Returns.

(xx) Taxes incurred by SHFMMS and/or SHFM as partners of the Company for periods (or portions thereof) starting as from the date of Closing due to the fact that the Company, prior to Closing, has been found to have violated applicable Austrian or applicable foreign tax law with respect to any tax wise relevant business transaction effected in a period (or portions thereof) prior to Closing shall be borne by Sellers.

(xxi) In the case of any Taxes that are imposed on a periodic basis and are payable for a taxable period that includes (but does not end on) the Closing Date, the portion of such Tax which relates to the portion of such taxable period ending on the Closing Date shall (x) in the case of any Taxes other than Taxes based upon or related to income or receipts (the latter including but not limited to Corporate Income Tax (“Körperschaftsteuer”), VAT (“Umsatzsteuer”), Insurance Tax (“Versicherungsteuer”), Fire Brigade Tax (“Feuerschutzsteuer”), Energy Tax (“Energieabgaben”), Wage Tax (“Lohnsteuer”), Social Insurance (“Sozialversicherungsabgaben”), Contribution to the Family Burden Equalization Fund (“Dienstgeberbeitrag zum Familienlastenausgleich”) and Surcharge thereon (“DZ”) Municipal Wage Tax (“Kommunalsteuer”)), be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in the entire taxable period, and (y) in the case of any Tax based upon or related to income or receipts be deemed equal to the amount which would be payable if the relevant taxable period ended on the Closing Date.

Nothwithstanding anything to the contrary contained herein, it is expressly agreed by Buyers and Sellers that:

(a) neither Party nor any of their Affiliates has, at Closing, any Knowledge of any breach or untruth of any representation or warranty or any obligation contained in Section 6.12, and

(b) no breach or untruth of any representation or warranty or any obligation contained in Section 6.12 is disclosed or contained on any Schedule, Exhibit or disclosure bundle or on any document, information or material that is disclosed on or in the Schedules.

6.13 Contracts and Commitments

(a) Except as specifically contemplated by this Agreement and except as set forth on Schedule 6.13, to the Knowledge of Sellers, neither the Company nor any Subsidiary is a party to or bound by any written:

(i) Collective bargaining agreement, works council agreement or Contract with any labor union or any bonus, commissions, pension, profit sharing, retirement or any other form of deferred compensation plan or any stock purchase, stock option, hospitalization insurance or similar plan or practice, whether formal or informal;

(ii) Contract for the employment of any officer, individual employee or other person on a full-time or consulting basis or any notice, severance or change-of-control agreements;

(iii) Contract or indenture relating to the borrowing of money or to mortgaging, pledging or otherwise placing a Lien on any of their assets;

(iv) Contracts with respect to the lending or investing of funds;

(v) Contracts (in particular licensing rights) relating to the Company Proprietary Rights by the Company or any Subsidiary to any Person or by any Person to the Companies or any Subsidiary, or Contracts affecting the Company’s or any Subsidiary’s ability to use or disclose any Proprietary Rights;

(vi) guaranty, surety or letter of comfort with regard to any obligation, other than endorsements made for collection;

(vii) Contract under which any of the Company or its Subsidiaries is lessee of, or holds or operates, any personal property owned by any other party calling for payments in excess of EUR 50,000 annually or under which it is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by it;

(viii) Contract or group of related Contracts with the same party for the purchase or sale of supplies, products or other personal property or for the furnishing or receipt of services which either calls for performance over a period of more than one year (except if such Contracts do not involve a sum in excess of EUR 50,000 annually) or involves a sum in excess of EUR 50,000;

(ix) Contract or group of related Contracts with the same party continuing over a period of more than six months from the date or dates thereof, not terminable by the Company or its Subsidiaries, as the case may be, on 90 days or less notice without penalties or involving more than EUR 50,000;

(x) Contract relating to the distribution, marketing or sales of its products (on a regular basis, such as agency contracts);

(xi) Contracts pursuant to which the Company or its Subsidiaries subcontract work to third parties, involving more than EUR 50,000;

(xii) formal power of attorney;

(xiii) warranty Contract with respect to their services rendered or their products sold, leased or licensed which contains terms and conditions that differ in any Material respect from the standard warranty terms and conditions of the Company and its Subsidiaries;

(xiv) Contract relating to the acquisition or sale of its business (or any Material portion thereof); or

(b) Except as disclosed on Schedule 6.13, to the Knowledge of Sellers (i) no Contract required to be disclosed on Schedule 6.13 has been breached in a Material respect or canceled by the other party, and Sellers have no Knowledge of any anticipated breach by any other party to any Contract set forth on Schedule 6.13, (ii) since December 31, 2003, no Material customer or supplier has indicated in writing to the Sellers that it shall stop or materially decrease the rate of business done with the Company or a Subsidiary or that it desires to renegotiate its Contract with the Company or its Subsidiaries in a Material aspect and with materially detrimental consequences for the Company, (iii) the Company and its Subsidiaries have performed all the Material obligations required to be performed by it in connection with the Material Contracts required to be disclosed on Schedule 6.13 and are not in Material default under or in Material breach of any Material Contract required to be disclosed on the Schedule 6.13, and no event has occurred which with the passage of time or the giving of notice or both would result in a default or breach thereunder, (iv) deleted (vi) each Material Contract is legal, valid, binding, enforceable and in full force and effect, with the exception of any terms and clauses which may not be valid or enforceable under applicable laws, and will continue as such following the consummation of the transactions contemplated hereby, (vii) deleted (viii) neither the Company nor any Subsidiary are a party to any Contract requiring it to purchase goods or services or lease property above or below, as the case may be, prevailing market rates and prices or to sell goods or services below prevailing market rates or below the cost of such goods of services to the Company or such Subsidiaries, and (ix) with regard to any commercial agency agreement and distribution agreement of the Company and its Subsidiaries statutory entitlement for a compensation fee (“Ausgleichsanspruch”) or similar entitlement exist in case of termination of such agreement, and it is explicitly agreed that these will be for the account of the Buyers.

(c) Schedule 6.13 lists the ten largest customers of the Company during the 12-month period ended December 31, 2003.

(d) The Sellers have provided Buyers with a true and correct copy of all written Material Contracts which are required to be disclosed on Schedule 6.13, in each case together

with all Material amendments, waivers or other changes thereto (all of which are disclosed on Schedule 6.13).

(e) To the Knowledge of the Sellers, no Material Contract contains a change of control provision, the implementation of which would have a Material Adverse Effect unless disclosed in Schedules to this Agreement.

6.14 Proprietary Rights

(a) To the Knowledge of the Sellers, Schedule 6.14(a) sets forth a complete and correct list of all of the following that are owned by the Company or any Subsidiary: (i) Material patents and utility models and pending patent and utility model applications; (ii) Material registered trademarks and Material registered service marks, corporate names and Internet domain names. Sellers have delivered to Buyers correct and complete lists of all such Material Proprietary Rights, as listed on Schedule 6.14(a).

(b) To the Knowledge of Sellers (i) the Company or its Subsidiaries own and possess all right, title and interest in and to any of the Proprietary Rights set forth on Schedule 6.14(a), and (ii) the Company or its Subsidiaries have valid and enforceable licenses to use the Proprietary Rights listed on Schedule 6.14(b), pursuant to a written license agreement (for the time, terms and scope described in the respective license agreements) as disclosed in Schedule 6.14(b).

The Material Proprietary Rights listed on Schedule 6.14(a) and 6.14(b) are herein referred to as the “Company Proprietary Rights”.

a. other than the proceedings between SMI and its Affiliates on the one hand and CASAG and its Affiliates on the other hand no action, suit, proceeding, injunction, judgment, hearing or investigation is pending, and Sellers have no Knowledge of any filed claims, that challenge the legality or validity of the Company Proprietary Rights, and which, if successfully pursued against the Company, would affect the validity and enforceability of the Company’s Proprietary Rights.;

b. there are no claims by third Persons that the Company’s or its Subsidiaries’ products or Company Proprietary Rights, as they are developed or manufactured as of the Closing, infringe or violate any patent, intellectual property or other Proprietary Right of any such third Person.

c. other than the claims of Blaha and Krenn, no present or former employee of the Company or the Sellers has made or is making any claim of ownership, in any Company Proprietary Right.

No other representation or warranty is given, and all liability regarding the validity and enforceability of the Company Proprietary Rights is excluded.

6.15 Supplemental Intellectual Property Issues.

Digital, Techno-Consult and Lumitech. Neither Digital-Elektronik Gesellschaft mit beschränkter Haftung, Gartenau-St Leonhard, Austria , Techno-Consult nor Lumitech Holding GmbH, Jennersdorf, nor any of their employees, have ever asserted or claimed and are not now asserting or claiming any ownership or other interest in any of the Company Proprietary Rights to the products.

6.16 Deleted

6.17 Inventory The inventory of the Company and its Subsidiaries consists of raw materials and supplies, manufactured and purchased parts, goods in process, and finished goods, all of which is merchantable and fit for the purpose for which it was procured or manufactured, and none of which is slow-moving, obsolete, damaged, or defective, subject only to the reserve for inventory writedown set forth on the face of the Latest Financial Statements (or in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and its Subsidiaries.

6.18 Litigation; Proceedings To the Knowledge of Sellers, except as set forth on Schedule 6.18 , there are no actions, suits, proceedings (including but not limited to administrative proceedings), orders, judgments, decrees or investigations pending or, to the Sellers’ Knowledge, threatened against or affecting the Company or any Subsidiary, at law or in equity, or before or by any Austrian or other federal, provincial, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, and to the Knowledge of Sellers and the Company and any Subsidiary there is no basis known for any of the foregoing. Neither the Company nor any Subsidiary are subject to any outstanding order, judgment or decree issued by any court or quasi-judicial or administrative agency of any federal, provincial, state, local or foreign jurisdiction or any arbitrator.

6.19 Brokerage (Companies) There are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement payable by or on behalf of the Company and its Subsidiaries.

6.20 Governmental Licenses and Permits Schedule 6.20 contains to the Knowledge of Sellers a complete listing and summary description of all Material permits, licenses, certificates, approvals, certificates of authorization, registrations and other authorizations of Austrian and other federal, provincial, state and local governments, administrations or departments or other similar rights, including, without limitation, any of the foregoing issued by any gaming entity, commission, agency or authority, or any authority that regulates the foregoing, and whether related to CARD or a Subsidiary or any product of CARD or a Subsidiary (collectively, the “Licenses”) owned or possessed by CARD or a Subsidiary or used by CARD or a Subsidiary in the conduct of their business. Except as indicated on Schedule 6.20 the Company, before the transformation, or a Subsidiary owned or possessed all right, title and interest in and to all Licenses which were necessary to conduct their business as presently conducted and it shall be the Buyers’ obligation to maintain all such Licenses and to have them transferred to CARD

(after the transformation and after the change of Company’s shareholders). CARD and its Subsidiaries were in compliance with the terms and conditions of such Licenses. Until the transformation, no loss or expiration of any License was pending , to Sellers’ and the Company’s Knowledge, or threatened or reasonably foreseeable (excluding, however, as a result of the transformation and of the transactions contemplated hereby although, after such transformation, the Company has not received any notice and has no Knowledge that any License is or has been suspended), other than expiration in accordance with the terms thereof, which terms may or may not expire as a result of the consummation of the transactions contemplated hereby (which shall be the risk of the Buyers). Neither the Company nor any Subsidiary has ever had a License conditioned, suspended or revoked.

6.21 Employees Except as set forth on Schedule 6.21, to the Knowledge of Sellers and the Company, no executive, key employee, or group of employees has any plans to terminate employment with the Company or any of its Subsidiaries as a cause of the transactions contemplated hereby. Neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement (“Kollektivvertrag” - except re the Company for the collective bargaining agreement for the white collar trade employees – “Kollektivvertrag der Handelsangestellten”) or any works council agreement (“Betriebsvereinbarung”), nor has any of them experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes. In the business of the Company no labor practice (“betriebliche Übung”) exist which have a Material adverse effect on the business of the Company. Neither the Company nor any of its Subsidiaries has committed any unfair labor practice. The Company does not have a works council (“Betriebsrat”). The works council of CASAG is not competent to represent any of the employees of the Company and has never acted on behalf of the Company’s employees. The Company and its Subsidiaries have complied in all material respects with all applicable laws relating to the employment of personnel and labor, including provisions thereof relating to wages, hours, vacation, overtime, notice, pay in lieu of notice, termination and severance pay obligations, human rights, occupational health and safety, equal opportunity and the payment of social security and other Taxes. Schedule 6.21 sets forth the names, present annual or, as the case may be, hourly rate of compensation (including base salary, bonuses and commissions) and all other Material employment arrangements like any royalty arrangements, fringe benefits, the date of the start of employment and any other (potential) entitlements of the employee like severance payment entitlements (“Abfertigung”), if any, of all persons employed by the Company and its Subsidiaries (including independent contractors) and their job descriptions. Except as set forth on Schedule 6.21, any employees who have been previously employed by CASAG but who provided services to the Company (i) are not entitled to any severance payment, (ii) any pension entitlements accrued until Closing have been fully settled and have been paid in by CASAG into the pension fund of ÖPAG Pensionskassen AG, Vienna and (iii) therefore no claims of employees arising out of or in connection with pension entitlements accrued until Closing exist. For all other employees only severance payments as set out in Schedule 6.21 exist and the aggregate maximum exposure of the Company to accrued pension entitlements as of the Closing Date amounts to EUR 10,000. The Company and its Subsidiaries are not, and, to the Knowledge of Sellers and the Company, none of the employees of the Company or its Subsidiaries are, subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar Contract , in each case relating to, affecting or in conflict with the present or proposed business activities of the Company and its Subsidiaries (other than such Contracts with and in favor of the Company). Except as set forth on Schedule 6.21,

the Company and its Subsidiaries are not party to any employment agreement and there is no agreement for the employment of any other person. Any employment of persons set forth on Schedule 6.21 who have been previously employed by CASAG but who provided services to the Company does not trigger a transfer of employment relationships of employees of CASAG who are not listed on Schedule 6.21. Except as set forth on Schedule 6.21 to the Knowledge of Seller, the Company and its Subsidiaries are not subject to any claim for wrongful dismissal, constructive dismissal or any other claim or complaint, actual or threatened, or any litigation, actual or threatened, relating to employment, discrimination or termination of employment of any employee or former employee of the Company or a Subsidiary.

6.22 Employee Benefit Plans (a) Except as provided by compulsory law or as set forth on Schedule 6.22 (which also contains a list of all entitled employees setting out their respective individual pension entitlements and payments to be made by the Company and its Subsidiaries) the Company and its Subsidiaries neither maintain nor ever have maintained, contribute to nor have ever contributed to, have nor ever have had any obligation to contribute to, nor have nor ever have had any liability or potential liability with respect to any (i) funded or unfunded, registered or unregistered, pension, retirement, superannuation or other employee pension benefit plans or retirement income arrangements (whether or not terminated) (“Employee Pension Plans”); (ii) ongoing or terminated funded or unfunded hospitalization, medical, dental, vision care, health, life, disability, accident or other employee welfare benefit plans (“Employee Welfare Plans”); or (iii) plan, policy, program or arrangement (whether individual or collective, whether or not terminated) which provides deferred compensation benefits, stock purchase, stock option, bonus benefits or compensation, incentive benefits or compensation, severance or salary continuation benefits or compensation, “change of control” benefits or compensation or any program, plan, policy or arrangement which provides any vacation, tuition reimbursement, car allowance, service awards or other fringe benefits (“Other Plans”). The Company and its Subsidiaries do not participate in or contribute to and has never participated in or contributed to any multiemployer plan (“Multiemployer Plan”), nor do the Company and its Subsidiaries have any other liability, including, without limitation, any potential withdrawal liability, with respect to any Multiemployer Plan, and the Company and its Subsidiaries have not incurred any current or potential withdrawal liability as a result of a complete or partial withdrawal (or potential partial withdrawal) from any Multiemployer Plan. Except as set forth on Schedule 6.22, the Company and its Subsidiaries do not maintain or have any obligation to contribute to (or any other liability with respect to) any funded or unfunded Employee Welfare Plan, Multiemployer Plan or Other Plan which provides post-retirement benefits to current or former employees, current or former independent contractors, current or future retirees, their spouses, dependents or beneficiaries. (Any Employee Pension Plan, any Employee Welfare Plan, any Other Plan and any Multiemployer Plan shall be referred to herein collectively as the “Plans”).

(b) All Plans (and related trusts and insurance contracts) comply in form and in operation in all material respects with the requirements of applicable law. All required reports and descriptions with respect to the Plans for which the Companies are responsible have been properly and timely filed with the appropriate government agency, if any, and distributed to participants as required.

(c) The Company and its Subsidiaries have not incurred any Liability to any governmental agency, any Multiemployer Plan or any other Person with respect to any Plan currently or previously maintained by the Company and its Subsidiaries that has not been satisfied in full, and

no condition exists that presents a risk to the Company or any Subsidiary of incurring such a liability.

(d) With respect to each Plan, all contributions which are required to be paid by the Company and its Subsidiaries under the terms of the applicable Plan or bylaws have been made (including all employer contributions and employee salary reduction contributions), all contributions for prior plan years which are not yet due and with respect to the current plan year for the period ending on the Closing Date have been made or accrued in accordance with Austrian GAAP and appear on the Closing Statement. The Sellers do not have any liability (other than Liabilities accruing after the Closing Date) with respect to any of the Plans.

(e) With respect to each of the Plans listed on Schedule 6.22, Sellers have furnished to Buyers true and complete copies of the respective (i) plan documents, summary plan descriptions and summaries of material modifications and other material employee communications, (ii) all related trust agreements, insurance contracts or other funding agreements which implement such plans and (iii) all contracts relating to each such plan, including, without limitation, service provider agreements, insurance contracts, investment management agreements and record keeping agreements.

6.23 Environmental, Health, and Safety Matters (a) The Company, each of its Subsidiaries, and their respective predecessors and Affiliates have complied and are in compliance with all Material Environmental, Health, and Safety Requirements.

(b) Without limiting the generality of the foregoing, the Company, each of its Subsidiaries, and their respective Affiliates have obtained and complied with, and are in compliance with, all material obligations under permits, licenses and other authorizations that are required pursuant to Environmental, Health, and Safety Requirements for the occupation of their facilities and the operation of their business; a list of all such permits, licenses and other authorizations is set forth on Schedule 6.23.

(c) Neither the Company, nor any of its Subsidiaries, nor their respective predecessors or Affiliates has received any written or oral notice, report or other information regarding any actual or alleged violation of Environmental, Health, and Safety Requirements, or any Liabilities or potential Liabilities, including any investigatory, remedial or corrective obligations, relating to any of them or their facilities arising under Environmental, Health, and Safety Requirements.

(d) None of the following exists at any property or facility owned or operated by the Company or its Subsidiaries: (1) underground storage tanks, (2) asbestos-containing material in any form or condition, (3) materials or equipment containing polychlorinated biphenyls, or (4) landfills, surface impoundments, or disposal areas.

(e) Neither the Company, nor any of its Subsidiaries, nor their respective predecessors or Affiliates have treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any substance, including without limitation any hazardous substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to Liabilities,

including any Liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to the applicable Environmental, Health, and Safety Requirements.

(f) To the Sellers’ Knowledge, neither this Agreement nor the consummation of the transaction that is the subject of this Agreement will result in any obligations for site investigation or cleanup, or notification to or consent of government agencies or third parties, pursuant to any of the so-called “transaction-triggered” or “responsible property transfer” Environmental, Health, and Safety Requirements.

(g) Neither the Company, nor any of its Subsidiaries, nor any of their respective predecessors or Affiliates have, either expressly or by operation of law, assumed or undertaken any Liability, including without limitation any obligation for corrective or remedial action, of any other Person relating to Environmental, Health, and Safety Requirements, and neither the Seller nor the Company have received an unfulfilled assessment of correction (“behördliche Auflage”) by any public authority.

(h) To the Knowledge of Sellers, no facts, events or conditions relating to the past or present facilities, properties or operations of the Company, its Subsidiaries, or any of their respective predecessors or Affiliates will prevent, hinder or limit continued compliance with Environmental, Health, and Safety Requirements, give rise to any investigatory, remedial or corrective obligations pursuant to Environmental, Health, and Safety Requirements, or give rise to any other Liabilities pursuant to Environmental, Health, and Safety Requirements, including without limitation any relating to onsite or offsite releases or threatened releases of hazardous materials, substances or wastes, personal injury, property damage or natural resources damage.

6.24 Insurance Schedule 6.24 lists and briefly describes each insurance policy maintained by or on behalf of the Company or its Subsidiaries with respect to their properties, assets and business, together with a claims history for the past five years. It is expressly agreed that Buyers, within 30 days of the Closing, will be exclusively responsible for securing appropriate insurance coverage after the Closing Date and the Sellers shall have no respective duties or liabilities.

6.25 Officers and Directors; Bank Accounts Schedule 6.25 lists all officers and directors of the Company and its Subsidiaries, and all bank accounts, (designating each authorized signatory with respect thereto) and there are no safety deposit boxes and no lock boxes, for the Company and its Subsidiaries.

6.26 Affiliate Transactions Except as disclosed on Schedule 6.26 no officer, director, employee, shareholder, or Affiliate of the Company or any individual related by marriage or adoption to any such individual or any entity in which any such Person owns any beneficial interest (collectively, the “Insiders”), is a party to any Contract or transaction with the Company and its Subsidiaries or which is pertaining to the business of the Company and its Subsidiaries or has any interest in any property, real or personal or mixed, tangible or intangible, used in or pertaining to the business of the Company and its Subsidiaries. Schedule 6.26 hereto describes all intercompany or affiliated services provided to or on behalf of the Company or its Subsidiaries by Sellers or any of their Affiliates and to or on behalf of Sellers and such Affiliates by the Company or its Subsidiaries and all intercompany transactions or Contracts among the Company or its Subsidiaries and Sellers or their Affiliates (including, in each case, the costs charged to the Company or its Subsidiaries) and all intercompany transactions or Contracts among the Company and any Subsidiary. Unless disclosed to the Buyers or SMI, all such intercompany transactions shall comply with arm’s length principles and except as disclosed on Schedule 6.26 or as reflected in the Closing Financial Statements, no claims of Sellers and any of their Affiliates exist against the Company and its Subsidiaries.

6.27 Compliance with Laws To the Sellers’ Knowledge, the Company, its Subsidiaries and their respective officers and directors, when acting on behalf of the Company or its Subsidiaries have complied with all Material applicable laws, regulations and ordinances of Austrian or other federal, provincial, state and local governments and all agencies thereof which are applicable to the business, business practices (including, but not limited to, their marketing, sales and distribution of their products and services) or any owned or leased properties of the Company or any Subsidiary or to which the Company or any Subsidiary may be subject, and no claims have been filed against the Company or any Subsidiary alleging a violation of any such laws or regulations, and the Company and its Subsidiaries have not received notice of any such violations.

6.28 Powers of Attorney; Guarantees Except as set forth on Schedule 6.28 , there are no outstanding formal powers of attorney executed on behalf of the Company or any Subsidiary. Neither the Company nor any Subsidiary are a guarantor or otherwise liable for any indebtedness of any other person, firm or corporation other than endorsements for collection in the Ordinary Course of Business.

6.29 Product Warranties To the Knowledge of Sellers, the Company and its Subsidiaries have not made any warranties with respect to the products or services manufactured, rendered and/or sold by them which contain terms and conditions that differ in any Material respect from those warranties usual in the trade or expressly made in the respective contracts or in the literature accompanying such products; copies of sample documents, which the Company prefers to use but which are not always accepted by customers, are attached hereto as Schedule 6.29.

6.30 Product Liability To the Knowledge of Sellers, neither the Company nor any of its Subsidiaries have any Liability (and there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving rise to any Liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by the Company or any of its Subsidiaries, which would exceed the aggregate of the respective reserves being accrued for such purposes in the Company’s accounts and the insurance coverage which was in place until the Closing Date, if any.

6.31 International Trade Laws and Regulations To the Knowledge of Sellers:

(a) The Company, its Subsidiaries have complied and are in compliance with all International Trade Laws and Regulations applicable to the Company and its Subsidiaries in connection with the conduct of the Company’s and its Subsidiaries’ business .

(b) Neither the Company nor the Subsidiaries are or have been the subject of any civil or criminal investigation, litigation, audit, penalty, proceeding or assessment, liquidated damages proceeding or claim, forfeiture or forfeiture action, claim for additional customs duties or fees, denial orders, suspension of export privileges, governmental sanctions, or any other action, proceeding or claim, in each of the above cases, by any Austrian or other federal, state or local governmental agency involving or otherwise relating to any alleged or actual violation of International Trade Laws and Regulations or relating to any alleged or actual underpayment of customs duties, fees, taxes or other amounts owed pursuant to any International Trade Laws and Regulations, in each case in connection with the conduct of the Company’s and its Subsidiaries’ business, and, to the Knowledge of Sellers and the Company, there is no basis for any of the foregoing.

(c) Neither the Company nor its Subsidiaries have knowingly made or provided any Material false statement or Material omission to any agency of any federal, state or local government, purchaser of products or services, or foreign government or foreign agency, in connection with the importation of merchandise (including the valuation or classification of imported merchandise, the duty treatment of imported merchandise, the eligibility of imported

merchandise for favorable duty rates or other special treatment, country-of-origin marking, or other statements or certificates concerning origin, quota or visa rights) or other approvals required by a foreign government or agency or any other requirement relating to any International Trade Laws and Regulations in connection with the conduct of the Company’s and its Subsidiaries’ business.

(d) Neither the Company nor the Subsidiaries have made any payment, offer, gift, promise to give, or authorized or otherwise participated in, assisted or facilitated any payment or gift that is prohibited by the United States Foreign Corrupt Practices Act or any similar Austrian or European Union law.

(e) Neither the Company nor its Subsidiaries have engaged in or otherwise participated in, assisted or facilitated any transaction that is prohibited by any applicable embargo or related trade restriction imposed by the United States Office of Foreign Assets Control or any other agency of the United States government or any agency of the Austrian government with similar authority or the European Union.

6.32 No Acceleration of Rights or Benefits Neither the Companies nor any Subsidiary have made, nor is any such entity obligated to make, any payment to any Person in connection with the transactions contemplated by the Transaction Documents. No rights or benefits of any Person have been (or will be) accelerated or increased as a result of the consummation of the transactions contemplated by the Transaction Documents.

6.33 Disclosure Neither this Agreement, the other Transaction Documents nor any of the Schedules, attachments or Exhibits hereto, contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein, not misleading, which has a Material Adverse Effect on the Company. In the course of the due diligence process, Sellers have provided to the Buyers’ and SMI’s representatives all information relating to the Company and its Subsidiaries requested by them that would be Material to a purchaser of the Shares. All such information is, to the Knowledge of Sellers in all material respects, true and correct and not misleading and no Material facts have been omitted therefrom that would make such information misleading. There is no fact which has not been disclosed to Buyers or SMI of which Sellers have Knowledge which has a Material Adverse Effect.

6.34 Closing Date All of the representations and warranties of Sellers contained in this Article VI and elsewhere in this Agreement and all information delivered in any Schedule, attachment or Exhibit hereto or in any writing delivered by the Company are true and correct in all material respects on the date of this Agreement which is also the Closing Date, unless explicitly otherwise stated herein or in the Schedules or Annexes hereto.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLERS

Each Seller jointly and severally represents and warrants to Buyers that:

7.1 Authorization of Transactions Sellers have full power, authority and legal capacity to enter into this Agreement and the other Transaction Documents to which Sellers are a

party and to perform their obligations hereunder and thereunder. . The execution, delivery and performance of this Agreement and the other Transaction Documents to which Sellers are a party have been duly and validly authorized by all requisite corporate action on the part of Sellers and no other corporate proceedings on their part are necessary to authorize the execution, delivery or performance of this Agreement. This Agreement constitutes, and each of the other Transaction Documents to which Sellers are a party shall when executed constitute, a valid and binding obligation of Sellers, enforceable in accordance with their terms.

7.2 Absence of Conflicts Neither the execution and delivery of this Agreement and the other Transaction Documents to which Sellers are a party, nor the consummation of the transactions contemplated hereby and thereby, nor the payment of any portion of the Purchase Price shall, with respect to the Sellers, (a) conflict with, result in a breach of any of the provisions of, (b) constitute a default under, (c) result in the violation of, (d) give any third party the right to terminate or to accelerate any obligation under, (e) result in the creation of any Lien upon the Shares owned by Sellers, or (f) require any authorization, consent, approval, execution or other action by or notice to any court or other governmental or regulatory body, the provisions of any License, indenture, mortgage, lease, loan agreement or other agreement or instrument to which Sellers are bound or affected, or any statute, regulation, rule, judgment, order, decree or other restriction of any government, governmental agency or court to which Sellers are subject. No notice to, filing with or authorization, consent or approval of any government, regulatory or governmental agency by Sellers is necessary for the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which Sellers are a party.

7.3 Governmental Authorities and Consents Sellers are not required to submit any notice, report or other filing with any governmental authority in connection with the execution or delivery by them of this Agreement and the other Transaction Documents to which they are a party or the consummation of the transactions contemplated hereby or thereby.

7.4 Brokerage (Seller) There are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Sellers.

7.5 Shares Sellers hold of record and owns legally and beneficially the Shares, and at the Closing, Sellers transfer to Buyers good and marketable title to the Shares, in each case free and clear of any Liens, restrictions on transfer, options, warrants, rights, calls, commitments, proxies or other contract rights. Sellers are not a party to any option, warrant, right, Contract, call, put or other agreement or commitment providing for the disposition or acquisition of any interest in the Company (other than this Agreement). Sellers are not a party to any voting trust, proxy or other agreement or understanding with respect to the voting of the Shares (other than this Agreement).

7.6 Seller Assets At Closing, Sellers do not or will not own or lease or possess any right, title or interest in any Material assets or properties (whether real (immoveable) or personal (moveable), tangible (corporeal) or intangible (incorporeal)), including but not limited to, Proprietary Rights, that are used in either the operation of the Company’s and its Subsidiaries’ business as presently conducted, or with respect to Company’s products in

development or in existence. Except as set forth on Schedule 7.6, Sellers do not provide the Company or a Subsidiary of the Company any services, employees or independent contractors.

7.7 Litigation There are no actions, suits, proceedings or orders pending or, to Sellers’ knowledge, threatened against or affecting Sellers at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would adversely affect Sellers’ performance under this Agreement and the other Transaction Documents to which Sellers are a party or the consummation of the transactions contemplated hereby or thereby.

7.8 Company Transactions Sellers are not a party to or bound by any agreement with respect to a Company Transaction other than this Agreement, and Sellers have terminated all discussions with third parties (other than Buyer) regarding Company Transactions, if any.

7.9 Closing Date All of the Sellers’ representations and warranties contained in this Article VII and elsewhere in this Agreement and all information delivered in any Schedule, attachment or Exhibit hereto or in any writing delivered by Sellers are true and correct in all Material respects on the date of this Agreement which is also the Closing Date.

7.10 Adherence to Securities Laws At all times, Sellers and its Affiliates will adhere to all United States securities laws respecting the common stock (and any transfers thereof) of SMI transferred under this Agreement.

7.11 Accredited Investor CASAG is an “accredited investor,” as defined in Regulation D, promulgated under the Securities Act.

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES OF BUYERS

Each of the Buyers hereby jointly and severally represents and warrants to Sellers that:

8.1 Organization and Corporate Power Each of the Buyers is a limited liability company, duly organized, validly existing and in good standing under the laws of Austria, with full corporate power and authority to enter into this Agreement and the other Transaction Documents to which Buyers are a party and perform its obligations hereunder and thereunder.

8.2 Authorization of Transaction The execution, delivery and performance of this Agreement and the other Transaction Documents to which Buyers are a party have been duly and validly authorized by all requisite corporate action on the part of Buyers and no other corporate proceedings on its part are necessary to authorize the execution, delivery or performance of this Agreement. This Agreement constitutes, and each of the other Transaction Documents to which Buyers are a party shall when executed constitute, valid and binding obligations of Buyers, enforceable in accordance with their terms.

8.3 No Violation Buyers are not subject to or obligated under their certificate of incorporation, their by-laws, any applicable law, or rule or regulation of any governmental authority, or any agreement or instrument, or any license, franchise or permit, or subject to any order, writ, injunction or decree, which would be breached or violated by its execution, delivery or performance of this Agreement and the other Transaction Documents to which they are a party.

8.4 Governmental Authorities and Consents Except for any applicable gaming regulatory authorities, Buyers are not required to submit any notice, report or other filing with any governmental authority in connection with the execution or delivery by it of this Agreement and the other Transaction Documents to which they are a party or the consummation of the transactions contemplated hereby or thereby. .

8.5 Litigation There are no actions, suits, proceedings or orders pending or, to Buyers’ knowledge, threatened against or affecting Buyers at law or in equity, or before or by

any federal, provincial, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would adversely affect Buyers’ performance under this Agreement and the other Transaction Documents to which Buyers are a party or the consummation of the transactions contemplated hereby or thereby.

8.6 SEC Documents and Other Reports SMI has timely filed with the Securities and Exchange Commission all documents required to be filed by it since January 1, 2001 under the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”, and together with the Securities Act, the “SMI SEC Documents”). As of their respective filing dates, the SMI SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, each as in effect on the date so filed, and at the time filed with the SEC none of the SMI SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. To the Knowledge of Buyers, the financial statements of SMI included in the SMI SEC Documents complied as of their respective dates in all material respects with the then applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with US GAAP (except in the case of the unaudited statements, as permitted by Form 10-Q under the Exchange Act) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present in all material respects the consolidated financial position of SMI and its consolidated Subsidiaries as at the dates thereof and the consolidated results of their operations and their consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein). Sellers acknowledge that they are voluntarily accepting the SMI Stock as part of the Purchase Price and without any reliance on any representations (whether by Buyers or any Affiliate of the Buyers, none of which has been made), about SMI or the value of the SMI Stock ,as may be contained in this Section 8.6 . The foregoing sentence shall not reduce or eliminate any indemnification obligations which may be applicable with respect to any other Section in this Article VIII.

8.7 SMI Stock All of the SMI Stock is duly authorized and validly issued; provided that the Sellers have complied with the Sellers’ representations in Section 7.10 and 7.11, is transferred pursuant to a valid exemption from registration under the Securities Act, and is fully paid and non-assessable and free of preemptive or other similar rights. There was no additional stock split or similar measure taken by SMI regarding the SMI shares, following the 3 for 2 stock split of SMI’s common stock which occurred on April 16, 2004. For the avoidance of doubt, notwithstanding the warranties given under this Article 8, no further warranties or representations are made regarding SMI, SMI’s business, or the SMI Stock.

8.8 Brokerage (Buyer) There are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Buyers.

8.9 Taxes

It is hereby agreed that any Taxes incurred by CASAG and/or CAI as partners of the Company for periods (or portions thereof) prior to Closing due to the fact that the Company after Closing is found to have violated applicable Austrian tax law with respect to any tax wise relevant business transaction effected in a period (or portions thereof) after Closing shall be borne by Buyers.

8.10 Closing Date All of the representations and warranties of Buyers contained in this Article VIII and elsewhere in this Agreement and all information delivered in any Schedule, attachment or Exhibit hereto or in any writing delivered by Buyers are true and correct in all material respects on the date of this Agreement which is also the Closing Date.

ARTICLE IX

GENERAL PROVISION REGARDING CLAIMS UNDER THIS AGREEMENT

9.1 Survival

(a) Survival of Representations, Warranties, Covenants and Agreements. All representations, warranties, covenants and agreements set forth in this Agreement, the Transaction Documents or in any writing or certificate delivered in connection with this Agreement shall survive the Closing Date.

Notwithstanding the foregoing, Buyers shall not be entitled to recover for any Loss and Sellers shall not be entitled to recover for any Loss unless written notice of a claim thereof is delivered to the other Party prior to the Applicable Limitation Date, and, in addition, a request for arbitration is filed with the ICC and delivered to the other Party within six months from the Applicable Limitation Date.

For purposes of this Agreement, the term “Applicable Limitation Date” shall mean December 31, 2005; unless explicitly agreed otherwise hereinafter:

(i) with respect to any Loss arising from a breach of the representations and warranties of the Sellers set forth in Section 7.6 (Seller Assets), the Applicable Limitation Date shall mean June 30, 2006;

(ii) with respect to any Loss arising from a breach of the representations and warranties of the Buyers set forth in Section 8.7 (SMI Stock), the Applicable Limitation Date shall mean the sooner of May 12, 2009 or six months after the Sellers shall have sold all the SMI Stock;

(iii) with respect to any Loss arising from a breach of the representations and warranties of the Sellers set forth in Section 6.12 (Taxes), the Applicable Limitation Date shall be six months after the final Tax assessment (which is not and cannot be subject to any review or amendment or reassessment whatsoever, and where there can not be any new or additional assessment) regarding the Company and its respective Subsidiary by the relevant tax authority in the respective jurisdiction with respect to the event which gave rise to such Loss is issued,

(iv) with respect to any Loss arising from a breach of the representations and warranties of the Sellers set forth in Section 6.1 (Organization and Corporate Power), Section 6.2 (Authorization of Transactions) Section 6.4 (Transformation of CARD), Section 7.1 (Authorization of Transaction), or Section 7.2 (Absence of Conflicts) there shall be no Applicable Limitation Date; and

(v) with respect to any Loss arising from a breach of the representations and warranties of Buyers set forth in Section 8.1(Organization and Corporate Power) or Section 8.2 (Authorization of Transaction) there shall be no Applicable Limitation Date.

(b) Special Rule For Fraud. Notwithstanding anything in this Section 9.1 to the contrary, and subject to Section 9.3 below, in the event of any breach of a representation or warranty by a Party that constitutes actual fraud (“List” in the sense of Section 870 of the Austrian Civil Code), such representation or warranty shall survive consummation of the transactions contemplated in this Agreement and continue in full force and effect without any time limitation.

9.2 Claims.

9.2.1 Buyers’ Claims. Subject to the Provisions of Article IX, the Sellers shall jointly and severally indemnify the Buyers, SMI (which shall be entitled to demand payment of Claims on behalf of the Buyers) and permitted (see Clause 11.3) assigns (collectively, the “Buyers Parties”) and hold each of them harmless from and against and pay on behalf of or reimburse such Buyers in respect of any loss, liability, cost, damage, deficiency, Tax, penalty, fine or expense, whether or not arising out of third party claims (including, without limitation, reasonable interest, and, with respect to third person claims, attorneys fees, as provided in Section 9.4.3), (collectively, “Losses” and individually, a “Loss”) which any such Buyers Party suffers from:

(i) the breach of any representation or warranty made by the Sellers contained in Sections VI and VII of this Agreement or any Exhibit or Schedule hereto or thereto; or

(ii) the breach of any covenant or agreement made by the Sellers contained in this Agreement or any Exhibit or Schedule hereto or thereto;

unless, in each case,

(a) Buyers or SMI had Knowledge of such breach of representation or warranty at or prior to the Closing, and

(b) only if and unless stated otherwise herein to the extent that no sufficient reserves or provisions for such purposes were included in the Closing Financial Statements.

9.2.2 Sellers’ Claims.

Subject to the Provisions of Article IX, the Buyers shall jointly and severally indemnify the Sellers and permitted (see Clause 11.3) assigns (collectively, the “Sellers Parties”) and hold each of them harmless from and against and pay on behalf of or reimburse such Sellers in respect of any Loss which any such Sellers Party suffers from:

(i) the breach of any representation or warranty made by the Buyers contained in Sections VIII of this Agreement or any Exhibit or Schedule hereto or thereto; or

(i) the breach of any covenant or agreement made by the Buyers contained in this Agreement or any Exhibit or Schedule hereto or thereto;

unless, in each case, Sellers had Knowledge of such breach of representation or warranty at or prior to the Closing.

9.3 Limitations on Claims. The claims provided for in Sections 9.1 and 9.2 above are subject to the following limitations:

9.3.1 No Party will be liable hereunder with respect to claims referred to in Section 9.2 above unless the other Party gives prior written notice of a claim or a potential claim prior to the Applicable Limitation Date, so as to allow the other Party to minimize the Loss.

Notwithstanding any implication to the contrary contained in this Agreement, so long as a Party (x) so delivers written notice of a claim and (y) files an arbitral action with the ICC with six months from the Applicable Limitation Date and (z) serves the request for arbitration on the other Parties within six months from the Applicable Limitation Date, the other Party shall be required to compensate as provided in and within the limitations of Article IX hereof, for all Losses and within the limitations so claimed by the Party requesting the indemnification.

9.3.2 The Sellers shall not be liable for any claim arising out of or in connection with this Agreement, including, without limitation, for any Loss arising under Clause 9.2.1 above, unless, except otherwise provided below, the amount of the Loss exceeds EUR 50,000 (fifty thousand Euros) individually (the “De Minimis”) or EUR 250,000 (two hundred and fifty thousand Euros) in the aggregate (the “Basket”), in which case the Sellers shall be liable for all such Losses (provided that the amount of these exceed EUR 50,000) the total of which exceed the Basket; further provided that once the Basket is achieved from all Losses (except De Minimis losses), there shall no longer be any De Minimis or Basket;

The Basket limitation and the De Minimis limitation shall not apply with respect to any Loss arising from a breach of the representations and warranties of the Sellers set forth in Section 6.1 (Organization), Section6.2 (Authorization of Transactions), Section 6.3 (Capitalization), Section 6.4 (Transformation of CARD), Section 6.12 (Taxes) and Sections 7.1 through 7.3 and Section 7.6.

The De Minimis amounts and the Basket amounts for each of Section 6.7 (Financial Statements) and Section 6.8 (Undisclosed Liabilities) shall be EUR 10,000 and EUR 100,000, respectively.

9.3.3 The Buyers shall not be liable for any claim arising out of or in connection with the Transaction Documents, including, without limitation, for any Loss arising under Clause 9.2.2 above, unless the amount of such Losses exceeds EUR 50,000 individually (the “De Minimis”) or EUR 250,000 in the aggregate (the “Basket”), in which case the Buyers shall be liable for all such Losses (provided that the amount of these exceed EUR 50,000) the total of which exceed the Basket; further provided that once the Basket is achieved from all Losses (except De Minimis losses), there shall no longer be any De Minimis or Basket;

The Basket limitation and the De Minimis limitation shall not apply with respect to any Loss arising from or related to a breach of the representations and warranties of the Buyers set forth in Section 8.2 (Authorization of Transaction) or Section 8.7 (SMI Shares);

9.3.4 The aggregate liability of each of the respective Sellers for all such Losses and for any and all claims out of or in connection with this Agreement shall not exceed 50% (fifty per cent) of the Limited KG Payment (Cash and Stock) in case of CASAG and of the Unlimited KG Payment

in case of CAI, which, in each case, was actually received by the respective Seller; however, there shall be no limit on the aggregate liability for a breach of Sellers’ representation under Section 6.1 (Organization), Section 6.2 (Authorization of Transactions), Section 6.3 (Capitalization), Section 6.4 (Transformation of CARD), Section 6.12 (Taxes) and Sections 7.1 through 7.3 and Section 7.6.

As a sub-threshold within such 50% threshold, in no event shall the aggregate liability of CASAG for all Losses arising out of or in connection with Proprietary Rights, including, without limitation, under Sections 6.14 and 6.15 hereof, exceed EUR 4,000.000 (four million Euros).

9.3.5 The Buyers’ aggregate liability for all such Losses and for any and all claims out of or in connection with this Agreement, other than the Purchase Price, shall not exceed EUR 4,000.000 (four million Euros); however, there shall be no limit for the aggregate liability of Buyers for a breach of Buyers’ representations under Section 8.2 (Authorization of Transaction), and there shall be a limit for the aggregate liability of Buyers in the amount of EUR 15,813,000 (fifteen million eight hundred thirteen thousand Euros) for a breach of Buyers representations under Section 8.7 (SMI Shares).

9.4 Procedure.

9.4.1 No Party shall raise a claim under this Agreement, unless such party (the “Compensated Party”) shall have promptly (no later than 10 business days) given written notice to the other Party(ies) (the “Compensating Party”) after receiving written notice of any action, lawsuit, proceeding, investigation or other claim against it (if by a third person) or discovering the potential liability, obligation or facts giving rise to such potential claim for compensation, describing, if and as known, the claim, the amount thereof (if known and quantifiable) and the basis thereof; failure to so notify the Compensating Party within six weeks after the Compensated Party has obtained knowledge of the relevant circumstances shall relieve the Compensating Party of its Liabilities hereunder, to the extent that the Compensating Party is actually prejudiced.

9.4.2 Sellers shall, at their own expense, assume the defense of any such suit, action or proceeding, provided that (i) the Sellers’ counsel is reasonably acceptable to the Buyers, (ii) the Sellers shall thereafter consult with the Buyers upon the Buyers’ reasonable request for such consultation from time to time, and Buyers shall be entitled to participate at their own expense with respect to such suit, action or proceeding and (iii) the Sellers shall not, without the Buyers’ consent, agree to any settlement (provided that no Party shall be obligated to accept a settlement that contains an admission of fraud) provided that if Sellers would be prepared to accept a settlement and to pay out of the settlement for periods prior to Closing and Buyers refuse their consent to the settlement, Sellers shall, provided they first pay to Buyers the proposed settlement amount, be free of their respective payment obligation under the respective representation and warranty, and Buyers shall solely be responsible for the continuation and handling (including without limitation the ultimate payment of any such claim). If the ultimate resolution by the Buyers of said claim results in the Buyers paying less than the settlement amount previously paid by Sellers to Buyers, Buyers shall promptly refund the excess amount to Sellers, but only after deduction of 100% of any unreimbursed attorneys fees, expert fees and court fees.

Participation of the Compensating Party in the defense of any claim shall not be deemed an acknowledgement of any obligation to indemnify the Compensated Party, and shall not constitute a waiver of any defenses which the Compensating Party may have against any claim for indemnification raised by the Compensated Party.

9.4.3 Except as otherwise provided herein, 30% of all reasonable attorneys fees, expert fees and court costs of such defense against such claims shall be reimbursed by CASAG and 70% shall be borne by the Company or Buyers, as the case may be; provided, however, that with respect to the representations and warranties of the Sellers contained in Sections 6.2, 6.12, and 7.2 the Indemnifying Party (i.e., the Sellers) shall pay and be responsible for 100% of the attorneys fees, expert fees and court cost).

9.4.4 In proceedings between the Sellers and the Buyers or SMI, the arbitral tribunal shall decide of the allocation of the costs and fees among the parties to the dispute.

9.5 Offset.

Notwithstanding any other provision contained in this Agreement, any Loss which any of the Parties suffers, sustains or becomes subject to and with respect to which such Party is entitled to indemnification from the respective other Party pursuant to this Article IX may, at the option of such Party, be satisfied (to the extent of such offset) by setting off all or any portion of such Losses against any amounts which such Party owes to the respective other Party.

9.6 Payment of Claims by Sellers.

Sellers shall be entitled to fulfill any obligation under this Agreement to any of the Buyers or SMI by delivering to SMI such number of shares of SMI common stock valued at the average closing price of SMI’s common stock during the 10 (ten) trading days prior to the third New York business day prior to the due date of such payment (the “Compensation Price”). The conversion rate for any Euro obligation thereunder shall be 1 Euro equals $1.2289. Thus, for example, if an obligation of 100 Euros shall be paid, the Sellers may deliver SMI Stock, based on the Compensation Price, with a value of $122.89.

The Parties agree that they will take all necessary and appropriate actions in order to avoid an unlawful repayment of equity and holding of parent shares.

9.7 No Rescission Rights or Similar Rights

9.7.1 The Buyers and the Sellers shall not be entitled to challenge, rescind or terminate this Agreement, in whole or in part, in particular based on any warranty claims and no Party shall be entitled to challenge, rescind or terminate this Agreement based on error, or for any similar reason.

9.7.2 No warranties are given other than those contained in Articles VI, VII and VIII, and these shall not constitute guaranties (i.e., no “echte oder unechte” “Garantien”). None of the representations and warranties given by the Sellers under this Agreement constitute and the Sellers do not make any representation, express or implied, with respect to the inherent value of the Company or the present or future performance for the Company or its Affiliates. None of the

representations and warranties given by the Buyers under this Agreement constitute and neither Buyers nor its Affiliates make any representation, express or implied, with respect to the inherent value of the Buyers or SMI or the present or future performance of the Buyers or SMI.

9.7.3 The remedies agreed in Section 9.2 shall be the sole and exclusive remedies for a Party for or in connection with any of the matters described in and breaches of any of the representations and warranties made in Articles VI, VII and VIII. Without limiting the generality of the foregoing, under no circumstances shall any of the Parties be entitled to loss of earnings or profits, diminution in value, indirect or consequential losses, damages and costs, or punitive damages.

9.7.4 Deleted .

9.7.5 Section 924 of the Austrian General Civil Code shall not apply.

9.7.6 Disclosures made against one representation and warranty in this Agreement in any of the Schedules or Exhibits hereto or thereto shall be deemed made against all and any representations and warranties herein.

9.7.7 Facts which constitute violations of more than one representation or warranty given by Sellers or Buyers shall not result in a double counting of warranty claims. To the extent a violation of representations and warranties has Tax implications, the De Minimis and Basket for Tax representations and Warranties (i.e., zero and zero) shall always apply. In all other situations where more than one representation and warranty is violated by the same set of facts, the De Minimis and the Basket for such representation shall apply, which is the “lex specialis” (i.e., the more specific rule).

ARTICLE X
ADDITIONAL AGREEMENTS

10.1 General In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request, all at the sole, actual cost and out of pocket expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under Article IX). The Sellers acknowledge and agree that from and after the Closing, the Company will be entitled to possession of all documents, books, records (including Tax records), agreements, and financial data of any sort relating to the Company and its Subsidiaries.

10.2 Litigation Support In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Company or any of its Subsidiaries, each of the other Parties will cooperate with it and its counsel in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense,

all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefore under Article IX.

10.3 Tax Matters.

10.3.1 Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such taxes and fees (including any penalties and interest thereon) incurred in connection with this Agreement (for the avoidance of doubt, with the exclusion of Sellers’ income taxes, if any) shall be paid by Buyers when due, and Buyers shall, at their own expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees, and if required by applicable law, Sellers shall, and shall cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.

10.3.2 Cooperation on Tax Matters. Buyers and Sellers shall cooperate fully and Sellers (for periods prior to Closing) and Buyers (for periods after the Closing) shall cause the Company and its Subsidiaries as and to the extent reasonably requested by any other Party, in connection with the preparation and filing of Tax Returns and the taxwise handling of Tax issues relating to periods prior to Closing but affecting periods thereafter of the Company and its Subsidiaries and any audit, litigation or other proceeding with respect to Taxes of the Company and its Subsidiaries. Such cooperation shall include the retention and (upon any such Party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Sellers shall agree:

(i) to retain all of Seller’s books and records with respect to Tax matters and pertinent to the Company relating to any taxable period beginning before the Closing Date until the expiration of the period during which the relevant tax authority may assess or reassess elements relating to the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority;

(ii) to specifically assist and support Buyers as reasonably requested to fulfill Company’s obligation to prepare the Company’s Tax Return 2004 as required pursuant to sec 188 Federal Fiscal Code (Bundesabgabenordnung); this includes but is not limited to assistance and support to:

(a) accurately determine each of Seller’s and Buyer’s tax relevant profit share in the Company for Company’s Fiscal Year 2004 which profit shares shall be calculated based upon a tax relevant Closing Financial Statements and Closing Profit and Loss Account considering the Closing Date and

(b) to determine Seller’s tax relevant taxable capital gain achieved through the sale of KG Shares at closing; and

(c) to specifically assist and support Buyers as reasonably requested to determine Buyers’ tax wise cost of acquisition of each of the Company’s assets and liabilities acquired through the consummation of this Agreement, such assistance and support including but not limited to the provision of such information and data that allows the Buyer to exactly determine the assets and liabilities acquired at closing so that Buyer can

accurately capitalize for tax purposes all of these assets and liabilities on a per item basis at closing.

10.3.3 Tax Audits.

At Sellers’ option and own expense Sellers are permitted to assume the conduct of any tax audit relating to the Company and/or its Subsidiaries insofar such tax audits cover the periods ending on or prior to December 31, 2003 (or in case of the New Zealand Subsidiary periods ending on or prior to March 31, 2004). If Sellers assume the conduct of any tax audit as mentioned in the presecing sentence, Sellers shall have the right to employ counsel separate from counsel employed by the Buyers in any such tax audit provided that (i) the Sellers’ counsel is reasonably acceptable to the Buyers, (ii) the Sellers shall thereafter consult with the Buyers upon the Buyers’ reasonable request for such consultation from time to time with respect to such tax audit and (iii) the Sellers shall not, without the Buyers’ consent, agree to any settlement with respect to any Tax.

In case the Sellers assume the conduct of any tax audit Buyers shall be entitled at their own expense to participate in any such tax audit, including but not limited to participation in any meeting with the tax auditors, up front coordination regarding any correspondence with the tax auditors and, as reasonably requested by Buyers, participation in any preparatory meeting by the Sellers to develop an appropriate tax audit strategy. For the purpose of the aforesaid Buyers shall be entitled to employ counsel, separate from the counsel employed by the Sellers.

10. 3.4 Tax Controversies. Buyers shall give prompt notice to the Sellers of the assertion of any claim, or the commencement of any suit, action or proceeding with respect to any Tax liability of the Company for which Sellers are responsible under Section 6.12 (by application of Section IX and shall give the Sellers such information with respect thereto as the Sellers may reasonably request.

At Sellers’ option and at their own expense Sellers shall be permitted to assume the defense of any such suit, action or proceeding, provided that (i) the Sellers’ counsel is reasonably acceptable to the Buyers, (ii) the Sellers shall thereafter consult with the Buyers upon the Buyers’ reasonable request for such consultation from time to time with respect to such suit, action or proceeding and (iii) Buyers shall always have the right to participate in the defense, and (iv) the Sellers shall not, without the Buyers’ consent, agree to any settlement with respect to any Tax.

If Sellers’ conduct the defense and propose a settlement which is acceptable by the competent tax office in charge of the proceeding and the Buyers fail to consent to such proposed settlement (but provided that no Party shall be obligated to accept a settlement that contains an admission of fraud), the Buyers’ claims for Indemnification against the Sellers shall be limited to the claims which the Buyers would have had, had the settlement been accepted by the Buyers, provided that Sellers first pay the Buyer the proposed settlement amount.

In the event that the Sellers do not assume the defense or, after having assumed the defense, fail to timely undertake the defense of any Tax claim under Section 6.12, then Buyers shall have the right to defend and settle any such Tax claim in their sole and reasonable discretion and Sellers

shall be solely liable for any Tax assessed or settlement including without limitation reasonable attorneys fees, expert fees and court costs pursuant to Sellers indemnification obligation under section 9.2.1.

10.4 Press Releases and Announcements At and prior to the Closing Date, no press releases related to this Agreement and the transactions contemplated herein, or other announcements to the employees, customers or suppliers of the Company shall be issued without the mutual approval of all Parties, except for any public disclosure which is required of a Party by law or regulation. During the first sixteen days after the Closing Date, no press releases related to this Agreement and the transactions contemplated herein, or other announcements to the employees, customers or suppliers of the Company, shall be issued without Buyers’ prior written consent.

10.5 Further Transfers Each Party shall do such additional acts, and shall execute and deliver such further documents and instruments of conveyance and transfer and take such additional action as the respective other Party may reasonably request to effect, consummate, confirm or evidence the transfer to the Buyers of the Shares and the payment to the Sellers of the Purchase Price and any other transactions contemplated or intended hereby.

10.6 Deleted

10.7 Expenses. Except as otherwise provided herein, the Sellers and the Buyers shall pay all of their own fees, costs and expenses (including, without limitation, fees, costs and expenses of legal counsel, investment bankers, accountants, brokers or other representatives and consultants and appraisal fees, costs and expenses) incurred in connection with the negotiation of the Letter of Intent, this Agreement, the other Transaction Documents, the performance of their obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby; it being understood that the Company shall pay the fees, costs and expenses of the Company (including without limitation its legal and accounting fees, costs and expenses up to an amount of EUR 25,000 (twenty five thousand Euros) as well as any Taxes) and that the Company shall not pay any of Sellers’ fees, costs and expenses (including, without limitation, Sellers’ legal and accounting fees, costs and expenses) arising in connection with the transactions contemplated hereby if the transactions are consummated.

10.8 Confidentiality.

10.8.1 Confidential Information. Each Party shall treat and hold as confidential any information concerning the business and affairs of the other Party and its Subsidiaries that is not already generally available to the public (the “Confidential Information”), refrain from using any of the Confidential Information except in connection with this Agreement. In the event that any Party or any Affiliate of any Party is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, such notifying Party shall notify the respective other Party promptly of the request or requirement so that the other Party may seek an appropriate protective order or waive compliance with the provisions of this Section

If, in the absence of a protective order or the receipt of a waiver hereunder, the notifying Party is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, the notifying Party may disclose the Confidential Information to the respective court, authority, tribunal, etc; provided that such disclosing party shall use its best efforts to obtain, at the request of the respective other Party, an order or other assurance that confidential treatment shall be accorded to such portion of the Confidential Information required to be disclosed as the other Party shall designate. Notwithstanding the foregoing, any Party shall be entitled to disclose and confidential information, as required by applicable law, regulation or regulatory entity.

10.8.2 Non-disclosure. The Parties shall keep confidential the subject matter described herein and the fact that negotiations were taking place until the content and timing of a public announcement are mutually agreed or until the Closing, whichever is earlier, and, in such case only pursuant to Section 10.8.2 except if otherwise required by applicable law, statute, regulation of regulatory entity.

10.9 Protection of Business The Sellers shall not in any manner take any action which is designed or intended to have the effect of discouraging customers, suppliers, vendors, service providers, employees, lessors, licensors and other business relations from maintaining the same business relationships with the Company after the date of this Agreement and after the Closing Date, provided that nothing contained herein shall be construed to restrain any of the Sellers in any way in the operation of its core business areas, including in particular the operation of casinos. This obligation shall terminate on March 31, 2009.

10.10 Covenant Not to Compete For a period of five years from and after the Closing Date, neither Sellers nor its subsidiaries will engage directly or indirectly in any area of the world in the business that the Buyers, the Companies or any of their Subsidiaries conduct as of the Closing Date, limited, however, to the design, manufacture, sale or leasing of automatic card shuffling machines or roulette chip sorting machines; provided, however, that no owner of less than 5% of the outstanding stock of any publicly-traded corporation shall be deemed to engage solely by reason thereof in any of its businesses, provided further that Sellers shall in no way be prevented from purchasing or leasing from any third person any product similar to those of the Company, for use in casinos co-owned or co-operated by Sellers. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 10.10 is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

If, for any reason, Sellers breach the 5 years non-compete period, or if such period is shortened by any court or administrative ruling, then Sellers agree to return and refund to SMI or the Company (as the case may be) any refunds or rebates which any Seller or its Affiliates received as a result of any supply arrangement between Buyers and/or its Affiliates and Sellers and/or its Affiliates (i.e. any refunds or rebates).

10.11 Settlement of Mutual Claims

Any and all pending and non-pending claims, court cases and arbitral proceedings, between SMI and/or any of SMI’s Affiliates on the one hand and CASAG and/or any of CASAG’s Affiliates and/or the Company or its Subsidiaries on the other hand, including, in particular, those proceedings listed on Schedule 10.11 (the “Proceedings”), are herewith settled by mutual agreement and no Party, as well as any Party’s and its Affiliates and assigns, shall have any further claims against the respective other party to any of these Proceedings, irrespective of whether or not such rights or claims were subject to or alleged in the Proceedings.

The Parties as well as SMI and its Affiliates and assigns shall promptly take any necessary steps to have all pending actions, petitions, complaints, challenges to patents, etc. withdrawn, to have all Proceedings formally closed and to have all court orders, judgments, injunctions, etc. vacated and to have all security bonds or similar deposits repaid to such party to the Proceedings who deposited them. Each party to the Proceedings shall bear its own costs, attorneys fees and other expenses incurred in the past or future, including any costs, attorneys fees or other expenses, if any, which shall become payable in the process of closing the Proceedings. Any expert fees shall be paid by the party to the Proceedings who requested the appointment of such expert. To the extent that rulings, decrees, awards, etc. have been issued on or before the Closing or shall be issued after the Closing (including, in particular, rulings ordering one party to the Proceedings to pay any amount to another party, or to refrain from or carry out any acts), the Parties will take all required steps to have such decrees vacated; if this should not be possible, the party to the Proceedings who is entitled under such decrees shall not make use of them (in particular, by demanding enforcement or other compliance with such decrees).

10.12 Corporate Names

In addition to the transfer of any and all rights in the expression “CARD”, if any, the Sellers expressly consent that the Company and its Subsidiaries are entitled to bear the term “CARD” as part of their respective corporate names, for an unlimited term (“Zustimmung zur Firmenfortführung”). The Buyers covenant and agree that they will take all necessary corporate actions and will make all necessary filings, and will cause the Company to do the same, to effect that the combination of the words “Casinos Austria”, “Austrian Casinos” (or any confusingly similar expressions or translations or any other names, marks, logos et cetera, used by any of the Sellers or their Affiliates, whether registered or not) (hereinafter the “Protected Names”) will be removed from all corporate names of the Company and its Subsidiaries, at the latest three months after the Closing.

Furthermore, the Buyers undertake and agree that as (a) from the Closing, they will cause the Company to discontinue the usage of and will refrain from using the Protected Names in any context and for any purposes whatsoever, and (b) that the Buyers and their Affiliates, including in particular, SMI and its Affiliates, will at all times (before or after the Closing) refrain from using any of the Protected Names for any purpose whatsoever, and (c) that any forms, advertising materials, price lists, or other documents, objects or items of the Company

or its Subsidiaries on which the Protected Names appear, shall be destroyed within fifteen business days after the Closing and (d) that the Company, the Subsidiaries nor SMI or any Affiliates of SMI will take any step or omission which would create the impression to any third party that the Company or the Subsidiaries or SMI or any of SMI’ Affiliates is associated with any of the Sellers or, in particular, that any of the Sellers is liable for any obligations of any of these companies.

10.13 Compliance Each Party acknowledges that each Party: (a) operates under privileged licenses in a highly regulated industry; and (b) maintains a compliance program to (i) protect and preserve its name, reputation, integrity, and good will through a thorough review and determination of its integrity and fitness, both initially and thereafter, of any person or company that performs work for either Party or with which those companies are otherwise associated, and (ii) to monitor compliance with the requirements established by gaming regulatory authorities or authorities that regulate the gaming industry in various jurisdictions around the world. Each Party shall cooperate with the other Party and its compliance committee as reasonably requested and provide the relevant committee with such information as it may reasonably request on appropriate notice.

ARTICLE XI

MISCELLANEOUS

11.1 Amendment and Waiver This Agreement may be amended and any provision of this Agreement may be waived, provided that any such amendment or waiver shall be binding upon a Party only if such amendment or waiver is set forth in a writing executed by the Buyers and the Sellers. No course of dealing between or among any persons having any interest in this Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or Liabilities of any Party under or by reason of this Agreement.

11.2 Notices All notices, demands and other communications given or delivered under this Agreement shall be in writing and shall be deemed to have been given when personally delivered, or delivered by express courier service or telecopied (with confirmation of receipt and hard copy by courier to follow). Notices, demands and communications to the Sellers shall be sent to the address or telecopy number of the Sellers at the address or telecopy number indicated below, unless another address or telecopy for the Sellers is specified in writing and shall be deemed received by both Sellers if received by CASAG, and notices, demands and communications to the Company and the Buyers shall, unless another address is specified in writing, be sent to the address or telecopy number indicated below, and shall be deemed received by both Buyers and the Company if received by SMI:

Notices to the Sellers:

	Casinos Austria Aktiengesellschaft
	Dr. Karl Lueger Ring 14
	1015 Vienna, Austria
	Attention:	Managing Board (“Vorstand”)
	Telecopy:	+43-1-53440 515


		CAI Casinoinvest Middle East GmbH
		Dr. Karl Lueger Ring 14
		1015 Vienna, Austria
		Attention:	Managing Directors (“Geschäftsführung”)
		Telecopy:	+43-1-53440 515

with copies to:

	Fiebinger, Polak, Leon & Partner
	Am Getreidemarkt 1
	1060 Vienna, Austria

	Attention:	Peter M. Polak
	Telecopy:	+43-1-582 582

Notices to the Buyers:

	Shuffle Master Management–Service GmbH
	1106 Palms Airport Drive
	Las Vegas, Nevada 89119
	Attention: Jerome R. Smith, General Counsel
	Telecopy:	+001-702-270-5161

	Shuffle Master GmbH
	1106 Palms Airport Drive
	Las Vegas, Nevada 89119
	Attention: Jerome R. Smith, General Counsel
	Telecopy:	+001-702-270-5161

with copies to:

	Shuffle Master, Inc.
	1106 Palms Airport Drive
	Las Vegas, Nevada 89119
	Attention: Jerome R. Smith, Senior Vice President and General Counsel
	Telecopy:	+001-702-270-5161	Kirkland & Ellis LLP
	200 East Randolph Drive
	Chicago, IL 60601
	Attention: Keith S. Crow, P.C.
	Telecopy: (312) 861-2200

11.3 Binding Agreement; Assignment This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the Buyers and the Sellers, which approval shall be at the sole and free discretion of the Party asked for such approval; provided, however, that the Sellers shall be obligated to agree to the assignment by Buyers of all or part of their rights, interests and obligations hereunder to one of their Affiliates (the “Designated Affiliate”) if and

provided that prior to such assignment (i) both the Buyers and the Designated Affiliate confirm to and agree with the Sellers in writing that each of the Buyers and the Designated Affiliate shall be jointly and severally liable to each of the Sellers for all and any obligations out of or in connection with any of the Transaction Documents; and (ii) the Designated Affiliate has counter-signed this Agreement, in particular, the arbitration clause (see Section 11.12 hereof) and (iii) so that any arbitral award thereunder, if any, will be enforceable against the Designated Affiliate and its assets.

11.4 Severability Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement. Any arbitrator or court shall be authorized by the Parties to reform and “blue pencil” this Agreement in the least way necessary in order to make it enforceable and consistent, to the maximum extent possible, with the original intent of the Parties.

11.5 No Partnership, Joint Venture or Fiduciary Relationship This Agreement does not create and shall not be deemed to create any partnership, joint venture, fiduciary relationship, or trust relationship, of any kind, express or implied by or between the Buyers (including the Buyers’s parent, SMI), on the one hand, and the Sellers, on the other hand. The only legal relationship between the Buyers (including the Buyers’s parent, SMI), on the one hand, and the Sellers, on the other hand, shall be contractual, consistent with and pursuant to this Agreement. The Parties expressly waive any presumptions to the contrary which might exist or be implied.

11.6 Construction The language used in this Agreement shall be deemed to be the language jointly chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any person. The inclusion or deletion of various provisions in prior drafts of this Agreement shall not be admissions, express or implied, by or against any Party and shall not be indicative of any intent of any Party. All Schedules and Exhibits hereto and all documents attached to the Schedules and Exhibits hereto shall be deemed read, understood and acknowledged by each of the Parties and Knowledge of the Buyers, even if they are not written in English.

11.7 Captions The captions used in this Agreement are for convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize or in any way affect any provision of this Agreement, and all provisions of this Agreement shall be enforced and construed as if no caption had been used in this Agreement.

11.8 Entire Agreement The Schedules identified in this Agreement are incorporated herein by reference. This Agreement and the documents referred to herein contain the entire agreement between the Parties and supersede any prior understandings, agreements, draft

versions of this Agreement, or representations by or between the Parties, written or oral, which may have related to the subject matter hereof in any way, including, without limitation, the Letter of Intent.

11.9 Counterparts This Agreement may be executed in four counterparts, one for each Party.

11.10 Governing Law All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the laws of Austria applicable therein, without giving effect to any choice of law or conflict of law provision (whether of Austria or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than Austria. The application of the United Nations Convention on Contracts for the International Sale of Goods is specifically excluded by the Parties.

11.11 Parties in Interest Nothing in this Agreement, express or implied, is intended to confer on any person other than the Parties and their respective successors and assigns any rights or remedies under or by virtue of this Agreement.

11.12 Arbitration (a) All disputes, controversies, or claims arising under or relating to this Agreement, however with the exclusion of the Transaction Documents (other than this Agreement), or any breach or threatened breach of this Agreement or violation, termination or nullity of this Agreement (“Arbitrable Dispute”), shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules.

(b) As more than two persons are party to this Agreement, it is expressly stipulated that more than one claimant and/or more than one defendant are permitted. For the purpose of the nomination of arbitrators, there is deemed to be only one claimant party and one defendant party, regardless of whether multiple parties appear.

(c) All such arbitration proceedings shall take place in London, United Kingdom. The language of the arbitration shall be the English language.

11.13 Deleted

11.14 Deleted

11.15 Currency To the extent that an amount in any currency is required from time to time to be converted into another currency pursuant to this Agreement or any other Transaction Document and except as otherwise expressly set forth herein, such conversion shall be made using the Euro foreign exchange reference rates as published by the European Central Bank (these reference rates are based on the regular daily concertation procedure between central banks within and outside the European System of Central Banks, which normally takes place at 2.15 p.m. ECB time (CET). The reference exchange rates are published by ECB both by

electronic market information providers and on the ECB’s website shortly after the concertation procedure has been completed). For those currencies for which the European Central Bank does not or ceases to publish any such reference rates, such conversion shall be made by using the Currency exchange rates published by the Financial Times, London, on its web-site (presently: www.marketprices.ft.com/markets/currencies/ab ) for each currency, on the end of the London business day preceding the date of such calculation (unless otherwise stated herein).

11.16 Governing Language. English shall be the governing language of this Agreement.

IN WITNESS WHEREOF, the Parties have executed this Purchase Agreement as of the date first written above.

CASINOS AUSTRIA AKTIENGESELLSCHAFT (“CASAG”)

/s/
By:			Peter Pollak
Its:			Im Vollmachtsnamen


CAI CASINOINVEST MIDDLE EAST GMBH (“CAI”)

/s/
By:	Peter Pollak
Its:	Im Vollmachtsnamen


SHUFFLE MASTER MANAGEMENT-SERVICE GMBH (“SHFMMS”)

/s/
By:			Rene Schneider
Its:			Im Vollmachtsnamen


SHUFFLE MASTER GMBH (“SHFM”)

/s/
By:		Rene Schneider
Its:		Im Vollmachtsnamen

EX-10.2 4 a04-6489_1ex10d2.htm EX-10.2

Exhibit 10.2

EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT

Dated as of May 13, 2004

by and between

SHUFFLE MASTER, INC.

and

CASINOS AUSTRIA AG

TABLE OF CONTENTS

1.	Definitions.

2.	Shelf Registration.

3.	Liquidated Damages.

4.	Registration Procedures.

5.	Registration Expenses.

6.	Indemnification.

7.	Rules 144 and 144A.

8.	Underwritten Registrations.

9.	Miscellaneous.

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is dated as of May 13, 2004, by and between Shuffle Master, Inc., a Minnesota corporation (the “Company”), and Casinos Austria AG (“Initial Shareholder”).

This Agreement is entered into in connection with the Stock Purchase Agreement dated May 13, 2004 (the “Stock Purchase Agreement”) by and between Shuffle Master Management-Service GmbH and Shuffle Master GmbH, on the one hand, and Casinos Austria Aktiengesellschaft and CAI Casinovest Middle East GmbH, on the other hand, which provides for the acquisition of CARD Casinos Austria Research and Development GmbH & Co. KG (“CARD”) by the Company and, among other transactions, provides for the issuance by the Company to the Initial Shareholder of 767,076 shares of common stock, par value $.01 per share, of the Company (the “Shares”), together with the rights evidenced by such Shares to the extent provided for in the Shareholder Rights Agreement dated as of June 26, 1998 between the Company and Norwest Bank Minnesota, N.A., as Rights Agent.

In order to induce the Initial Shareholder to enter into the Stock Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Shareholder and subsequent holders of the Shares as provided herein. The execution and delivery of this Agreement is a condition to the Initial Shareholder’s obligation to acquire the Shares pursuant to the Stock Purchase Agreement.

The parties hereto hereby agree as follows:

1. Definitions. As used in this Agreement, the following terms shall have the following meanings:

“Agreement”: See the first introductory paragraph hereto.

“Amendment Effectiveness Deadline Date”: See Section 2(d)(i) hereof.

“Business Day”: Any day that is not a Saturday, Sunday or a day on which banking institutions in the City of New York are authorized or required by law or executive order to be closed.

“CARD”: See the second introductory paragraph hereto.

“Closing Date”: May 13, 2004.

“Company”: See the first introductory paragraph hereto.

“Controlling Person”: See Section 6 hereof.

“Deferral Period”: See Section 3(b) hereof.

“Designated Counsel”: One nationally recognized firm of counsel experienced in securities laws matters chosen by the Holders of a majority of the Registrable Securities to be

included in a Registration Statement for a Shelf Registration, with the consent of the Company (which consent will not be unreasonably withheld).

“Effectiveness Date”: The 210^th day after the Closing Date.

“Effectiveness Period”: See Section 2(a) hereof.

“Exchange Act”: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Filing Date”: The 120^th day after the Closing Date.

“Holder”: Any beneficial owner from time to time of Registrable Securities.

“Indemnified Holder”: See Section 6 hereof.

“Indemnified Person”: See Section 6 hereof.

“Indemnifying Person”: See Section 6 hereof.

“Initial Shareholder”: See the first introductory paragraph hereto.

“Initial Shelf Registration”: See Section 2(a) hereof.

“Inspectors”: See Section 4(k) hereof.

“Liquidated Damages”: See Section 3(a) hereof.

“Liquidated Damages Payment Date”: See Section 3(c) hereof.

“Notice and Questionnaire”: means a written notice delivered to the Company containing substantially the information called for by the Form of Selling Securityholder Notice and Questionnaire attached as Appendix A hereto.

“Person”: An individual, partnership, corporation, limited liability company, unincorporated association, trust or joint venture, or a governmental agency or political subdivision thereof.

“Prospectus”: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“Records”: See Section 4(k) hereof.

“Registrable Securities”: All Shares upon original issuance thereof and at all times subsequent thereto, together with (a) any additional shares of SMI common stock issued or distributed by way of a dividend, stock split or other distribution in respect of the Shares, and (b) any shares of SMI common stock acquired by way of any rights offering or similar offering made in respect of the Shares (all shares of SMI common stock so issued, distributed or acquired pursuant to clauses (a) or (b), “Additional Shares”); provided, that all such Shares and Additional Shares shall cease to be Registerable Securities, in any case, upon the earliest to occur of (i) a Registration Statement covering such Shares or such Additional Shares having been declared effective by the SEC and such Shares or such Additional Shares having been disposed of in accordance with such effective Registration Statement, (ii) such Shares or such Additional Shares having been sold in compliance with Rule 144 or being able to (except with respect to affiliates of the Company within the meaning of the Securities Act) be sold in compliance with Rule 144(k), or (iii) such Shares or such Additional Shares ceasing to be outstanding.

“Registration Default”: See Section 3(a) hereof.

“Registration Statement”: Any registration statement of the Company filed with the SEC pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all documents incorporated by reference or deemed to be incorporated by reference in such registration statement.

“Rule 144”: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act.

“Rule 144A”: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC.

“Rule 415”: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

“SEC”: The U.S. Securities and Exchange Commission.

“Securities Act”: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Selling Holder”: On any date, any Holder that has delivered a Notice and Questionnaire to the Company on or prior to such date.

“Shares”: See the second introductory paragraph hereto.

“Shelf Registration”: See Section 2(b) hereof.

“Shelf Registration Statement”: See Section 2(b) hereof.

“Stock Purchase Agreement”: See the second introductory paragraph hereto.

“Subsequent Shelf Registration”: See Section 2(b) hereof.

“Underwritten Registration” or “Underwritten Offering”: A registration in which Registrable Securities are sold to an underwriter for reoffering to the public.

2. Shelf Registration.

(a) Shelf Registration. The Company shall file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Securities (the “Initial Shelf Registration”) on or prior to the Filing Date.

The Initial Shelf Registration shall be on Form S-3 or another appropriate form permitting registration of the Registrable Securities for resale by Holders in the manner or manners designated by them (excluding Underwritten Offerings) and set forth in the Initial Shelf Registration. The Company shall not permit any securities other than the Registrable Securities to be included in the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below).

The Company shall use its commercially reasonable efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act until the date (A) that is two years after the Closing Date (such period, as it may be shortened pursuant to clauses (i), (ii) or (iii) immediately following, the “Effectiveness Period”), or such shorter period ending when (i) all of the Registrable Securities covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration, (ii) the date on which all the Registrable Securities (x) held by Persons who are not affiliates of the Company may be resold pursuant to Rule 144(k) under the Securities Act or (y) cease to be outstanding, (iii) all the Registrable Securities have been resold pursuant to Rule 144 under the Securities Act or (B) a Subsequent Shelf Registration covering all of the Registrable Securities has been declared effective under the Securities Act.

(b) Subsequent Shelf Registrations. If the Initial Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the Registrable Securities registered thereunder), the Company shall use its commercially reasonable efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 45 days of such cessation of effectiveness amend the Initial Shelf Registration in a manner reasonably expected by the Company to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional “shelf” Registration Statement pursuant to Rule 415 covering all of the Registrable Securities (a “Subsequent Shelf Registration”). If a Subsequent Shelf Registration is filed, the Company shall use its commercially reasonable efforts to cause the Subsequent Shelf Registration to be declared effective under the Securities Act as soon as practicable after such filing (or if filed during a Deferral Period, after expiration of such Deferral Period) and to keep such Registration

Statement continuously effective for the balance of the Effectiveness Period. As used herein, the term “Shelf Registration” means the Initial Shelf Registration or any Subsequent Shelf Registration and the term “Shelf Registration Statement” means any Registration Statement filed in connection with a Shelf Registration.

(c) Supplements and Amendments. The Company shall promptly supplement and amend a Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority of the Registrable Securities covered by such Shelf Registration Statement.

(d) Notice and Questionnaire. Each Holder agrees that if such Holder wishes to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus, it will do so only in accordance with this Section 2(d) and Section 4A hereof. Each Holder wishing to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus when the Initial Shelf Registration Statement first becomes effective agrees to deliver a Notice and Questionnaire to the Company at least five (5) Business Days prior to the date that the Initial Shelf Registration is declared effective under the Securities Act. From and after the date the Initial Shelf Registration Statement is declared effective, the Company shall, as promptly as practicable after the date a fully completed and legible Notice and Questionnaire, together with such other information as the Company may reasonably request, is received by the Company, and in any event upon the later of (x) forty-five (45) days after such date or (y) ten (10) Business Days after the expiration of any Deferral Period in effect when the Notice and Questionnaire is received by the Company:

(i) if required by applicable law, file with the SEC a post-effective amendment to the Shelf Registration Statement or a Subsequent Shelf Registration or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Registrable Securities (subject to the rights of the Company under Section 3(b) to create a Deferral Period) in accordance with applicable law and, if the Company shall file a post-effective amendment to the Shelf Registration Statement, use its commercially reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as reasonably practicable, but in any event by the date (the “Amendment Effectiveness Deadline Date”) that is forty-five (45) days after the date such post-effective amendment is required by this clause to be filed;

(ii) provide such Holder copies of any documents filed pursuant to Section 2(d)(i); and

(iii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2(d)(i); provided that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i) and (ii) above upon expiration of the Deferral Period. Notwithstanding anything contained herein to the contrary, (i) the Company shall be under no obligation to name any Holder that has not delivered a fully complete and legible Notice and Questionnaire to the Company, together with such other information as the Company may reasonably request, in accordance with this Section 2(d) and (ii) the Amendment Effectiveness Deadline Date shall be extended by up to ten (10) Business Days from the expiration of a Deferral Period (and the Company shall incur no obligation to pay Liquidated Damages during such extension) if such Deferral Period shall be in effect on the Amendment Effectiveness Deadline Date.

3. Liquidated Damages.

(a) The Company and the Initial Shareholder agree that the Holders of Registrable Securities will suffer damages if the Company fails to fulfill its obligations under Section 2 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Company agrees to pay liquidated damages on the Registrable Securities (“Liquidated Damages”) under the circumstances and to the extent set forth below (each of which shall be given independent effect; each a “Registration Default”):

(i) if the Initial Shelf Registration is not filed on or prior to the Filing Date, then commencing on the day after the Filing Date;

(ii) if a Shelf Registration is not declared effective by the SEC on or prior to the Effectiveness Date, then commencing on the day after the Effectiveness Date;

(iii) if a Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period (other than as permitted under Section 3(b)), then commencing on the day after the date such Shelf Registration ceases to be effective;

(iv) if any post-effective amendment filed pursuant to Section 2(d)(i) has not become effective under the Securities Act on or prior to the Amendment Effectiveness Deadline Date, then commencing on the day after the Amendment Effectiveness Deadline Date; and

(v) if the aggregate duration of Deferral Periods in any period exceeds the number of days permitted in respect of such period pursuant to Section 3(b), then commencing on the day that caused the limit on the aggregate duration of Deferral Periods to be exceeded,

Liquidated Damages shall accrue on the Registrable Securities (in the case of clauses (i), (ii), (iii) and (v)), or solely on the Registrable Securities that are registered by such post-effective amendment in the case of clause (iv), at a rate of US$0.05 per annum per share of Registrable Securities (based on the number of shares of the Company’s common stock issued and outstanding on the Closing Date, to be adjusted appropriately for stock splits, stock dividends, stock recombinations and the like) for the first 90 days (whether or not consecutive) during which a Registration Default exists, and at a rate of US$0.10 per annum per share of Registrable Securities (based on the number of shares of the Company’s common stock issued and outstanding on the Closing Date, to be adjusted appropriately for stock splits, stock dividends, stock recombinations and the like) thereafter if a Registration Default exists for more than 90 days (whether or not consecutive); provided that Liquidated Damages on the Registrable Securities may not accrue under more than one of the foregoing clauses (i), (ii), (iii), (iv) and (v) at any one time; and provided further that (1) upon the filing of the Initial Shelf Registration as required hereunder (in the case of clause (a)(i) of this Section 3), (2) upon the effectiveness of a Shelf Registration as required hereunder (in the case of clause (a)(ii) of this Section 3), (3) upon the effectiveness of a Shelf Registration which had ceased to remain effective (in the case of clause (a)(iii) of this Section 3), (4) upon the effectiveness of a post-effective amendment as required hereunder (in the case of clause (a)(iv) of this Section 3), or (5) upon the termination of the Deferral Period that caused the limit on the aggregate duration of Deferral Periods to be exceeded (in the case of clause (a)(v) of this Section 3), Liquidated Damages on the Registrable Securities as a result of such clause shall cease to accrue. It is understood and agreed that, notwithstanding any provision to the contrary, no Liquidated Damages shall accrue on any Registrable Securities that are then covered by, and may be sold under, an effective Shelf Registration Statement. Notwithstanding the foregoing, no Liquidated Damages shall accrue as to any security from and after the earlier of (x) the date such security ceases to be a Registrable Security and (y) expiration of the Effectiveness Period.

(b) Notwithstanding Section 3(a), the Company, upon written notice to the Holders, shall be permitted to suspend the availability of a Registration Statement covering the Registrable Securities for any bona fide reason whatsoever for up to 30 consecutive days (the “Deferral Period”) in any 90-day period without being obligated to pay Liquidated Damages; provided that Deferral Periods may not total more than 90 days in the aggregate in any twelve-month period. The Company shall not be required to specify in the written notice to the Holders the nature of the event giving rise to the Deferral Period.

(c) So long as the Shares remain outstanding, the Company shall notify the Holders within five Business Days after each and every date on which an event occurs in respect of which Liquidated Damages are required to be paid. Any amounts of Liquidated Damages due pursuant to clause (a)(i), (a)(ii), (a)(iii), (a)(iv) or (a)(v) of this Section 3 will be payable in cash on April 15 and October 15 of each year (each, a “Liquidated Damages Payment Date”), commencing with the first such Liquidated Damages Payment Date occurring after any such Liquidated Damages commences to accrue, to holders of record of the applicable Registrable Securities on the immediately preceeding April 1 and October 1, whether or not such day is a Business Day. The amount of Liquidated Damages for Registrable Securities will be determined by multiplying the applicable rate of Liquidated Damages by the number of shares of Registrable Securities outstanding on the first Liquidated Damages Payment Date

following such Registration Default in the case of the first such payment of Liquidated Damages with respect to a Registration Default (and thereafter at the next succeeding Liquidated Damages Payment Date until the cure of such Registration Default), multiplied by a fraction, the numerator of which is the number of days such Liquidated Damages rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. The parties agree that the sole monetary damages payable for a violation of the terms of this Agreement with respect to which Liquidated Damages are expressly provided shall be such Liquidated Damages.

4. Registration Procedures.

In connection with its registration obligations pursuant to Section 2 hereof, the Company shall:

(a) Prepare and file with the SEC, on or prior to the Filing Date, a Registration Statement or Registration Statements as prescribed by Section 2 hereof, and use its commercially reasonable efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided that before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company shall furnish to and afford the Initial Shareholder a reasonable opportunity to review copies of all such documents proposed to be filed (in each case, where possible, at least three Business Days prior to such filing, or such later date as is reasonable under the circumstances) and the Initial Shareholder shall have the right to object to any information pertaining to the Initial Shareholder that is contained therein and the Company will make the corrections reasonably requested by the Initial Shareholder with respect to such information prior to filing any such documents.

(b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period; cause the related Prospectus to be supplemented by any prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act applicable to it with respect to the disposition of all Registrable Securities covered by such Registration Statement during the Effectiveness Period in accordance with the intended methods of distribution set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

(c) Notify the Selling Holders and Designated Counsel, if any, promptly (but in any event within five Business Days), (i) when a Prospectus or any prospectus supplement or post-effective amendment to a Registration Statement has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Company, one conformed copy of such Registration Statement or post-effective amendment, including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii)

of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any Prospectus or the initiation of any proceedings for that purpose, (iii) of the happening of any event, the existence of any condition or any information becoming known but not the nature or details concerning such event, condition or information that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however, that no notice of the Company pursuant to this clause (iii) shall be required in the event that the Company promptly files a prospectus supplement to update the Prospectus or a Current Report on Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which, in either case, contains the requisite information with respect to such event, condition or information that results in such Registration Statement no longer containing any untrue statement of a material fact or omitting to state a material fact necessary to make the statements contained therein not misleading and promptly furnishes to the Selling Holders and Designated Counsel a reasonable number of copies of such prospectus supplement) and (iv) of the Company’s determination that a post-effective amendment to a Registration Statement would be appropriate which notice may in any case, at the discretion of the Company state that it constitutes a notice of deferral under Section 3(b) hereof.

(d) Use its commercially reasonable efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus and, if any such order is issued, to use its commercially reasonable efforts to obtain the withdrawal of any such order at the earliest possible moment or if any such order or suspension is during any Deferral Period, at the earliest possible time after such Deferral Period ends, and provide prompt notice to the Selling Holders of the withdrawal of any such order.

(e) Furnish as promptly as reasonably practicable after the filing of such documents with the SEC to each Selling Holder and Designated Counsel, if any, upon request and at the sole expense of the Company, such number of conformed copies of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and all documents incorporated or deemed to be incorporated therein by reference and all exhibits as such Selling Holder and Designated Counsel may reasonably request.

(f) Deliver during the Effectiveness Period (except during any Deferral Period) to each Selling Holder and Designated Counsel, if any, at the sole expense of the Company, as many copies of the Prospectus (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference

therein as such Persons may reasonably request; and, subject to Sections 4A(a) and 4A(c) hereof, the Company hereby consents (except during any Deferral Period) to the use of such Prospectus and each amendment or supplement thereto by each of the Selling Holders of Registrable Securities and dealers, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto in the manner set forth therein.

(g) Cause the Company’s counsel to perform Blue Sky law investigations and to file registrations and qualifications required to be filed in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities or offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Selling Holder reasonably requests, use its commercially reasonable efforts to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective in connection with such Holder’s offer and sale of Registrable Securities pursuant to such registration or qualification (or exemption therefrom) and do any and all other acts or things reasonably necessary or advisable under Blue Sky laws to enable the disposition in such jurisdictions of the Registrable Securities in the manner set forth in the Registration Statement; provided that the Company shall not be required to (i) qualify generally to do business or as a dealer in any jurisdiction where it is not then so qualified, (ii) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (iii) subject itself to taxation in any such jurisdiction where it is not then so subject.

(h) Cooperate with the Selling Holders and their respective counsel to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for provision to the transfer agent and registrar; and enable such Registrable Securities to be in such denominations and registered in such names as the Selling Holders may reasonably request at least two (2) Business Days prior to any sale of such Registrable Securities.

(i) Upon the occurrence of any event contemplated by Sections 4(c)(ii), 4(c)(iii) or 4(c)(iv) hereof, as promptly as practicable prepare and (subject to Section 4(a) hereof) file with the SEC, at the sole expense of the Company, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(j) Prior to the effective date of the first Registration Statement relating to the Registrable Securities, (i) provide the transfer agent and registrar with certificates for the Registrable Securities and (ii) provide a CUSIP number for the Registrable Securities.

(k) During the Effectiveness Period, if requested in connection with a disposition of Registrable Securities pursuant to a Registration Statement, make available at reasonable times for inspection by one or more representatives of the Selling Holders and any attorney or accountant retained by any such Selling Holders (collectively, the “Inspectors”), at the offices where normally kept, during reasonable business hours, at such time or times as shall be mutually convenient for the Company and the Inspectors, all financial and other records, pertinent corporate documents and instruments of the Company and its subsidiaries (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement in accordance with this Section; provided that the Company shall have no obligation to provide any such information prior to the execution by the party receiving such information of a confidentiality agreement in a form reasonably acceptable to the Company. Records that the Company determines, in good faith, to be confidential and any Records that it notifies the Inspectors are confidential shall not be used for any purpose other than satisfying “due diligence” obligations under the Securities Act and exercising rights under this Agreement and shall not be disclosed by any Inspector unless (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or material omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the opinion of counsel for the Selling Holder or any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly involving or potentially involving such Selling Holder or Inspector and arising out of, based upon, relating to, or involving this Agreement or any transactions contemplated hereby or arising hereunder or (iv) the information in such Records has been made generally available to the public other than through the acts of such Inspector in breach of this Agreement; provided that prior notice shall be provided as soon as practicable to the Company of the potential disclosure of any information by such Inspector pursuant to clauses (ii) or (iii) of this sentence to permit the Company to obtain a protective order (or waive the provisions of this Section 4(k)). Each Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such actions are otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector, unless and until such information in such Records has been made generally available to the public other than as a result of a breach of this Agreement (it being understood that “reasonably necessary” for the purposes of this sentence will be defined by reference to those actions taken by such Inspector in protecting the confidentiality of its own information).

(l) During the Effectiveness Period, comply with all rules and regulations of the SEC applicable to any Registration Statement and make generally available to its security holders as soon as reasonably practicable earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods.

(m) If requested by Designated Counsel, if any, or the Holders of a majority of the Registrable Securities, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the Designated Counsel, if any, or such Holders reasonably determine is necessary to be included therein, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as reasonably practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment and (iii) supplement or make amendments to such Registration Statement.

(n) Use its commercially reasonable efforts to take all other steps necessary or advisable to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby; provided that the Company shall not be required to take any action in connection with an Underwritten Offering.

(o) Beginning not later than the effective date of the first Registration Statement relating to the Registrable Securities, use its commercially reasonable efforts to cause such Shares (in each case, that are then eligible for listing) to be listed on any national securities exchange or automated quotation system upon which the Company’s common stock is then listed.

(p) Use its commercially reasonable efforts to notify the Holders at least ten (10) Business Days prior to the anticipated effective date of the first Registration Statement relating to the Registrable Securities.

4A. Holders’ Obligations. (a) Each Holder agrees, by acquisition of the Registrable Securities, that no Holder shall be entitled to sell any of such Registrable Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(d) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Selling Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Selling Holder not misleading and any other information regarding such Selling Holder and the distribution of such Registrable Securities as the Company may from time to time reasonably request. Any sale of any Registrable Securities by any Holder shall constitute a representation and warranty by such Holder that the information relating to such Holder and its plan of distribution is as set forth in the Prospectus delivered by such Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Holder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Holder or its plan of distribution necessary to make the statements in such Prospectus, in the light of the circumstances under which they were made, not misleading.

the Company may, from time to time, reasonably request to the extent necessary or advisable to comply with the Securities Act. The Company may exclude from such registration the Registrable Securities of any Selling Holder if such Holder fails to furnish such additional information within five (5) Business Days after receiving such request. Each Selling Holder as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed so that the information previously furnished to the Company by such Holder is not materially misleading and does not omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made.

(c) Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon actual receipt of any notice from the Company suspending the availability of the Registration Statement pursuant to Section 3(b) hereof, or upon the happening of any event of the kind described in Section 4(c)(ii), 4(c)(iii) or 4(c)(iv) hereof (each Holder agrees to keep any such notice confidential), such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(i) hereof, or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and it has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus thereto.

5. Registration Expenses.

(a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company, including, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of compliance with state securities or Blue Sky laws, including, without limitation, reasonable fees and disbursements of its counsel in connection with Blue Sky qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as provided in Section 4(g) hereof), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for provision to the transfer agent and registrar and of printing prospectuses if the printing of prospectuses is requested by the Holders of a majority of the Registrable Securities included in any Registration Statement, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company desires such insurance, (vi) fees and expenses of all other Persons retained by the Company, (vii) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (viii) the expense of any annual audit, (ix) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, if applicable, and any NASD fees and (x) the expenses relating to printing, word processing and distributing all Registration Statements and any other documents necessary in order to comply with this Agreement. Notwithstanding anything in this Agreement to the contrary, each Holder shall pay all brokerage commissions with respect to any Registrable Securities sold by it and, except as set forth in Section 5(b) below, the Company shall not be responsible for the fees and expenses of any counsel, accountant or advisor for the Holders.

(b) The Company shall bear or reimburse the Holders of the Registrable Securities being registered in a Shelf Registration for the reasonable fees and disbursements of Designated Counsel.

6. Indemnification.

(a) The Company agrees to indemnify and hold harmless (x) each Holder (which, for the absence of doubt, for purposes of this Section 6 shall include the Initial Shareholder), (y) each Person, if any, who controls any Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) (any of the Persons referred to in this clause (y) being hereinafter referred to as a “Controlling Person”) and (z) the respective officers, directors, partners, employees, representatives and agents of any Holder (including any predecessor holder) or any Controlling Person (any person referred to in clause (x), (y) or (z) may hereinafter be referred to as an “Indemnified Holder”), against any losses, claims, damages, expenses or liabilities, joint or several, to which such Indemnified Holder may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, expenses or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement or Prospectus, or any amendment or supplement thereto or any related preliminary prospectus or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, in the light of the circumstances under which they were made), in each case, not misleading; provided that the Company will not be liable under this Section 6(a), (x) to the extent that any such loss, claim, damage, expense or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in any such Registration Statement or Prospectus, or any amendment or supplement thereto or any related preliminary prospectus in reliance upon and in conformity with written information relating to any Holder furnished to the Company by or on behalf of such Holder specifically for use therein, (y) with respect to any untrue statement or alleged untrue statement, or omission or alleged omission made in any preliminary prospectus if the person asserting any such loss, claim, damage, expense or liability who purchased Registrable Securities which are the subject thereof did not receive a copy of the Prospectus (or the preliminary prospectus as then amended or supplemented if the Company shall have furnished such Indemnified Holder with such amendment or supplement thereto on a timely basis) at or prior to the written confirmation of the sale of such Registrable Securities to such person and, in any case where such delivery is required by applicable law and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact made in such preliminary prospectus was corrected in the Prospectus (or the preliminary prospectus as then amended or supplemented if the Company shall have furnished such Indemnified Holder with such amendment or supplement thereto on a timely basis) or (z) arising from the offer or sale of Registrable Securities during any Deferral Period, if notice thereof was given to such Holder. The Company shall notify such Indemnified Holder promptly of the institution, threat or assertion of any claim, proceeding (including any governmental investigation) or litigation in connection with the matters addressed by this Agreement that involves the Company or such Indemnified Holder.

(b) Subject to Section 6(d) below, the Company agrees to reimburse each Indemnified Holder upon demand for any reasonable legal or other out-of-pocket expenses reasonably incurred by such Indemnified Holder in connection with investigating or defending any such loss, claim, damage, expense or liability, action or proceeding or in responding to a subpoena or governmental inquiry related to the offering of the Registrable Securities, whether or not such Indemnified Holder is a party to any action or proceeding. In the event that it is finally judicially determined that an Indemnified Holder was not entitled to receive payments for legal and other expenses pursuant to this Section 6, such Indemnified Holder will promptly return all sums that had been advanced pursuant hereto.

(c) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, each of its directors and officers and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as the indemnity provided in Section 6(a) from the Company to each Holder, provided, however, that such Holder will be liable in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission has been made in any Registration Statement or Prospectus, or any amendment or supplement thereto or any related preliminary prospectus, in reliance upon and in conformity with written information furnished to the Company by such Holder specifically for use in the preparation thereof. The liability of any Holder under this Section 6(c) shall in no event exceed the proceeds received by such Holder from sales of Registrable Securities giving rise to such obligation.

(d) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 6(a) or (c), such Person (the “Indemnified Person”) shall promptly notify the Person or Persons against whom such indemnity may be sought (each an “Indemnifying Person”) in writing. No indemnification provided for in Section 6(a) or (c) shall be available to any Person who shall fail to give notice as provided in this Section 6(d) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was materially prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the Indemnifying Person or Persons from any liability which it or they may have to the Indemnified Person for contribution or otherwise than on account of the provisions of Section 6(a) or (c). In case any such proceeding shall be brought against any Indemnified Person and it shall notify the Indemnifying Person of the commencement thereof, the Indemnifying Person shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other Indemnifying Person similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Person and shall pay as incurred (or within 30 days of presentation) the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the Indemnifying Person shall pay as incurred (or within 30 days of presentation) the reasonable fees and expenses of the counsel retained by the Indemnified Person in the event (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the retention of such counsel, (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be

inappropriate due to actual or potential differing interests between them or (iii) the Indemnifying Person shall have failed to assume the defense and employ counsel acceptable to the Indemnified Person within a reasonable period of time after notice of commencement of the action. It is understood that the Indemnifying Person shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such Indemnified Persons. Such firm shall be designated in writing by Holders of a majority of the Registrable Securities in the case of parties indemnified pursuant to Section 6(a) and by the Company in the case of parties indemnified pursuant to Section 6(c). The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify the Indemnified Person from and against any loss or liability by reason of such settlement or judgment. In addition, the Indemnifying Person will not, without the prior written consent of the Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding of which indemnification may be sought hereunder (whether or not any Indemnified Person is an actual or potential party to such claim, action or proceeding) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action or proceeding.

(e) To the extent the indemnification provided for in this Section 6 is unavailable to or insufficient to hold harmless an Indemnified Person under Section 6(a) or (c) in respect of any losses, claims, damages, expenses or liabilities (or actions or proceedings in respect thereof) referred to therein, then each Indemnifying Person shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages, expenses or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Person on the one hand and the Indemnified Person on the other hand from the issuance and sale of the Shares pursuant to the Stock Purchase Agreement and the Registrable Securities pursuant to any Shelf Registration. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each Indemnifying Person shall contribute to such amount paid or payable by such Indemnified Person in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Indemnifying Person on the one hand and the Indemnified Person on the other in connection with the statements or omissions which resulted in such losses, claims, damages, expenses or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company shall be deemed to be equal to the total net proceeds (before deducting expenses) received by the Company under the Stock Purchase Agreement from the offering and sale of the Registrable Securities giving rise to such obligations. The relative benefits received by any Holder shall be deemed to be equal to the value of receiving registration rights for the Registrable Securities under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand, such Indemnified Holder on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(f) The Company and the Initial Shareholder agree that it would not be just and equitable if contribution pursuant to Section 6(e) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in Section 6(e). The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages, expenses or liabilities (or actions or proceedings in respect thereof) referred to in Section 6(e) shall be deemed to include any reasonable legal or other expenses reasonably incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of Section 6(e) and (f), (i) in no event shall any Holder be required to contribute any amount in excess of the amount by which the net proceeds received by such Holder from the offering or sale of the Registrable Securities pursuant to a Shelf Registration Statement exceeds the amount of damages which such Holder would have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(g) In any proceeding relating to any Registration Statement or Prospectus or any supplement or amendment thereto or any related preliminary prospectus, each party against whom contribution may be sought under this Section 6 hereby consents to the jurisdiction of any court having jurisdiction over any other contributing party, agrees that process issuing from such court may be served upon it by any other contributing party and consents to the service of such process and agrees that any other contributing party may join it as an additional defendant in any such proceeding in which such other contributing party is a party.

(h) Any losses, claims, damages, liabilities or expenses for which an Indemnified Person is entitled to indemnification or contribution under this Section 6 shall be paid by the Indemnifying Person to the Indemnified Person as such losses, claims, damages, liabilities or expenses are incurred.

(i) The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any indemnified party at law or in equity.

(j) The indemnity and contribution agreements contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Holder or any Person controlling any Holder or by or on behalf of the Company, its officers or directors or any other Person controlling the Company and (iii) sale under the Registration Statement of any of the Registrable Securities. A successor to any Holder or Controlling Person, or to the Company, its directors or officers or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 6.

7. Rules 144 and 144A.

The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC

thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, if at any time before the expiration of the Effectiveness Period the Company is not required to file such reports, it will, upon the request of any Holder, make available such information necessary to permit sales pursuant to Rule 144A under the Securities Act. The Company further covenants that until the Effectiveness Period has expired, it will use all reasonable efforts to take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A under the Securities Act, as such rules may be amended from time to time. The Company will provide a copy of this Agreement to prospective purchasers of Registrable Securities identified to the Company by the Initial Shareholder upon request. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it is subject to and has complied with such reporting requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

8. Underwritten Registrations.

No Holder of Registrable Securities may participate in any Underwritten Registration hereunder.

9. Miscellaneous.

(a) No Inconsistent Agreements. The Company has not, as of the date hereof, and the Company shall not, after the date of this Agreement, enter into any agreement with respect to any of its securities that conflicts with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof.

(b) Adjustments Affecting Registrable Securities. The Company shall not take any action with respect to the Registrable Securities as a class with the intent of adversely affecting the ability of the Holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement.

(c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of the Company and the Holders of not less than a majority of the Registrable Securities; provided that Section 6 and this Section 9(c) may not be amended, modified or supplemented without the prior written consent of the Company and each Holder (including, in the case of an amendment, modification or supplement of Section 6, any Person who was a Holder of Registrable Securities disposed of pursuant to any Registration Statement). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Securities may be given by Holders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such Registration Statement.

Each Holder of Registrable Securities outstanding at the time of any amendment, modification, supplement, waiver, or consent or thereafter shall be bound by any such amendment, modification, supplement, waiver, or consent effected pursuant to this Section, whether or not any notice of such amendment, modification, supplement, waiver, or consent is delivered to such Holder.

(d) Notices. All notices, requests and other communications provided for or permitted hereunder shall be made in writing and delivered by hand-delivery, registered first-class mail, next-day air courier or facsimile:

(1) if to a Holder of Registrable Securities, at the most current address of such Holder set forth on the stock ledger of the Company, unless any Holder shall have provided notice information in a Notice and Questionnaire or any amendment thereto, in which case such information shall control.

(2) if to the Initial Shareholder:

CASINOS AUSTRIA AG
Dr. Karl Lueger Ring 14, A-1010
Vienna, Austria
Facsimile No.: +43-1-53440 515
Attention: Managing Board

with a copy to:

Milbank, Tweed, Hadley & McCloy
Frankfurter Welle
An der Welle 4
60422 Frankfurt, Germany
Facsimile No.: 49-69-7593-8303
Attention: Helfried J. Schwarz

(3) if to the Company:

Shuffle Master, Inc.

1106 Palms Airport Drive

Las Vegas, Nevada 89119

Facsimile No.: (702) 270-5161
Attention: General Counsel

with a copy to:

Latham & Watkins LLP
885 Third Avenue
New York, New York 10022
Facsimile No.: (212) 751-4864
Attention: Kirk A. Davenport II

All such notices, requests and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; the earlier of the date indicated on the notice of receipt and five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; one Business Day after being timely delivered to a next-day air courier; and when the addressor receives facsimile confirmation, if sent by facsimile during normal business hours, and otherwise on the next Business Day during normal business hours.

(e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including the Holders; provided that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and except to the extent such successor or assign holds Registrable Securities.

(f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, including via facsimile, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS SITTING IN MANHATTAN, NEW YORK CITY, THE STATE OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

(i) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(j) Securities Held by the Company or Its Affiliates. Whenever the consent or approval of Holders of a specified percentage of the Registrable Securities is required hereunder, Registrable Securities held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) other than the Initial Shareholder or Holders deemed to be affiliates solely by reason of their holdings of such Registrable Securities shall not be counted

in determining whether such consent or approval was given by the Holders of such required percentage; provided that Registrable Securities that the Company or an affiliate of the Company offers to purchase or acquires pursuant to an offer, exchange offer, tender offer or otherwise shall not be deemed to be held by the Company or such affiliate until legal title to such Registrable Securities passes to the Company or such affiliate, as the case may be.

(k) Third-Party Beneficiaries. Holders of Registrable Securities are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons.

(l) Entire Agreement. This Agreement, together with the Stock Purchase Agreement, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Initial Shareholder on the one hand and the Company on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby.

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

SHUFFLE MASTER, INC.


By:		/s/ Mark Yoseloff
	Name:	Mark Yoseloff
	Title:	CEO


CASINOS AUSTRIA AG


By:		/s/ Paul Herzfeld
	Name:	Paul Herzfeld
	Title:	Executive Director


CASINOS AUSTRIA AG


By:		/s/ Leo Wallner
	Name:	Leo Wallner
	Title:	CEO

[Signature Page to Registration Rights Agreement]

APPENDIX A

SHUFFLE MASTER, INC.

Form of Selling Securityholder Notice and Questionnaire

The undersigned beneficial holder of shares of common stock, par value $.01 per share (the “Common Stock”), of Shuffle Master, Inc., a Minnesota corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission a registration statement (the “Shelf Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended, of the Registrable Securities in accordance with the terms of the Registration Rights Agreement, dated on or about May 13, 2004 (the “Registration Rights Agreement”), between the Company and Casinos Austria AG. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

Each beneficial owner of Registrable Securities is entitled to the benefits of the Registration Rights Agreement. In order to sell or otherwise dispose of any Registrable Securities pursuant to the Shelf Registration Statement, a beneficial owner of Registrable Securities generally will be required to be named as a selling securityholder in the related prospectus, deliver a prospectus to purchasers of Registrable Securities and be bound by those provisions of the Registration Rights Agreement applicable to such beneficial owner (including certain indemnification provisions, as described below). Beneficial owners that do not complete this Notice and Questionnaire and deliver it to the Company as provided below will not be named as selling securityholders in the prospectus and therefore will not be permitted to sell any Registrable Securities pursuant to the Shelf Registration Statement. Beneficial owners are encouraged to complete and deliver this Notice and Questionnaire prior to the effectiveness of the Shelf Registration Statement so that such beneficial owners may be named as selling securityholders in the related prospectus at the time of effectiveness. Upon receipt of a completed Notice and Questionnaire from a beneficial owner following the effectiveness of the Shelf Registration Statement, the Company will prepare and file (a) a prospectus supplement as soon as practicable or (b) if required, such amendments to the Shelf Registration Statement or an additional Shelf Registration Statement within 45 days of the receipt of such questionnaire, in either case as are necessary to permit such holder to deliver such prospectus to purchasers of Registrable Securities. The Company has agreed to pay liquidated damages pursuant to the Registration Rights Agreement under certain circumstances as set forth therein.

Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and the related prospectus.

A-1

NOTICE

The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby gives notice to the Company that it may sell or otherwise dispose of Registrable Securities beneficially owned by it and listed below in Item 3 (unless otherwise specified under Item 3) pursuant to the Shelf Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement.

If you need more space for these responses, please attach additional sheets of paper. Please be sure to indicate you name and the number of the item being responded to on each such additional sheet of paper, and to sign each such additional sheet of paper before attaching it to this Questionnaire. Please note that you may be asked to answer additional questions depending on your responses to the following questions.

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

QUESTIONNAIRE

1. (a) Full Legal Name of Selling Securityholder:

(b) Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities listed in Item (3) below are held:

(c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) through which Registrable Securities listed in Item (3) below are held:

2. Address for Notices to Selling Securityholder:

Telephone:

Fax:

A-2

Contact Person:

3. Number of shares of Registrable Securities beneficially owned:

4. Nature of Your Beneficial ownership:

(a) If the name of the beneficial owner of the Registrable Securities set forth in your response to Item 1(a) above is that of a limited partnership, state the names of the general partners of such limited partnership:

(b) With respect to each general partner listed in Item 4(a) above who is not a natural person, and is not publicly held, name each shareholder (or holder of partnership interests, if applicable) of such general partner. If any of these named shareholders are not natural persons or publicly held entities, please provide the same information. This process should be repeated until you reach natural persons or a publicly held entity.

(c) If you are not publicly held, name the entity that exercises voting and dispositive power over the Registrable Securities set forth in Item 3 above (the “Controlling Entity”). If the Controlling Entity is not a natural person or a publicly held entity, please name the entity that controls such Controlling Entity and provide the same information for the entity controlling the Controlling Entity. This process should be repeated until you reach natural persons or a publicly held entity.

(i) Full legal name of Controlling Entity(ies) or natural person(s) who have sole or shared voting or dispositive power over the Registrable Securities:

(ii) Business address (including street address) (or residence if no business address), telephone number and facsimile number of such person(s):

Address:

A-3

Telephone:

Fax:

(iii) Name(s) of shareholders:

5. Beneficial Ownership of other of the Company’s securities owned by the Selling Securityholder:

Except as set forth below in this Item (5), the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item (3).

(a) Type and Amount of other securities beneficially owned by the Selling Securityholder:

(b) CUSIP No(s). of such other securities beneficially owned:

6. Relationship with the Company:

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equityholders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

State any exceptions here:

7. Plan of Distribution:

Except as set forth below, the undersigned (including its donees or pledgees) may distribute the Registrable Securities listed above in Item (3) pursuant to the Shelf Registration Statement only as follows (if at all): Subject to the limitations and restricitions set forth in the Stock Purchase Agreement, such Registrable Securities may be sold from time to time directly by

A-4

the undersigned or, alternatively, through underwriters, broker-dealers or agents. If the Registrable Securities are sold through underwriters or broker-dealers, the Selling Securityholder will be responsible for underwriting discounts or commissions or agents’ commissions. Subject to the limitations and restricitions set forth in the Stock Purchase Agreement, such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Such sales may be effected in transactions (which may involve cross or block transactions) (i) on any national securities exchange or quotation service on which the Registrable Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. Subject to the limitations and restricitions set forth in the Stock Purchase Agreement, the undersigned may also sell the Company’s Common Stock short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities.

State any exceptions here:

Note: In no event will such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Company.

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (7) above and the inclusion of such information in the Shelf Registration Statement and the related prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Shelf Registration Statement and the related prospectus.

Once this Notice and Questionnaire is executed by the undersigned and received by the Company, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the undersigned with respect to the Registrable Securities beneficially owned by the undersigned and listed in Item (3) above. THIS NOTICE AND QUESTIONNAIRE SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW YORK.

A-5

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.


			Beneficial Owner


			By:
			Name:
			Title:
Dated:

PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE
AND QUESTIONNAIRE TO:

Shuffle Master, Inc.
1106 Palms Airport Drive
Las Vegas, Nevada 89119
Attention: Jerome R. Smith
Fax: (702) 270-5161

A-6

EX-10.3 5 a04-6489_1ex10d3.htm EX-10.3

Exhibit 10.3

EXECUTION COPY

AGREEMENT AND GUARANTY

THIS AGREEMENT AND GUARANTY (this “Agreement”) is made as of the 12^th day of May, 2004, by Shuffle Master, Inc., a Minnesota corporation (“SMI”), on the one hand, and Casinos Austria Aktiengesellschaft, an Austrian stock corporation (“CASAG”) and CAI Casinoinvest Middle East GmbH, an Austrian limited liability company (“CAI”), on the other hand (individually, an “Obligee” and, collectively, the “Obligees”). Except as otherwise indicated herein, capitalized terms used in this Agreement have the- same meanings set forth in the Purchase Agreement (as defined below).

WHEREAS, this Agreement is being issued pursuant to, and as a condition to the consummation of the transactions contemplated by, the Purchase Agreement to be dated on or about May 13, 2004 (the “Purchase Agreement”), by and among CASAG, CM, Shuffle Master Management-Service GmbH, an Austrian limited liability company (“SHFMMS”), and Shuffle Master GmbH, an Austrian limited liability company (“SHFM”) in connection with the sale by CASAG and CAI to SHFMMS and SIIFM, respectively, of partnership interests in CARD Casinos Austria Research & Development GmbH & Co. KG (“CARD”); and

WHEREAS, SMI, in furtherance of its business objectives, has agreed to guarantee the due and punctual payment, observance and performance of certain obligations of each of SHFMMS and SHFM (individually, an “Obligor” and, collectively, the “Obligors”) to such Obligees under the Purchase Agreement and to take certain other actions and enter into certain other agreements in connection therewith, all as more fully described herein.

NOW, THEREFORE, in consideration of the premises and other valuable consideration (receipt and sufficiency of which is hereby acknowledged), each of the parties hereto agrees as follows:

SECTION 1. Guarantee.

1.1 Subject to the terms, conditions, and limitations hereof, SMI hereby guarantees, as primary obligor and as a guarantor of payment and performance (and not merely as surety or guarantor of collection), to each of the Obligees the due, complete and punctual payment of all amounts which are or may become due and payable by any Obligor, and the due, complete and punctual performance of all agreements and undertakings of any Obligor, but only as follows: (i) under Article II of the Purchase Agreement (Purchase and Sale of Shares, including the payment of the Purchase Price and all other payments and deliveries tp be made by the Obligors at the Closing), and (ii) under Article IX of the Purchase Agreement (Indemnification), together with all claims for damages arising from or in connection with the failure punctually and completely to pay or perform such obligations ‘(such obligations being herein collectively called the “Obligations”), in any case, subject to the terms, conditions, and limitations applicable to the Obligors set forth in the Purchase Agreement. Notwithstanding the above, the Obligees acknowledge and agree that SMI has not made, and does not hereby make (and, except for the representations and warranties of any Buyer contained in the Purchase

Agreement, no Buyer, nor any Affiliate of SMI or any Buyer has made or hereby makes), any representations, express or implied, with respect to the inherent or trading value of the SMI Stock, the availability of a liquid or open trading market with respect to the SMI Stock or the present or future performance of SMI, CARD or the SMI Stock.

1.2 The obligations of SMI under this Agreement shall be direct and primary obligations which shall, subject to the terms hereof, constitute a guaranty of payment, performance and compliance and not of collection, and SMI specifically agrees that it shall not be necessary, and that SMI shall not be entitled to require, before or as a condition of enforcing the liability of SMI under this Agreement or requiring payment or performance of the Obligations by SMI hereunder, or at any time thereafter, that any Person or Obligee (or any of their respective successors and assigns) exhaust any of its rights or remedies against the Obligors or take any other action of any kind prior to making any demand on or invoking any of the Obligee’s rights and remedies against SMI pursuant to this Agreement. Subject to Section 1.7, SMI agrees that the guarantee under this Agreement shall be continuing, and that the Obligations will be paid and performed in accordance with their terms and the terms of this Agreement, and are absolute and unconditional, to the fullest extent permitted by applicable law, irrespective of any circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 1.2 that the obligations of SMI hereunder shall be absolute and unconditional only to the extent expressly set forth herein under any and all circumstances. SMI hereby expressly waives notice of acceptance of and reliance upon this Agreement, diligence, presentment, demand of payment or performance, protest and all other notices whatsoever.

1.3 The obligations of SMI under this Section 1 shall continue and be automatically reinstated if and to the extent that for any reason any payment to any Obligee by or on behalf of any Obligor in respect of the Obligations is rescinded or must be otherwise restored by such Obligee, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and SMI agrees that it will indemnify such Obligee on demand for all reasonable costs and expenses (including, without limitation, fees and expenses of counsel) incurred by such Obligee in connection with its compliance with or resistance to any such rescission or restoration.

1.4 Until the earlier of (a) all Obligations have been indefeasibly paid or performed in full or (b) all of the provisions of Section 1.7 have become applicable, SMI hereby waives: (i) all rights of subrogation or reimbursement or any similar right or concept which it may at any time otherwise have (a) as a result of this Agreement (whether contractual, under applicable bankruptcy law or otherwise) to the claims of the Obligees against any Obligor and (b) any right to enforce any other remedy which any Obligee now has or may hereafter have against any Obligor and (ii) any benefit of, and any right to participate, in any security or collateral given to or for the benefit of the Obligees to secure payment of the Obligations.

1.5 SMI agrees that, as between SMI and each Obligee, the Obligations may be declared to be forthwith due and (in the case of payment Obligations) payable as provided herein, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such Obligations from becoming automatically due and (in the case of payment Obligations) payable as against any Obligor, as the case may be) and that, in the event of any such declaration, such obligations that are due and (in the case of payment Obligations) payable by any Obligor, shall forthwith become due and (in the case of payment Obligations) payable by

SMI.

1.6 This Agreement shall inure to the benefit of the Obligees and their successors and assigns.

1.7 Notwithstanding anything contained herein to the contrary, SMI’s aggregate Obligations under Section 1.1(i) shall be limited to any portion of the Purchase Price that is not paid or delivered at the Closing in accordance with Article II of the Purchase Agreement; and once any such unpaid or undelivered portion of the Purchase Price has been so paid or delivered, SMI’s Obligations under Section 1.1(i) shall be deemed to have been satisfied in full.

SECTION 2. Other Agreements.

2.1 SMI and CASAG each agree to negotiate in good faith, and to use commercially reasonable efforts to enter into (and/or cause one or more of its Affiliates to enter into), a supply agreement between SMI (and/or one or more of its Affiliates) and CASAG (and/or one or more of its Affiliates) within sixty (60) days of the Closing Date containing the terms set forth in the draft proposed term sheet for the supply agreement attached hereto as Exhibit 1 and such other terms as are reasonable and customary for such an agreement.

2.2 SMI hereby acknowledges and agrees that, pursuant to and as provided in the Purchase Agreement, it is the intent of the parties that, following the first anniversary of the Closing Date, the shares of SMI common stock shall be freely tradable (subject only to the terms of the right of first refusal contained in Section 5.5 of the Purchase Agreement) and in furtherance thereof hereby agrees (i) to comply with the terms of the Registration Rights Agreement dated as May 13, 2004 by and between SMI and each Obligee receiving shares of SMI common stock at the Closing, and (ii) pursuant to and as provided in the Purchase Agreement, at such times as such shares become freely tradable, upon the written request of the holder of such shares, to take all other actions necessary to remove any transfer restrictions imposed by it or any of its Affiliates, including without limitation, by removing any restrictive legends (other than those relating to the right of first refusal) on the certificates representing such shares.

2.3 SMI hereby agrees (i) to be bound by the provisions of Section 5.3 of the Purchase Agreement as a primary obligor, including without limitation to comply with all applicable provisions thereof relating to any exercise by SMI of any rights granted to it thereunder, and (ii) to be bound by the provisions of Section 5.6 of the Purchase Agreement as a primary obligor, including without limitation to, upon request by CASAG, buy back all, but not less than all, of the SMI Stock, all in accordance with the terms thereof.

2.4 Obligees, jointly and severally, agree that the original signed copy of this Agreement shall not, nor shall any certified, notarized or legalized copy thereof, ever be brought by Obligees into the country of Austria; provided that Obligees may bring into the country of Austria a simple copy of this Agreement without it being certified, notarized or legalized. Any tax, stamp duty or fee, if any, in connection with the execution, delivery or performance of this Agreement (collectively, a “Tax”), other than any Tax arising out of any Obligee’s breach of this Section 2.4 (which Tax will be paid by the Obligees), shall be paid by SMI, and SW shall indemnify and hold each Obligee and its Affiliates harmless for any such Tax and agree to indemnify and reimburse each Obligee for any and all legal or other

expenses incurred in connection with such Obligee’s enforcement of this Section 2.4 or collection of indemnifiable amounts pursuant to this Section 2.4. Obligees jointly and severally agree to indemnify and hold SMI harmless for any Tax, if any, incurred as a result of any Obligee’s breach of this Section 2.4, and further jointly and severally agree to indemnify and reimburse SMI for any and all legal or other expenses incurred in connection with SMI’s enforcement of this Section 2.4 or collection of indemnifiable amounts pursuant to this Section 2.4. Nothing herein is intended to imply that this Agreement constitutes a suretyship (Btirgschaft) obligation.

2.5 Upon any merger or consolidation of SMI with or into any other Person (unless SMI is the survivor entity), or the sale or other disposition of all or substantially all of the assets of S1VII, whether in a single transaction or a series of transactions, to any Person (any such merger, consolidation, sale or other disposition being referred to as a “Guarantor Transfer”), SMI or the Person formed by such Guarantor Transfer or the Person which acquires all or substantially all of the assets of SMI (such Person being the “Successor Guarantor”), shall deliver or cause to be delivered to each Obligee on or prior to the effective date of such Guarantor Transfer, unless the obligations of SMI under this Agreement (the “Guarantor Obligations”) are assumed by the Successor Guarantor by operation of law, an agreement, in form and substance reasonably satisfactory to each Obligee, containing an express assumption by the Successor Guarantor of SMI’s Obligations and an acknowledgment and agreement (in form and substance reasonably satisfactory to each Obligee executed and delivered by SMI under this Agreement (after giving effect to such transfer) to the effect that this Agreement shall remain in full force and effect and enforceable in accordance with its teams. Notwithstanding anything herein to the contrary, unless otherwise agreed to in writing by the Obligees, following any such merger, consolidation, sale or other disposition, SMI shall remain jointly and severally liable for the Obligations and other agreements hereunder.

2.6 SMI hereby acknowledges, that the Obligees willingness to enter into the Purchase Agreement and to consummate the transaction contemplated thereby are subject SMI’s legal and valid execution and delivery of this Agreement.

SECTION 3. Representations and Warranties.

3.1 SMI hereby represents and warrants as follows (each such representation and warranty being made as of the date hereof):

(i) SMI is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Minnesota, with full corporate power and authority to enter into this Agreement and to perform its obligations hereunder.

(ii) The execution, delivery and performance of this Agreement have been duly and validly authorized by all requisite corporate action on the part of SMI, and do not require any consent or approval of, or the giving notice to, or the taking of any other action in respect of, any stockholder or trustee or holder of any indebtedness or obligations of SMI. This Agreement has been duly and validly executed and delivered by SMI, and constitutes a legal, valid and binding obligation of SMI, enforceable against SMI in accordance with its terms.

(iii) The execution, delivery and performance of this Agreement do not and will not conflict with or result in any violation of or default under any provision of the organizational documents of SMI, or any indenture, mortgage, deed of trust, instrument, law, rule or regulation binding on SMI or to which SMI is a party.

(iv) The execution, delivery and performance of this Agreement do not and will not result in violation of any judgment or order applicable to SMI or result in the creation or imposition of any Lien on any of the properties or revenues of SMI pursuant to any requirement of law or any indenture, mortgage, deed of trust or other instrument to which SMI is a party.

(v) The execution, delivery and performance of this Agreement do not and will not conflict with and do not and will not require any consent, approval or authorization of, or registration or filing with, any governmental authority or agency binding on it.

(vi) The execution, delivery and performance by SMI of this Agreement will not render SMI insolvent, nor is it being made in contemplation of SMI’s insolvency, and SMI does not have an unreasonably small capital.

3.2 Each Obligee hereby represents and warrants as follows (each such representation and warranty being made as of the date hereof):

(i) It is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with full corporate power and authority to enter into this Agreement and to perform its obligations hereunder.

(ii) The execution, delivery and performance of this Agreement have been duly and validly authorized by all requisite corporate action on its part, and do not require any consent or approval of, or the giving notice to, or the taking of any other action in respect of, any stockholder or trustee or holder of any its indebtedness or obligations. This Agreement has been duly and validly executed and delivered by it, and constitutes a legal, valid and binding obligation of it, enforceable against it in accordance with its terms.

(iii) The execution, delivery and performance of this Agreement do not and will not conflict with or result in any violation of or default under any provision of its organizational documents, or any indenture, mortgage, deed of trust, instrument, law, rule or regulation binding on it or to which it is a party.

(iv) The execution, delivery and performance of this Agreement do not and will not result in violation of any judgment or order applicable to it or result in the creation or imposition of any Lien on any of the properties or revenues of it pursuant to any requirement of law or any indenture, mortgage, deed of trust or other instrument to which it is a party.

(v) The execution, delivery and performance of this Agreement do not and will not ( conflict with and do not and will not require any consent, approval or authorization of, or / a . registration or filing with, any governmental authority or agency binding on it.

SECTION 4. Miscellaneous.

4.1 Governing Law; Arbitration. (a) This Agreement, and all questions concerning the construction, validity and interpretation of this Agreement, or breach hereof, shall be governed by and construed in accordance with the laws of the State of New York applicable therein (including Section 5-1401 of the New York General Obligations Law but excluding all other choice-of-law and conflicts-of-law rules).

(b) All disputes, controversies or claims arising under or relating to this Agreement or any breach or threatened breach of this Agreement or violation, termination or

nullity of this Agreement (an “Arbitrable Dispute”), shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules, subject to the following:

(i) As more than two persons ,are party to this Agreement, it is expressly stipulated that more than one claimant and/or more than one defendant are permitted. For the purpose of the nomination of arbitrators, there is deemed to be only one claimant party and one defendant party, regardless of whether multiple parties appear.

(ii) All such arbitration proceedings shall take place in London, United Kingdom. The language of the arbitration shall be the English language.

4.2 No Waiver; Cumulative Remedies. No failure on the part of any Obligee or any of its agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by any Obligee or any of its agents of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law.

4.3 Notices. The provisions of Section 12.2 of the Purchase Agreement concerning notices are hereby incorporated herein by reference, as if fully set forth herein. SMI’s address and other information for purposes of such Section 12.2 is as follows: Shuffle Master, Inc., 1106 Palms Airport Drive, Las Vegas, Nevada 89119, Attention: Jerome R. Smith, Senior Vice President and General Counsel.

4.4 Amendments, etc. This Agreement, together with the exhibit hereto (which is incorporated herein by reference), and any provision hereof or thereof may be terminated, waived, amended, modified or supplemented only by an agreement or instrument in writing, specifying the provision (or, if applicable, the whole of this Agreement) intended to be terminated, waived, amended, modified or supplemented, and executed by SMI and each Obligee in their sole discretion.

4.5 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of SMI and the Obligees; provided, that except as otherwise provided in Section 2.5, SMI shall not assign or transfer its rights or obligations hereunder without the prior written consent of each Obligee. Notwithstanding anything herein to the contrary, unless otherwise agreed to in writing by the Obligees, following any such assignment or transfer, SMI shall remain jointly and severally liable for the Obligations and other agreements hereunder. Any attempted assignment in breach of this Section shall be void. SMI hereby acknowledges receipt of a copy of the Purchase Agreement and consents in all respects (to the extent such consent may be necessary) to the provisions of the Purchase Agreement.

4.6 Severability. Should any of the provisions of this Agreement be or become fully or in part invalid or unenforceable, the other provisions hereof shall remain enforceable and in full force and effect.

4.7 Enforcement. Any Obligee may enforce this Agreement to the extent of any Obligations owing to it in accordance with the terms hereof.

4.8 Survival. All warranties, representations and covenants made by SMI, whether herein or in any certificate or other instrument delivered by it or on behalf of it under this

Agreement, shall be considered to have been relied upon by each Obligee and shall survive the consummation of the transactions contemplated hereby on the Closing Date regardless of any investigation made by any such party or on behalf of any such party.

4.9 Integration. This Agreement contains the entire and complete agreement of the parties concerning the subject matter hereof and supercedes any prior understandings, agreements or presentations, if any, by or between the parties, written or oral, which may have related to the subject matter hereof.

4.10 Effectiveness. Notwithstanding any execution hereof, this Agreement shall only become effective upon the execution and delivery of the Purchase Agreement.

4.11 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument.

IN WITNESS WHEREOF, this Agreement has been duly executed in New York City, New York, by the undersigned parties on this 12th day of May, 2004.

Exhibit 1

Supply Agreement Term Sheet

FINAL VERSION

May 11, 2004

TERM SHEET

Sales Frame Agreement

The Sales Frame Agreement shall be consistent with this Term Sheet and shall be concluded between CASAG and/or its Affiliates on the one hand and SMI and/or its Affiliates on the other no later than 30.062004.

1. Seller: SMI and SMI Affiliates (including CARD)

2. Buyer. CASAG and CASAG Affiliates (the term Affiliates includes casinos (co-) owned or (co-) operated by a CASAG-group company)

3. Duration:

(a) start: 13.05.2004

(b) indefinite

(d) minimum duration: 31.12.2009

(e) extraordinary termination reserved

Purpose: Sale of all of Seller’s products now existing or later developed, produced or traded by Seller.

Minimum quantity: none

6. After sale services: optional, at request of Buyer, on terms mutually agreed upon

7. Full warranty for products sold by Seller: one year

8. Prices: basis is list price minus applicable volume discounts as offered by Sellers from time to time. Rebate payable in cash due 15.46 of each year for preceding 12 months (May 1 - April 30).

if total purchases exceed EUR 200.000, per year, then an annual rebate (separate from any applicable volume discount) on the total amount of 20%;

if total purchases exceed EUR 400.000, per year, then an annual rebate (separate from any applicable volume discount) on the total amount of 25%;

The first purchases under this agreement for a total amount of EUR 300.000 (after any applicable volume discount)- are free of charge.

9. Rebates Refund:

In the event that CASAG or any Affiliate violates the covenant not to compete contained in Section 10.10 of the Purchase Agreement, or if either CASAG or any CASAG Affiliate commits any acts which would be in violation of the covenant not to compete, if such

covenant were fully enforceable, then Buyers shall refund to Sellers all rebates received.

10. Testing:

For as long as Buyer shall enjoy all benefits of Sales Frame Agreement, CASAG shall allow Seller, at no charge to Seller, to test new product developments in casinos owned or operated by Buyer. Details to be mutually agreed.

11. Confidentiality:

Data and information obtained (including prices and testing results) to be kept confidential against third parties unless on a need to know basis, or unless required by law or statute.

12. Law:

Sales Frame Agreement and deliveries under the Agreement are exclusively subject to Austrian law (excluding UN Sales Law and conflict of law principles of Austrian law).

13. Disputes:

Disputes to be resolved by ICC arbitration; place of arbitration: London. Governing language = English

EX-10.4 6 a04-6489_1ex10d4.htm EX-10.4

Exhibit 10.4

$125,000,000

Shuffle Master, Inc.

1.25% Contingent Convertible Senior Notes Due 2024

PURCHASE AGREEMENT

April 15, 2004

Deutsche Bank Securities Inc.

As Representative of the

Several Initial Purchasers

60 Wall Street

New York, NY 10005

Ladies and Gentlemen:

Shuffle Master, Inc., a Minnesota corporation (the “Company”), proposes, subject to the terms and conditions contained herein, to issue and sell to the several purchasers named in Schedule I hereto (the “Initial Purchasers”) for whom you are acting as representative (the “Representative”) $125,000,000 in aggregate principal amount of its 1.25% Contingent Convertible Senior Notes Due 2024 (the “Firm Securities”). The Company also proposes to issue and sell at the Initial Purchasers’ option up to an additional $25,000,000 in aggregate principal amount of its 1.25% Contingent Convertible Senior Notes Due 2024 (the “Option Securities” and together with the Firm Securities, the “Securities”) as set forth below.

The Securities are convertible into cash and shares of common stock of the Company, $.01 par value (the “Common Stock”) together with the rights (the “Rights”) evidenced by such Common Stock to the extent provided for in the Shareholder Rights Plan dated June 26, 1998, between the Company and Norwest Bank Minnesota, N.A., (the “Rights Agreement”). The shares of Common Stock and accompanying Rights into which the Securities may be convertible are referred to herein as the “Underlying Securities”. The Securities are to be issued pursuant to the terms of an Indenture between the Company and Wells Fargo Bank, National Association, as Trustee (the “Trustee”).

The sale of the Securities and the Underlying Securities will be made without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on exemptions from the registration requirements of the Securities Act. As Representative, you have advised the Company that the Initial

Purchasers will offer and sell the Securities purchased by the Initial Purchasers hereunder (the “Offering”) in accordance with Section 3 hereof as soon as you deem advisable.

In connection with the Offering, the Company has prepared a preliminary Offering Memorandum, dated April 15, 2004 (including any and all exhibits and appendices thereto and the information incorporated by reference therein, the “Preliminary Offering Memorandum”) and a final Offering Memorandum, dated April 15, 2004 (including any and all exhibits and appendices thereto and the information incorporated by reference therein, the “Offering Memorandum”). Each of the Preliminary Offering Memorandum and the Offering Memorandum sets forth certain information regarding the Company, the Securities and the Underlying Securities. The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendment or supplement thereto, in connection with the Offering by the Initial Purchasers. Unless stated to the contrary, all references herein to the Offering Memorandum are to the Offering Memorandum, as supplemented or amended at the date hereof and are not meant to include any amendment or supplement, or any information incorporated by reference therein subsequent to the date thereof and any references herein to the terms “amend”, amendment” or “supplement” with respect to the Offering Memorandum shall be deemed to refer to and include any information filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), subsequent to the date of the Offering Memorandum which is incorporated by reference therein.

In connection with the Offering, the Company also proposes to enter into a Registration Rights Agreement, to be dated as of the Closing Date (as defined below), among the Company and the Initial Purchasers (the “Registration Rights Agreement”).

In consideration of the mutual agreements contained herein and of the interests of the parties in the transactions contemplated hereby, the parties hereto agree as follows:

1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

(a) The Company represents and warrants to the Initial Purchasers as follows:

(i) the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Minnesota, with the corporate power and authority to own or lease its properties and conduct its business as described in the Offering Memorandum; each of the subsidiaries of the Company (each, a “Subsidiary” and collectively, the “Subsidiaries”) has been duly incorporated and is validly existing

as a corporation in good standing under the laws of the jurisdiction of its organization, with the corporate power and authority to own or lease its properties and conduct its business as described in the Offering Memorandum; the Company and each of the Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business requires such qualification and where the failure to be so qualified would, individually or in the aggregate, reasonably be expected to result in a material adverse effect on the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and the Subsidiaries taken as a whole (a “Material Adverse Effect”); the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company or another Subsidiary free and clear of all liens, encumbrances and equities and claims; and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into shares of capital stock in the Subsidiaries are outstanding;

(ii) the issuance and sale of the Securities have been duly authorized by all necessary corporate action on the part of the Company and, when executed, authenticated and delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement and the Indenture, the Securities will be valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting creditors’ rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) and will be entitled to the benefits of the Indenture and the Registration Rights Agreement;

(iii) the execution and delivery of, and the performance by the Company of its obligations under, the Indenture have been duly and validly authorized by all necessary corporate action on the part of the Company and, when duly executed and delivered by the Company and the other parties thereto, the Indenture will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except to the extent that enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to

fraudulent transfers), reorganization, moratorium or other similar laws affecting creditors’ rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law);

(iv) (x) the outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and non-assessable; the shares of Common Stock to be issued upon conversion of the Securities have been duly authorized and reserved, and when issued upon conversion of the Securities will be validly issued, fully paid and non-assessable; and no preemptive or similar rights of stockholders exist with respect to any of the Common Stock to be issued upon conversion of the Securities; and (y) the Rights, if any, issuable upon conversion of the Securities have been duly authorized and, when and if issued upon conversion in accordance with the terms of the Indenture and the Rights Agreement, will have been validly issued;

(v) the information set forth under the caption “Capitalization” in the Offering Memorandum is true and correct in all material respects; all of the Underlying Securities conform to the description thereof contained in the Offering Memorandum in all material respects; the form of certificate for the shares of Common Stock conforms to the corporate law of the jurisdiction of the Company’s incorporation in all material respects;

(vi) except as described in or contemplated by the Offering Memorandum, there are no outstanding securities of the Company convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of capital stock of the Company and there are no outstanding or authorized options, warrants or rights of any character obligating the Company to issue any shares of its capital stock or any securities convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of such stock;

(vii) all of the Underlying Securities issuable upon conversion of the Securities have been approved for designation upon notice of issuance on the Nasdaq National Market;

(viii) each document filed, or to be filed, by the Company pursuant to the Exchange Act and incorporated, or to be incorporated, by reference in either the Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto) at the time filed with the Securities and Exchange Commission (the “Commission”) conformed, or will

conform, in all material respects with the Exchange Act and the applicable rules and regulations thereunder; the Preliminary Offering Memorandum as of the date thereof did not contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Offering Memorandum and any amendment or supplement thereto do not contain, and will not contain, any untrue statement of a material fact, and do not omit, and will not omit, any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty as to statements or omissions made in the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to them by the Initial Purchasers specifically for use therein;

(ix) the consolidated financial statements of the Company and the Subsidiaries, together with related notes and schedules included in the Offering Memorandum, present fairly in all material respects the financial position and the results of operations and cash flows of the Company and its consolidated Subsidiaries, at the indicated dates and for the indicated periods; such financial statements and related notes and schedules have been prepared in accordance with generally accepted accounting principles in the United States, consistently applied throughout the periods indicated, except as disclosed therein, and all adjustments necessary for a fair presentation of results for such periods have been made; the summary financial and statistical data of the Company and the Subsidiaries included in the Offering Memorandum present fairly in all material respects the information shown therein and such data has been compiled on a basis consistent with the financial statements presented therein and the books and records of the Company;

(x) Deloitte & Touche LLP, who has certified certain of the financial statements incorporated by reference in the Offering Memorandum, are independent public accountants as required by the Securities Act and the applicable rules and regulations thereunder;

(xi) except as described in or contemplated by the Offering Memorandum, there is no action, suit, claim or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of the Subsidiaries before

any court or administrative agency or otherwise which, if determined adversely to the Company or any of the Subsidiaries, would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or prevent the consummation of the transactions contemplated hereby or in the Indenture, the Securities or the Registration Rights Agreement, except as set forth in the Offering Memorandum;

(xii) except as described in or contemplated by the Offering Memorandum, the Company and the Subsidiaries have good and marketable title to all of the properties and assets reflected in the consolidated financial statements hereinabove described or described in the Offering Memorandum and material to the Company’s business or operations, subject to no lien, mortgage, pledge, charge or encumbrance of any kind except those reflected in such financial statements or described in the Offering Memorandum and such liens, mortgages, pledge, charges and encumbrances which are not material in amount; the Company and the Subsidiaries occupy their leased properties under valid and binding leases;

(xiii) except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Company and the Subsidiaries have filed all Federal, State, local and foreign tax returns which have been required to be filed and have paid all taxes indicated by such returns and all assessments received by them or any of them to the extent that such taxes have become due; all tax liabilities have been adequately provided for in the financial statements of the Company, and the Company does not know of any actual or proposed additional material tax assessments;

(xiv) since the respective dates as of which information is given in the Offering Memorandum, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise), or prospects of the Company and the Subsidiaries taken as a whole, whether or not occurring in the ordinary course of business, and there has not been any material transaction entered into or any material transaction that is probable of being entered into by the Company or the Subsidiaries, other than transactions in the ordinary course of business and changes and transactions described in or contemplated by the Offering Memorandum; the Company and the Subsidiaries have no material contingent obligations which are

not disclosed in the Company’s financial statements which are included in the Offering Memorandum;

(xv) neither the Company nor any of the Subsidiaries is or with the giving of notice or lapse of time or both, will be, in violation of or in default under i) its amended Articles of Incorporation or Bylaws or ii) any agreement, lease, contract, indenture or other instrument or obligation to which it is a party or by which it, or any of its properties, is bound and, solely with respect to this clause (B), which violation or default would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; the execution and delivery of this Agreement, the Indenture, the Securities and the Registration Rights Agreement, and the issuance and sale of the Securities to the Initial Purchasers by the Company pursuant to this Agreement, and the issuance by the Company of the Underlying Securities issuable upon conversion of the Securities and the consummation of the transactions herein and therein contemplated and the fulfillment of the terms hereof and thereof will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any of their respective properties is bound, except for such conflicts, breaches or defaults as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, or of the amended Articles of Incorporation or Bylaws of the Company or any law, order, rule or regulation, judgment, order, writ or decree applicable to the Company or any Subsidiary of any court or of any government, regulatory body or administrative agency or other governmental body having jurisdiction over the Company or any of the Subsidiaries, except for such conflicts with gaming regulations that both (x) would not have a Material Adverse Effect and (y) are not currently known to the Company;

(xvi) the execution and delivery of, and the performance by the Company of its obligations under, this Agreement have been duly and validly authorized by all necessary corporate action on the part of the Company, and this Agreement has been duly executed and delivered by the Company;

(xvii) the execution and delivery of, and the performance by the Company of its obligations under, the Registration Rights Agreement have been duly and validly authorized by all necessary corporate action on the part of the Company and, when duly executed and delivered by the Company and the other parties

thereto, the Registration Rights Agreement will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that (x) enforcement thereof may be (1) limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting creditors’ rights generally and (2) subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) and (y) rights to indemnification and contribution thereunder may be limited under applicable law;

(xviii) each approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body necessary in connection with the execution and delivery by the Company of this Agreement, the Indenture, the Securities and the Registration Rights Agreement, and the issuance and sale of the Securities to the Initial Purchasers by the Company pursuant to this Agreement, and the issuance of the Underlying Securities issuable upon conversion of the Securities and the consummation of the transactions herein and therein contemplated has been obtained or made and is in full force and effect, except for (A) the effectiveness of the Shelf Registration Statement (as such term is defined in the Registration Rights Agreement) under the Securities Act and the qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), in each case as contemplated by the Registration Rights Agreement, (B) such additional steps as may be necessary to qualify the Securities for public offering by the Initial Purchasers under state securities or Blue Sky laws, (C) the filing of audited financial statements and unaudited pro forma financial statements for CARD Casinos Austria Research and Development GmbH (“CARD”) with the Commission as described in the Offering Memorandum, (D) any regulatory approvals that may be required in connection with the Company’s acquisition of CARD, (E) the Company’s filing of copies of all documents related to the transaction (I) with the Mississippi Gaming Commission within fourteen (14) calendar days after the closing of this transaction, (II) with the Nevada State Gaming Control Board within thirty (30) days of the end of the calendar quarter in which the transaction is consummated and (III) with other gaming regulatory authorities and (F) the approvals of the relevant gaming regulatory authorities (including without limitation the approval of the Nevada Gaming Commission as described in the Offering

Memorandum) of the Company’s fulfillment of its obligations under the Registration Rights Agreement;

(xix) all of the Securities have been designated by the NASD PORTAL Market (“PORTAL”) as PORTAL-eligible securities in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. (the “NASD”);

(xx) (A) the Company, each of the Subsidiaries and each of their respective directors and executive officers hold all material licenses, certificates and permits from governmental authorities, including gaming regulatory authorities, which are necessary to the conduct of their businesses; (B) except as described in or contemplated by the Offering Memorandum, the Company and the Subsidiaries each own or possess the right to use all patents, patent rights, trademarks, trade names, service marks, service names, copyrights, license rights, know-how (including trade secrets and other unpatented and unpatentable proprietary or confidential information, systems or procedures) and other intellectual property rights (“Intellectual Property”) necessary to carry on their business in all material respects; neither the Company nor any of the Subsidiaries has infringed, and, except as described in or contemplated by the Offering Memorandum, none of the Company or the Subsidiaries have received notice of conflict with, any Intellectual Property of any other person or entity; (C) the Company has taken all reasonable steps necessary to secure interests in such Intellectual Property from its contractors; (D) except as described in or contemplated by the Offering Memorandum, there are no outstanding options, licenses or agreements of any kind relating to the Intellectual Property of the Company that are material to the Company and the Subsidiaries taken as a whole; (E) except as described in or contemplated by the Offering Memorandum, the Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property of any other person or entity that are material to the Company and the Subsidiaries taken as a whole; except as described in or contemplated by the Offering Memorandum, none of the technology employed by the Company has been obtained or is being used by the Company in violation of any contractual obligation binding on the Company or any of its officers, directors or employees or otherwise in violation of the rights of any persons; (F) except as described in or contemplated by the Offering Memorandum, the Company has not received any written or oral communications alleging that the Company has violated, infringed or conflicted with, or, by conducting its business as set forth in the Offering Memorandum, would violate,

infringe or conflict with, any of the Intellectual Property of any other person or entity; and (G) except as described in or contemplated by the Offering Memorandum, the Company knows of no infringement by others of Intellectual Property owned by or licensed to the Company;

(xxi) neither the Company nor any Subsidiary is or, after giving effect to the offering and sale of the Securities contemplated hereunder and the application of the net proceeds from such sale as described in the Offering Memorandum, will be required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”) and the applicable rules and regulations thereunder;

(xxii) the Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences;

(xxiii) the Company and the Subsidiaries comply in all material respects with all Environmental Laws (as defined below), except to the extent that failure to comply with such Environmental Laws would not, individually or in the aggregate, result in a Material Adverse Effect; none of the Company or any of the Subsidiaries is the subject of any pending or threatened federal, state or local investigation evaluating whether any remedial action by the Company or any of the Subsidiaries is needed to respond to a release of any Hazardous Materials (as defined below) into the environment, resulting from the Company’s or any of the Subsidiaries’ business operations or ownership or possession of any of their properties or assets or is in contravention of any Environmental Law that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect; none of the Company or any of the Subsidiaries has received any notice or claim, nor are there pending or threatened lawsuits against them, with respect to violations of an Environmental Law or in connection with any release of any Hazardous Material into the environment that could reasonably be expected, individually or in the aggregate, to result in a Material

Adverse Effect; as used herein, “Environmental Laws” means any federal, state or local law or regulation applicable to the Company’s or any of the Subsidiaries’ business operation or ownership or possession of any of their properties or assets relating to environmental matters, and “Hazardous Materials” means those substances that are regulated by or form the basis of liability under any Environmental Laws;

(xxiv) the Company and each of the Subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties;

(xxv) the Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”); no “reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Company would have any material liability; the Company has not incurred and does not expect to incur any material liability under (A) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan” or (B) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the “Code”); and each “pension plan” for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification;

(xxvi) assuming the accuracy of the Initial Purchasers’ representations set forth in Section 3(c) of this Agreement, neither the Company, nor any of its Affiliates (as defined in Rule 501(b) under the Securities Act), nor any person acting on its or their behalf has, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration of the Securities or the Underlying Securities issuable upon conversion thereof under the Securities Act;

(xxvii) neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf has engaged in any form of general solicitation or general advertising (as those terms are used in Rule 502(c) under the Securities Act) in connection with any offer or sale of the Securities or the Underlying Securities issuable upon conversion thereof in the United States;

(xxviii) the Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act;

(xxix) the Company is subject to and in full compliance with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act;

(xxx) the Securities, the Underlying Securities, the Indenture and the Registration Rights Agreement will each conform in all material respects to the respective descriptions thereof contained in the Offering Memorandum;

(xxxi) on and as of the date hereof, no event has occurred or is continuing which constitutes, or with notice or lapse of time would constitute, an Event of Default (as defined in Indenture and the Securities);

(xxxii) assuming that (x) the representations and warranties of the Initial Purchasers in Section 3 hereof are true and (y) the Initial Purchasers comply with the covenants set forth in Section 3 hereof, the purchase and sale of the Securities pursuant hereto (including the Initial Purchasers’ proposed offering of the Securities on the terms and in the manner set forth in the Offering Memorandum and Section 3 hereof) is exempt from the registration requirements of the Securities Act and does not require the qualification of an indenture under the Trust Indenture Act;

(xxxiii) there is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply in all material respects with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to certifications; and

(xxxiv) there are no indentures, notes, loan agreements, mortgages, deeds of trust, security agreements or other written agreements or instruments that are material to the Company.

2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES.

(a) On the basis of the representations, warranties and covenants herein contained, and subject to the conditions herein set forth, the Company agrees to issue and sell to the several Initial Purchasers and each Initial Purchaser agrees, severally and not jointly, to purchase from the Company, at a purchase price of 97.0% of the

aggregate principal amount thereof (the “Purchase Price”), plus accrued interest, if any, from April 21, 2004 to the Closing Date, the principal amount of Firm Securities set forth opposite the name of such Initial Purchaser in Schedule I hereto. Each Security will be convertible at the option of the holder into a combination of cash and Underlying Securities as provided in the Securities and the Indenture. One or more global securities representing the Firm Securities shall be registered by the Trustee in the name of the nominee of the Depository Trust Company (“DTC”), Cede & Co., credited to the accounts of such of its participants as the Representative shall request, upon notice to the Company at least 48 hours prior to the Closing Date, with any transfer taxes payable in connection with the transfer of the Securities to the Initial Purchasers duly paid, and deposited with the Trustee as custodian for DTC on the Closing Date, against payment by or on behalf of the Initial Purchasers to the account of the Company of the aggregate Purchase Price therefor by wire transfer in immediately available funds. Delivery of and payment for the Firm Securities shall be made at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017 at 9:30 A.M., New York City time, on the fourth full business day following the date of this Agreement, or at such other place, time or date not later than five business days thereafter as the Initial Purchasers and the Company may agree upon. Such time and date of delivery against payment are herein referred to as the “Closing Date.” (As used herein, “business day” means a day on which the Nasdaq National Market is open for trading and on which banks in New York are open for business and are not permitted by law or executive order to be closed.)

(b) In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Initial Purchasers to purchase the Option Securities at the Purchase Price set forth in the first paragraph of this Section 2 plus accrued interest, if any, from April 21, 2004 to the Option Closing Date (as defined below). The option granted hereby may be exercised in whole or in part by giving written notice (i) at any time before the Closing Date and (ii) only once thereafter within 30 days after the date of this Agreement, by you, as Representative of the Initial Purchasers, to the Company setting forth the aggregate principal amount of Option Securities as to which the Initial Purchasers are exercising the option and the time and date for delivery of and payment for such Option Securities. The time and date for delivery of and payment for such Option Securities shall be determined by the Representative but shall not be later than ten full business days after the exercise of such option, nor in any event prior to the Closing Date (such time and date being herein referred to as the “Option Closing Date”). If the date of exercise of the option is two or more days before the Closing Date, the

notice of exercise shall set the Closing Date as the Option Closing Date. The aggregate principal amount of Option Securities to be purchased by each Initial Purchaser shall be in the same proportion to the total aggregate principal amount of Option Securities being purchased as the aggregate principal amount of Firm Securities being purchased by such Initial Purchaser bears to the total aggregate principal amount of Firm Securities, adjusted by you in such manner as to avoid fractional Option Securities. You, as Representative of the Initial Purchasers, may cancel such option at any time prior to its expiration by giving written notice of such cancellation to the Company.

3. OFFERING BY THE INITIAL PURCHASERS.

(a) It is understood that the several Initial Purchasers will offer and sell the Securities in accordance with this Section as soon as they deem it advisable to do so. The Securities are to be initially offered at the offering price set forth in the Offering Memorandum. The Initial Purchasers may from time to time thereafter change the price and other selling terms.

(b) Each Initial Purchaser understands and acknowledges that the Securities and the Underlying Securities to be issued upon conversion thereof have not been and will not be registered under the Securities Act (except as contemplated by Section 1 of this Agreement) and may not be offered or sold, except in compliance with the registration requirements of the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, each Initial Purchaser agrees that it will offer and sell the Securities only to persons that it reasonably believes to be qualified institutional buyers as defined in Rule 144A under the Securities Act.

(c) Each Initial Purchaser agrees that neither it nor any person acting on its behalf has engaged or will engage in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) in connection with any offer or sale of the Securities.

(d) Each Initial Purchaser agrees that it is an institutional accredited investor within the meaning of Rule 501(a) under the Securities Act.

4. COVENANTS OF THE COMPANY.

The Company covenants and agrees with the Initial Purchasers that:

(a) The Company will furnish to the Initial Purchasers and counsel for the Initial Purchasers, without charge, during the period

mentioned in paragraph (d) below, as many copies of the Preliminary Offering Memorandum and Offering Memorandum, any documents incorporated by reference therein and any supplements or amendments thereto as they may reasonably request.

(b) The Company will not amend or supplement the Offering Memorandum, other than by filing documents under the Exchange Act which are incorporated by reference therein, and, prior to the completion of the distribution of the Securities by the Initial Purchasers (as determined by the Representative), the Company will not file any document under the Exchange Act which is incorporated by reference in the Offering Memorandum, in each case unless the Initial Purchasers previously have been advised of, and furnished with a copy within a reasonable period of time prior to, the proposed filing and the Initial Purchasers shall have given their consent to such filing, such consent not to be unreasonably withheld. The Company will advise the Initial Purchasers of the time when any amendment or supplement to the Offering Memorandum has been made or when any document filed under the Exchange Act which is incorporated by reference in the Offering Memorandum has been filed with the Commission and will provide evidence satisfactory to the Initial Purchasers of each such amendment, supplement or filing. The Company will prepare promptly upon request by the Initial Purchasers or counsel for the Initial Purchasers any amendments or supplements to the Offering Memorandum that may be necessary or advisable in connection with the distribution of the Securities by the Initial Purchasers.

(c) The Company will cooperate with the Initial Purchasers in endeavoring to qualify the Securities for sale under the securities laws of such jurisdictions as the Initial Purchasers may reasonably have designated in writing and will make such applications, file such documents and furnish such information as may be reasonably required for that purpose; provided that the Company shall not be required to qualify as a foreign corporation in any jurisdiction where it is not now so qualified or to file any general consent to service of process or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. The Company will, from time to time, prepare and file such statements, reports and other documents, as are or may be required to continue such qualifications in effect for so long a period as the Initial Purchasers may reasonably request for distribution of the Securities.

(d) If at any time prior to the date on which all of the Securities shall have been sold by the Initial Purchasers, any event shall occur as a result of which, in the judgment of the Company or in the reasonable opinion of the Initial Purchasers, it becomes necessary to amend or supplement the Offering Memorandum in order to make the statements

therein, in the light of the circumstances under which they were made, not misleading, or, if it is necessary at any time to amend or supplement the Offering Memorandum to comply with applicable law, the Company promptly will prepare an appropriate amendment or supplement to the Offering Memorandum so that the Offering Memorandum as so amended or supplemented will not contain statements that, in light of the circumstances under which they were made, are misleading, or so that the Offering Memorandum will comply with applicable law.

(e) No offering, sale, short sale or other disposition of any shares of Common Stock or other securities convertible into or exchangeable or exercisable for shares of Common Stock or derivative of Common Stock (or agreement for such) will be made for a period of 90 days after the date of this Agreement, directly or indirectly, by the Company otherwise than hereunder or with the prior written consent of the Representative on behalf of the Initial Purchasers. The foregoing sentence shall not apply to (A) any Option Securities delivered pursuant to this Agreement, (B) any shares of Common Stock issued by the Company pursuant to existing options, (C) the issuance of shares of Common Stock as consideration for, and employee options in connection with, the acquisition of CARD or (D) the issuance of any shares of Common Stock or options to purchase shares of Common Stock of the Company pursuant to employee benefit agreements or incentive stock or director stock unit plans in effect as of the date hereof.

(f) The Company shall have caused each officer and director of the Company to furnish to you, on or prior to the date of this agreement, a letter or letters, in substantially the form attached hereto as Exhibit A-1 and, in the case of Mark L. Yoseloff, Exhibit A-2 (collectively, the “Lock-up Agreements”).

(g) The Company will not, nor will it permit any of its Affiliates (as defined in Rule 144 under the Securities Act) to, resell any Securities that have been acquired by any of them.

(h) Except as contemplated by the Registration Rights Agreement, neither the Company, nor any of its Affiliates, nor any person acting on its behalf will, directly or indirectly, make offers or sales of any security, or solicit offers to buy any security, under circumstances that would require the registration of the Securities or the Underlying Securities issuable upon conversion thereof under the Securities Act.

(i) Neither the Company nor any of its Affiliates, nor any person acting on its behalf will engage in any form of general solicitation or general advertising (as those terms are used in Rule 502(c) under the Securities Act) in connection with any offer or sale of the Securities.

(j) So long as any of the Securities or the Underlying Securities issuable upon conversion thereof are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Company will, during any period in which they are not subject to and in compliance with Section 13 or 15(d) of the Exchange Act or exempt from such reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act, upon the request of any holder or prospective purchaser of such restricted securities, provide to such holder or prospective purchaser of such restricted securities any information required to be provided by Rule 144A(d)(4) under the Securities Act. This covenant is intended to be for the benefit of the holders, and the prospective purchasers designated by such holders, from time to time of such restricted securities.

(k) The Company will cooperate with the Initial Purchasers and use its best efforts to (x) permit the Securities to be eligible for clearance and settlement through DTC and such other clearance and settlement systems that the Initial Purchasers may designate and (y) arrange to have the Securities be designated by the PORTAL as PORTAL-eligible securities in accordance with the rules and regulations of the NASD.

(l) The Company will use its best efforts to cause the Underlying Securities issuable upon conversion of the Securities to be approved for designation on the Nasdaq National Market on or prior to the Closing Date and ensure that the Underlying Securities issuable upon conversion of the Securities remain authorized for listing following the Closing Date.

(m) The Company shall apply the net proceeds from its sale of the Securities as set forth in the Offering Memorandum.

(n) The Company will not invest, or otherwise use the proceeds received by the Company from its sale of the Securities in such a manner as would require the Company or any of the Subsidiaries to register as an investment company under the Investment Company Act.

(o) The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company.

5. COSTS AND EXPENSES.

The Company will pay all costs, expenses and fees incident to the performance of its obligations under this Agreement, including, without limiting the generality of the foregoing, the following: accounting fees of the Company;

the fees and disbursements of counsel for the Company; the cost of printing and delivering to, or as requested by, the Initial Purchasers copies of the Preliminary Offering Memorandum and the Offering Memorandum and any supplements or amendments thereto and the printing and production of all other documents connected with the Offering (including this Agreement, the Indenture, the Registration Rights Agreement and any other related agreements); the Listing Fee of the Nasdaq National Market; the expenses arising from having the Securities designated as eligible for trading in the PORTAL market; the expenses associated with the preparation, issuance and delivery to the Initial Purchasers of the Securities; the fees and expenses of the Trustee; the expenses of the “roadshow” and any other meetings with prospective investors in the Securities; and the costs and expenses of advertising relating to the Offering (other than advertising costs and expenses that the Initial Purchasers expressly agree to pay). The Company shall not, however, be required to pay for any of the Initial Purchasers’ expenses except that, if this Agreement shall not be consummated because the conditions in Section 6 hereof are not satisfied, or because this Agreement is terminated by the Initial Purchasers pursuant to Section 9(a)(i) hereof, or by reason of any failure, refusal or inability on the part of the Company to perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on their part to be performed, unless such failure, refusal or inability is due primarily to the default or omission of the Initial Purchasers, the Company shall reimburse the Initial Purchasers for reasonable out-of-pocket expenses, including fees and disbursements of counsel, reasonably incurred in connection with investigating, marketing and proposing to market the Securities or in contemplation of performing their obligations hereunder; but the Company shall not in any event be liable to the Initial Purchasers for damages on account of loss of anticipated profits from the sale by it of the Securities. Notwithstanding the foregoing, the Initial Purchasers agree to reimburse the Company up to $300,000 of the foregoing expenses incurred by the Company.

6. CONDITIONS OF OBLIGATIONS OF THE INITIAL PURCHASERS.

The obligation of the Initial Purchasers to purchase the Firm Securities on the Closing Date and the Option Securities, if any, on the Option Closing Date are subject to the accuracy, as of the Closing Date or the Option Closing Date, as the case may be, of the representations and warranties of the Company contained herein, and to the performance by the Company of its covenants and obligations hereunder and to the following additional conditions:

(a) The Initial Purchasers shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinion of Latham & Watkins LLP, special counsel for the Company, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Initial Purchasers to the effect set forth in Exhibit B hereto.

(b) The Initial Purchasers shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinion of Jerome R. Smith, Senior Vice President and General Counsel to the Company, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Initial Purchasers (and stating that it may be relied upon by counsel to the Initial Purchasers) to the effect that:

(i) based on such counsel’s current knowledge and after “due inquiry,” and subject to any modifications or qualifications in Exhibits C, D and E hereto, in connection with the Offering Memorandum, the statements in (x) “Part, I, Item 1 – Business –Gaming Regulation” and “Part I, Item 3 – Legal Proceedings” of the Company’s Annual Report on Form 10-K for the Year Ended October 31, 2003 and “Part 2, Item 1 – Legal Proceedings” of the Company’s Quarterly Report on Form 10-Q for the Three Months Ended January 31, 2004, both of which are incorporated by reference in the Offering Memorandum and (y) the Offering Memorandum under the heading “Regulation and Licensing” in the Offering Memorandum, insofar as such statements constitute a summary of documents and proceedings referred to therein or matters of law, but subject to the qualifications and explanatory text which is also contained therein, fairly summarize in all material respects the information called for with respect to such documents and matters; and

(ii) such counsel knows of no material legal or governmental proceedings pending or threatened against the Company or any of the Subsidiaries which have not been disclosed in the Company’s Annual Report on Form 10-K for the Year Ended October 31, 2003, as updated by the Company’s Quarterly Report on Form 10-Q for the Three Months Ended January 31, 2004.

Such counsel’s opinion shall be subject to such limitations as are typical in attorney opinion letter for Rule 144A offerings. “Due inquiry” for purposes of clause (i) shall mean such inquiry as such counsel deems reasonable under all applicable facts and circumstances. Such counsel may note in such opinion that the Director of Compliance does not report to such counsel.

(c) The Initial Purchasers shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinion of Larkin Hoffman Daly & Lindgren, Ltd., Minnesota counsel for the Company, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Initial Purchasers (and stating that it may be relied upon by counsel to the Initial Purchasers) to the effect that:

(i) this Agreement has been duly authorized, executed and delivered by the Company;

(ii) the Company was duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Minnesota, with the power and authority to own or lease its properties and conduct its business under Minnesota corporate law as described in the Offering Memorandum under Minnesota law (it being understood that such counsel need express no opinion with respect to the Company’s qualification to do business in, good standing in, power, or authority as a foreign corporation or otherwise under the laws of any other jurisdiction);

(iii) the execution and delivery of this Agreement, the Indenture, the Securities, the Registration Rights Agreement and the issuance and sale of the Securities to the Initial Purchasers by the Company pursuant to this Agreement, and the issuance of the Underlying Securities issuable upon conversion of the Securities and the consummation of the transactions herein and therein contemplated do not and will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, the amended Articles of Incorporation or Bylaws of the Company;

(iv) the outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and non-assessable; the shares of Common Stock initially issuable upon conversion of the Securities have been duly authorized and reserved for issuance upon conversion by all necessary corporate action of the Company and when issued, assuming issuance of such shares of Common Stock in compliance with the terms of the Notes and the Indenture, will be validly issued, fully paid and non-assessable; and no preemptive or similar rights of stockholders exist with respect to any of the shares of Common Stock initially issuable upon conversion of the Securities; and the Rights, if any, issuable upon conversion of the Securities in accordance with the terms of the Indenture and the Rights Agreement, will be validly issued;

(v) the statements under the caption “Description of Capital Stock” in the Offering Memorandum, insofar as such statements constitute a summary of documents referred to therein or matters of Minnesota corporate law, fairly summarize such documents and matters in all material respects; and

(vi) each document filed by the Company pursuant to the Exchange Act and incorporated by reference in the Offering

Memorandum (or any amendment or supplement thereto) at the time filed with the Commission conformed in all material respects with the Exchange Act and the then-applicable rules and regulations thereunder in effect at the time of such filing (it being understood that such counsel expresses no opinion with respect to the financial statements and schedules included therein or with respect to the exhibits filed in, or omitted from, such documents).

(d) The Initial Purchasers shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinions of Fox Rothschild LLP, New Jersey counsel for the Company, Lionel Sawyer & Collins, Nevada counsel for the Company, and Phelps Dunbar LLP, Mississippi counsel for the Company, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Initial Purchasers (and stating that it may be relied upon by counsel to the Initial Purchasers) to the effect set forth in Exhibits C, D and E hereto, respectively.

(e) The Initial Purchasers shall have received from their counsel, Davis Polk & Wardwell, an opinion dated the Closing Date or the Option Closing Date, as the case may be, substantially to the effect of opinions 2, 3, 5 and 6 of Exhibit B. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the attention of such counsel which leads them to believe that the Offering Memorandum, as of its date or as of the Closing Date or the Option Closing Date, as the case may be, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that such counsel need express no view as to financial statements, related notes and schedules and statistical information therein). With respect to such statement, Davis Polk & Wardwell may state that their belief is based upon the procedures set forth therein, but is without independent check and verification.

(f) The Initial Purchasers shall have received on each of the date hereof, the Closing Date and, if applicable, the Option Closing Date, letters dated the date hereof, the Closing Date or the Option Closing Date, as the case may be, in form and substance reasonably satisfactory to you, of Deloitte & Touche LLP confirming that they are independent public accountants within the meaning of the Securities Act and the applicable published rules and regulations thereunder and stating that in their opinion the financial statements and schedules of the Company examined by them and incorporated by reference in the Offering Memorandum comply in form in all material respects with the applicable accounting requirements of the Securities Act and the Exchange Act and the respective related published rules and regulations; and containing such other statements and

information as is ordinarily included in accountants’ “comfort letters” to initial purchasers in Rule 144A offerings with respect to the financial statements and certain financial and statistical information contained or incorporated by reference in the Offering Memorandum.

(g) The Initial Purchasers shall have received on the Closing Date and, if applicable, the Option Closing Date, as the case may be, a certificate or certificates of the Chief Executive Officer and the Chief Financial Officer of the Company to the effect that, as of the Closing Date or the Option Closing Date, as the case may be, each of them severally represents as follows:

(i) the representations and warranties of the Company contained in Section 1 hereof are true and correct as of the Closing Date or the Option Closing Date, as the case may be;

(ii) he or she has carefully examined the Offering Memorandum (including the documents of the Company incorporated by reference therein) and, in his or her opinion, as of the Closing Date or Option Closing Date as the case may be, the statements contained in the Offering Memorandum (including the documents of the Company incorporated by reference therein) with respect to the Company were true and correct in all material respects, and, with respect to the Company, such Offering Memorandum (including the documents of the Company incorporated by reference therein) does not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(iii) since the respective dates as of which information is given in the Offering Memorandum, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and the Subsidiaries taken as a whole, whether or not arising in the ordinary course of business; and

(iv) the Company has performed all covenants and agreements and satisfied all conditions on its part to be performed or satisfied under this Agreement at or prior to the Closing Date or the Option Closing Date, as the case may be.

(h) The Company shall have furnished to the Initial Purchasers such further certificates and documents confirming the representations and

warranties, covenants and conditions contained herein and related matters as the Initial Purchasers may reasonably have requested.

(i) The Underlying Securities issuable upon conversion of the Securities shall have been designated for trading, subject to notice of issuance, on the Nasdaq National Market and the Securities shall have been designated as PORTAL-eligible securities.

(j) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date, there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company’s securities by any “nationally recognized statistical rating organization,” as such term is defined for purposes of Rule 436(g)(2) under the Securities Act.

(k) The Indenture shall have been executed and delivered by all the parties thereto and the Registration Rights Agreement shall have been executed and delivered by the Company.

(l) The Lock-up Agreements described in Section 4(f) shall be in full force and effect.

The opinions and certificates mentioned in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in all material respects satisfactory to the Initial Purchasers.

If any of the conditions hereinabove provided for in this Section 6 shall not have been fulfilled when and as required by this Agreement to be fulfilled, the Initial Purchasers may terminate their obligations hereunder by notifying the Company of such termination in writing or by telegram at or prior to the Closing Date or the Option Closing Date, as the case may be.

In such event, the Company and the Initial Purchasers shall not be under any obligation to each other (except to the extent provided in Sections 5 and 7 hereof).

7. INDEMNIFICATION.

(a) The Company agrees:

(i) to indemnify and hold harmless each Initial Purchaser and each person, if any, who controls any Initial Purchaser within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which any such Initial Purchaser or any such controlling person may become subject under

the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in any Preliminary Offering Memorandum, the Offering Memorandum, or any amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser specifically for use in the preparation thereof; and

(ii) to reimburse each such Initial Purchaser and each such controlling person upon demand for any reasonable legal or other out-of-pocket expenses reasonably incurred by such Initial Purchaser or such controlling person in connection with investigating or defending any such loss, claim, damage or liability, action or proceeding or in responding to a subpoena or governmental inquiry related to the offering of the Securities, whether or not any such Initial Purchaser or controlling person is a party to any action or proceeding. In the event that it is finally judicially determined that such Initial Purchaser was not entitled to receive payments for legal and other expenses pursuant to this subparagraph, such Initial Purchaser will promptly return all sums that had been advanced pursuant hereto.

(b) Each Initial Purchaser agrees to indemnify and hold harmless the Company, each of its directors and officers and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities to which the Company or any such director, officer or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto, or (ii) the omission or the alleged omission to state therein a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and will reimburse any reasonable legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that such

Initial Purchaser will be liable in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission has been made in any Preliminary Offering Memorandum, the Offering Memorandum or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by such Initial Purchaser specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which each Initial Purchaser may otherwise have.

(c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to this Section 7, such person (the “indemnified party”) shall promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing. No indemnification provided for in Section 7(a) or (b) shall be available to any party who shall fail to give notice as provided in this Section 7(c) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was materially prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the indemnifying party or parties from any liability which it or they may have to the indemnified party for contribution or otherwise than on account of the provisions of Section 7(a) or (b). In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or within 30 days of presentation) the reasonable fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or (iii) the indemnifying party shall have failed to assume the defense and employ counsel acceptable to the indemnified party within a reasonable period of time after notice of commencement of the action. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties. Such firm shall be designated in writing by you in the case of parties indemnified pursuant to

Section 7(a) and by the Company in the case of parties indemnified pursuant to Section 7(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. In addition, the indemnifying party will not, without the prior written consent of the indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding of which indemnification may be sought hereunder (whether or not any indemnified party is an actual or potential party to such claim, action or proceeding) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action or proceeding.

(d) (i) To the extent the indemnification provided for in this Section 7 is unavailable to or insufficient to hold harmless an indemnified party under Section 7(a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchasers on the other from the offering of the Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Initial Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by the Initial Purchasers. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Initial Purchasers on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(ii) The Company and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 7(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 7(d) shall be deemed to include any reasonable legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), (i) the Initial Purchasers shall not be required to contribute any amount in excess of the discounts and commissions applicable to the Securities purchased by it and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

(e) In any proceeding relating to any Preliminary Offering Memorandum, the Offering Memorandum or any supplement or amendment thereto, each party against whom contribution may be sought under this Section 7 hereby consents to the jurisdiction of any court having jurisdiction over any other contributing party, agrees that process issuing from such court may be served upon it by any other contributing party and consents to the service of such process and agrees that any other contributing party may join it as an additional defendant in any such proceeding in which such other contributing party is a party.

(f) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 7 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 7 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Initial Purchasers or any person controlling any Initial Purchaser, the Company, its directors or officers or any persons controlling the Company, (ii) acceptance of any Securities and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Initial Purchaser, or any person controlling any such Initial Purchaser, or to the Company, its directors or officers or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 7.

8. NOTICES.

All communications hereunder shall be in writing and, except as otherwise provided herein, will be mailed, delivered or faxed and confirmed as follows: if to the Initial Purchasers, to Deutsche Bank Securities Inc., 60 Wall Street, New York, New York 10005; Attention: Syndicate Manager, Fax: (212) 797-9344, with a copy to Davis Polk & Wardwell, 450 Lexington Avenue, New York, NY 10017, Attention: Alan Dean and Alan Denenberg, Fax: (212) 450-4800; if to the Company, to Shuffle Master, Inc., 1106 Palms Airport Drive, Las Vegas, Nevada 89119, Attention: Jerry Smith, Fax: (702) 270-5161, with a copy to Latham & Watkins LLP, 885 Third Avenue, New York, NY 10022, Attention: Kirk A. Davenport II, Fax (212) 751-4864.

9. TERMINATION.

(a) This Agreement may be terminated by the Initial Purchasers by written notice to the Company at any time prior to the Closing Date or any Option Closing Date (if different from the Closing Date and then only as to Option Securities) if any of the following has occurred: (i) since the date as of which information is given in the Offering Memorandum, any material adverse change or any development involving a prospective material adverse change in or affecting the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and the Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (ii) any outbreak or escalation of hostilities or declaration of war or national emergency or other national or international calamity or crisis or change in economic or political conditions if the effect of such outbreak, escalation, declaration, emergency, calamity, crisis or change on the financial markets of the United States would, in your reasonable judgment, make it impracticable or inadvisable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) suspension of trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market or limitation on prices (other than limitations on hours or numbers of days of trading) for securities on either such Exchange, (iv) the enactment, publication, decree or other promulgation of any statute, regulation, rule or order of any court or other governmental authority which in your opinion materially and adversely affects or may materially and adversely affect the business or operations of the Company, (v) the declaration of a banking moratorium by United States or New York State authorities, (vi) any downgrading, or placement on any watch list for possible downgrading, in the rating of any of the Company’s debt securities by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Exchange Act); (vii) the suspension of trading of the Company’s common stock by the Nasdaq National Market, the Commission, or any other governmental authority or, (viii) the taking of any action by any governmental body or agency in respect of its monetary

or fiscal affairs which in your reasonable opinion has a material adverse effect on the securities markets in the United States; or

(b) as provided in Section 6 of this Agreement.

10. DEFAULTING INITIAL PURCHASERS.

(a) If, on the Closing Date or the Option Closing Date, as the case may be, either of the Initial Purchasers shall fail or refuse to purchase Securities that it has agreed to purchase hereunder on such date, and the aggregate principal amount of Securities which such defaulting Initial Purchaser agreed but failed or refused to purchase is not more than one-tenth of the aggregate principal amount of Securities to be purchased on such date, the other Initial Purchaser shall be obligated to purchase the Securities which such defaulting Initial Purchaser agreed but failed or refused to purchase on such date; provided that in no event shall the principal amount of Securities that either Initial Purchaser has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 10 by an amount in excess of one-ninth of such principal amount of Securities without the written consent of such Initial Purchaser.

(b) If, on the Closing Date, either Initial Purchaser shall fail or refuse to purchase Firm Securities which it has agreed to purchase hereunder on such date and the aggregate principal amount of Securities with respect to which such default occurs is more than one-tenth of the aggregate principal amount of Firm Securities to be purchased on such date, and arrangements satisfactory to you and the Company for the purchase of such Firm Securities are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchaser or of the Company. In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Offering Memorandum or in any other documents or arrangements may be effected. If, on the Option Closing Date, either Initial Purchaser shall fail or refuse to purchase Option Securities and the aggregate principal amount of Option Securities with respect to which such default occurs is more than one-tenth of the aggregate principal amount of Option Securities to be purchased, the non-defaulting Initial Purchaser shall have the option to (a) terminate its obligation hereunder to purchase Option Securities or (b) purchase not less than the principal amount of Option Securities that such non-defaulting Initial Purchaser would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Initial Purchaser from liability in respect of any default of such Initial Purchaser under this Agreement.

11. SUCCESSORS.

This Agreement has been and is made solely for the benefit of the Initial Purchasers and the Company and their respective successors and assigns, and the officers, directors and controlling persons referred to herein, and no other person will have any right or obligation hereunder. No purchaser of any of the Securities from the Initial Purchasers shall be deemed a successor or assign merely because of such purchase.

12. INFORMATION PROVIDED BY THE INITIAL PURCHASERS.

The Company and the Initial Purchasers acknowledge and agree that the only information furnished or to be furnished by the Initial Purchasers to the Company for inclusion in the Offering Memorandum consists of the information set forth in the last paragraph on the front cover page (insofar as such information relates to the Initial Purchasers) and the information set forth in the first and eighth paragraphs in each case under the heading “Plan of Distribution” (insofar as such information relates to the Initial Purchasers).

13. MISCELLANEOUS.

The reimbursement, indemnification and contribution agreements contained in this Agreement and the representations, warranties and covenants in this Agreement shall remain in full force and effect regardless of b) any termination of this Agreement, c) any investigation made by or on behalf of the Initial Purchasers or any controlling person thereof, or by or on behalf of the Company or its directors or officers and d) delivery of and payment for the Securities under this Agreement.

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

If the foregoing letter is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among the Company and the Initial Purchasers in accordance with its terms.

	Very truly yours,


	SHUFFLE MASTER, INC.


	By:	/s/ Paul Meyer
		Name: Paul Meyer
		Title: President

The foregoing Purchase Agreement

is hereby confirmed and accepted as

of the date first above written.

DEUTSCHE BANK SECURITIES INC.

As Representative of the several

Initial Purchasers listed on Schedule I

By:	/s/ Paul Whyte
	Name: Paul Whyte
	Title: Managing Director

By:	/s/ Arthur Goldfrank
	Name: Arthur Goldfrank
	Title: Director

SCHEDULE I

Initial Purchasers	Principal Amount of Firm Securities to be Purchased

Deutsche Bank Securities Inc.	$	100,000,000
Goldman, Sachs & Co.	25,000,000
Total	$	125,000,000

I-1

EXHIBIT A-1

April [ ], 2004

Deutsche Bank Securities Inc.

As representative of the Initial Purchasers

60 Wall Street

New York, NY 10005

Ladies & Gentlemen:

The undersigned understands that you, as the representative of the several purchasers (the “Representative”), propose to enter into a Purchase Agreement (the “Purchase Agreement”) with Shuffle Master, Inc., a Minnesota corporation (the “Company”), providing for the offering (the “Offering”) by the several purchasers, including the Representative (the “Initial Purchasers”), of securities convertible into shares of common stock, par value $.01, of the Company (the “Common Stock”).

To induce the Initial Purchasers to continue their efforts in connection with the Offering, the undersigned hereby agrees that, without the prior written consent of Deutsche Bank Securities Inc., it will not, for a period of 90 days after the date of the Purchase Agreement, directly or indirectly, offer, sell, pledge, contract to sell (including any short sale), grant any option to purchase or otherwise dispose of any shares of Common Stock or enter into any hedging transaction relating to the Common Stock or make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock.

Notwithstanding the foregoing, the undersigned may transfer shares of Common Stock acquired in open market transactions by the undersigned after the completion of the Offering.

The undersigned agrees that the Company may, and that the undersigned will, (i) with respect to any shares of Common Stock or other Company securities for which the undersigned is the record holder, cause the transfer agent for the Company to note stop transfer instructions with respect to such securities on the transfer books and records of the Company and (ii) with respect to any shares of Common Stock or other Company securities for which the undersigned is the beneficial holder but not the record holder, cause the record holder of such securities to cause the transfer agent for the Company to note stop transfer instructions with respect to such securities on the transfer books and records of the Company.

A-1-1

held by the undersigned, including any registration rights agreement to which the undersigned and the Company may be party, provided that such waiver shall apply only to the proposed Offering, and any other action taken by the Company in connection with the proposed Offering.

The undersigned hereby agrees that, to the extent that the terms of this letter agreement conflict with or are in any way inconsistent with any registration rights agreement to which the undersigned and the Company may be a party, this letter agreement supersedes such registration rights agreement.

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this letter agreement. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.

	Signature:

	Print Name:

A-1-2

EXHIBIT A-2

April , 2004

Deutsche Bank Securities Inc.

As representative of the Initial Purchasers

60 Wall Street

New York, NY 10005

Ladies & Gentlemen:

Notwithstanding the foregoing, the undersigned may transfer (a) shares of Common Stock acquired in open market transactions by the undersigned after the completion of the Offering and (b) an aggregate of 10,000 shares of Common Stock by gift to charities.

A-2-1

In addition, the undersigned hereby waives any and all notice requirements and rights with respect to registration of securities pursuant to any agreement, understanding or otherwise setting forth the terms of any security of the Company held by the undersigned, including any registration rights agreement to which the undersigned and the Company may be party, provided that such waiver shall apply only to the proposed Offering, and any other action taken by the Company in connection with the proposed Offering.

	Signature:

	Name:	Mark L. Yoseloff

A-2-2

EXHIBIT B

	53rd at Third
	885 Third Avenue
	New York, New York 10022-4834
	Tel: (212) 906-1200 Fax: (212) 751-4864
	www.lw.com

	FIRM / AFFILIATE OFFICES
	Boston	New Jersey
	Brussels	New York
	Chicago	Northern Virginia
	Frankfurt	Orange County
	Hamburg	Paris
	Hong Kong	San Diego
April 21, 2004	London	San Francisco
	Los Angeles	Silicon Valley
	Milan	Singapore
	Moscow	Tokyo
Deutsche Bank Securities Inc.		Washington, D.C.
Goldman, Sachs & Co.
	File No. 038437-000

c/o:	Deutsche Bank Securities Inc.
	60 Wall Street
	New York, New York 10005

Re:	Shuffle Master, Inc.
	$125,000,000 1.25% Contingent Convertible Senior Notes due 2024

Ladies and Gentlemen:

We have acted as special counsel to Shuffle Master, Inc., a Minnesota corporation (the “Company”), in connection with the sale to you (the “Initial Purchasers”) on the date hereof by the Company, of $125,000,000 in aggregate principal amount of the Company’s 1.25% Contingent Convertible Senior Notes Due 2024 (the “Notes”) pursuant to a purchase agreement, dated April 15, 2004 (the “Purchase Agreement”), between you and the Company. The Notes are being issued pursuant to an indenture, dated the date hereof (the “Indenture”), between the Company and Wells Fargo Bank, National Association, as trustee (the “Trustee”). This letter is being furnished to you pursuant to Section 6(a) of the Purchase Agreement.

As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter, except where a specific fact confirmation procedure is stated to have been performed (in which case we have with your consent performed the stated procedure), and except where a statement is qualified as to knowledge or awareness (in which case we have with your consent made no or limited inquiry as specified below). We have examined, among other things, the following:

(a) The Purchase Agreement;

B-1

(b) The Indenture, the form of the Note and the Registration Rights Agreement, dated the date hereof, between you and the Company (the “Registration Rights Agreement” and, together with the Indenture and the Notes, the “Operative Documents”);

(d) The reports filed by the Company with the Securities and Exchange Commission (the “Commission”) and incorporated by reference into the Offering Memorandum (the “Incorporated Documents”); and

(e) The court or administrative orders, writs, judgments or decrees specifically directed to the Company that were identified to us by an officer of the Company as material to the Company and listed in Exhibit A (the “Court Orders”).

As to facts material to the opinions, statements and assumptions expressed herein, we have, with your consent, relied upon oral or written statements and representations of officers and other representatives of the Company, including the representations and warranties of the Company in the Purchase Agreement. We have not independently verified such factual matters.

Whenever a statement herein is qualified as to knowledge, awareness, or a similar phrase, it is intended to indicate that those attorneys in the firm who have rendered legal services in connection with the transaction referenced above do not have current actual knowledge of the inaccuracy of such statement. However, except as otherwise expressly indicated, we have not undertaken any independent investigation to determine the accuracy of any such statement.

We are opining herein as to the effect on the subject transaction only of the federal laws of the United States and the internal laws of the State of New York, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction, or as to any matters of municipal law or the laws of any local agencies within any state. Our opinions and confirmations herein are based upon our consideration of only those statutes, rules and regulations which, in our experience, are normally applicable to private placements of convertible debt securities, provided that no opinion or confirmation is expressed herein or in our separate letter of even date with respect to federal or state securities laws (except to the extent stated in numbered paragraph 5 herein), tax laws, antitrust or trade regulation laws, insolvency or fraudulent transfer laws, antifraud laws, margin regulations, usury laws, gaming laws or other laws excluded by customary practice. We express no opinion as to any state or federal laws or regulations applicable to the subject transaction because of the nature or extent of the business of any parties to the Purchase Agreement. Various matters concerning the gaming and other internal laws of the states of Nevada, New Jersey and Mississippi are addressed in the opinions of Fox

B-2

Rothschild LLP, Lionel Sawyer & Collins and Phelps Dunbar LLP, respectively, which have been separately provided to you. We express no opinion with respect to those matters herein.

Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof:

1. When executed, issued and authenticated in accordance with the terms of the Indenture and delivered to and paid for by you in accordance with the terms of the Purchase Agreement, the Notes will be legally valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. The Notes are in the form contemplated by the Indenture.

2. The Indenture is the legally valid and binding agreement of the Company, enforceable against the Company in accordance with its terms.

3. The Registration Rights Agreement is the legally valid and binding agreement of the Company, enforceable against the Company in accordance with its terms.

4. The execution and delivery of the Operative Documents and the issuance and sale of the Notes by the Company to you and the other Initial Purchasers pursuant to the Purchase Agreement on the date hereof do not:

(a) violate any federal or New York statute, rule or regulation or Court Order applicable to the Company; or

(b) require any consents, approvals, or authorizations to be obtained by the Company, or any registrations, declarations or filings to be made by the Company, in each case, under any federal or New York statute, rule or regulation applicable to the Company that have not been obtained or made.

5. No registration of the Notes under the Securities Act of 1933, as amended, and no qualification of the Indenture under the Trust Indenture Act of 1939, as amended, is required for the purchase of the Notes by you or the initial resale of the Notes by you to Subsequent Purchasers, in each case in the manner contemplated by the Purchase Agreement and the Offering Memorandum. We express no opinion, however, as to when or under what circumstances any Notes initially sold by you may be reoffered or resold.

6. The statements in the Offering Memorandum under the caption “Description of the Notes,” insofar as they purport to constitute a summary of the terms of the Indenture, the Notes and the Registration Rights Agreement, are accurate descriptions or summaries in all material respects.

B-3

7. With your consent based solely on a certificate of an officer of the Company as to factual matters, the Company is not, and immediately after giving effect to the sale of the Notes in accordance with the Purchase Agreement and the application of the proceeds as described in the Offering Memorandum under the caption “Use of Proceeds,” will not be required to be registered as an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

The opinions rendered in paragraphs 1, 2, and 3 above relating to the enforceability of the Operative Documents, are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights and remedies of creditors; (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law (including the possible unavailability of specific performance or injunctive relief), concepts of materiality, reasonableness, good faith and fair dealing, and the discretion of the court before which any proceeding therefor may be brought; (iii) the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy; (iv) we express no opinion concerning the enforceability of the waiver of rights or defenses contained in Section 6.12 of the Indenture; (v) the unenforceability of any provision requiring the payment of attorneys’ fees, where such payment is contrary to law or public policy.

We have not been requested to express and, with your consent, do not render any opinion as to the applicability to the obligations of the Company under the Indenture and the Notes of Section 548 of the United States Bankruptcy Code or applicable state law (including, without limitation, Article 10 of the New York Debtor and Creditor Law) relating to preferences and fraudulent transfers and obligations.

With your consent, we have assumed for purposes of this opinion that (i) each of the parties to the Operative Documents (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (b) has the requisite power and authority to execute and deliver and to perform its obligations under each of the Operative Documents to which it is a party; and (c) has duly authorized, executed and delivered each such Operative Document; (ii) with respect to each of the parties to the Operative Documents other than the Company, each Operative Document to which it is a party constitutes its legally valid and binding agreement, enforceable against it in accordance with its terms; and (iii) the Trustee is in compliance, generally and with respect to acting as Trustee under the Indenture, with all applicable laws and regulations.

B-4

assigned to, quoted to, or relied upon by any other person, firm or other entity for any purpose (including any person, firm or other entity that acquires Notes from you) without our prior written consent, which may be granted or withheld in our sole discretion.

Very truly yours,

B-5

EXHIBIT A

COURT ORDERS

[None]

B-6

		53rd at Third
		885 Third Avenue
		New York, New York 10022-4834
		Tel: (212) 906-1200 Fax: (212) 751-4864
		www.lw.com

		FIRM / AFFILIATE OFFICES
		Boston	New Jersey
		Brussels	New York
April 21, 2004		Chicago	Northern Virginia
		Frankfurt	Orange County
		Hamburg	Paris
		Hong Kong	San Diego
		London	San Francisco
Deutsche Bank Securities Inc.		Los Angeles	Silicon Valley
Goldman, Sachs & Co.		Milan	Singapore
		Moscow	Tokyo
			Washington, D.C.
c/o:	Deutsche Bank Securities Inc.
	60 Wall Street	File No. 038437-000
	New York, New York 10005

Re:	Shuffle Master, Inc.
	$125,000,000 1.25% Contingent Convertible Senior Notes due 2024

Ladies and Gentlemen:

We have acted as special counsel to Shuffle Master, Inc., a Minnesota corporation (the “Company”), in connection withthe sale to you (the “Initial Purchasers”) on the date hereof by the Company, of $125,000,000 in aggregate principal amount of the Company’s 1.25% Contingent Convertible Senior Notes Due 2024 (the “Notes”) pursuant to a purchase agreement, dated April 15, 2004 (the “Purchase Agreement”), between you and the Company. The Notes are being issued pursuant to an indenture, dated the date hereof, between the Company and Wells Fargo Bank, National Association, as trustee. This letter is being furnished to you pursuant to Section 6(a) of the Purchase Agreement.

The offering memorandum dated April 15, 2004 with respect to the Notes is herein called the “Offering Memorandum,” and the reports filed by the Company with the Securities and Exchange Commission and incorporated in the Offering Memorandum by reference are sometimes referred to herein collectively as the “Incorporated Documents.”

The primary purpose of our professional engagement was not to establish or confirm factual matters or financial or quantitative information. Therefore, we are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in, or incorporated by reference in, the Offering Memorandum (or the Incorporated Documents), except to the extent expressly set forth in the numbered paragraph 6 of our opinion letter to you of even date, and have not made an independent check or verification thereof (except as aforesaid). However, in the course of acting as special counsel to the Company in connection with the preparation by the Company of the

B-7

Offering Memorandum, we reviewed the Offering Memorandum and the Incorporated Documents, and participated in conferences and telephone conversations with officers and other representatives of the Company, the independent public accountants for the Company, your representatives, and your counsel, during which conferences and conversations the contents of the Offering Memorandum and related matters were discussed. We also reviewed and relied upon certain corporate records and documents and oral and written statements of officers and other representatives of the Company and others as to the existence and consequence of certain factual and other matters.

Based on our participation, review and reliance as described above, we advise you that no facts came to our attention that caused us to believe that the Offering Memorandum, together with the Incorporated Documents, as of its date or as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that we express no belief with respect to the financial statements, schedules, or other financial data included or incorporated by reference in, or omitted from, the Offering Memorandum or the Incorporated Documents.

This letter is furnished only to you in your capacity as Initial Purchasers and is solely for your benefit in connection with the transactions covered hereby. This letter may not be relied upon by you for any other purpose, or furnished to, assigned to, quoted to, or relied upon by any other person, firm or other entity for any purpose (including any person, firm or other entity that acquires Notes from you) without our prior written consent, which may be granted or withheld in our sole discretion.

Very truly yours,

B-8

EXHIBIT C

[Form of Fox Rothschild LLP Opinion]

(1) The statements in the Offering Memorandum under the heading “Regulation and Licensing” and in the Annual Report on Form 10-K for the fiscal year ended October 31, 2003 of the Company under the heading “Item 1. Business---Gaming Regulation—General Regulatory Licensing and Approvals” have been reviewed by us and to the extent the same pertain solely to the New Jersey Casino Control Act and the rules and regulations promulgated thereunder (the “New Jersey Gaming Laws”), they are accurate and correct in all material respects and fairly summarize the information called for; and we have no knowledge of any material legal or governmental proceedings in the State of New Jersey to which the Company or any affiliate that has licensed gaming operations in the State of New Jersey (a “New Jersey Gaming Affiliate”) is a named party wherein a claim of a violation of the New Jersey Gaming Laws is asserted.

(2) Each approval, consent, order, authorization, designation, declaration or filing (each, a “New Jersey Permit”) required of or from any governmental or regulatory body (the “New Jersey Gaming Authorities”) under the New Jersey Gaming Laws necessary in connection with the execution and delivery by the Company of the Purchase Agreement, the Indenture, the Securities, the Registration Rights Agreement and the issuance and sale of the Securities to the Initial Purchasers by the Company pursuant to the Purchase Agreement, and the issuance of the Underlying Securities issuable upon conversion of the Securities and the consummation of the transactions therein contemplated has been obtained or made and is in full force in effect.

(3) The execution and delivery by the Company of the Purchase Agreement, the Indenture, the Securities and the Registration Rights Agreement and the issuance and sale of the Securities to the Initial Purchasers by the Company pursuant to the Purchase Agreement, and the issuance of the Underlying Securities issuable upon conversion do not violate any of the New Jersey Gaming Laws or any orders or decrees of any executive, legislative, judicial, administrative or regulatory body of the State of New Jersey known to us to be binding upon the Company or any of its subsidiaries.

(4) Each of the Company and its subsidiaries has such authorizations from the New Jersey Gaming Authorities as are necessary to own, lease and operate its respective properties and to conduct its business in the manner described in the Offering Memorandum (including documents incorporated by reference therein).

C-1

EXHIBIT D

[Form of Lionel Sawyer & Collins Opinion]

(1) The statements under the caption “Gaming Regulation—Nevada Regulatory Matters” in the Annual Report on Form 10-K for the fiscal year ended October 31, 2003 of the Company (the “2003 10-K”) and in the Offering Memorandum under the caption “Regulation and Licensing---Nevada Regulatory Matters,” insofar as such statements constitute a summary of matters of Nevada law or Nevada legal conclusions, are correct in all material respects as of the date of the Purchase Agreement and as of the date hereof.

(2) Except as described in or contemplated by the Offering Memorandum, or as may be required under Nevada “blue sky” laws, as to which such counsel need express no opinion, each approval, consent, order, authorization, designation, declaration or filing by or with any Nevada regulatory, administrative or other governmental body necessary in connection with the execution and delivery by the Company of the Purchase Agreement, the Indenture, the Securities, the Registration Rights Agreement and the issuance and sale of the Securities to the Initial Purchasers by the Company pursuant to the Purchase Agreement, and the issuance of the Underlying Securities issuable upon conversion of the Securities and the consummation of the transactions therein contemplated has been obtained or made and is in full force and effect, except for (A) the Company’s filing of copies of all documents related to the transaction with the Nevada State Gaming Control Board within thirty (30) days after the end of the calendar quarter in which the transaction is consummated and (B) the approvals of the Nevada State Gaming Control Board and the Nevada Gaming Commission of the Company’s fulfillment of its obligations under the Registration Rights Agreement as a public offering of securities.

(3) The Company has all authorizations, approvals, consents, orders, licenses, certificates and permits required of or from any governmental or regulatory body under the Nevada Gaming Control Act and the rules and regulations promulgated thereunder (the “Nevada Gaming Laws”) (each, a “Nevada Permit”) to own, lease and license its assets and properties, to conduct its business as its business and properties are described in the 2003 10-K and the Offering Memorandum. To the best of such counsel’s knowledge, the Company has fulfilled and performed in all material respects all of its obligations with respect to Nevada Permits and, to the best of such counsel’s knowledge, the Company is not in violation of any term or provision of any such Nevada Permit, nor has any event occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or which could result in any material impairment of the rights of the holder of any such Nevada Permits.

D-1

(4) The execution and delivery by the Company of the Purchase Agreement, the Indenture, the Securities and the Registration Rights Agreement and the issuance and sale of the Securities to the Initial Purchasers by the Company pursuant to the Purchase Agreement, and the issuance of the Underlying Securities issuable upon conversion do not violate any of the Nevada Gaming Laws or any orders or decrees of any executive, legislative, judicial, administrative or regulatory body of the State of Nevada known to such counsel to be binding upon the Company or any of its subsidiaries, provided that (A) the Company files copies of all documents related to the transaction with the Nevada State Gaming Control Board within thirty (30) days after the end of the calendar quarter in which the transaction is consummated, and (B) the Company obtains approvals from the Nevada State Gaming Control Board and the Nevada Gaming Commission of the Company’s fulfillment of its obligations under the Registration Rights Agreement as a public offering of securities, before the shelf registration statement covering the Securities is declared effective.

(5) Shuffle Master Holding Company, Inc. (“Holding”) has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Nevada and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum (including documents incorporated by reference therein).

D-2

EXHIBIT E

April 21, 2004

Deutsche Bank Securities Inc.

As Representative of the

Several Initial Purchasers

60 Wall Street

New York, NY 10005

Re: Shuffle Master, Inc.

11205-1

Ladies and Gentlemen:

We have acted as special Mississippi counsel to Shuffle Master, Inc., a Minnesota corporation (the “Company”), in connection with the sale by the Company to the Initial Purchasers of up to $125,000,000 in aggregate principal amount of the Company’s 1.25% Contingent Convertible Senior Notes due 2024 (the “Securities”), pursuant to a purchase agreement dated April 15, 2004 (the “Purchase Agreement”), between you, as representative for the Initial Purchasers, and the Company. This letter is being furnished to you pursuant to Section 6(d) of the Purchase Agreement. Capitalized terms not defined herein shall have the meanings assigned to them in the Purchase Agreement. Additionally, the term “Mississippi Gaming Laws” means the Mississippi Gaming Control Act and the rules and regulations promulgated thereunder.

In connection with the opinions delivered herein, we have examined only the Confidential Offering Memorandum (the “Offering Memorandum”) and the Purchase Agreement. We have reviewed such documents only for the limited purpose of the opinions rendered herein, and do not give any opinion or statement as to the sufficiency or accuracy of the disclosure provided therein, the enforceability thereof or the applicability of the forms used or compliance with the requirements of such forms. We also render no opinion as to federal securities laws or state securities laws or “blue sky” laws with respect to the transactions contemplated by the Offering Memorandum.

In connection with the opinions herein, we have also examined and relied upon that letter from Larry Gregory, Executive Director of the Mississippi Gaming

E-1

Commission (the “Gaming Commission”), dated April 15, 2004, pertaining to the Securities offering.

OPINIONS

Based upon the foregoing and subject to the other limitations, assumptions and qualifications set forth herein, we are of the opinion that:

(1) Except as provided in paragraph A below, each approval, consent, order, authorization, designation, declaration or filing by or with the Gaming Commission necessary for (i) the execution and delivery by the Company of the (a) Purchase Agreement and (b) the Indenture and the Registration Rights Agreement as those documents are described in the Offering Memorandum, (the Indenture and the Registration Rights Agreement being referred to herein as the “Other Transaction Documents”), (ii) the issuance and sale of the Securities to the Initial Purchasers by the Company pursuant to the Purchase Agreement, and (iii) the issuance of the Underlying Securities issuable upon conversion of the Securities has been obtained or made and is in full force and effect.

(2) The execution and delivery by the Company of the Purchase Agreement and the Other Transaction Documents, the issuance and sale of the Securities to the Initial Purchasers by the Company pursuant to the Purchase Agreement, and the issuance of the Underlying Securities issuable upon conversion of the Securities, do not violate any of the Mississippi Gaming Laws.

(3) Each of the Company and Shuffle Master of Mississippi, Inc. (“Shuffle Mississippi”) has such authorizations from the Gaming Commission as are necessary to conduct its business as described in the “Summary: Shuffle Master, Inc.” section of the Offering Memorandum.

(4) Based solely on a certificate from the Mississippi Secretary of State, Shuffle Mississippi has been duly incorporated and is validly existing as a corporation in good standing in Mississippi.

ASSUMPTIONS, EXCEPTIONS AND QUALIFICATIONS

The opinions expressed herein are subject to the following additional assumptions, exceptions, qualifications and limitations:

E-2

A. As part of the Gaming Commission “shelf approval” granted to the Company and its affiliated companies and subsidiaries, including Shuffle Mississippi, for public offerings or private placements of its securities, the Company is required to report to the Executive Director of the Gaming Commission all public offerings and private placements of its securities by simultaneously filing with the Executive Director “all related reports, statements, etc. (and amendments thereto)” that must be filed with the U.S. Securities and Exchange Commission, or, if no Securities and Exchange Commission filing or reporting is required, by filing copies of “all documents related to the transaction” within fourteen (14) calendar days after closing the transaction. It is our understanding that the transactions contemplated by the Purchase Agreement and the Other Transaction Documents do not require a filing with the Securities and Exchange Commission at this time, and, therefore, the Company is required within fourteen (14) calendar days after the closing of this transaction to file with the Gaming Commission “copies of all documents related to the transaction.” However, any future filing made with the Securities and Exchange Commission related to the transactions contemplated by the Purchase Agreement and the Other Transaction Documents must simultaneously be filed with the Gaming Commission. Additionally, as part of said “shelf approval,” the Company is required within fourteen (14) calendar days after the closing of this transaction to file with the Executive Director a report of all participants in the transaction, which shall include (at a minimum) the name, amount of securities issued and purchase price. Furthermore, you should be aware that the Gaming Commission (as part of said “shelf approval” granted to the Company and its affiliated companies and subsidiaries) has granted the Executive Director the power to issue an interlocutory stop order with respect to any public offering or private placement by the Company.

B. Except with respect to the opinion expressed above in Opinion paragraph 3 regarding authorizations from the Gaming Commission, the opinions expressed above do not extend to, and we express no opinion as to, whether the Company and Shuffle Mississippi have made any filings or obtained or maintained any authorizations or permits required by or necessary for the operation of their respective businesses.

C. Our opinions expressed above in Opinion paragraphs 1 and 2 as to the lack of any required approval, consent, order, authorization, designation, declaration or filing by or with the Gaming

E-3

Commission and as to compliance with Mississippi Gaming Laws are based upon a review of those statutes and regulations which, in our experience, are normally applicable to transactions of the type contemplated by the Purchase Agreement and Other Transaction Documents.

D. The recipients of this opinion understand and acknowledge that notwithstanding (but without negating) the opinion stated in Opinion paragraph 3 above, the parties to and the transactions contemplated by Purchase Agreement and the Other Transaction Documents, and the suitability of the Company and Shuffle Mississippi to conduct their businesses, remain subject to continuing review by the Gaming Commission, and the Company and Shuffle Mississippi are subject from time to time to administrative proceedings or investigations. In particular, the opinion expressed in Opinion paragraph 3 relates only to authorizations on the date hereof, and we do not express an opinion or imply that such authorizations will continue, or that such matters will not be affected by facts and circumstances known to us on the date hereof.

E. You should be aware that the Gaming Commission retains broad discretion to require any person directly or indirectly involved with a gaming licensee to apply for a license or finding of suitability, including, without limitation, a lender, holder of indebtedness or greater than 5% beneficial owner of a gaming licensee or registered publicly traded corporation. For example, if, as a result of the transactions described in the Purchase Agreement and the Other Transaction Documents, any person that does not already hold a Gaming Commission finding of suitability or “institutional investor” waiver will beneficially own more than 5% of the stock of the Company or Shuffle Mississippi, the Gaming Commission may require that person to apply for a finding of suitability or an “institutional investor” waiver.

F. Except only as expressly stated otherwise above, we have not undertaken any independent investigation, verification, or inquiry as to the existence or non-existence of any facts, judgments, legal or governmental proceedings or other matters but have relied solely on the actual knowledge of the attorneys in this firm that have actively represented the Company and Shuffle Mississippi in connection with this opinion letter. No inference as to our knowledge of the existence or non-existence of facts, other than the facts of which we have obtained actual knowledge, should be

E-4

drawn from our representation of the Company and Shuffle Mississippi. The Company and Shuffle Mississippi use other legal counsel in addition to our firm, and accordingly there exist matters of a legal and/or factual nature pertaining to the Company and Shuffle Mississippi which are not addressed by this opinion and with respect to which we have not been consulted.

Except as expressly stated otherwise above, the foregoing opinions are based on and are limited to the Mississippi Gaming Laws, and we render no opinion with respect to other laws of the state of Mississippi or to other laws or the law of any other jurisdiction. Furthermore, no opinion is expressed herein as to the effect of any future acts of the parties or changes in existing law. We undertake no responsibility to advise you of any changes after the date hereof in the law or the facts presently in effect that would alter the scope or substance of the opinions herein expressed. This letter expresses our legal opinion as to the foregoing matters based on our professional judgment at this time; it is not, however, to be construed as a guaranty, nor is it a warranty that a court considering such matters would not rule in a manner contrary to the opinions set forth above.

The opinions expressed herein are rendered as of the date hereof, are intended solely for the benefit of the Initial Purchasers as set forth in the Purchase Agreement and may not be used, quoted, circulated, referenced, or relied upon by any other person without our prior written consent.

	Yours very truly,


	Phelps Dunbar, L.L.P.

E-5

EX-10.5 7 a04-6489_1ex10d5.htm EX-10.5

Exhibit 10.5

REGISTRATION RIGHTS AGREEMENT

Dated as of April 21, 2004

by and between

SHUFFLE MASTER, INC.

and

DEUTSCHE BANK SECURITIES INC.

GOLDMAN, SACHS & CO.

1.25% Contingent Convertible Senior Notes Due 2024

TABLE OF CONTENTS

1.	Definitions.

2.	Shelf Registration.

3.	Liquidated Damages.

4.	Registration Procedures.

5.	Registration Expenses.

6.	Indemnification.

7.	Rules 144 and 144A.

8.	Underwritten Registrations.

9.	Miscellaneous.

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is dated as of April 21, 2004, by and between Shuffle Master, Inc., a Minnesota corporation (the “Company”), and Deutsche Bank Securities Inc. and Goldman, Sachs & Co. (together, the “Initial Purchasers”).

This Agreement is entered into in connection with the Purchase Agreement dated April 15, 2004 (the “Purchase Agreement”) between the Company and the Initial Purchasers, which provides for the sale by the Company to the Initial Purchasers of $125,000,000 aggregate principal amount of the Company’s 1.25% Contingent Convertible Senior Notes Due 2024 (the “Firm Notes”), plus up to an additional $25,000,000 aggregate principal amount of the same which the Initial Purchasers may subsequently elect to purchase (and have so elected) pursuant to the terms of the Purchase Agreement (the “Option Notes” and, together with the Firm Notes, the “Notes”), which are convertible into cash and common stock, par value $.01 per share, of the Company (the “Underlying Shares”), together with the rights evidenced by such Common Stock to the extent provided for in the Shareholder Rights Agreement dated as of June 26, 1998 between the Company and Norwest Bank Minnesota, N.A., as Rights Agent. The Notes are being issued pursuant to an Indenture dated as of the date hereof (the “Indenture”), by and between the Company and Wells Fargo Bank, National Association, as Trustee.

In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and subsequent holders of the Notes or Underlying Shares as provided herein. The execution and delivery of this Agreement is a condition to the Initial Purchasers’ obligation to purchase the Firm Notes under the Purchase Agreement.

The parties hereto hereby agree as follows:

1. Definitions. As used in this Agreement, the following terms shall have the following meanings:

“Agreement”: See the first introductory paragraph hereto.

“Amendment Effectiveness Deadline Date”: See Section 2(d)(i) hereof.

“Amount of Registrable Notes”: With respect to Notes constituting Registrable Securities, the aggregate principal amount of all such Notes then outstanding.

“Amount of Registrable Securities”: (a) With respect to Notes constituting Registrable Securities, the aggregate principal amount of all such Notes then outstanding, (b) with respect to Underlying Shares constituting Registrable Securities, the aggregate number of such Underlying Shares outstanding multiplied by the Conversion Price (as defined in the Indenture) in effect at the time of computing the Amount of Registrable Securities or, if no Notes are then outstanding, the Conversion Price shall be calculated as if the Notes were continuously outstanding to the date of calculation, giving effect to any adjustments to the Conversion Price set forth in the Indenture as if the Indenture continued to be in effect, and (c) with respect to combinations thereof, the sum of (a) and (b) for the relevant Registrable Securities.

“Business Day”: Any day that is not a Saturday, Sunday or a day on which banking institutions in the City of New York are authorized or required by law or executive order to be closed.

“Closing Date”: April 21, 2004.

“Company”: See the first introductory paragraph hereto.

“Controlling Person”: See Section 6 hereof.

“Damages Payment Date”: See Section 3(c) hereof.

“Deferral Period”: See Section 3(b) hereof.

“Depositary”: The Depository Trust Company until a successor is appointed by the Company.

“Designated Counsel”: One nationally recognized firm of counsel experienced in securities laws matters chosen by the Holders of a majority in Amount of Registrable Securities to be included in a Registration Statement for a Shelf Registration, with the consent of the Company (which consent will not be unreasonably withheld).

“Effectiveness Date”: The 210^th day after the Closing Date.

“Effectiveness Period”: See Section 2(a) hereof.

“Exchange Act”: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Filing Date”: The 120^th day after the Closing Date.

“Firm Notes”: See the second introductory paragraph hereto.

“Holder”: Any beneficial owner from time to time of Registrable Securities.

“Indemnified Holder”: See Section 6 hereof.

“Indemnified Person”: See Section 6 hereof.

“Indemnifying Person”: See Section 6 hereof.

“Indenture”: See the second introductory paragraph hereto.

“Initial Purchasers”: See the first introductory paragraph hereto.

“Initial Shelf Registration”: See Section 2(a) hereof.

“Inspectors”: See Section 4(k) hereof.

“Liquidated Damages”: See Section 3(a) hereof.

“Notes”: See the second introductory paragraph hereto.

“Option Notes”: See the second introductory paragraph hereto.

“Person”: An individual, partnership, corporation, limited liability company, unincorporated association, trust or joint venture, or a governmental agency or political subdivision thereof.

“Purchase Agreement”: See the second introductory paragraph hereto.

“Records”: See Section 4(k) hereof.

“Registrable Notes”: All Notes until the earliest to occur of (i) a Registration Statement covering such Notes having been declared effective by the SEC and such Notes having been disposed of in accordance with such effective Registration Statement, (ii) such Notes having been sold in compliance with Rule 144 or being able to (except with respect to affiliates of the Company within the meaning of the Securities Act) be sold in compliance with Rule 144(k) or (iii) such Notes ceasing to be outstanding.

“Registrable Securities”: All Notes and all Underlying Shares upon original issuance thereof and at all times subsequent thereto until the earliest to occur of (i) a Registration Statement covering such Notes and Underlying Shares having been declared effective by the SEC and such Notes or Underlying Shares having been disposed of in accordance with such effective Registration Statement, (ii) such Notes or Underlying Shares having been sold in compliance with Rule 144 or being able to (except with respect to affiliates of the Company within the meaning of the Securities Act) be sold in compliance with Rule 144(k), or (iii) such Notes or Underlying Shares ceasing to be outstanding.

“Registration Default”: See Section 3(a) hereof.

“Registration Statement”: Any registration statement of the Company filed with the SEC pursuant to the provisions of this Agreement, including the Prospectus, amendments and

supplements to such registration statement, including post-effective amendments, all exhibits and all documents incorporated by reference or deemed to be incorporated by reference in such registration statement.

“Rule 144A”: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC.

“Rule 415”: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

“SEC”: The U.S. Securities and Exchange Commission.

“Securities Act”: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Selling Holder”: On any date, any Holder that has delivered a Notice and Questionnaire to the Company on or prior to such date.

“Shelf Registration”: See Section 2(b) hereof.

“Shelf Registration Statement”: See Section 2(b) hereof.

“Subsequent Shelf Registration”: See Section 2(b) hereof.

“TIA”: The Trust Indenture Act of 1939, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Trustee”: The Trustee under the Indenture.

“Underlying Shares”: See the second introductory paragraph hereto.

“Underwritten Registration” or “Underwritten Offering”: A registration in which Registrable Securities are sold to an underwriter for reoffering to the public.

2. Shelf Registration.

(a) Shelf Registration. The Company shall file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Securities (the “Initial Shelf Registration”) on or prior to the Filing Date.

The Company shall use its commercially reasonable efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act until the date (A) that is two years after the Closing Date, or if later, the date on which the Option Notes were issued, (such period, as it may be shortened pursuant to clauses (i), (ii) or (iii) immediately following, the “Effectiveness Period”), or such shorter period ending when (i) all of the Registrable Securities covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration, (ii) the date on which all the Registrable Securities (x) held by Persons who are not affiliates of the Company may be resold pursuant to Rule 144(k) under the Securities Act or (y) cease to be outstanding, (iii) all the Registrable Securities have been resold pursuant to Rule 144 under the Securities Act or (B) a Subsequent Shelf Registration covering all of the Registrable Securities has been declared effective under the Securities Act.

(b) Subsequent Shelf Registrations. If the Initial Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the Registrable Securities registered thereunder), the Company shall use its commercially reasonable efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 45 days of such cessation of effectiveness amend the Initial Shelf Registration in a manner reasonably expected by the Company to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional “shelf” Registration Statement pursuant to Rule 415 covering all of the Registrable Securities (a “Subsequent Shelf Registration”). If a Subsequent Shelf Registration is filed, the Company shall use its commercially reasonable efforts to cause the Subsequent Shelf Registration to be declared effective under the Securities Act as soon as practicable after such filing (or if filed during a Deferral Period, after expiration of such Deferral Period) and to keep such Registration Statement continuously effective for the balance of the Effectiveness Period. As used herein, the term “Shelf Registration” means the Initial Shelf Registration or any Subsequent Shelf Registration and the term “Shelf Registration Statement” means any Registration Statement filed in connection with a Shelf Registration.

(c) Supplements and Amendments. The Company shall promptly supplement and amend a Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in Amount of Registrable Securities covered by such Shelf Registration Statement.

(d) Notice and Questionnaire. Each Holder agrees that if such Holder wishes to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus,

5 it will do so only in accordance with this Section 2(d) and Section 4A hereof. Each Holder wishing to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus when the Initial Shelf Registration Statement first becomes effective agrees to deliver a Notice and Questionnaire to the Company at least five (5) Business Days prior to the date that the Initial Shelf Registration is declared effective under the Securities Act. From and after the date the Initial Shelf Registration Statement is declared effective, the Company shall, as promptly as practicable after the date a fully completed and legible Notice and Questionnaire, together with such other information as the Company may reasonably request, is received by the Company, and in any event upon the later of (x) forty-five (45) days after such date or (y) ten (10) Business Days after the expiration of any Deferral Period in effect when the Notice and Questionnaire is received by the Company:

(i) if required by applicable law, file with the SEC a post-effective amendment to the Shelf Registration Statement or a Subsequent Shelf Registration or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Registrable Securities (subject to the rights of the Company under Section 3(b) to create a Deferral Period) in accordance with applicable law and, if the Company shall file a post-effective amendment to the Shelf Registration Statement, use its commercially reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as reasonably practicable, but in any event by the date (the “Amendment Effectiveness Deadline Date”) that is forty-five (45) days after the date such post-effective amendment is required by this clause to be filed;

(ii) provide such Holder copies of any documents filed pursuant to Section 2(d)(i); and

(iii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2(d)(i); provided that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i) and (ii) above upon expiration of the Deferral Period. Notwithstanding anything contained herein to the contrary, (i) the Company shall be under no obligation to name any Holder that has not delivered a fully complete and legible Notice and Questionnaire to the Company, together with such other information as the Company may reasonably request, in accordance with this Section 2(d) and (ii) the Amendment Effectiveness Deadline Date shall be extended by up to ten (10) Business Days from the expiration of a Deferral Period (and the Company shall incur no obligation to pay Liquidated Damages during such extension) if

such Deferral Period shall be in effect on the Amendment Effectiveness Deadline Date.

3. Liquidated Damages.

(a) The Company and the Initial Purchasers agree that the Holders of Registrable Notes will suffer damages if the Company fails to fulfill its obligations under Section 2 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Company agrees to pay liquidated damages on the Registrable Notes (“Liquidated Damages”) under the circumstances and to the extent set forth below (each of which shall be given independent effect; each a “Registration Default”):

(i) if the Initial Shelf Registration is not filed on or prior to the Filing Date, then commencing on the day after the Filing Date;

(ii) if a Shelf Registration is not declared effective by the SEC on or prior to the Effectiveness Date, then commencing on the day after the Effectiveness Date;

(iii) if a Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period (other than as permitted under Section 3(b)), then commencing on the day after the date such Shelf Registration ceases to be effective;

(iv) if any post-effective amendment filed pursuant to Section 2(d)(i) has not become effective under the Securities Act on or prior to the Amendment Effectiveness Deadline Date, then commencing on the day after the Amendment Effectiveness Deadline Date; and

(v) if the aggregate duration of Deferral Periods in any period exceeds the number of days permitted in respect of such period pursuant to Section 3(b), then commencing on the day that caused the limit on the aggregate duration of Deferral Periods to be exceeded,

Liquidated Damages shall accrue on the Registrable Notes (in the case of clauses (i), (ii), (iii) and (v)), or solely on the Registrable Notes that are registered by such post-effective amendment in the case of clause (iv), at a rate of 0.25% per annum on the Amount of Registrable Notes for the first 90 days during which a Registration Default has occurred and is continuing, and at a rate of 0.50% per annum on the Amount of Registrable Notes thereafter if a Registration Default has occurred and continues for more than 90 days; provided that Liquidated Damages on the Registrable Notes may not accrue under more than one of the foregoing clauses (i), (ii), (iii), (iv) and (v) at any one time; and provided further that (1) upon the filing of the Initial Shelf Registration as required hereunder (in the case of clause (a)(i) of this Section 3), (2) upon the effectiveness of a Shelf Registration as required hereunder (in the case of clause (a)(ii) of this Section 3), (3) upon the effectiveness of a Shelf Registration which had ceased to remain effective (in the case of clause (a)(iii) of this Section 3), (4) upon the effectiveness of a post-effective amendment as required hereunder (in the case of clause (a)(iv) of this Section 3), or (5)

upon the termination of the Deferral Period that caused the limit on the aggregate duration of Deferral Periods to be exceeded (in the case of clause (a)(v) of this Section 3), Liquidated Damages on the Registrable Notes as a result of such clause shall cease to accrue. It is understood and agreed that, notwithstanding any provision to the contrary, no Liquidated Damages shall accrue on any Registrable Notes that are then covered by, and may be sold under, an effective Shelf Registration Statement. Notwithstanding the foregoing, no Liquidated Damages shall accrue as to any security from and after the earlier of (x) the date such security ceases to be a Registrable Note and (y) expiration of the Effectiveness Period.

(b) Notwithstanding Section 3(a), the Company, upon written notice to the Holders, shall be permitted to suspend the availability of a Registration Statement covering the Registrable Securities for any bona fide reason whatsoever for up to 30 consecutive days (the “Deferral Period”) in any 90-day period without being obligated to pay Liquidated Damages; provided that Deferral Periods may not total more than 90 days in the aggregate in any twelve-month period. The Company shall not be required to specify in the written notice to the Holders the nature of the event giving rise to the Deferral Period.

(c) So long as Notes remain outstanding, the Company shall notify the Trustee within five Business Days after each and every date on which an event occurs in respect of which Liquidated Damages are required to be paid. Any amounts of Liquidated Damages due pursuant to clause (a)(i), (a)(ii), (a)(iii), (a)(iv) or (a)(v) of this Section 3 will be payable in cash on April 15 and October 15 of each year (each, a “Damages Payment Date”), commencing with the first such Damages Payment Date occurring after any such Liquidated Damages commences to accrue, to Holders to whom regular interest is payable on the Damages Payment Date; provided that any Liquidated Damages accrued with respect to any Note or portion thereof called for redemption by the Company on a redemption date or converted into Underlying Shares on a conversion date prior to the Damages Payment Date, shall, in any such event, be paid instead to the Holder who submitted such Note or portion thereof for redemption or conversion on the applicable redemption date or conversion date, as the case may be, on such date (or promptly following the conversion date, in the case of conversion). The amount of Liquidated Damages for Registrable Notes will be determined by multiplying the applicable rate of Liquidated Damages by the Amount of Registrable Notes outstanding on the first Damages Payment Date following such Registration Default in the case of the first such payment of Liquidated Damages with respect to a Registration Default (and thereafter at the next succeeding Damages Payment Date until the cure of such Registration Default), multiplied by a fraction, the numerator of which is the number of days such Liquidated Damages rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. The parties agree that the sole monetary damages payable for a violation of the terms of this Agreement with respect to which Liquidated Damages are expressly provided shall be such Liquidated Damages.

4. Registration Procedures.

In connection with its registration obligations pursuant to Section 2 hereof, the Company shall:

(a) Prepare and file with the SEC, on or prior to the Filing Date, a Registration Statement or Registration Statements as prescribed by Section 2 hereof, and use its commercially reasonable efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided that before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company shall furnish to and afford the Initial Purchasers a reasonable opportunity to review copies of all such documents proposed to be filed (in each case, where possible, at least three Business Days prior to such filing, or such later date as is reasonable under the circumstances).

(b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period; cause the related Prospectus to be supplemented by any prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act applicable to it with respect to the disposition of all Registrable Securities covered by such Registration Statement during the Effectiveness Period in accordance with the intended methods of distribution set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

(c) Notify the Selling Holders and Designated Counsel, if any, promptly (but in any event within five Business Days), (i) when a Prospectus or any prospectus supplement or post-effective amendment to a Registration Statement has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Company, one conformed copy of such Registration Statement or post-effective amendment, including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any Prospectus or the initiation of any proceedings for that purpose, (iii) of the happening of any event, the existence of any condition or any information becoming known but not the nature or details concerning such event, condition or information that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however, that no notice of the Company pursuant to this clause (iii) shall be required in the event that the Company promptly files a prospectus supplement to update the Prospectus or a Current Report on Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which, in either case, contains the requisite information with respect to such event, condition or

information that results in such Registration Statement no longer containing any untrue statement of a material fact or omitting to state a material fact necessary to make the statements contained therein not misleading) and (iv) of the Company’s determination that a post-effective amendment to a Registration Statement would be appropriate which notice may in any case, at the discretion of the Company state that it constitutes a notice of deferral under Section 3(b) hereof.

(d) Use its commercially reasonable efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus and, if any such order is issued, to use its commercially reasonable efforts to obtain the withdrawal of any such order at the earliest possible moment or if any such order or suspension is during any Deferral Period, at the earliest possible time after such Deferral Period ends, and provide prompt notice to the Selling Holders of the withdrawal of any such order.

(e) Furnish as promptly as reasonably practicable after the filing of such documents with the SEC to each Selling Holder and Designated Counsel, if any, upon request and at the sole expense of the Company, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and all documents incorporated or deemed to be incorporated therein by reference and all exhibits.

(f) Deliver during the Effectiveness Period (except during any Deferral Period) to each Selling Holder and Designated Counsel, if any, at the sole expense of the Company, as many copies of the Prospectus (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to Sections 4A(a) and 4A(c) hereof, the Company hereby consents (except during any Deferral Period) to the use of such Prospectus and each amendment or supplement thereto by each of the Selling Holders of Registrable Securities and dealers, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto in the manner set forth therein.

(g) Cause the Company’s counsel to perform Blue Sky law investigations and to file registrations and qualifications required to be filed in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities or offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Selling Holder reasonably requests, use its commercially reasonable efforts to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective in connection with such Holder’s offer and sale of Registrable Securities pursuant to such registration or qualification (or exemption therefrom) and do any and all other acts or things reasonably necessary or advisable under Blue Sky laws to enable the disposition in such jurisdictions of the Registrable Securities in the manner set forth in the Registration Statement; provided that the Company shall not be required to (i) qualify generally to do business or as a dealer in any jurisdiction where it is not then so qualified, (ii) take any action that would subject it to general service of

process in any such jurisdiction where it is not then so subject or (iii) subject itself to taxation in any such jurisdiction where it is not then so subject.

(h) Cooperate with the Selling Holders and their respective counsel to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Securities to be in such denominations and registered in such names as the Selling Holders may reasonably request at least two (2) Business Days prior to any sale of such Registrable Securities.

(i) Upon the occurrence of any event contemplated by Sections 4(c)(ii), 4(c)(iii) or 4(c)(iv) hereof, as promptly as practicable prepare and (subject to Section 4(a) hereof) file with the SEC, at the sole expense of the Company, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(j) Prior to the effective date of the first Registration Statement relating to the Registrable Securities, (i) provide the Trustee for the Notes and the transfer agent for the Common Stock with certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Securities.

(k) During the Effectiveness Period, if requested in connection with a disposition of Registrable Securities pursuant to a Registration Statement, make available at reasonable times for inspection by one or more representatives of the Selling Holders and any attorney or accountant retained by any such Selling Holders (collectively, the “Inspectors”), at the offices where normally kept, during reasonable business hours, at such time or times as shall be mutually convenient for the Company and the Inspectors as a group, all financial and other records, pertinent corporate documents and instruments of the Company and its subsidiaries (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement in accordance with this Section; provided that the Company shall have no obligation to provide any such information prior to the execution by the party receiving such information of a confidentiality agreement in a form reasonably acceptable to the Company. Records that the Company determines, in good faith, to be confidential and any Records that it notifies the Inspectors are confidential shall not be used for any purpose other than satisfying “due diligence” obligations under the Securities Act and exercising rights under this Agreement and shall not be disclosed by any Inspector unless (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or material omission in such Registration Statement, (ii) the release of such

Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the opinion of counsel for the Selling Holder or any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly involving or potentially involving such Selling Holder or Inspector and arising out of, based upon, relating to, or involving this Agreement or any transactions contemplated hereby or arising hereunder or (iv) the information in such Records has been made generally available to the public other than through the acts of such Inspector; provided that prior notice shall be provided as soon as practicable to the Company of the potential disclosure of any information by such Inspector pursuant to clauses (ii) or (iii) of this sentence to permit the Company to obtain a protective order (or waive the provisions of this Section 4(k)). Each Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such actions are otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector, unless and until such information in such Records has been made generally available to the public other than as a result of a breach of this Agreement.

(l) During the Effectiveness Period, comply with all rules and regulations of the SEC applicable to any Registration Statement and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods.

(m) Cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement relating to the Registrable Securities; and in connection therewith, cooperate with the Trustee and the Holders of the Registrable Securities and their respective counsel to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use all reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner.

(n) If requested by Designated Counsel, if any, or the Holders of a majority in Amount of Registrable Securities, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the Designated Counsel, if any, or such Holders reasonably determine is necessary to be included therein, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as reasonably practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment and (iii) supplement or make amendments to such Registration Statement.

(o) Use its commercially reasonable efforts to take all other steps necessary or advisable to effect the registration of the Registrable Securities covered by a Registration

Statement contemplated hereby provided that the Company shall not be required to take any action in connection with an Underwritten Offering.

(b) The Company may require each Selling Holder of Registrable Securities as to which any registration is being effected to furnish to the Company such additional information regarding such Holder and its plan of distribution of such Registrable Securities as the Company may, from time to time, reasonably request to the extent necessary or advisable to comply with the Securities Act. The Company may exclude from such registration the Registrable Securities of any Selling Holder if such Holder fails to furnish such additional information within 20 Business Days after receiving such request. Each Selling Holder as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed so that the information previously furnished to the Company by such Holder is not materially misleading and does not omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made.

5. Registration Expenses.

(a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company, including, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of compliance with state securities or Blue Sky laws, including, without limitation, reasonable fees and disbursements of its counsel in connection with Blue Sky qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as provided in Section 4(g) hereof), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the Holders of a majority in Amount of Registrable Securities included in any Registration Statement, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company desires such insurance, (vi) fees and expenses of all other Persons retained by the Company, (vii) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (viii) the expense of any annual audit, (ix) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, if applicable, and (x) the expenses relating to printing, word processing and distributing all Registration Statements and any other documents necessary in order to comply with this Agreement. Notwithstanding anything in this Agreement to the contrary, each Holder shall pay all brokerage commissions with respect to any Registrable Securities sold by it and, except as set forth in Section 5(b) below, the Company shall not be responsible for the fees and expenses of any counsel, accountant or advisor for the Holders.

(b) The Company shall bear or reimburse the Holders of the Registrable Securities being registered in a Shelf Registration for the reasonable fees and disbursements of Designated Counsel.

6. Indemnification.

(a) The Company agrees to indemnify and hold harmless (x) each Holder (which, for the absence of doubt, for purposes of this Section 6 shall include the Initial Purchasers), (y) each Person, if any, who controls any Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) (any of the Persons referred to in this clause (y) being hereinafter referred to as a “Controlling Person”) and (z) the respective officers, directors, partners, employees, representatives and agents of any Holder (including any predecessor holder) or any Controlling Person (any person referred to in clause (x), (y) or (z) may hereinafter be referred to as an “Indemnified Holder”), against any losses, claims, damages or liabilities to which such Indemnified Holder may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement or Prospectus, or any amendment or supplement thereto or any related preliminary prospectus or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make

the statements made therein, in the light of the circumstances under which they were made, not misleading; provided that the Company will not be liable under this Section 6(a), (x) to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in any such Registration Statement or Prospectus, or any amendment or supplement thereto or any related preliminary prospectus in reliance upon and in conformity with written information relating to any Holder furnished to the Company by or on behalf of such Holder specifically for use therein, (y) with respect to any untrue statement or alleged untrue statement, or omission or alleged omission made in any preliminary prospectus if the person asserting any such loss, claim, damage or liability who purchased Registrable Securities which are the subject thereof did not receive a copy of the Prospectus (or the preliminary prospectus as then amended or supplemented if the Company shall have furnished such Indemnified Holder with such amendment or supplement thereto on a timely basis) at or prior to the written confirmation of the sale of such Registrable Securities to such person and, in any case where such delivery is required by applicable law and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact made in such preliminary prospectus was corrected in the Prospectus (or the preliminary prospectus as then amended or supplemented if the Company shall have furnished such Indemnified Holder with such amendment or supplement thereto on a timely basis) or (z) arising from the offer or sale of Registrable Securities during any Deferral Period, if notice thereof was given to such Holder. The Company shall notify such Indemnified Holder promptly of the institution, threat or assertion of any claim, proceeding (including any governmental investigation) or litigation in connection with the matters addressed by this Agreement that involves the Company or such Indemnified Holder.

(b) Subject to Section 6(d) below, the Company agrees to reimburse each Indemnified Holder upon demand for any reasonable legal or other out-of-pocket expenses reasonably incurred by such Indemnified Holder in connection with investigating or defending any such loss, claim, damage or liability, action or proceeding or in responding to a subpoena or governmental inquiry related to the offering of the Registrable Securities, whether or not such Indemnified Holder is a party to any action or proceeding. In the event that it is finally judicially determined that an Indemnified Holder was not entitled to receive payments for legal and other expenses pursuant to this Section 6, such Indemnified Holder will promptly return all sums that had been advanced pursuant hereto.

(c) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, each of its directors and officers and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as the indemnity provided in Section 6(a) from the Company to each Holder, provided, however, that such Holder will be liable in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission has been made in any Registration Statement or Prospectus, or any amendment or supplement thereto or any related preliminary prospectus, in reliance upon and in conformity with written information furnished to the Company by such Holder specifically for use in the preparation thereof. The liability of any Holder under this Section 6(c) shall in no event exceed the proceeds received by such Holder from sales of Registrable Securities giving rise to such obligation.

(d) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 6(a) or (c), such Person (the “Indemnified Person”) shall promptly notify the Person or Persons against whom such indemnity may be sought (each an “Indemnifying Person”) in writing. No indemnification provided for in Section 6(a) or (c) shall be available to any Person who shall fail to give notice as provided in this Section 6(d) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was materially prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the Indemnifying Person or Persons from any liability which it or they may have to the Indemnified Person for contribution or otherwise than on account of the provisions of Section 6(a) or (c). In case any such proceeding shall be brought against any Indemnified Person and it shall notify the Indemnifying Person of the commencement thereof, the Indemnifying Person shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other Indemnifying Person similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Person and shall pay as incurred (or within 30 days of presentation) the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the Indemnifying Person shall pay as incurred (or within 30 days of presentation) the reasonable fees and expenses of the counsel retained by the Indemnified Person in the event (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the retention of such counsel, (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or (iii) the Indemnifying Person shall have failed to assume the defense and employ counsel acceptable to the Indemnified Person within a reasonable period of time after notice of commencement of the action. It is understood that the Indemnifying Person shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such Indemnified Persons. Such firm shall be designated in writing by Holders of a majority in Amount of Registrable Securities in the case of parties indemnified pursuant to Section 6(a) and by the Company in the case of parties indemnified pursuant to Section 6(c). The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify the Indemnified Person from and against any loss or liability by reason of such settlement or judgment. In addition, the Indemnifying Person will not, without the prior written consent of the Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding of which indemnification may be sought hereunder (whether or not any Indemnified Person is an actual or potential party to such claim, action or proceeding) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action or proceeding.

(e) To the extent the indemnification provided for in this Section 6 is unavailable to or insufficient to hold harmless an Indemnified Person under Section 6(a) or (c) in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect

thereof) referred to therein, then each Indemnifying Person shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Person on the one hand and the Indemnified Person on the other hand from the offering of the Notes pursuant to the Purchase Agreement and the Registrable Securities pursuant to any Shelf Registration. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each Indemnifying Person shall contribute to such amount paid or payable by such Indemnified Person in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Indemnifying Person on the one hand and the Indemnified Person on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company shall be deemed to be equal to the total net proceeds (before deducting expenses) received by the Company under the Purchase Agreement from the offering and sale of the Registrable Securities giving rise to such obligations. The relative benefits received by any Holder shall be deemed to be equal to the value of receiving registration rights for the Registrable Securities under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand, such Indemnified Holder on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(f) The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to Section 6(e) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in Section 6(e). The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to in Section 6(e) shall be deemed to include any reasonable legal or other expenses reasonably incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of Section 6(e) and (f), (i) in no event shall any Holder be required to contribute any amount in excess of the amount by which the net proceeds received by such Holder from the offering or sale of the Registrable Securities pursuant to a Shelf Registration Statement exceeds the amount of damages which such Holder would have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(g) In any proceeding relating to any Registration Statement or Prospectus or any supplement or amendment thereto or any related preliminary prospectus, each party against whom contribution may be sought under this Section 6 hereby consents to the jurisdiction of any court having jurisdiction over any other contributing party, agrees that process issuing from such court may be served upon it by any other contributing party and consents to the service of such process and agrees that any other contributing party may join it as an additional defendant in any such proceeding in which such other contributing party is a party.

(h) Any losses, claims, damages, liabilities or expenses for which an Indemnified Person is entitled to indemnification or contribution under this Section 6 shall be paid by the Indemnifying Person to the Indemnified Person as such losses, claims, damages, liabilities or expenses are incurred.

(i) The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any indemnified party at law or in equity.

(j) The indemnity and contribution agreements contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Holder or any Person controlling any Holder or by or on behalf of the Company, its officers or directors or any other Person controlling the Company and (iii) sale under the Registration Statement of any of the Registrable Securities. A successor to any Holder or Controlling Person, or to the Company, its directors or officers or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 6.

7. Rules 144 and 144A.

The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, if at any time before the expiration of the Effectiveness Period the Company is not required to file such reports, it will, upon the request of any Holder, make available such information necessary to permit sales pursuant to Rule 144A under the Securities Act. The Company further covenants that until the Effectiveness Period has expired, it will use all reasonable efforts to take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A under the Securities Act, as such rules may be amended from time to time. The Company will provide a copy of this Agreement to prospective purchasers of Registrable Securities identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it is subject to and has complied with such reporting requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

8. Underwritten Registrations.

No Holder of Registrable Securities may participate in any Underwritten Registration hereunder.

9. Miscellaneous.

(a) No Inconsistent Agreements. The Company has not, as of the date hereof, and the Company shall not, after the date of this Agreement, enter into any agreement with

respect to any of its securities that conflicts with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof.

(b) Adjustments Affecting Registrable Securities. The Company shall not take any action with respect to the Registrable Securities as a class with the intent of adversely affecting the ability of the Holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement.

(c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of the Company and the Holders of not less than a majority in Amount of Registrable Securities; provided that Section 6 and this Section 9(c) may not be amended, modified or supplemented without the prior written consent of the Company and each Holder (including, in the case of an amendment, modification or supplement of Section 6, any Person who was a Holder of Registrable Securities disposed of pursuant to any Registration Statement). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Securities may be given by Holders of at least a majority in Amount of Registrable Securities being sold by such Holders pursuant to such Registration Statement. Each Holder of Registrable Securities outstanding at the time of any amendment, modification, supplement, waiver, or consent or thereafter shall be bound by any such amendment, modification, supplement, waiver, or consent effected pursuant to this Section, whether or not any notice of such amendment, modification, supplement, waiver, or consent is delivered to such Holder.

(d) Notices. All notices, requests and other communications (including without limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing and delivered by hand-delivery, registered first-class mail, next-day air courier or facsimile:

(1) if to a Holder of Registrable Securities, at the most current address of such Holder set forth on (x) the records of the registrar under the Indenture, in the case of Holders of Notes, and (y) the stock ledger of the Company, in the case of Holders of common stock of the Company, unless, in either such case, any Holder shall have provided notice information in a Notice and Questionnaire or any amendment thereto, in which case such information shall control.

(2) if to the Initial Purchasers:

Deutsche Bank Securities Inc.
60 Wall Street
New York, New York 10005
Facsimile No.: (212) 797-8974
Attention: Equity Capital Markets
with a copy to the General Counsel
Facsimile No.: (212) 797-4564

with a copy to:

Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 450-3800
Attention: Alan Dean

Alan Denenberg

(3) if to the Company:

Shuffle Master, Inc.

1106 Palms Airport Drive

Las Vegas, Nevada 89119

Facsimile No.: (702) 270-5161
Attention: General Counsel

with a copy to:

Latham & Watkins LLP
885 Third Avenue
New York, New York 10022
Facsimile No.: (212) 751-4864
Attention: Kirk A. Davenport II

(4) if to the Trustee:

Wells Fargo Bank, National Association

Sixth Street & Marquette Avenue, N9303-120

Minneapolis, MN 55479

Facsimile No.: (612) 667-9825
Attention: Jeffery Rose

(e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including the Holders; provided that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and except to the extent such successor or assign holds Registrable Securities.

(f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, including via facsimile, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS SITTING IN MANHATTAN, NEW YORK CITY, THE STATE OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

(i) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(j) Securities Held by the Company or Its Affiliates. Whenever the consent or approval of Holders of a specified percentage in Amount of Registrable Securities is required hereunder, Registrable Securities held by the Company or its affiliates (as such term is defined

in Rule 405 under the Securities Act) other than the Initial Purchasers or Holders deemed to be affiliates solely by reason of their holdings of such Registrable Securities shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage; provided that Registrable Securities that the Company or an affiliate of the Company offers to purchase or acquires pursuant to an offer, exchange offer, tender offer or otherwise shall not be deemed to be held by the Company or such affiliate until legal title to such Registrable Securities passes to the Company or such affiliate, as the case may be.

(k) Third-Party Beneficiaries. Holders of Registrable Securities are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons.

(l) Entire Agreement. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Initial Purchasers on the one hand and the Company on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby.

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

SHUFFLE MASTER, INC.


By:		/s/ Paul Meyer
	Name:	Paul Meyer
	Title:	President


DEUTSCHE BANK SECURITIES INC.
GOLDMAN, SACHS & CO.

BY: DEUTSCHE BANK SECURITIES INC.


By:		/s/ Arthur Goldfrank
	Name:	Arthur Goldfrank
	Title:	Director


By:		/s/ M Nayber
	Name:	M Nayber
	Title:	Director

[Signature Page to Registration Rights Agreement]

EX-10.6 8 a04-6489_1ex10d6.htm EX-10.6

Exhibit 10.6

SHUFFLE MASTER, INC.,

as Issuer

1.25% Contingent Convertible Senior Notes Due 2024

INDENTURE

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Trustee

Dated as of April 21, 2004

CROSS-REFERENCE TABLE^*

Trust Indenture Act Section		Indenture Section
310	(a)(1)	7.10
	(a)(2)	N.A.
	(a)(3)	N.A.
	(a)(4)	N.A.
	(a)(5)	N.A.
	(b)	7.10
	(c)	N.A.
311	(a)	7.11
	(b)	7.11
	(c)	N.A.
312	(a)	N.A.
	(b)	11.03
	(c)	11.03
313	(a)	7.06
	(b)	7.06
	(b)	7.06
314	(c)	N.A.
	(d)	N.A.
	(a)	4.02, 4.03
	(b)	N.A.
	(c)(1)	N.A.
	(c)(2)	N.A.
	(c)(3)	N.A.
	(d)	N.A.
	(e)	N.A.
	(f)	N.A.
315	(a)	7.01(b)
	(b)	7.05
	(c)	N.A.
	(d)	7.01(c)
	(e)	6.11
316	(a)(1)(A)	6.05
	(a)(1)(B)	6.04
	(a)(2)	N.A.
	(b)	N.A.
	(c)	N.A.
317	(a)(1)	N.A.
	(a)(2)	N.A.
	(b)	N.A.
318	(a)	N.A.

N.A. means not applicable.

* This Cross-Reference Table is not part of the Indenture.

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01. Definitions.
Section 1.02. Other Definitions.
Section 1.03. Incorporation by Reference of Trust Indenture Act
Section 1.04. Rules of Construction
Section 1.05. Acts of Holders.

ARTICLE 2 THE SECURITIES

Section 2.01. Form and Dating.
Section 2.02. Execution and Authentication
Section 2.03. Registrar, Paying Agent and Conversion Agent
Section 2.04. Paying Agent to Hold Money in Trust
Section 2.05. Holder Lists
Section 2.06. Transfer and Exchange.
Section 2.07. Replacement Securities
Section 2.08. Outstanding Securities; Determinations of Holders’ Action
Section 2.09. Temporary Securities
Section 2.10. Cancellation
Section 2.11. Persons Deemed Owners
Section 2.12. Global Securities.
Section 2.13. CUSIP Numbers
Section 2.14. Designation

ARTICLE 3 REDEMPTION AND REPURCHASES

Section 3.01. Right to Redeem; Notices to Trustee.
Section 3.02. Selection of Securities to Be Redeemed
Section 3.03. Notice of Redemption
Section 3.04. Effect of Notice of Redemption
Section 3.05. Deposit of Redemption Price
Section 3.06. Securities Redeemed in Part
Section 3.07. Sinking Fund
Section 3.08. Repurchase of Securities at Option of the Holder on Specified Dates.
Section 3.09. Repurchase of Securities at Option of the Holder Upon Change in Control.

Section 3.10. Effect of Repurchase Notice or Change in Control Repurchase Notice
Section 3.11. Deposit of Repurchase Price or Change in Control Repurchase Price
Section 3.12. Securities Repurchased in Part
Section 3.13. Covenant to Comply with Securities Laws upon Repurchase of Securities
Section 3.14. Repayment to the Company
Section 3.15. Mandatory Disposition Pursuant to Gaming Laws.

Article 4 COVENANTS

Section 4.01. Payment of Securities
Section 4.02. SEC and Other Reports
Section 4.03. Compliance Certificate; Notice of Default.
Section 4.04. Further Instruments and Acts
Section 4.05. Maintenance of Office or Agency
Section 4.06. Delivery of Certain Information
Section 4.07. Liquidated Damages

Article 5 SUCCESSOR CORPORATION

Section 5.01. When the Company May Consolidate, Merge or Transfer Assets

Article 6 DEFAULTS AND REMEDIES

Section 6.01. Events of Default
Section 6.02. Acceleration.
Section 6.03. Other Remedies
Section 6.04. Waiver of Past Defaults
Section 6.05. Control by Majority
Section 6.06. Limitation on Suits
Section 6.07. Rights of Holders to Receive Payment and to Convert
Section 6.08. Collection Suit by Trustee
Section 6.09. Trustee May File Proofs of Claim
Section 6.10. Priorities
Section 6.11. Suits
Section 6.12. Waiver of Stay, Extension or Usury Laws
Section 6.13. Disqualified Holders

iii

Article 7 TRUSTEE

Section 7.01. Duties of Trustee.
Section 7.02. Rights of Trustee
Section 7.03. Individual Rights of Trustee
Section 7.04. Trustee’s Disclaimer
Section 7.05. Notice of Defaults
Section 7.06. Reports by Trustee to Holders
Section 7.07. Compensation and Indemnity
Section 7.08. Replacement of Trustee
Section 7.09. Successor Trustee by Merger Etc
Section 7.10. Eligibility; Disqualification
Section 7.11. Preferential Collection of Claims Against Company
Section 7.12. Force Majeure
Section 7.13. Gaming License Requirements

Article 8 DISCHARGE OF INDENTURE

Section 8.01. Discharge of Liability on Securities
Section 8.02. Repayment to the Company

Article 9 AMENDMENTS

Section 9.01. Without Consent of Holders
Section 9.02. With Consent of Holders.
Section 9.03. Compliance with Trust Indenture Act
Section 9.04. Revocation and Effect of Consents
Section 9.05. Notation on or Exchange of Securities
Section 9.06. Trustee to Sign Supplemental Indentures
Section 9.07. Effect of Supplemental Indentures

Article 10 CONVERSION OF THE SECURITIES

Section 10.01. Conversion Privilege.
Section 10.02. Conversion Procedure.
Section 10.03. Taxes on Conversion
Section 10.04. Company to Provide Stock
Section 10.05. Adjustment of Conversion Price
Section 10.06. No Adjustment
Section 10.07. Equivalent Adjustments
Section 10.08. Adjustment for Tax Purposes

Section 10.09. Notice of Adjustment
Section 10.10. Notice of Certain Transactions
Section 10.11. Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion Privilege
Section 10.12. Trustee’s Disclaimer
Section 10.13. Voluntary Reduction
Section 10.14. Conversion Value of Securities Tendered.
Section 10.15. Simultaneous Adjustments

Article 11 MISCELLANEOUS

Section 11.01. Trust Indenture Act Controls
Section 11.02. Notices
Section 11.03. Communication by Holders with Other Holders
Section 11.04. Certificate and Opinion as to Conditions Precedent
Section 11.05. Statements Required in Certificate or Opinion
Section 11.06. Separability Clause
Section 11.07. Rules by Trustee, Paying Agent, Conversion Agent and Registrar
Section 11.08. Legal Holidays
Section 11.09. Governing Law
Section 11.10. No Recourse Against Others
Section 11.11. Successors
Section 11.12. Multiple Originals
Section 11.13. Table of Contents and Headings

Exhibit A	–	Form of Global Security
Exhibit B	–	Transfer Certificate

INDENTURE dated as of April 21, 2004 between SHUFFLE MASTER, INC., a Minnesota corporation (the “Company”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association organized under the laws of the United States of America (the “Trustee”).

Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined below) of the Company’s 1.25% Contingent Convertible Senior Notes Due 2024 (the “Securities”):

ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01. Definitions.

“Additional Securities” means an unlimited principal amount of Securities (other than the Initial Securities) issued from time to time with the same terms and the same CUSIP number as the Initial Securities under this Indenture in accordance with Section 2.02 hereof.

“Affiliate” has the meaning provided in Rule 405 under the Securities Act.

“Agent” means any Registrar, Paying Agent, Conversion Agent or co-registrar.

“Applicable Procedures” means, with respect to any transfer or transaction involving a Global Security or beneficial interests therein, the rules and procedures of the Depositary for such Global Security, in each case to the extent applicable to such transaction and as in effect from time to time.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal, state, or foreign law for the relief of debtors.

“Beneficial Owner” shall be determined in accordance with Rule 13d-3 and Rule 13d-5 promulgated by the SEC under the Exchange Act or any successor provision, except that, (i) a person shall be deemed to have “Beneficial Ownership” of all shares of Common Stock that the Person has the right to acquire, whether exercisable immediately or only after the passage of time and (ii) any percentage of “Beneficial Ownership” shall be determined using the definition in clause (i) in both the numerator and the denominator.

“Board of Directors” means either the board of directors of the Company or any duly authorized committee of such board of directors authorized to act for it with respect to this Indenture.

“Board Resolution” means a copy of one or more resolutions, certified by an Officer of the Company to have been duly adopted or consented to by the Board of Directors and to be in full force and effect, and delivered to the Trustee.

“Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York.

“Capital Stock” for any corporation means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that corporation, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

“Change in Control” means the occurrence of one or more of the following events:

(a) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the properties and assets of the Company, to any Person or group of related Persons, as defined in Section 13(d) of the Exchange Act (a “Group”);

(b) the approval by the holders of the Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company, whether or not otherwise in compliance with this Indenture;

(c) any Person or Group, other than the Company, any Subsidiary of the Company or any employee benefit plan of the Company or any such Subsidiary, becomes the Beneficial Owner, directly or indirectly, of shares of Capital Stock of the Company entitling such Person or Group to exercise in excess of 50% of the aggregate ordinary voting power of all shares of Voting Stock of the Company; or

(d) the first day on which a majority of the members of the Board of Directors are not Continuing Directors.

“Common Stock” shall mean shares of the Company’s Common Stock, $.01 par value per share, as they exist on the date of this Indenture or any other shares of Capital Stock of the Company into which the Common Stock shall be reclassified or changed.

“Common Stock Price” on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average

ask prices) on such date for the Common Stock as reported in composite transactions on the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, as reported by The NASDAQ System.

“Company” means the party named as the “Company” in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent successor or successors.

“Company Order” means a written request or order signed in the name of the Company by any two Officers.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors who (a) was a member of the Board of Directors as of the date hereof or (b) was nominated for election or elected to the Board of Directors with the approval of a majority of the Continuing Directors who were members of the Board of Directors at the time of such nomination or election.

“Conversion Price” means $42.11 per share of Common Stock as of the date of this Indenture, subject to the adjustments described in Section 10.05 hereof.

“Conversion Rate” means the number of shares of Common Stock equal to $1,000 divided by the Conversion Price, which shall be approximately 23.7473 as of the date of this Indenture.

“Corporate Trust Office” means the office of the Trustee at which at any time the trust created by this Indenture shall be administered, which office at the date hereof is located at Wells Fargo Bank, National Association, Sixth Street & Marquette Avenue, N9303-120, Minneapolis, MN 55479, Attention: Shuffle Master, Inc. Administrator, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Company).

“Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect from time to time.

“Holder” means a Person in whose name a Security is registered on the Registrar’s books.

“Indenture” means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof.

“Initial Purchasers” shall mean Deutsche Bank Securities Inc. and Goldman, Sachs & Co.

“Initial Securities” means Securities in an aggregate principal amount of up to $125,000,000 (which amount shall be increased by up to $25,000,000 in principal amount of additional Initial Securities purchased pursuant to the Initial Purchasers’ option to purchase additional Securities) issued under this Indenture.

“Liquidated Damages” has the meaning set forth in the Registration Rights Agreement dated as of April 21, 2004 between the Company and the Initial Purchasers.

“Market Price” means the average of the Common Stock Prices for 20 consecutive Trading Days commencing 30 Trading Days before the record date with respect to any distribution, issuance or other event requiring such computation, appropriately adjusted (as determined in good faith by the Board of Directors, whose determination shall be conclusive) to take into account the occurrence, during the period commencing on the first of such 20 consecutive Trading Days and ending on such record date, of any event requiring adjustment of the Conversion Price under this Indenture.

“Obligations” means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation under which any indebtedness is created, evidenced or secured, including in the case of the Securities, Liquidated Damages, if any.

“Offering Memorandum” means the offering memorandum of the Company dated April 15, 2004 relating to the offering of the Securities.

“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President (whether or not such title is preceded by any modifier such as “Executive, “Senior” or the like), the Chief Financial Officer, the Treasurer, the Controller or the Secretary of such Person or any other officer designated by the board of directors of such Person serving in a similar capacity; provided that the designation of any such Officer of the Company by the Board of Directors shall be evidenced in a Board Resolution.

“Officers’ Certificate” means a written certificate containing the information specified in Sections 11.04 and 11.05, signed in the name of the Company by any two Officers, and delivered to the Trustee. An Officers’ Certificate given pursuant to Section 4.03 shall be signed by the principal executive officer, principal financial officer or the principal accounting officer of the Company but need not contain the information specified in Sections 11.04 and 11.05.

“Opinion of Counsel” means a written opinion containing the information specified in Sections 11.04 and 11.05, from legal counsel who is acceptable to the Trustee in its reasonable discretion. The counsel may be an employee of, or counsel to, the Company or the Trustee.

“Person” or “Persons” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or other entity.

“Redemption Date” shall mean a date specified for redemption of the Securities in accordance with the terms of this Indenture.

“Responsible Officer” shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

“Rule 144A” means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time.

“Security” or “Securities” means any of the Company’s 1.25% Contingent Convertible Senior Notes Due 2024 issued under this Indenture. The Initial Securities and any Additional Securities shall be treated as a single series which means that, in circumstances where the Indenture provides for the Holders to vote or take any action, the Holders of Initial Securities and the Holders of Additional Securities will vote or take that action as a single class.

“Significant Subsidiary” has the meaning ascribed to such term in Regulation S-X (17 CFR Part 210).

“Stated Maturity”, when used with respect to any Security, means the date specified in such Security as the fixed date on which an amount equal to the principal amount of such Security is due and payable.

“Subsidiary” means, with respect to any Person, (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances (determined without regard to any classification of directors) shall at the time be owned, directly or indirectly, by such Person, (ii) any other Person (other than a partnership) of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person or (iii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof).

“TIA” means the Trust Indenture Act of 1939 as in effect on the date of this Indenture, provided that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended.

“Trading Day” means any regular or abbreviated trading day of the Nasdaq National Market.

“Trading Price of the Securities” on any date of determination means the average of the secondary market bid quotations per $1,000 in principal amount of Securities obtained by the Trustee for $5,000,000 in principal amount of the Securities at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers the Company selects, which may include the Initial Purchasers; provided that if at least three such bids cannot reasonably be obtained by the Trustee, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Trustee, this one bid shall be used. If the Trustee cannot reasonably obtain at least one such bid or, in the Company’s reasonable judgment, the bid quotations are not indicative of the secondary market value of the Securities, then the Trading Price of the Securities

will be determined in good faith by the Trustee, taking into account in such determination such factors as it, in its sole discretion after consultation with the Company, deems appropriate. The Trustee shall not be required to determine the Trading Price of the Securities unless requested in writing by the Company.

“Transfer Restricted Securities Legend” means the legend labeled as such and that is set forth in Exhibit A hereto.

“Trustee” means the party named as the “Trustee” in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors.

“Voting Stock” of a Person means Capital Stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances (determined without regard to any classification of directors) to elect at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time Capital Stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

Section 1.02. Other Definitions

Term		Defined in Section

Acceleration Notice		6.02(a)
Act		1.05(a)
Agent Members		2.12(e)
Authenticating Agent		2.02
Change in Control Repurchase Date		3.09(a)
Change in Control Repurchase Notice		3.09(c)
Change in Control Repurchase Price		3.09(a)
Company Change in Control Repurchase Notice		3.09(b)
Company Repurchase Notice		3.08(b)
Conversion Agent		2.03
Conversion Date		10.02(a)
Conversion Value		10.14(a)
Depositary		2.01(b)
Determination Date		10.14(b)
Disqualified Holder		3.15(a)
Dividend Adjustment Amount		10.05(e)
DTC		2.01(b)
Event of Default		6.01
Ex-Dividend Date		10.01(c)
Expiration Time		10.05(d)

Term		Defined in Section

Global Security		2.01(b)
Legal Holiday		11.08
Net Share Amount		10.14(b)
Net Shares		10.14(b)
Paying Agent		2.03
Pre-Dividend Sale Price		10.05(e)
Principal Return		10.14(b)
Principal Value Conversion		10.01(a)
Purchased Shares		10.05(d)
QIBs		2.06(e)
Quarter		10.01(a)
Redemption Price		3.01(a)
Registrar		2.03
Repurchase Date		3.08(a)
Repurchase Notice		3.08(a)
Repurchase Price		3.08(a)
Rule 144A Information		4.06
Shareholder Rights Plan		10.05(f)
Ten Day Average Closing Stock Price		10.14(a)
Transfer Restricted Securities		2.06(e)

Section 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms incorporated by reference in this Indenture have the following meanings:

“Commission” means the SEC.

“Indenture Securities” means the Securities.

“Indenture Security Holder” means a Holder.

“Indenture to be Qualified” means this Indenture.

“Indenture Trustee” or “Institutional Trustee” means the Trustee.

“Obligor” on the indenture securities means the Company.

All other TIA terms incorporated by reference in this Indenture that are defined by the TIA, defined by a TIA reference to another statute or defined by an SEC rule have the meanings assigned to them by such definitions.

Section 1.04. Rules of Construction. Unless the context otherwise requires:

(a) a term has the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(d) “including” means including, without limitation; and

(e) words in the singular include the plural, and words in the plural include the singular.

Section 1.05. Acts of Holders.

(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.

(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such officer the execution thereof. Where such execution is by a signer acting in a capacity other than such signer’s individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer’s authority.

The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.

(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

(e) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date.

ARTICLE 2
THE SECURITIES

Section 2.01. Form and Dating.

(a) Forms. The Securities and the Trustee’s certificate of authentication shall be substantially in the forms set forth on Exhibit A, which are a part of this Indenture and incorporated by reference herein. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage; provided that any such notation, legend or endorsement required by usage is in a form acceptable to the Company. The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication.

(b) Global Securities. Unless otherwise required by law or otherwise contemplated by Section 2.12(a), all of the Securities will be represented by one or more Securities in global form (a “Global Security”), which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for the Depositary and registered in the name of The Depository Trust Company (“DTC”) or the nominee thereof (such depositary, or any successor thereto, and any such nominee

being hereinafter referred to as the “Depositary”), duly executed by the Company and authenticated by the Trustee as hereinafter provided.

Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon and that the aggregate amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions and conversions.

Any adjustment of the aggregate principal amount of a Global Security to reflect the amount of any increase or decrease in the amount of outstanding Securities represented thereby shall be made by the Trustee as required by Section 2.12 hereof and shall be made on the records of the Trustee and the Depositary.

Section 2.02. Execution and Authentication. The Securities shall be executed on behalf of the Company by the manual or facsimile signature of any Officer.

Securities bearing the manual or facsimile signatures of individuals who were at the time of the execution of the Securities the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of authentication of such Securities.

No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.

The Trustee may appoint an authenticating agent (the “Authenticating Agent”) reasonably acceptable to the Company to authenticate Securities. Unless otherwise provided in the appointment, the Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by the Authenticating Agent. The Authenticating Agent has the same rights as an Agent to deal with the Company or with any Affiliate of the Company.

The Trustee shall authenticate and deliver Initial Securities for original issue in an aggregate principal amount of up to $125,000,000 (which amount shall be increased by up to $25,000,000 in principal amount of additional Initial Securities purchased pursuant to the Initial Purchasers’ option to purchase

additional Securities) upon a Company Order without any further action by the Company. In addition, the Trustee shall authenticate and deliver Additional Securities in aggregate principal amounts specified by the Company, if such Additional Securities would be part of the “same issue” as the Initial Securities for U.S. federal income tax purposes.

The Securities shall be issued only in registered form without coupons and only in denominations of $1,000 of principal amount and any integral multiple thereof.

Section 2.03. Registrar, Paying Agent and Conversion Agent. The Company shall maintain an office or agency with the Trustee where Securities may be presented for registration of transfer or for exchange (the “Registrar”), an office or agency where Securities may be presented for repurchase or payment (the “Paying Agent”) and an office or agency where Securities may be presented for conversion (the “Conversion Agent”). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company, upon prior written notice to the Trustee, may have one or more co-registrars, one or more additional paying agents reasonably acceptable to the Trustee and one or more additional conversion agents. The term “Paying Agent” includes any additional paying agent, including any named pursuant to Section 4.05. The term “Conversion Agent” includes any additional conversion agent, including any named pursuant to Section 4.05.

The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Conversion Agent or co-registrar (if other than the Trustee). Such agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee, in advance, of the name and address of any such Agent. If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its Subsidiaries or an Affiliate of the Company or any of its Subsidiaries may act as Paying Agent, Registrar, Conversion Agent or co-registrar.

The Company initially appoints the Trustee as Registrar, Conversion Agent and Paying Agent in connection with the Securities.

Section 2.04. Paying Agent to Hold Money in Trust. Except as otherwise provided herein, not later than 11:00 a.m. (New York City time) on the Business Day prior to each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent a sum of money sufficient to make such payments when they become due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that such Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by such Paying

Agent for the making of payments in respect of the Securities and shall notify the Trustee of any default by the Company in making any such payment. At any time during the continuance of any such default, such Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all moneys held in trust. If the Company, a Subsidiary of the Company or an Affiliate of the Company or any of its Subsidiaries acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require each Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by it. Upon doing so, such Paying Agent shall have no further liability for such money or shares of Common Stock, as the case may be.

Section 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee on each April 15 and October 15 and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders, which list may be conclusively relied upon by the Trustee and dated not more than 15 days prior to the time such information is furnished; provided that the list of Holders provided on April 15 and October 15 shall contain the list of Holders as of the immediately preceding April 1 and October 1, respectively.

Section 2.06. Transfer and Exchange.

(a) Subject to Section 2.12 hereof, upon surrender for registration of transfer of any Securities to the Registrar, together with a written instrument of transfer satisfactory to the Registrar, substantially in the form affixed to the form of Security attached as Exhibit A hereto, duly executed by the Holder thereof or such Holder’s attorney duly authorized in writing, at the office or agency of the Registrar or co-registrar, the Company shall execute and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations of a like aggregate principal amount.

At the option of the Holder thereof, Securities may be exchanged for other Securities of any authorized denomination or denominations, of a like aggregate principal amount, upon surrender of the Securities to be exchanged, together with a written instrument of transfer satisfactory to the Registrar duly executed by such Holder or such Holder’s attorney duly authorized in writing, at the office or agency of the Registrar or co-registrar. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities that the Holder making the exchange is entitled to receive. The Company shall not charge a service charge for any registration of transfer or exchange, but the Company may require payment of a

sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of the Securities from the Holder requesting such transfer or exchange.

The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities in respect of which a Repurchase Notice or Change in Control Repurchase Notice has been given and not withdrawn by the Holder thereof in accordance with the terms of this Indenture (except, in the case of Securities to be repurchased in part, the portion thereof not to be repurchased) or any Securities for a period of 15 days before the mailing of a notice of redemption to each Holder of Securities to be redeemed, as provided in Section 3.03.

(b) Successive registrations and registrations of transfers and exchanges as aforesaid may be made from time to time as desired, and each such registration shall be noted on the register for the Securities.

(c) The Registrar shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by the Registrar of Securities upon transfer or exchange of Securities.

(d) The Registrar shall not be required to make registrations of transfer or exchange of Securities during any periods designated in the Securities or in this Indenture as periods during which such registration of transfers and exchanges need not be made.

(e) Notwithstanding any other provision of this Indenture or the Securities, until the expiration of the applicable holding period set forth in Rule 144(k) of the Securities Act (or any successor provision), the Securities may not be transferred or exchanged in whole or in part other than (i) to the Company or any of its Subsidiaries, (ii) to a person whom the seller reasonably believes is a qualified institutional buyer, as such term is defined in Rule 144A (a “QIB”), in reliance on Rule 144A, (iii) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available) or (iv) pursuant to an effective registration statement under the Securities Act, in each of cases (i) through (iv) in accordance with any applicable securities laws of any state of the United States. Whenever any Security is presented or surrendered for registration of transfer or exchange for a Security registered in a name other than that of the Holder thereof, such Security must be accompanied by a certificate in substantially the form set forth in Exhibit B, dated the date of such surrender and signed by the Holder of such Security, as to compliance with such restrictions on transfer. The Registrar shall not be required to accept for such registration of transfer or exchange any Security not so accompanied by a properly completed certificate.

Any certificate evidencing a Security (and all securities issued in exchange therefor or substitution thereof) shall bear the Transfer Restricted Securities Legend, unless (1) such Security has been sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such transfer) or pursuant to Rule 144 under the Securities Act or any similar provision then in force, (2) such Security is eligible for resale pursuant to Rule 144(k) under the Securities Act (or any successor provision) or (3) otherwise agreed by the Company in writing, with written notice thereof to the Trustee.

Every Security that bears or is required under this Section 2.06(e) to bear the Transfer Restricted Securities Legend (the “Transfer Restricted Securities”) shall be subject to the restrictions on transfer set forth in this Section 2.06(e) (including those set forth in the Transfer Restricted Securities Legend) unless such restrictions on transfer shall be waived by written consent of the Company, and the Holder of each such Transfer Restricted Security, by such Security Holder’s acceptance thereof, agrees to be bound by all such restrictions on transfer. As used in this Section 2.06(e), the term “transfer” encompasses any sale, pledge, loan, transfer or other disposition whatsoever of any Transfer Restricted Security or any interest therein.

Any Security (or Security issued in exchange or substitution therefor) as to which such restrictions on transfer shall have expired in accordance with their terms or as to conditions for removal of the Transfer Restricted Securities Legend have been satisfied may, upon surrender of such Security for exchange to the Registrar in accordance with the provisions of this Section 2.06, be exchanged for a new Security or Securities, of like tenor and aggregate principal amount, which shall not bear the Transfer Restricted Securities Legend. If the Transfer Restricted Security surrendered for exchange is represented by a Global Security bearing a Transfer Restricted Securities Legend, the principal amount of the Global Security so legended shall be reduced by the appropriate principal amount and the principal amount of a Global Security without the Transfer Restricted Securities Legend shall be increased by an equal principal amount. If a Global Security without the Transfer Restricted Securities Legend is not then outstanding, the Company shall execute and the Trustee shall authenticate and deliver a Global Security without the Transfer Restricted Securities Legend to the Depositary.

Section 2.07. Replacement Securities. If any mutilated Security is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a protected purchaser (within the meaning of Section 8-303 of the Uniform Commercial Code

as adopted in the State of New York), the Company shall execute, and upon the Company’s written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be redeemed or repurchased by the Company pursuant to Article 3 hereof, the Company in its discretion may, instead of issuing a new Security, pay, redeem or repurchase such Security, as the case may be.

Upon the issuance of any new Securities under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

Section 2.08. Outstanding Securities; Determinations of Holders’ Action. Securities outstanding at any time are all the Securities authenticated by the Trustee, except for those cancelled by it, those delivered to it for cancellation pursuant to Section 2.10 and those described in this Section 2.08 as not outstanding. A Security does not cease to be outstanding because the Company or any Affiliate of the Company holds the Security; provided that in determining whether the Holders of the requisite principal amount of Securities have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded; and provided further that Securities that the Company or an Affiliate offers to purchase or acquires pursuant to an offer, exchange offer, tender offer or otherwise shall not be deemed to be owned by the Company or an Affiliate until

legal title to such Securities passes to the Company or such Affiliate, as the case may be. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination (including, without limitation, determinations pursuant to Articles 6 and 9).

If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a protected purchaser.

If the Paying Agent holds, in accordance with this Indenture, on a Redemption Date, or on the Business Day following a Repurchase Date or a Change in Control Repurchase Date, or on Stated Maturity, money sufficient to pay amounts owed with respect to Securities payable on that date, then immediately after such Redemption Date, Repurchase Date, Change in Control Repurchase Date or Stated Maturity, as the case may be, such Securities shall cease to be outstanding and interest (including Liquidated Damages, if any) on such Securities shall cease to accrue whether or not the Securities are delivered to the Paying Agent; provided that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made. Thereafter, all other rights of the Holder of such Securities shall terminate, other than the rights to receive the Redemption Price, the Repurchase Price, the Change in Control Repurchase Price or the principal amount of such Securities due and payable on Stated Maturity, as the case may be, upon delivery of the Securities.

If a Security is converted in accordance with Article 10, then from and after the time of conversion on the Conversion Date, such Security shall cease to be outstanding and interest shall cease to accrue on such Security.

Section 2.09. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, and with such appropriate insertions, omissions, substitutions and other variations as the Officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities.

If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 2.03, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall

authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities.

Section 2.10. Cancellation. All Securities surrendered for payment, redemption, repurchase, conversion, exchange or registration of transfer shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it, or, if surrendered to the Trustee, shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article 10. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of by the Trustee in accordance with the Trustee’s customary procedures.

Section 2.11. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of the principal amount of the Security or the payment of any Redemption Price, Repurchase Price or Change in Control Repurchase Price in respect thereof, and accrued but unpaid interest (including Liquidated Damages, if any) thereon, for the purpose of conversion and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

Section 2.12. Global Securities.

(a) Notwithstanding any other provisions of this Indenture or the Securities, a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any Person other than the Depositary, any successor Depositary or one or more nominees thereof; provided that a Global Security may be exchanged for Securities registered in the name of any Person designated by the Depositary if (1) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a “clearing agency” registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days, or (2) an Event of Default has occurred and is continuing with respect to the Securities, and the Depositary notifies the Trustee that it elects to cause the issuance of Securities in definitive form. Any Global Security

exchanged pursuant to clause (1) above shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to clause (2) above may be exchanged in whole or from time to time in part as directed by the Depositary. Any Security issued in exchange for a Global Security or any portion thereof shall be a Global Security; provided that any such Security so issued that is registered in the name of a Person other than the Depositary or a nominee thereof shall not be a Global Security.

(b) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate principal amount equal to that of such Global Security or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Trustee, as Registrar. With regard to any Global Security to be exchanged in part, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the principal amount thereof shall be reduced by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the Security issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof.

(c) Subject to the provisions of Section 2.12(e), the registered Holder may grant proxies and otherwise authorize any Person, including Agent Members (as defined below) and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities.

(d) If any of the events specified in Section 2.12(a) occurs, the Company will promptly make available to the Trustee a reasonable supply of Securities in definitive form.

(e) Neither any members of, or participants in, the Depositary (collectively, the “Agent Members”) nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or

impair, as between the Depositary, its Agent Members and any other Person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Security.

(f) With respect to any Global Security, the Company, the Registrar and the Trustee shall be entitled to treat the Person in whose name such Global Security is registered as the absolute owner of such Security for all purposes of this Indenture, and neither the Company, the Registrar nor the Trustee shall have any responsibility or obligation to any Agent Members or other beneficial owners of the Securities represented by such Global Security. Without limiting the immediately preceding sentence, neither the Company, the Registrar nor the Trustee shall have any responsibility or obligation with respect to (1) the accuracy of the records of the Depositary or any other Person with respect to any ownership interest in any Global Security, (2) the delivery to any Person, other than a Holder, of any notice with respect to the Securities represented by a Global Security, including any notice of redemption or repurchase, (3) the selection of the particular Securities or portions thereof to be redeemed or repurchased in the event of a partial redemption or repurchase of part of the Securities outstanding or (4) the payment to any Person, other than a Holder, of any amount with respect to the principal of or Redemption Price, Repurchase Price, Change in Control Repurchase Price or accrued but unpaid interest (including Liquidated Damages, if any) with respect to any Global Security.

Section 2.13. CUSIP Numbers. The Company may issue the Securities with one or more CUSIP numbers (if then generally in use), and, if the Company so elects, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers.

Section 2.14. Designation. The indebtedness evidenced by the Securities is hereby irrevocably designated as “senior indebtedness” or such other term denoting seniority for the purposes of any other existing or future indebtedness of the Company which the Company makes subordinate in right of payment to any senior (or such other term denoting seniority) indebtedness of the Company.

ARTICLE 3
REDEMPTION AND REPURCHASES

Section 3.01. Right to Redeem; Notices to Trustee.

(a) Optional Redemption. On or after April 21, 2009, the Company, at its option, may redeem the Securities, in whole at any time, or in part from time to time, for cash at a price equal to 100% of the principal amount of the Securities to be redeemed (the “Redemption Price”), together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, up to but not including the Redemption Date; provided that if the Redemption Date is between the close of business on an interest record date and the opening of business on the related interest payment date, accrued but unpaid interest (including Liquidated Damages, if any) will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant interest record date.

(b) Notice to Trustee. If the Company elects to redeem Securities pursuant to this Section 3.01, it shall notify the Trustee in writing of the Redemption Date, the principal amount of Securities to be redeemed and the Redemption Price. The Company shall give the notice to the Trustee provided for in this Section 3.01(b) by a Company Order at least ten days before the date notice of redemption is to be given to Holders pursuant to Section 3.03 (unless a shorter notice shall be satisfactory to the Trustee).

Section 3.02. Selection of Securities to Be Redeemed. If less than all the Securities are to be redeemed, subject to the Applicable Procedures in the case of Global Securities to be so redeemed, the Trustee shall select the Securities to be redeemed by any method that the Trustee deems fair and appropriate. In the event of a partial redemption, the Trustee may select for redemption portions of the principal amount of Securities in principal amounts of $1,000 and integral multiples thereof.

Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed.

If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as possible) to be the portion selected for redemption. Securities that have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection.

Section 3.03. Notice of Redemption. At least 30 days but not more than 60 days before any Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed at such Holder’s registered address.

The notice of redemption shall identify the Securities to be redeemed and shall state:

(a) the Redemption Date;

(b) the Redemption Price and, to the extent known at the time of such notice the amount of accrued but unpaid interest (including Liquidated Damages, if any) payable on the Redemption Date;

(d) the name and address of the Paying Agent and Conversion Agent;

(e) that Securities called for redemption may be converted at any time before the close of business on the second Business Day immediately preceding the Redemption Date;

(f) that Holders who want to convert Securities must satisfy the requirements set forth in the Securities and Article 10 of this Indenture;

(g) that Securities called for redemption must be surrendered to the Paying Agent in order to collect the Redemption Price therefor, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon;

(h) if fewer than all the outstanding Securities are to be redeemed, the certificate numbers, if any, and principal amounts of the particular Securities to be redeemed;

(i) that, unless the Company defaults in paying the Redemption Price, interest (including Liquidated Damages, if any) on Securities called for redemption will cease to accrue on and after the Redemption Date and the Securities called for redemption will cease to be outstanding; and

(j) the CUSIP number of the Securities called for redemption.

At the Company’s request, the Trustee shall give the notice of redemption in the Company’s name and at the Company’s expense, so long as the Company makes such request at least five Business Days prior to the date by which such notice of redemption is to be given to Holders in accordance with this Section 3.03 and the Company provides the Trustee with all information required for such notice of redemption.

If any of the Securities is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the Applicable Procedures that apply to the redemption of Global Securities.

Section 3.04. Effect of Notice of Redemption. Once notice of redemption is given, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice of redemption, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, except for Securities which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price stated in the notice of redemption, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, up to but not including the Redemption Date.

Section 3.05. Deposit of Redemption Price. Prior to 11:00 a.m. (New York City time) on the Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary thereof or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the aggregate Redemption Price of all Securities to be redeemed on the Redemption Date, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, up to but not including the Redemption Date, other than Securities or portions of Securities called for redemption that on or prior thereto have been delivered by the Company to the Trustee for cancellation or have been converted pursuant to Article 10. The Paying Agent shall as promptly as practicable return to the Company any money not required for making payments on the Redemption Date because of conversion of Securities pursuant to Article 10. If such money is then held by the Company in trust and is not required for making payments on the Redemption Date, it shall be discharged from such trust.

Section 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the unredeemed portion of the principal amount of the Security surrendered.

Section 3.07. Sinking Fund. There shall be no sinking fund provided for the Securities.

Section 3.08. Repurchase of Securities at Option of the Holder on Specified Dates.

(a) At the option of the Holder, the Company shall repurchase all or a portion of the Securities tendered pursuant to this Section 3.08 on April 15, 2009, April 15, 2014 and April 15, 2019 (each, a “Repurchase Date”) for cash at a price per Security equal to 100% of the aggregate principal amount of the Security (the “Repurchase Price”), together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, up to but not including the Repurchase Date.

Securities shall be repurchased pursuant to this Section 3.08 at the option of the Holder thereof upon:

(i) delivery to the Company and the Paying Agent by the Holder of a written notice (a “Repurchase Notice”) at any time from the opening of business on the date that is 30 Business Days prior to the Repurchase Date until the close of business on the Business Day prior to such Repurchase Date stating:

(A) if the Security which the Holder will deliver to be repurchased is a Security in definitive form, the certificate number of such Security, or if such Security is a Global Security, the notice must comply with the Applicable Procedures;

(B) the portion of the principal amount of the Security which the Holder will deliver to be repurchased, which portion must be in a principal amount of $1,000 or any integral multiple thereof; and

(C) that such Security shall be repurchased as of the Repurchase Date pursuant to the terms and conditions specified in this Indenture; and

(ii) delivery or book-entry transfer of such Security to the Paying Agent prior to, on or after the Repurchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Repurchase Price therefor, together with accrued but unpaid interest (including Liquidated Damages, if any); provided that the Repurchase Price, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, shall be so paid pursuant to this Section 3.08 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Repurchase Notice.

The Company shall repurchase from the Holder thereof, pursuant to this Section 3.08, a portion of a Security if the principal amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the repurchase of all of a Security also apply to the repurchase of a portion of a Security.

Any repurchase by the Company contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery to the Paying Agent of the Repurchase Price, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, to be received by the Holder promptly

following the later of the Repurchase Date and the time of delivery or book-entry transfer of the Security to the Paying Agent in accordance with this Section 3.08.

Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Repurchase Notice contemplated by this Section 3.08(a) shall have the right to withdraw such Repurchase Notice at any time prior to the close of business on the Repurchase Date by delivery of a written notice of withdrawal to the Paying Agent at the principal office of the Paying Agent in accordance with Section 3.10.

The Paying Agent shall promptly notify the Company of the receipt by it of any Repurchase Notice or written notice of withdrawal thereof.

(b) Company Repurchase Notice. In connection with any repurchase of Securities pursuant to this Section 3.08, the Company shall give written notice of each Repurchase Date to the Trustee and the Holders (the “Company Repurchase Notice”). The Company Repurchase Notice shall be sent by first-class mail to the Trustee and to each Holder not less than 30 Business Days prior to each Repurchase Date, and to Beneficial Owners as required by applicable law. Each Company Repurchase Notice shall include a form of Repurchase Notice to be completed by a Holder and shall state:

(i) the Repurchase Price, the Conversion Price and, to the extent known at the time of such notice, the amount of accrued but unpaid interest (including Liquidated Damages, if any) that will be payable with respect to the Securities on the Repurchase Date;

(ii) the name and address of the Paying Agent and the Conversion Agent;

(iii) that Securities as to which a Repurchase Notice has been given may be converted only if the applicable Repurchase Notice has been withdrawn in accordance with the terms of this Indenture;

(iv) that Securities must be surrendered to the Paying Agent to collect payment of the Repurchase Price and accrued but unpaid interest (including Liquidated Damages, if any);

(v) that the Repurchase Price for any Securities as to which a Repurchase Notice has been given and not withdrawn, together with accrued but unpaid interest (including Liquidated Damages, if any) payable with respect thereto, shall be paid promptly following the later of the Repurchase Date and the time of surrender of such Securities as described in clause (iv);

(vi) the procedures the Holder must follow under this Section 3.08;

(vii) briefly, the conversion rights of the Securities;

(viii) that, unless the Company defaults in making payment of such Repurchase Price, interest (including Liquidated Damages, if any) on Securities covered by any Repurchase Notice will cease to accrue on and after the Repurchase Date;

(ix) the CUSIP number of the Securities; and

(x) the procedures for withdrawing a Repurchase Notice (as specified in Section 3.10).

At the Company’s request, which shall be made at least five Business Days prior to the date by which a Company Repurchase Notice is to be given to the Holders in accordance with this Section 3.08, and at the Company’s expense, the Trustee shall give such Company Repurchase Notice in the Company’s name; provided that, in all cases, the text of such Company Repurchase Notice shall be prepared by the Company.

Section 3.09. Repurchase of Securities at Option of the Holder Upon Change in Control.

(a) If at any time that Securities remain outstanding there shall have occurred a Change in Control, Securities shall be repurchased by the Company, at the option of the Holder thereof, at a price in cash (the “Change in Control Repurchase Price”) equal to 100% of the aggregate principal amount of such Securities plus accrued but unpaid interest (including Liquidated Damages, if any) thereon, up to but not including the date (the “Change in Control Repurchase Date”) fixed by the Company that is not less than 30 days nor more than 45 days after the date the Company Change in Control Repurchase Notice (as defined below) is given, subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.09(c); provided that if the Change in Control Repurchase Date is between the close of business on an interest record date and the opening of business on the related interest payment date, accrued but unpaid interest (including Liquidated Damages, if any) will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant interest record date.

(b) Company Change in Control Repurchase Notice. In connection with any repurchase of Securities pursuant to this Section 3.09, the Company shall give written notice of the occurrence of a Change in Control, the repurchase right arising as a result thereof and the Change in Control Repurchase Date to the Trustee and the Holders (the “Company Change in Control Repurchase Notice”). The Company Change in Control Repurchase Notice shall be sent by first-class mail to the Trustee and to each Holder on or before the 30^th day after the occurrence of a Change in Control. Each Company Change in Control Repurchase Notice shall include a form of Change in Control Repurchase Notice to be completed by a Holder and shall state:

(i) the Change in Control Repurchase Price, the Conversion Price and, to the extent known at the time of such notice, the amount of accrued but unpaid interest (including Liquidated Damages, if any) that will be payable with respect to the Securities on the Change in Control Repurchase Date;

(ii) the name and address of the Paying Agent and the Conversion Agent;

(iii) that Securities as to which a Change in Control Repurchase Notice has been given may be converted only if such Change in Control Repurchase Notice has been withdrawn in accordance with the terms of this Indenture;

(iv) that Securities must be surrendered to the Paying Agent to collect payment of the Change in Control Repurchase Price and accrued but unpaid interest (including Liquidated Damages, if any);

(v) that the Change in Control Repurchase Price for any Securities as to which a Change in Control Repurchase Notice has been given and not withdrawn, together with any accrued but unpaid interest (including Liquidated Damages, if any) payable with respect thereto, shall be paid promptly following the later of the Change in Control Repurchase Date and the time of surrender of such Securities as described in clause (iv);

(vi) the procedures the Holder must follow under this Section 3.09;

(vii) briefly, the conversion rights of the Securities;

(viii) that, unless the Company defaults in making payment of such Change in Control Repurchase Price, interest (including Liquidated Damages, if any) on Securities covered by any Change in Control

Repurchase Notice will cease to accrue on and after the Change in Control Repurchase Date;

(ix) the CUSIP number of the Securities; and

(x) the procedures for withdrawing a Change in Control Repurchase Notice (as specified in Section 3.10).

At the Company’s request, which shall be made at least five Business Days prior to the date by which a Company Change in Control Repurchase Notice is to be given to the Holders in accordance with this Section 3.09 and at the Company’s expense, the Trustee shall give such Company Change in Control Repurchase Notice in the Company’s name; provided that, in all cases, the text of such Company Change in Control Repurchase Notice shall be prepared by the Company. If any of the Securities is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the Applicable Procedures that apply to the repurchase of Global Securities.

(c) For a Security to be so repurchased at the option of the Holder upon a Change in Control, the Paying Agent must receive such Security with the form entitled “Option to Elect Repurchase Upon a Change in Control” (a “Change in Control Repurchase Notice”) on the reverse thereof duly completed, together with such Security duly endorsed for transfer, on or before the close of business on the Business Day prior to the Change in Control Repurchase Date. All questions as to the validity, eligibility (including time of receipt) and acceptance of any Security for repurchase shall be determined by the Company, whose determination shall be final and binding.

The Company shall repurchase from the Holder thereof, pursuant to this Section 3.09, a portion of a Security if the principal amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the repurchase of all of a Security also apply to the repurchase of a portion of a Security.

Any repurchase by the Company contemplated pursuant to the provisions of this Section 3.09 shall be consummated by the delivery to the Paying Agent of the Change in Control Repurchase Price, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, to be received by the Holder promptly following the later of the Change in Control Repurchase Date and the time of delivery or book-entry transfer of the Security to the Paying Agent in accordance with this Section 3.09.

Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Change in Control Repurchase Notice contemplated by this Section 3.09(c) shall have the right to withdraw such Change in Control

Repurchase Notice at any time prior to the close of business on the Change in Control Repurchase Date by delivery of a written notice of withdrawal to the Paying Agent at the principal office of the Paying Agent in accordance with Section 3.10.

The Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Repurchase Notice or written withdrawal thereof.

Notwithstanding anything herein to the contrary, the Company’s obligations pursuant to this Section 3.09 shall be satisfied if a third party makes an offer to repurchase outstanding Securities after a Change in Control in the manner and at the times and otherwise in compliance in all material respects with the requirements of this Section 3.09 and such third party purchases all Securities properly tendered and not withdrawn pursuant to the requirements of this Section 3.09.

(d) The Company shall use its commercially reasonable efforts to, within 30 days following any Change in Control, either (i) obtain the consents under all indebtedness required to permit the repurchase of the Securities pursuant to any Company Change in Control Repurchase Notice or (ii) repay in full all indebtedness and terminate all commitments under all indebtedness, the terms of which would prohibit the repurchase of the Securities pursuant to any Company Change in Control Repurchase Notice.

Section 3.10. Effect of Repurchase Notice or Change in Control Repurchase Notice. Upon receipt by the Paying Agent of a Repurchase Notice or Change in Control Repurchase Notice, the Holder of the Security in respect of which such Repurchase Notice or Change in Control Repurchase Notice, as the case may be, was given shall (unless such Repurchase Notice or Change in Control Repurchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Repurchase Price or Change in Control Repurchase Price, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, to but not including the Repurchase Date or Change in Control Repurchase Date, as the case may be, with respect to such Security. Such Repurchase Price or Change in Control Repurchase Price, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, to but not including the Repurchase Date or Change in Control Repurchase Date, as the case may be, shall be paid to such Holder, subject to receipt of funds by the Paying Agent, promptly following the later of (x) the Repurchase Date or the Change in Control Repurchase Date, as the case may be, with respect to such Security (provided that the conditions in Section 3.08 or Section 3.09, as applicable, have been satisfied) and (y) the time of delivery or book-entry transfer of such Security to the Paying Agent by the Holder thereof in the manner required by Section 3.08 or Section 3.09(c), as applicable. Securities in respect of which a Repurchase Notice or Change in

Control Repurchase Notice, as the case may be, has been given by the Holder thereof may not be converted pursuant to Article 10 hereof on or after the date of the delivery of such Repurchase Notice or Change in Control Repurchase Notice, as the case may be, unless such Repurchase Notice or Change in Control Repurchase Notice, as the case may be, has first been validly withdrawn as specified in the following two paragraphs.

A Repurchase Notice or Change in Control Repurchase Notice, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Repurchase Notice or Change in Control Repurchase Notice, as the case may be, at any time prior to the close of business on the Repurchase Date or the Change in Control Repurchase Date, as the case may be, specifying:

(i) if the Security with respect to which such notice of withdrawal is being submitted is a Security in definitive form, the certificate number of such Security, or if such Security is a Global Security, the notice must comply with the Applicable Procedures;

(ii) the principal amount of the Security with respect to which such notice of withdrawal is being submitted; and

(iii) the principal amount, if any, of such Security which remains subject to the original Repurchase Notice or Change in Control Repurchase Notice, as the case may be, and which has been or will be delivered for repurchase by the Company.

There shall be no repurchase of any Securities pursuant to Section 3.08 or Section 3.09 or redemption pursuant to Section 3.01 if an Event of Default (other than a default in the payment of the Redemption Price, Repurchase Price or Change in Control Repurchase Price, as the case may be) has occurred prior to, on or after, as the case may be, the giving by the Holders of such Securities of the required Repurchase Notice or Change in Control Repurchase Notice, or the giving by the Company of the notice of redemption, as the case may be, and such Event of Default is continuing. The Paying Agent will promptly return to the respective Holders thereof any Securities (x) with respect to which a Repurchase Notice or Change in Control Repurchase Notice, as the case may be, has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of an Event of Default (other than a default in the payment of the Repurchase Price or Change in Control Repurchase Price, as the case may be) in which case, upon such return, the Repurchase Notice or Change in Control Repurchase Notice with respect thereto shall be deemed to have been withdrawn.

Section 3.11. Deposit of Repurchase Price or Change in Control Repurchase Price. Prior to 11:00 a.m. (New York City time) on the Repurchase

Date or the Change in Control Repurchase Date, as the case may be, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary thereof or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.04) an amount of money (in immediately available funds if deposited on such Business Day) sufficient to pay the aggregate Repurchase Price or Change in Control Repurchase Price, as the case may be, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, to but not including the Repurchase Date or Change in Control Repurchase Date, as the case may be, of all the Securities or portions thereof which are to be repurchased as of the Repurchase Date or Change in Control Repurchase Date, as the case may be.

Section 3.12. Securities Repurchased in Part. Any Security in definitive form that is to be repurchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, one or more new Securities in definitive form, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Security in definitive form so surrendered which is not repurchased.

Section 3.13. Covenant to Comply with Securities Laws upon Repurchase of Securities. When complying with the provisions of Sections 3.08 or 3.09 hereof (so long as such offer or repurchase constitutes an “issuer tender offer” for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or repurchase), the Company shall (i) comply in all material respects with Rule 13e-4 and Rule 14e-1 under the Exchange Act, (ii) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act and (iii) otherwise comply in all material respects with all federal and state securities laws so as to permit the rights and obligations under Sections 3.08 or 3.09 to be exercised in the time and in the manner specified in Sections 3.08 or 3.09.

Section 3.14. Repayment to the Company. To the extent that the aggregate amount of cash deposited by the Company pursuant to Section 3.11 exceeds the aggregate Repurchase Price or Change in Control Repurchase Price, as the case may be, of the Securities or portions thereof which the Company is obligated to repurchase as of the Repurchase Date or Change in Control Repurchase Date, as the case may be, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, then, unless otherwise agreed in writing with the Company, promptly after the Business Day following the Repurchase Date or Change in Control Repurchase Date, as the case may be, the

Trustee shall return any such excess to the Company together with interest, if any, thereon (subject to the provisions of Section 7.01(f)).

Section 3.15. Mandatory Disposition Pursuant to Gaming Laws.

(a) Each Holder, by accepting a Security, will be deemed to have agreed that if the gaming authority of any jurisdiction in which the Company or any of its subsidiaries conducts or proposes to conduct gaming operations requires that a Person who is a Holder or the Beneficial Owner of Securities (or an affiliate of such Holder or Beneficial Owner) be licensed, qualified or found suitable under applicable gaming laws, such Holder or the Beneficial Owner, as the case may be, will apply for a license, qualification or a finding of suitability within the required time period. If such Person fails to apply or become licensed or qualified or is found unsuitable (a “Disqualified Holder”), the Company will have the right, at any time, at its option:

(i) to require such Person to dispose of its Securities or beneficial interest therein within 30 days of receipt of notice of the Company’s election or such earlier date as may be requested or prescribed by such gaming authority, or

(ii) to redeem such Securities at a redemption price equal to the lesser of (1) such Person’s cost, (2) 100% of the principal amount thereof, plus accrued and unpaid interest (including Liquidated Damages, if any), to the earlier of the redemption date or the date of the finding of unsuitability, which redemption date may be less than 30 days following the notice of redemption if so requested or prescribed by the applicable gaming authority or (3) such lesser amount as may be required by an applicable gaming authority.

(b) Immediately upon a determination by a gaming authority that a Holder or Beneficial Owner of Securities (or an affiliate thereof) will not be licensed, qualified or found suitable or is denied a license, qualification or finding of suitability, the Holder or Beneficial Owner will not have any further right with respect to the Securities to:

(i) exercise, directly or indirectly, through any Person, any right conferred by the Securities; or

(ii) receive any interest (including Liquidated Damages, if any), or any other distribution or payment with respect to the Securities, or any remuneration in any form from the Company for services rendered or otherwise, except for the redemption of the Securities.

(c) The Company will notify the Trustee in writing of any such Disqualified Holder status or redemption of Securities as soon as practicable. The Company will not be responsible for any costs or expenses any such Holder or Beneficial Owner may incur in connection with its application for a license, qualification or a finding of suitability.

ARTICLE 4
COVENANTS

Section 4.01. Payment of Securities. The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities or pursuant to this Indenture. Any amounts to be given to the Trustee or Paying Agent, as the case may be, shall be deposited with the Trustee or Paying Agent, as the case may be, by 11:00 a.m. (New York City time), on the dates required pursuant to Section 2.04 hereof. Interest installments, Liquidated Damages, principal amount, Redemption Price, Repurchase Price, Change in Control Repurchase Price and interest, if any, due on overdue amounts shall be considered paid on the applicable date due if at 11:00 a.m. (New York City time) on such date, the Trustee or the Paying Agent, as the case may be, holds, in accordance with this Indenture, money sufficient to pay all such amounts then due.

The Company shall, to the extent permitted by law, pay interest on overdue amounts at the rate per annum set forth in paragraph 1 of the Securities, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in addition to the continued accrual of interest on the Securities.

Section 4.02. SEC and Other Reports. The Company shall file with the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall continue to provide the Trustee with reports containing substantially the same information as would have been required to be filed with the SEC had the Company continued to have been subject to such reporting requirements. In such event, such reports shall be provided to the Trustee at the times the Company would have been required to provide reports had it continued

to have been subject to such reporting requirements. In addition, the Company shall comply with the other provisions of TIA Section 314(a).

Section 4.03. Compliance Certificate; Notice of Default.

(a) The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on October 31, 2004) an Officers’ Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in Default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder), and if the Company shall be in Default, describing all such Defaults and the nature and status thereof of which the signers thereof may have knowledge.

(b) The Company shall, so long as any of the Securities are outstanding, deliver to the Trustee promptly, and in any event within 30 days after becoming aware of any Default or Event of Default under this Indenture, an Officers’ Certificate describing such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. The Trustee shall not be deemed to have knowledge of a Default or Event of Default unless one of its Responsible Officers receives written notice of the Default or Event of Default from the Company or any of the Holders.

Section 4.04. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

Section 4.05. Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange, repurchase, redemption or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Trustee’s Corporate Trust Office shall initially be such office or agency for all of the aforesaid purposes. The Company shall give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency (other than a change in the location of the office or agency of the Trustee). If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any

or all such purposes, and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain at least one Paying Agent having an office or agency in the Borough of Manhattan, The City of New York, for such purposes.

Section 4.06. Delivery of Certain Information. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder or any Beneficial Owner of Securities or holder or Beneficial Owner of Common Stock delivered upon conversion thereof, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder or any Beneficial Owner of Securities or holder or Beneficial Owner of Common Stock delivered upon conversion thereof or to a prospective purchaser of any such security designated by any such holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act in connection with the resale of any such security. “Rule 144A Information” shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act or any successor provisions. Whether a Person is a Beneficial Owner shall be determined by the Company to the Company’s reasonable satisfaction.

Section 4.07. Liquidated Damages. If at any time Liquidated Damages become payable by the Company pursuant to the Registration Rights Agreement, the Company shall promptly deliver to the Trustee a certificate to that effect and stating (i) the amount of such Liquidated Damages that are payable and (ii) the date on which such Liquidated Damages are payable pursuant to the terms of the Registration Rights Agreement. Unless and until a Responsible Officer of the Trustee receives such a certificate, the Trustee may assume without inquiry that no Liquidated Damages are payable. If the Company has paid Liquidated Damages directly to the Persons entitled to them, the Company shall deliver to the Trustee a certificate setting forth the particulars of such payment.

ARTICLE 5
SUCCESSOR CORPORATION

Section 5.01. When the Company May Consolidate, Merge or Transfer Assets. The Company shall not consolidate with or merge with or into any other Person or sell, lease, exchange or otherwise transfer (in one transaction or a series of related transactions) all or substantially all of its properties and assets to any other Person, unless:

(a) (i) the Company shall be the resulting or surviving corporation or (ii) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, lease,

exchange or other transfer all or substantially all of the properties and assets of the Company (A) shall be a corporation, limited partnership, limited liability company or other business entity organized and validly existing under the laws of the United States or any State thereof or the District of Columbia, and (B) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company under the Securities and this Indenture; and

(b) immediately after giving effect to such transaction, no Event of Default and no Default shall have occurred and be continuing.

For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of the properties and assets of one or more Subsidiaries (other than to the Company or another Subsidiary of the Company), which, if such assets were owned by the Company would constitute all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. The successor Person formed by such consolidation or into which the Company is merged or the successor Person to which such sale, lease, exchange or other transfer is made shall succeed to, and (except in the case of a lease) be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein; and thereafter, except in the case of a lease and except for obligations the Company may have under a supplemental indenture pursuant to Section 9.06, the Company shall be discharged from all obligations and covenants under this Indenture and the Securities. Subject to Section 9.06, the Company, the Trustee and the successor Person shall enter into a supplemental indenture to evidence the succession and substitution of such successor Person and such discharge and release of the Company, as applicable.

ARTICLE 6
DEFAULTS AND REMEDIES

Section 6.01. Events of Default. Subject to the provisions set forth below in this Section 6.01, each of the following events is an “Event of Default”:

(a) the failure to pay interest (including Liquidated Damages, if any) on any Security when the same becomes due and payable and the continuation of such default for a period of 30 days, whether or not such failure shall be due to compliance with agreements with respect to any other indebtedness or any other cause;

(b) the failure to pay the principal of any Security, when such principal becomes due and payable, at the stated maturity, upon acceleration, upon

redemption or otherwise (including the failure to make cash payments due upon conversion, failure to make a Change in Control offer or make a payment to repurchase Securities tendered pursuant to a Change in Control offer or failure to repurchase Securities pursuant to Section 3.08 hereof), whether or not such failure shall be due to compliance with agreements with respect to any other indebtedness or any other cause;

(c) the failure to provide a Company Change in Control Repurchase Notice in accordance with the terms of Section 3.09(b) hereof;

(d) a default in the observance or performance of any other covenant or agreement contained in this Indenture that continues for a period of 60 days after the Company has received written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Securities;

(e) a default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness of the Company or any of its Subsidiaries, or the payment of which is guaranteed by the Company or any of its Subsidiaries, whether such indebtedness now exists or is created after the date hereof, which default results in the acceleration of such indebtedness prior to its express maturity and the principal amount of such indebtedness, together with the principal amount of any other such indebtedness the maturity of which has been so accelerated, aggregates at least $10,000,000;

(f) one or more judgments in an uninsured aggregate amount in excess of $10,000,000 shall have been rendered against the Company or any of its Subsidiaries and remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and nonappealable;

(g) the Company or any of its Significant Subsidiaries pursuant to or under or within the meaning of any Bankruptcy Law:

(i) commences a voluntary case or proceeding;

(ii) consents to the entry of an order for relief against it in an involuntary case or proceeding;

(iii) consents to the appointment of a custodian of it or for all or substantially all of its property;

(iv) makes a general assignment for the benefit of its creditors; or

(v) shall generally not pay its debts when such debts become due or shall admit in writing its inability to pay its debts generally; or

(h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against the Company or any Significant Subsidiary of the Company in an involuntary case or proceeding;

(ii) appoints a custodian of the Company or any Significant Subsidiary of the Company for all or substantially all of its properties; or

(iii) orders the liquidation of the Company or any Significant Subsidiary of Company;

and in each case the order or decree remains unstayed and in effect for 60 consecutive days.

Section 6.02. Acceleration.

(a) If an Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01) shall occur and be continuing, the Trustee may, and at the written request of the Holders of at least 25% in principal amount of outstanding Securities shall, declare the principal of and accrued but unpaid interest on all the Securities to be due and payable by notice in writing to the Company (the “Acceleration Notice”). Such notice shall specify the respective Event of Default and that it is a “notice of acceleration.” Upon the giving of an Acceleration Notice, the principal of and accrued but unpaid interest (including Liquidated Damages, if any) on all the Securities shall become immediately due and payable. If an Event of Default specified in clause (g) or (h) of Section 6.01 occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued but unpaid interest (including Liquidated Damages, if any) on all of the outstanding Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

(b) At any time after a declaration of acceleration with respect to the Securities as described in the preceding paragraph, the Holders of a majority in aggregate principal amount of the Securities at the time outstanding may rescind and cancel such declaration and its consequences (i) if the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of such acceleration, (iii) if interest on overdue installments of interest (to the extent the payment of such interest is lawful) and on overdue principal, which has become due otherwise than by such declaration of

acceleration, has been paid, (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of an Event of Default of the type described in clause (d) of Section 6.01, the Trustee shall have received an Officers’ Certificate and an Opinion of Counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Event of Default or impair any right consequent thereto.

Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of the principal amount of all the Securities plus accrued but unpaid interest (including Liquidated Damages, if any) thereon, or to enforce the performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law.

Section 6.04. Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of the Securities at the time outstanding, by notice in writing to the Trustee (and without notice to any other Holder), may waive an existing Event of Default and its consequences, except (i) an Event of Default described in Section 6.01(a) or Section 6.01(b), (ii) an Event of Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Holder affected or (iii) an Event of Default which constitutes a failure to convert any Security in accordance with the terms of Article 10. When an Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Event of Default or impair any consequent right. This Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 6.05. Control by Majority. The Holders of a majority in aggregate principal amount of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law (including gaming laws) or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Holders or would involve the Trustee in personal liability unless the Trustee is offered indemnity satisfactory to it. This Section 6.05 shall be in lieu of Section 316(a)(1)(A) of the

TIA and such Section 316(a)(1)(A) is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 6.06. Limitation on Suits. A Holder may not pursue any remedy with respect to this Indenture or the Securities unless:

(a) the Holder gives to the Trustee written notice stating that an Event of Default is continuing;

(b) the Holders of at least 25% in aggregate principal amount of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy;

(c) such Holder or Holders offer to the Trustee security or indemnity satisfactory to the Trustee against any loss, liability or expense;

(d) the Trustee does not comply with the request within 60 days after receipt of such notice, request and offer of security or indemnity; and

(e) the Holders of a majority in aggregate principal amount of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period.

A Holder may not use this Indenture to prejudice the rights of any other Holder or to obtain a preference or priority over any other Holder.

Section 6.07. Rights of Holders to Receive Payment and to Convert. Notwithstanding any other provision of this Indenture, except for restrictions imposed by applicable gaming regulatory authorities or pursuant to applicable gaming laws, the right of any Holder to receive payment of interest installments (including Liquidated Damages, if any), the principal amount, Redemption Price, Repurchase Price, Change in Control Repurchase Price or interest, if any, due on overdue amounts in respect of the Securities held by such Holder, on or after the respective due dates expressed in the Securities, and to convert the Securities in accordance with Article 10, or to bring suit for the enforcement of any such payment on or after such respective dates or the enforcement of the right to convert, shall not be impaired or affected adversely without the consent of such Holder.

Section 6.08. Collection Suit by Trustee. If an Event of Default described in Section 6.01(a) or 6.01(b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor upon the Securities for the whole amount owing with respect to the Securities and the amounts provided for in Section 7.07.

Section 6.09. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether any amounts in respect of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any such amounts) shall be entitled and empowered, by intervention in such proceeding or otherwise,

(a) to file and prove a claim for any accrued but unpaid amounts due in respect of the Securities, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel or any other amounts due the Trustee under Section 7.07) and of the Holders allowed in such judicial proceeding, and

(b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:

FIRST: to the Trustee for amounts due under Section 7.07;

SECOND: to Holders for amounts due and unpaid on the Securities and for any accrued but unpaid interest amounts due in respect of the Securities, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and

THIRD: the balance, if any, to the Company.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to each Holder and the Company a notice that states the record date, the payment date and the amount to be paid.

Section 6.11. Suits. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate principal amount of the Securities at the time outstanding. This Section 6.11 shall be in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 6.12. Waiver of Stay, Extension or Usury Laws. The Company covenants (to the fullest extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company from paying all or any portion of any amounts due in respect of the Securities, as contemplated herein, or which may affect the covenants or the performance of this Indenture; and the Company (to the fullest extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 6.13. Disqualified Holders. To the extent required by applicable gaming laws, Securities held by a Disqualified Holder shall, so long as held by such Person, be disregarded for purposes of providing notices, directions, waivers or other actions and determining the sufficiency of such notices, directions waivers or actions under this Article 6.

ARTICLE 7
TRUSTEE

Section 7.01. Duties of Trustee.

(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b) Except during the continuance of an Event of Default:

(i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and

(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein.

This Section 7.01(b) shall be in lieu of Section 315(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA.

(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(i) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.01;

(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is conclusively determined by a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts; and

(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.02, 6.04 or 6.05.

Sections 7.01(c)(i), (ii) and (iii) shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the TIA.

(d) Every provision of this Indenture that in any way relates to the Trustee is subject to Sections 7.01(a), (b), (c), (e) and (f).

(e) The Trustee may refuse to perform any duty or exercise any right or power or expend or risk its own funds or otherwise incur any financial liability unless it receives indemnity satisfactory to it against any loss, liability or expense.

(f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee (acting in any capacity hereunder) shall be under no liability for interest on any money received by it hereunder unless otherwise agreed in writing with the Company.

(g) The Trustee shall cooperate with, produce any document or information (to the extent previously provided to the Trustee in connection with this Indenture) requested in writing by, and comply with any order or directive of any gaming authority of any jurisdiction in which the Company or any Subsidiary conducts or proposes to conduct gaming in connection with this Indenture, including that the Trustee submit an application for any license, finding of suitability or other approval pursuant to any applicable gaming laws (unless the Trustee shall have submitted its resignation) and will cooperate fully and completely in any proceeding related to such application; provided the Company agrees to prepare all documentation in connection with any such order, directive, application and proceeding and to reimburse the Trustee for all costs and expenses incurred by it in connection therewith.

Section 7.02. Rights of Trustee. Subject to its duties and responsibilities under the TIA,

(a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may obtain and, in the absence of bad faith or negligence on its part, conclusively rely upon an Officers’ Certificate and/or an Opinion of Counsel;

(c) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, attorney, custodian or nominee appointed with due care by it hereunder;

(d) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith which it reasonably believes to be authorized or within its rights or powers conferred under this Indenture;

(e) the Trustee may consult with counsel selected by it and any advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion of such counsel;

(f) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby;

(g) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Order and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution;

(h) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, during normal business hours, to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation;

(i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office, and such notice references the Securities and this Indenture;

(j) the rights, privileges, protections, immunities and benefits given to the Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder (including Paying Agent, Registrar and Conversion Agent), and to all other Persons employed to act hereunder, including the Trustee’s officers, employees, agents and custodians;

(k) the Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which

Officers’ Certificate may be signed by any person authorized to sign an Officers’ Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded;

(l) neither the Trustee nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted under this Indenture or in connection therewith except to the extent caused by the Trustee’s gross negligence, bad faith or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, no longer subject to appeal or review. Anything in this Indenture to the contrary notwithstanding, in no event shall the Trustee be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action;

(m) the Trustee is not required to give any bond or surety with respect to the performance of its duties or the exercise of its powers under this Indenture; and

(n) notwithstanding anything else herein contained, whenever any provision of this Indenture indicates that any confirmation of a condition or event is qualified by the words “to the knowledge of” or “known to” the Trustee or other words of similar meaning, said words shall mean and refer to the current awareness of one or more Responsible Officers who are located at the Corporate Trust Office.

Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.

Section 7.04. Trustee’s Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, shall not be accountable for the Company’s use or application of the proceeds from the Securities, and shall not be responsible for any statement in any registration statement for the Securities under the Securities Act or in any offering document for the Securities, the Indenture or the Securities (other than its certificate of authentication), or the determination as to which Beneficial Owners are entitled to receive any notices hereunder.

Section 7.05. Notice of Defaults. If an Event of Default occurs and if it is actually known to a Responsible Officer of the Trustee, the Trustee shall give to each Holder notice of all current Event of Defaults known to it within 90 days

after any such Event of Default occurs or, if later, within 15 days after it is known to the Trustee, unless such Event of Default shall have been cured or waived before the giving of such notice. Notwithstanding the preceding sentence, except in the case of an Event of Default described in Sections 6.01(a) and 6.01(b), the Trustee may withhold the notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or officers of the Trustee in good faith determines that withholding the notice is in the interests of Holders. The second sentence of this Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 7.06. Reports by Trustee to Holders. Within 60 days after each October 31 beginning with the October 31 following the date of this Indenture, the Trustee shall mail to each Holder a brief report dated as of such October 31 that complies with TIA Section 313(a), if required by such Section 313(a), but only to the extent any such report is required to be given pursuant to said TIA Section 313(a), or any successor provision of the TIA. The Trustee also shall comply with TIA Section 313(b).

Commencing at the time this Indenture is qualified under the TIA, a copy of each report at the time of its mailing to Holders shall be filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Company agrees to notify the Trustee in writing promptly whenever the Indenture is qualified under the TIA and the Securities become listed on any securities exchange and of any delisting thereof.

Section 7.07. Compensation and Indemnity. The Company agrees:

(a) to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited (to the extent permitted by law) by any provision of law in regard to the compensation of a trustee of an express trust);

(b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture or any documents executed in connection herewith (including costs incurred in connection with applications to any gaming authority and the reasonable compensation and the expenses, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, bad faith or willful misconduct; and

(c) to indemnify the Trustee or any predecessor Trustee and their respective agents, officers, directors and employees for, and to hold them

harmless against, any loss, damage, claim, liability, cost or expense (including attorneys’ fees and expenses and taxes (other than franchise, capital, net worth, employment and ad valorem taxes and taxes based upon, measured by or determined by the income or gross receipts of the Trustee)) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the Trustee’s exercise or performance of any of its powers or duties hereunder.

To secure the Company’s payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except any money or property held in trust to pay interest installments (including Liquidated Damages, if any), the principal amount, Redemption Price, Repurchase Price, Change in Control Repurchase Price or interest, if any, due on overdue amounts, as the case may be, in respect of any particular Securities.

The Company’s payment obligations pursuant to this Section 7.07 shall survive the discharge of this Indenture or the earlier termination or resignation of the Trustee. When the Trustee incurs expenses after the occurrence of an Event of Default specified in Section 6.01(g) or Section 6.01(h), the expenses, including the reasonable charges and expenses of its counsel, are intended to constitute expenses of administration under any Bankruptcy Law.

Any amounts due and owing the Trustee hereunder (whether in nature of fees, expenses, indemnification payments or reimbursement for advances) which have not been paid by or on behalf of the Company within 15 days following written notice thereof given to the Company in accordance with the provisions of Section 11.02, shall bear interest at an interest rate equal to the Trustee’s announced prime rate in effect from time to time, plus four percent (4.0%) per annum.

Section 7.08. Replacement of Trustee. Subject to compliance with applicable gaming laws, the Trustee may resign by so notifying the Company; provided that no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of a majority in aggregate principal amount of the Securities at the time outstanding may remove the Trustee by so notifying the Trustee and the Company in writing. The Company shall remove the Trustee if:

(a) the Trustee fails to comply with Section 7.10;

(b) the Trustee is adjudged bankrupt or insolvent;

(d) the Trustee otherwise becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee. As soon as practicable, the successor Trustee shall mail a notice of its succession to the Company and the Holders. Any such successor must nevertheless be eligible and qualified under the provisions of Section 7.01 hereof.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company satisfactory in form and substance to the retiring Trustee and the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture; provided, notwithstanding the foregoing, the effectiveness of any such resignation or removal shall be conditioned on receipt by the retiring Trustee of all amounts due and owing under Section 7.07 hereof. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07.

If a successor Trustee does not take office within 30 days after the retiring Trustee gives its notice of resignation or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate principal amount of the Securities at the time outstanding may petition any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Section 7.09. Successor Trustee by Merger Etc. Subject to compliance with applicable gaming laws, if the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets (including the administration of the trust created by this Indenture) to, another Person, the resulting or surviving Person without any further act shall be the successor Trustee.

Section 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a)(1). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent filed annual report of condition.

Nothing herein contained shall prevent the Trustee from filing with the SEC the application referred to in the penultimate paragraph of TIA Section 310(b). The Trustee shall comply with TIA Section 310(b); provided that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met.

If at any time the Trustee shall cease to be eligible in accordance with this Section 7.10, it shall resign immediately in the manner and with the effect specified in Article 7.

Section 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.

Section 7.12. Force Majeure. To the extent permitted by the TIA, in no event shall the Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond the Trustee’s control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo or government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Indenture.

Section 7.13. Gaming License Requirements. To the extent required by gaming laws, the Trustee will provide any applicable gaming authority upon its or the Company’s written request with:

(1) copies of all notices, reports and other written communications which the Trustee gives to holders of Securities;

(2) a list of holders of Securities promptly after the original issuance of the Securities, eight months and two months prior to the expiration date of each then-current gaming license held by the Company or its Subsidiaries, and upon demand;

(3) notice of any Event of Default or of any Default, any acceleration of the indebtedness evidenced or secured hereby, the institution of any legal actions or proceedings before any court or governmental authority in respect of this Indenture and any rescission, annulment or waiver in respect of an Event of Default;

(4) notice of the removal or resignation of the Trustee within five Business Days thereof;

(5) notice of any transfer or assignment of rights under this Indenture (but no transfers or assignments of the Notes) within five Business Days thereof; and

(6) a copy of any amendment to the Notes or this Indenture within five Business Days of the effectiveness thereof.

The notice specified in clause (3) above shall be in writing and, except as set forth below, shall be given within five Business Days after the Trustee has transmitted the notice required by Section 6.02. In the case of any notice in respect of any Event of Default, such notice shall be accompanied by a copy of any notice from the holders of the Notes, or a representative thereof or the Trustee, to the Company and, if accompanied by any such notice to the Company, shall be given simultaneously with the giving of any such notice to the Company. In the case of any legal actions or proceedings, such notice shall be accompanied by a copy of the complaint or other initial pleading or document.

The Trustee shall in accordance with the limitations set forth herein cooperate with any applicable gaming authority in order to provide such gaming authority with information and documentation relevant to compliance with clause (3) above and as otherwise required by any applicable gaming laws.

ARTICLE 8
DISCHARGE OF INDENTURE

Section 8.01. Discharge of Liability on Securities. When (a) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (b) all outstanding Securities have become due and payable whether at stated maturity or any Redemption Date, or any Repurchase Date, or upon Conversion or otherwise, and the Company deposits with the Trustee, the Paying Agent, or the Conversion Agent, if applicable, cash or shares of Common Stock (as applicable under the terms of this Indenture) sufficient to pay all amounts due and owing on all outstanding Securities (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 7.07, be satisfied and discharged and cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand at the cost and expense of the Company and accompanied by an Officers’ Certificate and Opinion of Counsel.

Section 8.02. Repayment to the Company. The Trustee, the Paying Agent and the Conversion Agent shall return to the Company upon written request any

money or shares of Common Stock held by them for the payment of any amount and any shares of Common Stock with respect to the Securities that remain unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, as applicable, Holders entitled to the money or shares of Common Stock must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person and the Trustee, the Paying Agent and the Conversion Agent shall have no further liability to the Holders with respect to such money or shares of Common Stock for that period commencing after the return thereof.

The terms of any document entered into pursuant to this Article 8 shall be subject to prior approval, if required, of any applicable gaming authority.

ARTICLE 9
AMENDMENTS

Section 9.01. Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Securities without notice to or consent of any Holder:

(a) to comply with Article 5 or Section 10.11;

(b) to cure any ambiguity, omission, defect or inconsistency in this Indenture;

(c) to make any change that does not adversely affect the rights of any Holder in any material respect; provided that any change to conform this Indenture to the Offering Memorandum shall be deemed not to adversely affect the rights of any Holder;

(d) to make provisions with respect to the conversion right of the Holders pursuant to the requirements of Section 10.01;

(e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities;

(f) to comply with the provisions of the TIA, or with any requirement of the SEC arising as a result of the qualification of this Indenture under the TIA; or

(g) to provide for the issuance of Additional Securities in accordance with this Indenture.

The terms of any document entered into pursuant to this Section 9.01 shall be subject to prior approval, if required, of any applicable gaming authority.

Section 9.02. With Consent of Holders.

The Company and the Trustee may amend or supplement this Indenture or the Securities without notice to any Holder but with the written consent or consent pursuant to DTC procedures of the Holders of at least a majority in aggregate principal amount of the Securities at the time outstanding. The Holders of a majority in aggregate principal amount of the Securities at the time outstanding may, on behalf of the Holders of all outstanding Securities, waive compliance by the Company with restrictive provisions of this Indenture other than as set forth in this Section 9.02 below, and waive any past Event of Default under this Indenture and its consequences, except a default in the payment of the principal of, or Redemption Price, Repurchase Price, Change in Control Repurchase Price of, or any interest on, any Security, or in respect of a provision which under this Indenture cannot be modified or amended without the consent of the Holder of each outstanding Security affected.

Subject to Section 9.04, without the written consent or consent pursuant to DTC procedures of each Holder affected, however, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may not:

(a) change the Stated Maturity of, or any payment date of any installment of interest on, any Security;

(b) reduce the principal amount or Redemption Price of, or the rate of interest on, any Security, whether upon acceleration, redemption or otherwise, or alter the manner of calculation of interest or the rate of accrual thereof on any Security;

(d) impair the right to institute suit for the enforcement of any payment of any amount with respect to any Security when due;

(e) adversely affect the conversion rights provided in Article 10;

(f) modify the provisions of this Indenture requiring the Company to make an offer to repurchase Securities upon a Change in Control pursuant to Section 3.09, or to repurchase the Securities at the option of the Holders pursuant to Section 3.08;

(g) reduce the percentage of principal amount of the outstanding Securities necessary to modify or amend this Indenture or to consent to any waiver provided for in this Indenture;

(h) waive a default in the payment of any amount or shares of Common Stock with respect to any Security when due (except as provided in Section 6.02); or

(i) make any changes to Section 6.04, Section 6.07 or this Section 9.02.

It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.

After an amendment under this Section 9.02 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment. Failure to mail the notice or a defect in the notice shall not affect the validity of the amendment.

The terms of any documents entered into pursuant to this Section 9.02 shall be subject to prior approval, if required, of any applicable gaming authority. To the extent required by applicable gaming laws, Securities held by a Disqualified Holder shall, so long as held by such a Person, be disregarded for purposes of providing consents and determining the sufficiency of consents under this Section 9.02.

Section 9.03. Compliance with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article 9 shall comply with the TIA.

Section 9.04. Revocation and Effect of Consents. Until an amendment, waiver or other action by Holders becomes effective, a consent thereto by a Holder of a Security hereunder is a continuing consent by such Holder and every subsequent Holder of such Security or portion of such Security that evidences the same obligation as the consenting Holder’s Security, even if notation of the consent, waiver or action is not made on such Security. However, unless otherwise agreed in writing by such Holder or a predecessor Holder, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder’s Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment, waiver or action becomes effective. After an amendment, waiver or action becomes effective, it shall bind every Holder.

Section 9.05. Notation on or Exchange of Securities. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 9 may, and shall if required by the Trustee, bear a notation

in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company, and such new Securities may be authenticated and delivered by the Trustee in exchange for outstanding Securities.

Section 9.06. Trustee to Sign Supplemental Indentures. The Trustee shall sign any supplemental indenture authorized pursuant to this Article 9 if the amendment contained therein does not, in the sole determination of the Trustee, adversely affect the rights, duties, powers, privileges, benefits, indemnities, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing any supplemental indenture the Trustee shall be entitled to receive, and (subject to the provisions of Section 7.01) shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture.

Section 9.07. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article 9, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes, and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

ARTICLE 10
CONVERSION OF THE SECURITIES

Section 10.01. Conversion Privilege.

(a) Subject to the provisions of this Article 10, a Holder of a Security, except a Disqualified Holder, may convert such Security into cash and, if applicable, Common Stock equal to the Conversion Value in accordance with Section 10.14, if any of the following conditions is satisfied:

(i) during any fiscal quarter (the “Quarter”) commencing after the date of original issuance of the Securities, if the Common Stock Price for at least 20 Trading Days in the period of 30 consecutive Trading Days ending on the last Trading Day of the Quarter immediately preceding such Quarter (appropriately adjusted to take into account the occurrence, during such 30 consecutive Trading Day period, of any event requiring adjustment of the Conversion Price under this Indenture) is more than 120% of the Conversion Price on such 30th Trading Day;

(ii) such Security has been called for redemption by the Company pursuant to Section 3.01 and the redemption has not yet

occurred, so long as the Holder surrenders such Security for conversion prior to the close of business on the date that is two Business Days prior to the applicable Redemption Date, even if the Security is not otherwise convertible at such time;

(iii) (A) during the five Trading Day period immediately after any period of five consecutive Trading Days in which the Trading Price of the Securities for each Trading Day in such period was less than 95% of the product of (x) the Common Stock Price on such Trading Day and (y) the Conversion Rate on such Trading Day;

(B) notwithstanding the foregoing, if on the date of any conversion pursuant to Section 10.01(a)(iii)(A), the Common Stock Price on such date is greater than the Conversion Price on such date but less than 120% of the Conversion Price on such date, then, for purposes of Section 10.14, the Conversion Value a Holder of Securities will be entitled to receive will be equal to the principal amount of the Securities surrendered by such Holder plus accrued and unpaid interest (including Liquidated Damages, if any) as of the Conversion Date (such a conversion, a “Principal Value Conversion”);

(iv) (A) a distribution to all holders of Common Stock of rights, warrants or options entitling them (for a period commencing no earlier than the date of distribution and expiring not more than 60 days after the date of distribution) to subscribe for or purchase shares of Common Stock at a price less than the average Common Stock Price for the 10 Trading Days immediately preceding the date such distribution was first publicly announced; or

(B) a distribution to all holders of Common Stock of cash, other assets, debt securities or certain rights or warrants to purchase Capital Stock or other securities of the Company, where the fair market value of such distribution per share of Common Stock (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value) exceeds 10% of the Common Stock Price on the Trading Day immediately preceding the date that such distribution was first publicly announced;

provided that the Holder shall have no right to convert any Security pursuant to this Section 10.01(a)(iv) hereof if the Holder of a Security otherwise participates in the distribution described in this Section 10.01(a)(iv) on an as-converted basis solely into Common Stock at the

then applicable Conversion Price without conversion of such Holder’s Securities; or

(v) if the Company is party to a consolidation, merger, share exchange, sale of all or substantially all of its properties and assets or other similar transaction, in each case pursuant to which the Common Stock is subject to conversion into cash, securities or other property, from and after the effective date of such transaction until and including the date that is 30 days after the effective date of such transaction.

(b) In the case of Section 10.01(a)(iii), the Trustee shall have no obligation to determine the Trading Price of the Securities unless the Company has requested such determination in writing, and the Company shall have no obligation to make such request unless a Holder of the Securities provides the Company with reasonable evidence that the Trading Price of the Securities on any date would be less than 95% of the product of (x) the Common Stock Price on such date and (y) the Conversion Rate then in effect. Upon receipt of such reasonable evidence, the Company shall instruct the Trustee in writing to determine the Trading Price of the Securities beginning on the next Trading Day and on each successive Trading Day until the Trading Price of the Securities is greater than or equal to 95% of the product of the Common Stock Price and the Conversion Rate. Neither the Trustee nor the Conversion Agent shall be under any duty or obligation to make the calculations described in Section 10.01(a)(iii) hereof or to determine whether the Securities are convertible pursuant to such Section. The Company shall make the calculations described in Section 10.01(a)(iii) hereof using the Trading Price of the Securities provided by the Trustee, shall determine whether the Securities are convertible under Section 10.01(a)(iii) and shall advise the Trustee (or Conversion Agent, as the case may be) of any determination that the Securities are convertible under Section 10.01(a)(iii).

(c) In the case of the foregoing Sections 10.01(a)(iv)(A) and 10.01(a)(iv)(B), the Company shall cause a notice of such distribution to be filed with the Trustee and the Conversion Agent and to be mailed to each Holder of Securities no later than 20 days prior to the Ex-Dividend Date for such distribution. Once the Company has given such notice, Holders may surrender their Securities for conversion at any time thereafter until the earlier of the close of business on the Business Day prior to the Ex-Dividend Date or the Company’s announcement that such distribution will not take place. The “Ex-Dividend Date” for any such issuance or distribution means the date immediately prior to the commencement of “ex-dividend” trading for such issuance or distribution on The New York Stock Exchange or such other national securities exchange or The Nasdaq Stock Market or similar system of automated dissemination of quotations of securities prices on which the Common Stock is then listed or quoted.

(d) A Holder may convert a portion of a Security equal to $1,000 or any integral multiple thereof. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security.

If a Security is called for redemption pursuant to Section 3.01, in order to convert such Security, the Holder must deliver the Security to the Conversion Agent (or, if the Security is held in book-entry form, complete and deliver to the Depositary appropriate instructions in accordance with the Applicable Procedures) at any time prior to the close of business on the day that is two Business Days prior to the applicable Redemption Date for such Security (unless the Company shall default in paying the Redemption Price when due, in which case the conversion right shall terminate on the date such default is cured and such Security is redeemed). A Security in respect of which a Holder has delivered a Repurchase Notice pursuant to Section 3.08 or a Change in Control Repurchase Notice pursuant to Section 3.09 exercising the option of such Holder to require the Company to repurchase such Security may be converted only if such Repurchase Notice or Change in Control Repurchase Notice, as the case may be, is withdrawn by a written notice of withdrawal delivered to the Paying Agent prior to the close of business on the Repurchase Date or the Change in Control Repurchase Date, as the case may be, in accordance with Section 3.10.

(e) A Holder of Securities is not entitled to any rights of a holder of Common Stock until such Holder has converted its Securities into Common Stock.

Section 10.02. Conversion Procedure.

(a) To convert a Security, a Holder must (i) if the Security is in definitive form, complete and manually sign the irrevocable conversion notice on the back of the Security and deliver such notice to the Conversion Agent, (ii) if the Security is in definitive form, surrender the Security to the Conversion Agent, (iii) if the Security is in definitive form, furnish appropriate endorsements and transfer documents if required by the Registrar or the Conversion Agent, (iv) pay any transfer or other tax, if required by Section 10.03 and (v) if the Security is held in book-entry form, complete and deliver to the Depositary appropriate instructions pursuant to the Applicable Procedures. The later of (x) the date on which the Holder satisfies all of the foregoing requirements and (y) the Determination Date is the “Conversion Date”. As promptly as practicable after the Conversion Date and in any event within four Business Days thereof, the Company shall deliver to the Holder through the Conversion Agent (1) cash in the amount calculated in accordance with Section 10.14, (2) either a certificate for or a book-entry notation of the number of whole shares of Common Stock issuable upon the conversion and (3) cash in lieu of any fractional shares pursuant to Section 10.14.

(b) The Person in whose name the Security is registered shall be deemed to be a stockholder of record on the Conversion Date; provided that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the Person or Persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the Person or Persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided, further, that such conversion shall be at the Conversion Price in effect on the date that such Security shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of a Security, such Person shall no longer be a Holder of such Security.

(c) No payment or adjustment will be made for accrued but unpaid interest (including Liquidated Damages, if any) on a converted Security or for dividends or distributions on shares of Common Stock issued upon conversion of a Security. The Company shall not adjust the Conversion Price to account for the accrued but unpaid interest. Nonetheless, if Securities are converted after the close of business on a regular record date and prior to the opening of business on the next interest payment date, including the date of maturity, Holders of such converted Securities at the close of business on such regular record date shall receive the accrued but unpaid interest (including Liquidated Damages, if any) payable on such Securities on the corresponding interest payment date notwithstanding the conversion. In such event, such Security, when surrendered for conversion, must be accompanied by delivery of a check payable to the Conversion Agent in an amount equal to the accrued but unpaid interest (including Liquidated Damages, if any) payable on such interest payment date on the portion so converted. If such payment does not accompany such Security, the Security shall not be converted; provided that no such check shall be required if such Security has been called for redemption on a redemption date within the period between the close of business on such record date and the opening of business on such interest payment date, or if such Security is surrendered for conversion on the interest payment date. If the Company defaults in the payment of interest (including Liquidated Damages, if any) payable on the interest payment date, the Conversion Agent shall repay such funds to the Holder.

(d) Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall, upon receipt of a Company Order, authenticate and deliver to the Holder, a new Security equal in principal amount to the unconverted portion of the Security surrendered.

Section 10.03. Taxes on Conversion. If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on

the issue of shares of Common Stock upon such conversion. However, the Holder shall pay any tax which is due because the Holder requests the shares to be issued in a name other than the Holder’s name. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder’s name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder’s name. Nothing herein shall preclude any tax withholding required by law or regulations.

Section 10.04. Company to Provide Stock. The Company shall, prior to issuance of any Securities hereunder, and from time to time as may be necessary, reserve, out of its authorized but unissued Common Stock, a sufficient number of shares of Common Stock to permit the conversion of all outstanding Securities into shares of Common Stock. The certificates representing the shares of Common Stock issued upon conversion of Transfer Restricted Securities shall bear a legend substantially in the following form:

THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, OR THE “SECURITIES ACT”, AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF SHUFFLE MASTER, INC. (THE “COMPANY”) THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY

APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

The Company covenants that all shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and non-assessable and shall be free from preemptive rights and free of any lien or adverse claim.

The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted.

Section 10.05. Adjustment of Conversion Price. The Conversion Price shall be adjusted (without duplication) from time to time by the Company as follows:

(a) In case the Company shall (i) issue shares of Common Stock to all holders of Common Stock as a dividend or distribution on Common Stock, (ii) subdivide its outstanding Common Stock into a greater number of shares or (iii) combine its outstanding Common Stock into a smaller number of shares, the Conversion Price shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which it would have owned or been entitled to receive had such Security been converted immediately prior to the happening of such event. For the purposes of calculating the Conversion Price adjustment pursuant to this Section 10.05(a), Holders of a Security shall be treated as if they had the right to convert the Security solely into Common Stock at the then applicable Conversion Price. An adjustment made pursuant to this Section 10.05(a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of subdivision, combination or reclassification.

(b) In case the Company shall issue to all holders of Common Stock rights, warrants or options entitling such holders (for a period commencing no earlier than the date of distribution and expiring not more than 60 days after the date of distribution) to subscribe for or purchase shares of Common Stock at a price per share less than the average Common Stock Price for the 10 Trading Days immediately preceding the date that such distribution was first publicly announced, the Conversion Price shall be decreased so that the Conversion Price

shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction,

(i) the numerator of which shall be the number of shares of Common Stock outstanding on such date of public announcement, plus the number of shares which the aggregate subscription or purchase price for the total number of shares of Common Stock offered by the rights, warrants or options so issued (or the aggregate conversion price of the convertible securities offered by such rights, warrants or options) would purchase at such average Common Stock Price, and

(ii) the denominator of which shall be the number of shares of Common Stock outstanding on such date of public announcement plus the number of additional shares of Common Stock offered by such rights, warrants or options (or into which the convertible securities so offered by such rights, warrants or options are convertible);

provided that no adjustment will be made if Holders are entitled to participate in the distribution on substantially the same terms as holders of Common Stock as if such Holders had converted their Securities solely into Common Stock immediately prior to such distribution at the then applicable Conversion Price.

Such adjustment shall be made successively whenever any such rights, warrants or options are issued, and shall become effective immediately after such record date. If at the end of the period during which such rights, warrants or options are exercisable not all rights, warrants or options shall have been exercised, the adjusted Conversion Price shall be immediately readjusted to what it would have been upon application of the foregoing adjustment substituting the number of additional shares of Common Stock actually issued (or the number of shares of Common Stock issuable upon conversion of convertible securities actually issued) for the total number of shares of Common Stock offered (or convertible securities offered).

(c) In case the Company shall distribute to all holders of Common Stock evidences of its indebtedness, shares of Capital Stock of the Company (other than Common Stock), other securities or other assets, or rights, warrants or options to subscribe for or purchase any of its securities (excluding (i) those rights, options and warrants referred to in Section 10.05(b); (ii) those dividends and distributions referred to in Section 10.05(a); and (iii) those dividends or distributions paid in cash referred to in Section 10.05(e)), then in each such case the Conversion Price shall be decreased so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of such distribution by a fraction,

(i) the numerator of which shall be the Market Price on the record date for the determination of holders of Common Stock entitled to receive such distribution less the fair market value on such record date (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value) of the portion of the Capital Stock or evidences of indebtedness, securities or assets so distributed or of such rights, warrants or options, in each case applicable to one share of Common Stock, and

(ii) the denominator of which shall be the Market Price on such record date,

such adjustment to become effective immediately after the record date for such distribution; provided that if the numerator of the foregoing fraction is less than $1.00 (including a negative amount), then in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion, in addition to the cash and Common Stock issuable upon such conversion, the distribution such Holder would have received had such Holder converted its Security solely into Common Stock at the then applicable Conversion Price immediately prior to the record date for such distribution; provided further that no adjustment will be made if Holders are entitled to participate in the distribution on substantially the same terms as holders of Common Stock as if such Holders had converted their Securities solely into Common Stock immediately prior to such distribution at the then applicable Conversion Price.

(d) In case the Company or any of its Subsidiaries makes a payment to holders of Common Stock in respect of a tender or exchange offer, other than an odd lot offer, for shares of Common Stock to the extent that the offer involves aggregate consideration that, together with any cash and the fair market value of any other consideration in respect of any tender or exchange offer by the Company or any of its Subsidiaries for shares of Common Stock consummated within the preceding 12 months not triggering a Conversion Price adjustment, exceeds an amount equal to 5.0% of the market capitalization of the Common Stock on the expiration date of the tender offer, the Conversion Price shall be decreased so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the expiration time of such tender or exchange offer (the “Expiration Time”) by a fraction,

(i) the numerator of which shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) at the Expiration Time multiplied by the Common Stock Price on the Trading Day next succeeding the Expiration Time, and

(ii) the denominator of which shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to holders of Common Stock based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares of Common Stock validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted up to any such maximum being referred to as the “Purchased Shares”) and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the Common Stock Price on the Trading Day next succeeding the Expiration Time,

such adjustment to become effective immediately prior to the opening of business on the day following the Expiration Time. If the Company is obligated to purchase shares pursuant to any such tender or exchange offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price that would then be in effect if such tender or exchange offer had not been made.

(e) In case the Company shall declare a cash dividend or cash distribution to all of the holders of Common Stock, the Conversion Price shall be decreased so that the Conversion Price shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the record date for such dividend or distribution by a fraction,

(i) the numerator of which shall be the average of the Common Stock Price for the three consecutive Trading Days ending on the Trading Day immediately preceding the record date for such dividend or distribution (the “Pre-Dividend Sale Price”), minus the full amount of such cash dividend or cash distribution applicable to one share of Common Stock (the “Dividend Adjustment Amount”), and

(ii) the denominator of which shall be the Pre-Dividend Sale Price,

such adjustment to become effective immediately after the record date for such dividend or distribution; provided that no adjustment will be made if Holders are entitled to participate in the distribution on substantially the same terms as holders of Common Stock as if such Holders had converted their Securities solely into Common Stock immediately prior to such distribution at the then applicable Conversion Price; and provided further that if the numerator of the foregoing fraction is less than $1.00 (including a negative amount), then in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion, in addition to the cash and Common Stock issuable upon such conversion, the amount of cash such Holder would have

received had such Holder converted its Security solely into Common Stock at the then applicable Conversion Price immediately prior to the record date for such cash dividend or cash distribution. If such cash dividend or cash distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price that would then be in effect if such dividend or distribution had not been declared.

(f) If the rights provided for in the Company’s Shareholder Rights Plan dated as of June 26, 1998 (the “Shareholder Rights Plan”), have separated from the Common Stock in accordance with the provisions of the Shareholder Rights Plan so that the Holders of the Securities would not be entitled to receive any rights in respect of Common Stock issuable upon conversion of the Securities, the Conversion Price will be adjusted as provided in Section 10.05(c) above, subject to readjustment in the event of the expiration, termination or redemption of the rights. In lieu of any such adjustment, the Company may amend the Shareholder Rights Plan to provide that upon conversion of the Securities the Holders will receive, in addition to the cash and Common Stock issuable upon such conversion, the rights which would have attached to the shares of Common Stock issuable upon conversion of the Securities solely into Common Stock at the then applicable Conversion Price, if the rights had not become separated from the Common Stock under the Shareholder Rights Plan. To the extent that the Company adopts any future rights plan, upon conversion of the Securities, Holders will receive, in addition to the cash and Common Stock issuable upon such conversion, the rights under the future rights plan in respect of the shares of Common Stock issuable upon conversion of the Securities solely into Common Stock at the then applicable Conversion Price, whether or not the rights have separated from the Common Stock at the time of conversion, and no adjustment to the Conversion Price will be made in connection with any distribution of rights thereunder.

(g) In any case in which this Section 10.05 shall require that an adjustment be made immediately following a record date established for purposes of this Section 10.05, the Company may elect to defer (but only until five Business Days following the filing by the Company with the Trustee of the certificate described in Section 10.09) issuing to the holder of any Security converted after such record date the shares of Common Stock and other Capital Stock of the Company issuable upon such conversion over and above the shares of Common Stock and other Capital Stock of the Company issuable upon such conversion only on the basis of the Conversion Price prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Company shall issue or cause its transfer agents to issue due bills or other appropriate evidence of the right to receive such shares.

(h) Before taking any action which would cause an adjustment decreasing the Conversion Price so that the shares of Common Stock issuable

upon conversion of the Securities would be issued for less than the par value of such Common Stock, the Company will take all corporate action which may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Common Stock at such adjusted Conversion Price.

(i) If the Company is required by law to withhold any taxes with respect to a deemed distribution to a Holder or Beneficial Owner resulting from a Conversion Price adjustment, such taxes may be withheld from interest payments made to such Holder or Beneficial Owner on or after the date of such Conversion Price adjustment.

Section 10.06. No Adjustment. No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price as last adjusted; provided that any adjustments which by reason of this Section 10.06 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 10 shall be made to the nearest cent, with one-half cent rounded up, or to the nearest one-ten thousandth (0.0001) of a share, with one-five hundred thousandth (0.00005) of a share being rounded up, as the case may be.

No adjustment need be made upon the issuance of Common Stock (or securities convertible into or exchangeable for Common Stock) under any present or future employee benefit plan or program of the Company.

No adjustment need be made upon the issuance of Common Stock (or securities convertible into or exchangeable for Common Stock) pursuant to (i) the exercise of any option, warrant or right to purchase such Common Stock, (ii) the exchange of any exchangeable security for such Common Stock or (iii) the conversion of any convertible security into such Common Stock, in each case so long as such option, warrant, right to purchase, exchangeable security or convertible security is outstanding as of the date on which the Securities are first issued.

No adjustment need be made for a change in the par value or a change to no par value of the Common Stock.

To the extent that the Securities become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash.

Section 10.07. Equivalent Adjustments. If, as a result of an adjustment made pursuant to Section 10.05 above, the Holder of any Security thereafter surrendered for conversion shall become entitled to receive any shares of Capital Stock of the Company other than shares of Common Stock, thereafter the Conversion Price of such other shares so receivable upon conversion of any

Securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in this Article 10.

Section 10.08. Adjustment for Tax Purposes. The Company shall be entitled to make such reductions in the Conversion Price, in addition to those required by Section 10.05, as the Board of Directors in its discretion shall determine to be advisable in order that any stock dividends, subdivisions of shares, distributions of rights to purchase stock or other securities, or distributions of securities convertible into or exchangeable for stock hereafter made by the Company to its holders of Common Stock shall not be taxable to such holders.

Section 10.09. Notice of Adjustment. Whenever the Conversion Price is adjusted, or Holders become entitled to other securities or due bills, the Company shall promptly mail to Holders a notice of the adjustment and file with the Trustee an Officers’ Certificate briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence of the correctness of such adjustment and the Trustee may conclusively assume that, unless and until such certificate is received by it, no such adjustment is required.

Section 10.10. Notice of Certain Transactions. In case:

(a) the Company shall declare a dividend (or any other distribution) on the Common Stock; or

(b) the Company shall authorize the granting to the holders of Common Stock of rights, warrants or options to subscribe for or purchase any share of any class or any other rights, warrants or options; or

(c) of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation, merger, or share exchange to which the Company is a party and for which approval of any holders of Common Stock is required, or of the sale or transfer of all or substantially all of the properties and assets of the Company; or

(d) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

the Company shall cause to be filed with the Trustee and the Conversion Agent and to be mailed to each Holder of Securities at its address appearing on the list provided for in Section 2.05, as promptly as possible but in any event at least ten days prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or

rights, warrants or options, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, sale, share exchange, transfer, dissolution, liquidation or winding-up.

Section 10.11. Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion Privilege. If any of the following shall occur, namely: (i) any reclassification or change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination); (ii) any consolidation, combination, merger or share exchange to which the Company is a party other than a merger in which the Company is the resulting or surviving corporation and which does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; or (iii) any sale or conveyance of all or substantially all of the properties and assets of the Company, in each case pursuant to which the shares of Common Stock are converted into cash, securities, or other property, then the Company, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such reclassification, change, consolidation, combination, merger, share exchange, sale or conveyance, execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right to convert such Security into the kind and amount of cash, securities and other property receivable upon such reclassification, change, consolidation, combination, merger, share exchange, sale or conveyance by a holder of the number of shares of Common Stock deliverable upon conversion of such Security solely into Common Stock at the then applicable Conversion Price immediately prior to the effective date of such reclassification, change, consolidation, combination, merger, share exchange, sale or conveyance. Such supplemental indenture shall provide for adjustments of the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments of the Conversion Price provided for in this Article 10. If, in the case of any such consolidation, merger, share exchange, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of Common Stock includes shares of Capital Stock or other securities and property of a corporation other than the successor or

purchasing corporation, as the case may be, in such consolidation, merger, share exchange, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders of the Securities as the Board of Directors shall reasonably consider necessary by reason of the foregoing. The provision of this Section 10.11 shall similarly apply to successive consolidations, mergers, share exchanges, sales or conveyances. Notwithstanding the foregoing, a distribution by the Company to all or substantially all holders of Common Stock for which an adjustment to the Conversion Price or provision for conversion of the Securities may be made pursuant to Section 10.05 shall not be deemed to be a sale or conveyance of all or substantially all of the properties and assets of the Company for purposes of this Section 10.11.

In the event the Company shall execute a supplemental indenture pursuant to this Section 10.11, the Company shall promptly file with the Trustee an Opinion of Counsel stating that such supplemental indenture is authorized or permitted by this Indenture and an Officers’ Certificate briefly stating the reasons therefor, the kind or amount of cash, securities or other property receivable by Holders of the Securities upon the conversion of their Securities after any such reclassification, change, consolidation, merger, share exchange, sale or conveyance, any adjustment to be made with respect thereto and that all conditions precedent have been complied with.

Section 10.12. Trustee’s Disclaimer. The Trustee has no duty to determine when an adjustment under this Article 10 should be made, how it should be made or what such adjustment should be made, but may accept as conclusive evidence of the correctness of any such adjustment, and shall be fully protected in relying upon, the Officers’ Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 10.09. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities, and the Trustee shall not be responsible for the Company’s failure to comply with any provisions of this Article 10. Each Conversion Agent (other than the Company or an Affiliate of the Company) shall have the same protection under this Section 10.12 as the Trustee.

The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 10.11, but may accept as conclusive evidence of the correctness thereof, and shall be protected in relying upon, the Officers’ Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 10.11.

Section 10.13. Voluntary Reduction. The Company may from time to time reduce the Conversion Price if the Board of Directors determines that this

reduction would be in the best interests of the Company; provided that in no event may the Conversion Price be less than the par value of a share of Common Stock. Any such determination by the Board of Directors shall be conclusive. Any such reduction in the Conversion Price must remain in effect for at least 20 trading days or such longer period as may be required by law. In addition, the Company may from time to time reduce the Conversion Price if the Board of Directors deems it advisable to avoid or diminish any income tax to Holders of Common Stock resulting from any stock or rights distribution on Common Stock.

Section 10.14. Conversion Value of Securities Tendered.

(a) Subject to certain exceptions described in Sections 10.01(a)(iii) and 10.01(a)(iv), Holders tendering the Securities for conversion shall be entitled to receive, upon conversion of such Securities, cash and, if applicable, shares of Common Stock, the value of which (the “Conversion Value”) shall be equal to the product of:

(i) (A) the aggregate principal amount of Securities to be converted divided by 1,000 multiplied by (B) the then applicable Conversion Rate; and

(ii) the average of the Common Stock Prices for the ten consecutive Trading Days (appropriately adjusted to take into account the occurrence during such period of stock splits, stock dividends and similar events) beginning on the second Trading Day immediately following the day the Securities are tendered for conversion (the “Ten Day Average Closing Stock Price”).

(b) Subject to certain exceptions described below and under Sections 10.01(a)(iii) and 10.01(a)(iv), the Company shall deliver the Conversion Value to converting holders as follows:

(i) an amount in cash (the “Principal Return”) equal to the lesser of (a) the aggregate Conversion Value of the Securities to be converted and (b) the aggregate principal amount of the Securities to be converted;

(ii) if the Conversion Value of the Securities to be converted is greater than the Principal Return, an amount in whole shares (the “Net Shares”), determined as set forth below, equal to such aggregate Conversion Value less the Principal Return (the “Net Share Amount”); and

(iii) an amount paid in cash, determined as set forth below, in lieu of any fractional shares of Common Stock.

The number of Net Shares to be paid shall be determined by dividing the Net Share Amount by the Ten Day Average Closing Stock Price. Holders of Securities will not receive fractional shares upon conversion of Securities. In lieu of fractional shares, Holders will receive cash for the value of the fractional shares, which cash payment shall be based on the Ten Day Average Closing Stock Price.

The Conversion Value, Principal Return, number of Net Shares and Net Share Amount shall be determined by the Company at the end of the ten consecutive Trading Day period beginning on the second Trading Day immediately following the day the Securities are tendered for conversion (the “Determination Date”).

(c) The Company shall pay the Principal Return and cash for fractional shares and deliver the Net Shares, if any, as promptly as practicable after the Conversion Date, but in no event later than four Business Days thereafter. Except as provided in Section 10.02(c), delivery of the Principal Return, Net Shares and cash in lieu of fractional shares shall be deemed to satisfy the Company’s obligation to pay the principal amount of a converted Security and accrued but unpaid interest (including Liquidated Damages, if any) thereon. Any accrued interest (including Liquidated Damages, if any) payable on a converted Security shall be deemed paid in full rather than canceled, extinguished or forfeited. The Company will not adjust the Conversion Price to account for accrued interest.

(d) Neither the Trustee nor the Conversion Agent has any duty to determine or calculate the Conversion Value, Principal Return, number of Net Shares, the Net Share Amount or any other computation required under this Article 10, all of which shall be determined by the Company (or the Trustee, as the case may be) in accordance with the provisions of this Indenture, and the Trustee and Conversion Agent shall not be under any responsibility to determine the correctness of any such determinations and/or calculations and may conclusively rely on the correctness thereof.

Section 10.15. Simultaneous Adjustments. In the event that this Article 10 requires adjustments to the Conversion Price under more than one of Sections 10.05(a) and (c), and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 10.05(c), as applicable, and, second, the provisions of Section 10.05(a). If more than one event requiring adjustment pursuant to Section 10.05 shall occur before completing the determination of the Conversion Price for the first event requiring such adjustment, then the Board of Directors (whose determination shall, if made in good faith, be conclusive) shall make such adjustments to the Conversion Price (and the calculation thereof) after giving effect to all such events as shall preserve for Holders the Conversion Price protection provided in Section 10.05.

ARTICLE 11
MISCELLANEOUS

Section 11.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control.

Section 11.02. Notices. Any request, demand, authorization, notice, waiver, consent or communication shall be in writing, in the English language and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows, or transmitted by facsimile transmission (confirmed orally) to the following facsimile numbers:

if to the Company, to:

Shuffle Master, Inc.

1106 Palms Airport Drive

Las Vegas, Nevada 89119

Attention: General Counsel

Facsimile No.: (702) 270-5161

with a copy to:

Latham & Watkins LLP

885 Third Avenue

New York, New York 10022

Facsimile No.: (212) 751-4864

Attention: Kirk A. Davenport II

if to the Trustee, to:

Wells Fargo Bank, National Association

Corporate Trust Services

Sixth Street & Marquette Avenue

Minneapolis, MN 55479

Attn: Jeffery Rose

Facsimile No.: (612) 667-9825

The Company or the Trustee by notice given to the other in the manner provided above may designate additional or different addresses for subsequent notices or communications.

Any notice or communication given to a Holder shall be mailed to the Holder, by first-class mail, postage prepaid, at the Holder’s address as it appears

on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.

Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee.

If the Company mails a notice or communication to the Holders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent or co-registrar.

Section 11.03. Communication by Holders with Other Holders. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of TIA Section 312(c).

Section 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:

(a) an Officers’ Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such eligible and qualified Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating the information on which

counsel is relying unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

Section 11.05. Statements Required in Certificate or Opinion. Each Officers’ Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include:

(a) a statement that each person making such Officers’ Certificate or Opinion of Counsel has read such covenant or condition;

(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers’ Certificate or Opinion of Counsel are based;

(c) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d) a statement that, in the opinion of such person, such covenant or condition has been complied with.

Section 11.06. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 11.07. Rules by Trustee, Paying Agent, Conversion Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar, the Conversion Agent and the Paying Agent may make reasonable rules for their functions.

Section 11.08. Legal Holidays. A “Legal Holiday” is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Securities, no interest (including Liquidated Damages, if any), shall accrue for the intervening period.

Section 11.09. Governing Law. THIS INDENTURE AND EACH SECURITY SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 11.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any Obligations of the Company under the Securities or for any claim based on, in respect of or by reason of such Obligations or their creation. By accepting a Security, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities.

Section 11.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor.

Section 11.12. Multiple Originals. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

Section 11.13. Table of Contents and Headings. The Table of Contents and the headings of the Articles or Sections of this Indenture have been inserted for convenience of reference only, are not to be considered as part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written.

SHUFFLE MASTER, INC.


By:	/s/ Paul Meyer
	Name:	Paul Meyer
	Title:	President

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee


By:	/s/ Jeffrey Rose
	Name:	Jeffrey Rose
	Title:	Corporate Trust Officer

EXHIBIT A

[FORM OF FACE OF GLOBAL SECURITY]

[Transfer Restricted Securities Legend — Include only on Transfer Restricted Securities]

[THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, OR THE “SECURITIES ACT”, AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE FOREGOING LEGEND MAY BE REMOVED FROM THE SECURITY ON SATISFACTION OF THE CONDITIONS SPECIFIED IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.]

[Global Securities Legend — Include only on Global Securities]

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF

A-1

TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.]

A-2

SHUFFLE MASTER, INC.

1.25% Contingent Convertible Senior Note Due 2024

No.: 1	CUSIP: [825549AA6]*

Issue Date: April 21, 2004

SHUFFLE MASTER, INC., a Minnesota corporation, promises to pay to [Cede & Co.]** or registered assigns, [the principal amount of ] [the principal amount as set forth on Schedule I hereto]**, on April 15, 2024, subject to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Security is convertible as specified on the other side of this Security.

Interest Payment Dates: April 15 and October 15, commencing October 15, 2004.

Record Dates: April 1 and October 1, commencing October 1, 2004.

	SHUFFLE MASTER, INC.


	By:	/s/
		Name:
		Title:

* For Rule 144A Global Security only.

** Include only on Global Security.

A-3

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

Wells Fargo Bank, National Association, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture.

By:
	Authorized Signatory

Dated:

A-4

[FORM OF REVERSE SIDE OF NOTE]

SHUFFLE MASTER, INC.

1.25% Contingent Convertible Senior Note Due 2024

(1) Interest.

This Security will bear interest at the rate of 1.25% per annum from April 21, 2004 or from the most recent date to which interest has been paid or duly provided for, semiannually in arrears on April 15 and October 15 of each year, subject to Section 11.08 of the Indenture, commencing October 15, 2004. The Company will pay interest on any overdue principal amount and on overdue installments of interest and Liquidated Damages, if any (without regard to any applicable grace period), at the rate of 1.25% per annum, compounded semiannually. Interest (including Liquidated Damages, if any) on the Securities will be computed on the basis of a 360-day year comprised of twelve 30-day months.

(2) Method of Payment.

The Company will pay interest (including Liquidated Damages, if any) on this Security to the Person who is the registered Holder of this Security at the close of business on April 1 or October 1, as the case may be, immediately preceding the related interest payment date. Subject to the terms and conditions of the Indenture, the Company will make payments in respect of the Redemption Price, Repurchase Price, Change in Control Repurchase Price and the principal amount at Stated Maturity, as the case may be, to the Holder who surrenders a Security to a Paying Agent to collect such payments in respect of the Security. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay interest (including Liquidated Damages, if any), the Redemption Price, Repurchase Price, Change in Control Repurchase Price and the principal amount at Stated Maturity, as the case may be, to a Holder holding Securities in definitive form by check or wire payable in such money; provided that a Holder holding Securities in definitive form with an aggregate principal amount in excess of $1,000,000 may request payment by wire transfer in immediately available funds to an account in North America at the election of such Holder. The Company may mail an interest check to the Holder’s registered address. Notwithstanding the foregoing, so long as this Security is registered in the name of a Depositary or its nominee, all payments hereon shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee.

A-5

(3) Paying Agent, Conversion Agent and Registrar.

Initially, Wells Fargo Bank, National Association (the “Trustee”) will act as Paying Agent, Conversion Agent and Registrar. The Company may appoint and change any Paying Agent, Conversion Agent or Registrar without notice, other than notice to the Trustee; provided that the Company will maintain at least one Paying Agent having an office or agency in the State of New York, City of New York, Borough of Manhattan, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent or Registrar.

(4) Indenture.

The Company issued the Securities under an Indenture dated as of April 21, 2004 (the “Indenture”), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect from time to time (the “TIA”). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of those terms.

The Initial Securities are general unsecured obligations of the Company limited to up to $125,000,000 aggregate principal amount (which amount shall be increased by up to $25,000,000 in principal amount of additional Initial Securities purchased pursuant to the Initial Purchasers’ option to purchase additional Securities). The Indenture provides that Additional Securities may be issued pursuant to the Indenture, and the originally issued Initial Securities and all such Additional Securities vote together for all purposes as a single class. The Indenture does not limit other indebtedness of the Company, secured or unsecured.

(5) Redemption at the Option of the Company.

No sinking fund is provided for the Securities. On or after April 21, 2009, the Securities are redeemable in whole at any time, or in part from time to time, in any integral multiple of $1,000, at the option of the Company for cash at a Redemption Price equal to 100% of the principal amount of the Securities to be redeemed, together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, up to but not including the Redemption Date; provided that, if the Redemption Date is between the close of business on an interest record date and the opening of business on the related interest payment date, accrued but unpaid interest (including Liquidated Damages, if any) will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant interest record date.

A-6

Notice of redemption pursuant to paragraph 5 of this Security will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at the Holder’s registered address. If money sufficient to pay the Redemption Price of all Securities (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to 11:00 a.m., New York City time, on the Redemption Date, immediately after such Redemption Date, interest (including Liquidated Damages, if any) shall cease to accrue on such Securities or portions thereof. Securities in denominations larger than $1,000 of principal amount may be redeemed in part but only in integral multiples of $1,000 of principal amount.

(6) Mandatory Disposition Pursuant to Gaming Laws

(A) Each Holder, by accepting this Security, will be deemed to have agreed that if the gaming authority of any jurisdiction in which the Company or any of its Subsidiaries conducts or proposes to conduct gaming operations requires that a Person who is a Holder or the Beneficial Owner of this Security (or an affiliate of such Holder or Beneficial Owner) be licensed, qualified or found suitable under applicable gaming laws, such Holder or the Beneficial Owner, as the case may be, will apply for a license, qualification or a finding of suitability within the required time period. If such Person fails to apply or become licensed or qualified or is found unsuitable (a “Disqualified Holder”), the Company will have the right, at any time, at its option:

(i) to require such Person to dispose of this Security or beneficial interest herein within 30 days of receipt of notice of the Company’s election or such earlier date as may be requested or prescribed by such gaming authority, or

(ii) to redeem such Securities at a redemption price equal to the lesser of (1) such Person’s cost, (2) 100% of the principal amount thereof, plus accrued and unpaid interest (including Liquidated Damages, if any) to the earlier of the redemption date or the date of the finding of unsuitability, which redemption date may be less than 30 days following the notice of redemption if so requested or prescribed by the applicable gaming authority or (3) such lesser amount as may be required by an applicable gaming authority.

(B) Immediately upon a determination by a gaming authority that a Holder or Beneficial Owner of this Security (or an affiliate thereof) will not be licensed, qualified or found suitable or is denied a license, qualification or finding of suitability, the Holder or Beneficial Owner will not have any further right with respect to this Security to:

A-7

(i) exercise, directly or indirectly, through any Person, any right conferred by this Security; or

(ii) receive any interest (including Liquidated Damages, if any), or any other distribution or payment with respect to this Security, or any remuneration in any form from the Company for services rendered or otherwise, except for the redemption of this Security.

(C) The Company will notify the Trustee in writing of any such Disqualified Holder status or redemption as soon as practicable. The Company will not be responsible for any costs or expenses any such Holder or the Beneficial Owner may incur in connection with its application for a license, qualification or a finding of suitability.

(7) Repurchase By the Company at the Option of the Holder on Specified Dates; Repurchase at the Option of the Holder Upon a Change in Control.

Subject to the terms and conditions of the Indenture, the Company shall become obligated to repurchase, at the option of the Holder, all or a portion of the Securities tendered pursuant to the Indenture, in any integral multiple of $1,000, on April 15, 2009, April 15, 2014 and April 15, 2019 (each, a “Repurchase Date”), for cash at a price per Security equal to 100% of the aggregate principal amount of the Security (the “Repurchase Price”), together with accrued but unpaid interest (including Liquidated Damages, if any) thereon, up to but not including the Repurchase Date upon delivery of a Repurchase Notice containing the information set forth in the Indenture, together with the Securities subject thereto, at any time from the opening of business on the date that is 30 Business Days prior to such Repurchase Date until the close of business on the Business Day prior to such Repurchase Date, and upon delivery or book-entry transfer of the Securities to the Paying Agent by the Holder as set forth in the Indenture.

At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to repurchase the Securities held by such Holder after the occurrence of a Change in Control of the Company for a Change in Control Repurchase Price equal to 100% of the aggregate principal amount thereof plus accrued but unpaid interest (including Liquidated Damages, if any) thereon, up to but not including the Change in Control Repurchase Date which Change in Control Repurchase Price shall be paid in cash (provided that if the Change in Control Repurchase Date is between the close of business on an interest record date and the opening of business on the related interest payment date, accrued but unpaid interest (including Liquidated Damages, if any) will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant interest record date). Holders have the right to withdraw any Repurchase Notice or Change in Control Repurchase Notice, as the case may

A-8

be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture.

If cash sufficient to pay the Repurchase Price or Change in Control Repurchase Price, as the case may be, and accrued but unpaid interest (including Liquidated Damages, if any) on all Securities or portions thereof to be repurchased as of the Repurchase Date or the Change in Control Repurchase Date, as the case may be, is held by the Paying Agent by 11:00 a.m., New York City time, on the Business Day immediately following the Repurchase Date or the Change in Control Repurchase Date, interest (including Liquidated Damages, if any) shall cease to accrue on such Securities (or portions thereof) as of such Repurchase Date or Change in Control Repurchase Date, and the Holder thereof shall have no other rights as such, other than the right to receive the Repurchase Price or Change in Control Repurchase Price, as the case may be, and interest (including Liquidated Damages, if any) upon surrender of such Security.

(8) Conversion.

Upon satisfaction of the conditions set forth in Section 10.01(a) of the Indenture, a Holder of a Security may convert any portion of the principal amount of any Security that is an integral multiple of $1,000 into cash and fully paid and non-assessable shares (calculated as to each conversion to the nearest 1/10000th of a share) of Common Stock in accordance with the provisions of Section 10.14 of the Indenture; provided that if such Security is called for redemption, the conversion right will terminate at the close of business on the second Business Day immediately preceding the Redemption Date of such Security (unless the Company shall default in making the redemption payment when due, in which case the conversion right shall terminate at the close of business on the date such Default is cured and such Security is redeemed). Such conversion right shall commence on the initial issuance date of the Securities and expire at the close of business on the Business Day immediately preceding the date of maturity, subject, in the case of conversion of any Global Security, to any Applicable Procedures. The Conversion Price shall, as of the date of the Indenture, initially be $42.11 per share of Common Stock. The Conversion Rate shall, as of the date of the Indenture, initially be approximately 23.7473. The Conversion Price and Conversion Rate will be adjusted under the circumstances specified in the Indenture. Upon conversion, no adjustment for interest (including Liquidated Damages, if any) or dividends will be made. No fractional shares will be issued upon conversion; in lieu thereof, an amount will be paid in cash based upon the Ten Day Average Closing Stock Price (as defined in the Indenture). Except as provided in Section 10.02(c) of the Indenture, delivery of the Principal Return, Net Shares and cash in lieu of fractional shares shall be deemed to satisfy the Company’s obligation to pay the principal amount of a converted Security and accrued but unpaid interest (including Liquidated Damages, if any) thereon. Any accrued interest (including Liquidated Damages, if any) payable on a converted

A-9

Security will be deemed paid in full, rather than canceled, extinguished or forfeited.

To convert a Security, a Holder must (a) complete and manually sign the conversion notice set forth below and deliver such notice to the Conversion Agent, (b) surrender the Security to the Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by the Registrar or the Conversion Agent, (d) pay any transfer or other tax, if required and (e) if the Security is held in book-entry form, complete and deliver to the Depositary appropriate instructions pursuant to the Applicable Procedures. If a Holder surrenders a Security for conversion between the close of business on the record date for the payment of an installment of interest and the opening of business on the related interest payment date, the Security must be accompanied by payment of an amount equal to the interest (including Liquidated Damages, if any) payable on such interest payment date on the principal amount of the Security or portion thereof then converted; provided that no such payment shall be required if such Security has been called for redemption on a Redemption Date within the period between the close of business on such record date and the opening of business on such interest payment date, or if such Security is surrendered for conversion on the interest payment date. A Holder may convert a portion of a Security equal to $1,000 or any integral multiple thereof.

A Security in respect of which a Holder has delivered a Repurchase Notice or a Change in Control Repurchase Notice exercising the option of such Holder to require the Company to repurchase such Security as provided in Section 3.08 or Section 3.09, respectively, of the Indenture may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture.

(9) Denominations; Transfer; Exchange.

The Securities are in fully registered form, without coupons, in denominations of $1,000 of principal amount and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed), or any Securities in respect of which a Repurchase Notice or a Change in Control Repurchase Notice has been given and not withdrawn (except, in the case of a Security to be repurchased in part, the portion of the Security not to be repurchased), or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed.

A-10

(10) Persons Deemed Owners.

The registered Holder of this Security may be treated as the owner of this Security for all purposes.

(11) Amendment; Waiver.

Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent or consent pursuant to DTC procedures of the Holders of at least a majority in aggregate principal amount of the Securities at the time outstanding and (ii) certain defaults may be waived with the written consent or consent pursuant to DTC procedures of the Holders of a majority in aggregate principal amount of the Securities at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency, or make any other change that does not adversely affect the rights of any Holder in any material respect; provided that any change to conform the Indenture to the Offering Memorandum shall be deemed not to adversely affect the rights of any Holder, (ii) to comply with Article 5 or Section 10.11 of the Indenture, (iii) to make provisions with respect to the conversion right of Holders pursuant to the requirements of Section 10.01 of the Indenture, (iv) to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee, or (v) to comply with the provisions of the TIA or any requirement of the SEC in connection with the qualification of the Indenture under the TIA.

(12) Defaults and Remedies.

Except as set forth in the Indenture, if an Event of Default occurs and is continuing, the Trustee may, and at the written request of the Holders of at least 25% in principal amount of outstanding Securities shall, declare all the Securities to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has received security or indemnity reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities at the time outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a default in payment of principal or interest when due, for any reason) if it determines in good faith that withholding notice is in the interests of Holders.

(13) Trustee Dealings with the Company.

Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or

A-11

pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

(14) No Recourse Against Others.

A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.

(15) Ranking.

The Securities shall be senior unsecured obligations of the Company and shall rank equally in right of payment with any other existing and future senior indebtedness of the Company and senior to any future subordinated indebtedness of the Company.

(16) Authentication.

This Security shall not be valid until an authorized signatory of the Trustee manually signs the Trustee’s Certificate of Authentication on the other side of this Security.

(17) Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (“Tenants In Common”), TEN ENT (“Tenants By The Entireties”), JT TEN (“Joint Tenants With Right Of Survivorship And Not As Tenants In Common”), CUST (“Custodian”) and U/G/M/A (“Uniform Gift To Minors Act”).

(18) Governing Law.

THE INDENTURE AND THIS SECURITY SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

(19) CUSIP Numbers.

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No

A-12

representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon.

A-13

ASSIGNMENT FORM		CONVERSION NOTICE

To assign this Security, fill in the form below		To convert this Security into Cash and Common Stock of the Company, check the box o

I or we assign and transfer this Security to		To convert only part of this Security, state the principal amount to be converted (which must be $1,000 or an integral multiple of $1,000):

(Insert assignee’s soc. sec. or tax ID no.)		If you want the stock certificate made out in another person’s name fill in the form below:


(Print or type assignee’s name, address and zip code)		(Insert the other person’s soc. sec. tax ID no.)


and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.		(Print or type other person’s name, address and zip code)

Date:		Your Signature:

		(Sign exactly as your name appears on the other side of this Security)




Signature Guaranteed


Participant in a Recognized Signature Guarantee Medallion Program

By:
	Authorized Signatory

A-14

FORM OF REPURCHASE NOTICE

To: Shuffle Master, Inc.

The undersigned registered holder of this Security requests and instructs the Company to repurchase this Security, or the portion hereof (which is $1,000 principal amount or a multiple thereof) designated below, on the date specified below, in accordance with the terms and conditions specified in paragraph 7 of this Security and the Indenture referred to in this Security and directs that the check in payment for this Security or the portion thereof and any Securities representing the portion of principal amount hereof not to be so repurchased, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If any portion of this Security not repurchased is to be issued in the name of a Person other than the undersigned, the undersigned shall pay all transfer taxes payable with respect thereto.

Dated:


	Signature(s)

Fill in for registration of Securities not repurchased if
to be issued other than to and in the name
of registered holder:

(Name)

(Street Address)

(City, state and zip code)

Please print name and address

principal amount to be repurchased (if less than all): $ ,000

date of requested repurchase: April 15, 20
(specify either April 15, 2009, 2014 or 2019)

A-15

FORM OF OPTION TO ELECT REPURCHASE
UPON A CHANGE IN CONTROL

To: Shuffle Master, Inc.

The undersigned registered holder of this Security hereby acknowledges receipt of a notice from Shuffle Master, Inc. (the “Company”) as to the occurrence of a Change in Control with respect to the Company and requests and instructs the Company to repurchase this Security, or the portion hereof (which is $1,000 principal amount or a multiple thereof) designated below, in accordance with the terms of the Indenture referred to in this Security and directs that the check in payment for this Security or the portion thereof and any Securities representing any unrepurchased principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If any portion of this Security not repurchased is to be issued in the name of a Person other than the undersigned, the undersigned shall pay all transfer taxes payable with respect thereto.

Dated:


	Signature(s)

Fill in for registration of Securities not repurchased if
to be issued other than to and in the name of
registered holder:

(Name)

(Street Address)

(City, state and zip code)

Please print name and address

principal amount to be repurchased (if less than all): $ ,000

A-16

SCHEDULE I*

SHUFFLE MASTER, INC.
1.25% Contingent Convertible Senior Notes Due 2024

No:

Date	Principal Amount	Notation

* Include only on Global Security

A-17

EXHIBIT B

Transfer Certificate

In connection with any transfer of any of the Securities within the period prior to the expiration of the holding period applicable to the sales thereof under Rule 144(k) under the Securities Act of 1933, as amended (the “Securities Act”) (or any successor provision), the undersigned registered owner of this Security hereby certifies with respect to $ principal amount of the above-captioned Securities presented or surrendered on the date hereof (the “Surrendered Securities”) for registration of transfer, or for exchange or conversion where the securities deliverable upon such exchange or conversion are to be registered in a name other than that of the undersigned registered owner (each such transaction being a “transfer”), that such transfer complies with the restrictive legend set forth on the face of the Surrendered Securities for the reason checked below:

o A transfer of the Surrendered Securities is made to the Company or any of its subsidiaries; or

o The transfer of the Surrendered Securities complies with Rule 144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”); or

o The transfer of the Surrendered Securities is pursuant to an exemption from the registration requirement of the Securities Act provided by Rule 144 thereunder; or

o The transfer of the Surrendered Securities is pursuant to an effective registration statement under the Securities Act.

The undersigned confirms that, to the undersigned’s knowledge, such Securities are not being transferred to an “affiliate” of the Company as defined in Rule 144 under the Securities Act (an “Affiliate”).

Date:

			Signature(s)

(If the registered owner is a corporation, partnership or fiduciary, the title of the Person signing on behalf of such registered owner must be stated.)

Signature Guaranteed

Participant in a Recognized Signature Guarantee Medallion Program

By:
	Authorized Signatory

B-1

EX-31.1 9 a04-6489_1ex31d1.htm EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Mark L. Yoseloff, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Shuffle Master, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 27, 2004


/s/ Mark L. Yoseloff
Mark L. Yoseloff
Chairman and Chief Executive Officer

EX-31.2 10 a04-6489_1ex31d2.htm EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Gerald W. Koslow, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Shuffle Master, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 27, 2004


/s/ Gerald W. Koslow
Gerald W. Koslow
Senior Vice President, Chief Financial Officer and Secretary

EX-32.1 11 a04-6489_1ex32d1.htm EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Shuffle Master, Inc. (the “Company”) on Form 10-Q for the period ended April 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark L. Yoseloff, Chairman and Chief Executive Officer, certify, pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350), that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 27, 2004


/s/ Mark L. Yoseloff
Mark L. Yoseloff
Chairman, Chief Executive Officer and President

EX-32.2 12 a04-6489_1ex32d2.htm EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Shuffle Master, Inc. (the “Company”) on Form 10-Q for the period ended April 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gerald W. Koslow, Senior Vice President, Chief Financial Officer and Secretary, certify, pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350), that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 27, 2004


/s/ Gerald W. Koslow
Gerald W. Koslow
Senior Vice President, Chief Financial Officer and Secretary

GRAPHIC 13 g64891kd2image002.jpg GRAPHIC begin 644 g64891kd2image002.jpg M_]C_X``02D9)1@`!`0$`8`!@``#__@`<4V]F='=A M3SCFO,NXRT7[6<)Z;>GVH#05##+[J@RK:3E1!Z9QUXXK:KT$B0VS%FW5Z3`8 ME>M(86RC,A.3TZ_&H?\`D^>3-O4MN_/!R])V2=T=!&WD`#PX.*#Y M^+I=(VB=)W9J[SQ+N4U;$IPR5G>CM",8)P.`.16PU3*FP+K>V(MQF--P]/B4 MPD2%>RZ%+3NZ\\)'6K@]&$)6F(=B=N-2NPH+UUNBI?:J>=?7(4EM;2%(!0.XG!5TZ<5] M+L.DV=/V+Z+C2E+4ELM(DK:3VB4$D[>!R`5$\^-0Z5T3#TG!5&BR%OD*6IIU MYM.]HJQNP0.AVCCX4"CT63IL^W7:5<;C)E*9G.,I+[Q4$(3TQGIUZTAOEXD0 M?2;/M3MSNYA.QVBPVQ)7AIUQ:!NR.B1N/7CH*T;?HZDP;;+MULU))C1I[JG) M2%,-JW[O>`.`4Y\Z]O>C^0K44LJ M1O*AGD@)23YJ`KZ8QI]V+I5=E9N3G;+0L*F+0%**EDE2L=.\TN&@8A"WU2UF MX.6\0%R@TD$H\0GINQ[.?`4"[2E\DP_1:WJ";)?G37D*(+SA.]PK*$)'CYN%;;=:UW9Z3`M[W:HCO M,ME+G7A7'(Y->#Z-XK=RNDR'>01FMQ;](]AJ%-]N,[UZ8RR66%]@ELI0>]6/>5W9_2BTZ/1:=1 M7"^(N3[LFX@!X+0G;QTP`.,4'RI%RD-ZONMI?FW1YI=T;AQG!,=`82HKW'(. M-WNX!\#\:>:J)LFL+!%N5TN*H:K>HS3&>=]M3:2"L!)R.F3^M.HGHPF0I<^2 MUJ%*G)[XD++D%"MC@*B%)R<)(W'FKC?HX*9]MF.7R0ZNVM]DT%M)5N2K/:;L M]2K)Y[OC0=]%4ZYW+3+TJ=)BZ-3/BR9 M$>0S(0E*V7E(X5G((!YZ"HYGHXG6RV28>G+O-91)EI>990\&D13DY.>JDXXV M]^!6BUGI'ZXVENVNW%R(RE86OLVPK>1TSGICF@^>7\WS2VH&[Q87Y3T*!`C2 M)L1V2MP.!Q2PHX43Q[(\NM0+U/)C:47(LDN0U].WE4=I]YY2U1V1C@;B<'VC MS_\`5?2+/I25;;JY.EWIR>EV*B*MER.A*2A&=O3^97XU"OTGG;'V;B8R MI"I+)2K"HZS^X?A\:#L71J[7IMAPF6U)E+<2^"A0S@]#N(/<*U59 MI.D'UH(F:ENTA26E-LJ#B6^SW)V[O9`RH#H33BT6\VJUL052Y$PLI([>0OI[_`#;`;EIS4CDPN3BW'0MA':!`9*RA:=OO92<8ZYJKJ'TH MW>3HRW2[++2Q+;;3]).!"24K.4A(!!`R4J5Y8K8Q/1]*@J:>C79AM_Z0]>?( MAX;6K;MVI2%>RG!/C56Y^B>/*LDFT0;EZHQ*G*F.J,?>HD^ZD'<,!//XT%95 MSO:/2;"T^B]RS$=@>L$*2@DKVG_#TR!Q18F?2`_.CL3[G*2RY&>*UF,E!;.X M]DHDCE1[T]PZ]:=,Z(F)UE#U,]>&G'HT<1^R3$*4J3@@\[S@\UIKG,5;[;(E MICNR%-()2TTG0P*TM`45S(\:HR;U;(N\.S6=R!DH2L*5^ M`YH+]%9_ZRO2EI3;;/,E)/5QP!E(^]76E=UU!>FG7(D5<1$G&0VWE?9#Q<4? M9`H-I4;K[+"-[SJ&T^*U`#]:Q5EN%^6EX(EBY/+P52G&^SC,@9SM[U=?TJK' MM!U9-,B5+@0".O?0?0DJ2I(4D@@\@@]:[607J";V[]"L.RUIF/WBY+7N4VU[:LGJ3CA":#645 M`N2EJ.7GE):2D945G`3YFD4#4C]ZN246J)VMN;40[-6=J5'P0._SZ4&DHKRD MC:*57[4MLT[#,FXR`V/LH&2I9\`!S0-Z*RVG;Q(U#-=F>OH;;9&TP&P%;">A M6O')^`Z5I@X`WO5P`,DGB@]TCGW\)N;5L@,F7*407-ON,)\5GN/@*73M3/7. M>JTV`I=6D'UF:H'LXP^'&%'PI>[/:L%F=586TK"G,+EO=9#IX`3^\2>_I\>* M#>"NTJT\U6L;G%;0G;GG;QQQTIK0%%%%`4444!125S5EF:<4VY M-"5(44J'9JZC[JY];['W32?)E?RH'=%)/K?9?^)9![-L_Y1\ZN)B6:PQU/=C&ALHY4LI`_7K4/UKLQX M#[WY5W^FJ-SN6E[PEI%P0[(0RKN3J>P]]<5`PVI7[RS]HU<8U)8HK*66$O--@8"40G0/_ M`(UV5J2RR&G(SWK2D.)*%I$)[D'@\[:!#<[_`&^\K%LC.*3;D':I$4$N22/L MI2.B?$G&:BN:]2W:2+2Q878=J2@$AMY*>T'.:LTV\H%V2A>T^SN962X(Z0A+,9.\IQW''`^^J%QEZ-N\U$J&,8-13-6VMAOU& MQ-I+JCV:EH8(1&X]Y7'./"@ANNMY*VRU!7`BNN>RWV[X4I!_>6$G:D>9/E2M M*K>S(?"KS%?E[!ZU=9CJ2EK/.UD>/_[FG]IN.GK;%4A2WI#[QWOO.1E%3BN_ MN_2NKG:/+KDEVV-;CRMQR!_N2*#_T-?8+G;H<%4;3\27<"M1*I3Q"`\H]5%: ML%7W`U1OLZ;*6J._.9=?;QN8C$F.R3W+/O+4<\)&,TKO-TMUXD-Q]-V1IN.[ MD.W5,/V4`==FT9^&:86FTZ1MS)S$G/O+<*RYV+B"D_X<'C\:!M9=,'U,-.H7 M$B%7:*9&$N/J\7".@_PBK,YIJ9K*V6XH"68+"I:4@<;L[$\?#VOTI>I5C*DE MGZ=9*1@;"[Q]QS2VX]HW?(XJ]]=8*#^W@71@#WE+A+VI\R,T&CHK.1]=6&8G=$D/2.<8;C. M*.?+;5CZU0?^XG_D7?Z:!7K6[SK)/LBHLUN/'F2_5GPXT%)`4,[\]Q&/UI?8 MM?)VWQZ[2&9=OM;K:4SXC"@%!64VH2-Z M'6F5884K"W!N2.!X"SVTEP-MYQDCOH)L44M.H;6!GUM/W)/RKPK4]H2<&8`<9QL5T M_"@9]FW^XG\*.R;/V$_A2H:KLAR1-SCK^R7\JD^L5KZ"5S_Y:OE04KE>A$NP MBA*`Q'CKD3%E.=@Z(`^)Y_"I1?XC=JC39#:V5R4!3<QK1B3>&XZ6TLPU-+6I]Y6T MG;C!`\#FL]'LZI;-L@7:Z*?MT=L]O&:CNI#J^XDXR>@ZUU&H5M:/-^F1#&7V M*G>P4>1R=O/E@_?2219]-HTTBTM/2XP;4E0D>KN!2E#O5E/(^'2O;$V!,M,F M!?KJY/9D("-C<);8">_HF@OL:S3(98;APG[C*6D%P11^S2>_VCQP:=VQ^>_# M2Y<6&H[RB[7/1'L=JGA,3 M;_:7XV5[&Q]D$9Y4?CTS023M6F?.E6B(^U;U1U8>EO.#&SOV>*O]JJP+O"1* M#]ND*3:(*BTK8#VDN4>[GD\'\?*F,EVPBW%F&TSV[+11'4Y'40@XXYQXUG(\ M6;`ZWD7*(B:RPRW,=6$QTG+C M:`DJ"E'[L&D6L52CJ2/'E.2'H4ID)BPV'-J7W><8F57I4) MM+S<^"%*VMLPVVF6V_`$E1)\ZOS-8285[8MTN-&A91VKRW9&Y01Q@``#))XX MKMO5;&5M2+E-G7.6TK*7GHKB0D_!`&T>>*9_2UJ6\EU<=XN`8W&&LG'GB@HS MM4R7Y+=MLL%YR4^C>EU]LMH;1D940>3^E5W]1W1R!%@QD!VZ/NK2M;*`I(;2 M2%.#)P,\8!\:FN:+'=I:)3[5R#B4=FHM-O(WHSG:<#D4O8?5%URP_&MNT1*OV4@MJ)Q@>SD#!QXT_^E;#U$/\(9^5 M2C45N2``B1@?^'7\J"/55XGV9-M5"$>+`C2C%!4VO+J@,D@8SW*XZX&:-96^[7'Z)3;(C3XBW!N4Z7'NSP$=PXY MSG]*STO2NHG&[C"5;HCT5ZZ.S6'FYJFGV]X.%).,`@X'QR:#<1+W;9S[3$66 MAUQZ.)+:4@^TV3@*\LU?K/Z=B7RW-08-P1&>:9@I2[)2KVR\#[N,>[COIW(D MQXC)>DOML-CJMQ82D?>:"3%%4DWJU+05IN<,I2,DA])`'XUU-YM:TA:+E$4D M]"'TD']:"YBN;$^`_"JAO%L'6XQ/]=/SKAO5J'6YP_\`73\Z"X4@]:[M%43? M+4#CZ2B?ZZ?G7#?K0.MSB#_UD_.@OX'A1@>%447VTN+"$7**I1Z`.BK!FQ$G M!DM`_%8H)2A*A@@$?&J=QDQ+9"OP_\`BF?_`'BJ%X3: M[Q;GH$B6UV;R<$I<`(/<1Y4&?%DN5_BOW*Z,A*RE1A6]W"FD?NE8[U&F>E[2 M_;K>]*N,>.S/E++DCL4C:,<)`^`2!2]I6H+:G8SJ"VW!L<)]:2&EX^*DDY_" MK;=UN,E:&9B[7'84?VJFI>\J3W@`I'6@\*O=QN#2G;3%BQX@44B9-7C=@XR$ M#J/,BJD2[7)FXH-PU+95,)5^T;98(41Y[S69U#;N;*PC)*U+&5J)))/F2:![7:7?6&SQ1BJ'T_9OX MO!_,H^=<^L-D_C$#\RCYT##`HP*7_6*Q_P`9@?F4?.N?62Q?QJW_`)I'SH&. M!X48'A2WZRV'^-0/S*/G7/K-8?XS!_,)^=`THHHH"L]KC_JR]_.G_>BB@PB? M[DO^44-_W=ORHHH)&O>^ZK".^BB@M1_>-6D^]110?__1TES_`.C'ONK`/?WE M=%%!*Q[A\ZL-T44%I'2K+5%%!?9_YO[ZLIZT44$R:LM]!1100O\`O*_F34ZN @B?Y:**#J.@J5-%%![37M-%%!*BITT44$B:E'2BB@_]D_ ` end GRAPHIC 14 g64891kd2image004.jpg GRAPHIC begin 644 g64891kd2image004.jpg M_]C_X``02D9)1@`!`0$`8`!@``#__@`<4V]F='=A`H'45R#V1D)I>8K\.WOJQ*Z45S"SW3]:`X?PX^-(M=**Y\P_A^M*5G&R?K2 M)3Z*YEPC[OUHUG'L_6D*Z44PK/X?K29D<1(J M=2FRI>2M`.RNFV?"N7"?%3W$\>1+%N,:,AS0TI2\ESSQC:DTK245SYA[)^M! M<('L_6DTKI17(NG'L_6LWQ-QHFQ/1H<:*)L^2L!#`N,Z[Q+:VER8ZEE*UA""H^TH]!2:5.HKD'2?N_6GZD%G-N;\15 MK;=D*6^PSSG@#@N*TA*01YJ5]*M>%7I4BPLO3'2X\LJ4HYS]X[#RJOBVMEQC M[:+5CB)/7DI)VQN=_^=356=%%%9444TKP> ME)S/(T#Z*9S/*DYH_":L'2BN1>T@DIP!WS46VW5NYP$3&6U);0EQE:%#*5)(-19UR:M\)Z6\A6AI)4<=Z@IXB8>L+MT6PXTV$JPE6"I M6#C;'B>E)I4/AF]-29,RT+>URH+JDX)RHMY&"?G6CK&\&VI<:Z76Y2/\:?6$ MNGMJZD#R&0/A6P!VK6H=28HS14`!2TE%`NV*!24HZT!BDQ3J;0!WH%%%`HWH M[T"@T!66XL<E7[B)NSP"'?1UE*6P=EO8SD_V4@9]];6P6INR6IJ(DZU@% M3KG=Q9ZJJ\1/<=;CLJ<<6$H0"HD]@*PEF6YQMQ0NZOH/V7;U:8S9]E:\^T?. MNO'EW?E.L<+6PYES2`[@XT(\,^=:BR6EBR6EB!'&$MIW/BKN:"RHS5/=^)[; M9G4,/N*Q'93K<5\!4-KC6&9K,27#F0%OG#:I+6E*C[Z*_]#UN0^U'CK> M>4$H;25*)[`5D^%$.WNZ2N)Y*"$N?FH:5#V6QW'OIG&$Q^[S&>%(!P[)`7)< MQ_-M^'QK5P8;,&"S%8&&VD!*?=6V,2.FU&:,"DHIWPI;`VF8!(7I<;883&;QT.PU M_7;X5>L1V8S*66&TMMI]E*1@"J.=Q3FVR0,_S2LCX4MF_P"Z(G_HH_8*[.)U MMJ1^($4VWL&+"984H*+:`C([X&*SJI5%)165,5[5-/C3E=::>E:Q!55.DR#Q M!;XC*BELH<<>`[@``#YFK2J"3-:@<5KD30IEA45#3+RDDHU:E%0R.GW>M5$^ M^RE0;',?0,K;9.@>*L8`IUFC>AV:&P?Z-E*3[\;U6WY1N$Z!9VB#K=$B0#V: M0>GQ5I%=OMR'`BP4R'#KE.\EI*4Y)5G'RH(?&4I*(T>(H^JZI3BAXI1N!\5% M(KG+;3$8L=K<(2@'FNCMA"<__+%1+N&;S^4"V1.8KDPT.*=`]E:QI5H\^B3\ M*[<:I5Z7:M"TIY[JHZB>R5C.<_2A6AD7-F/<(T$ZE/2M10`.@`R2?*IF:QB M8=Z=NJ.)&HP?>4E;2(CCFCEM'&DY\3@D^_RJ?,1Q.]$$M+C,=UK"Q$9.KF;[ M@J(\/"H-(*6LXWQE`7I92Q,,Q1QZ(&#S$GSSMCSS5A%-T?<2])"(K6X5!9T#K3<[=Z<*!GF`2_S%I'B0!M55Q'PHQ8[ MA;IUR=GW6WZU"5S7"LI.-CCL*O8W$/!-LM+JK4]$CK2V0D)1I63C;MDFI%K; M:T^SJWK/<5\3LVB(J+'5S;E(]1AA!RK)Z$UG.&."6+C88URDSY[,U\*67&I! M!P2`-D('59\!5+-X^@+*8MC"KI->V;2T/52?,] MJSG$/#\EQ,%V^R1(N-PEI:0E*B&F$=2`/G\Z&M#P;:2ZI[B:>G5-N!U(!WY3 M?8#SV%3.)^)4VQ*+?#4%W25ZC#8WTYVU'R%%]XDCV1E$2&WZ5.6`EB*WN1X$ MXZ"LBQJX:XT9NO$\@ZI,7@*J/RES8T;ALI*T)DEU*F4GH[`XJS4KT+@2VR$P7;U<#KG7(AQ1(]E' MW16M&U-`0H<>WQ$18K0:9;'JI';O7>BEQ0)3T=Z M2G([U-4ZBBBLJA2K@Q&>+;G-U``^HRM0^8%4O"<[@ M`;^_/PJ0KN+_`!>T>9^JKI?M^/\`HD[]654*9=_2IEOB175-LRG%ZWBDIU)2 M`<)SXYZU9M7.([+,)IWF.H3J6$@J"1YGH*0NN(O$;F:O1)85T"O159_9707E MG]'E_JZZJ'#>+H^[/MLL,LQU%##1'JR<'"BH]NF!72+=Y%]=,6(E40M9$PJ3 ME32OPC.Q/G5A=69O#/Z/+_N%4QN^QGM7*9DN:3@Z62<&LS?F/1+\RVMJMU.G5[@=ZFE)]JYZ099]S?_P!TOVHK^KYG]V/WU,"`G.D8 MSN:=4BU`^TW/ZNF?[@_?57>^*EVIAK1;)"Y#[@;8;7A.M7OR:T9&:R/%BDGB M?AQ&D*/I*B`>F=-7,2O_T=#<+]'N?!MY;-K=B.M-K1(0E*0$+QMD]ZL>$"FS M<)P&FX1E6_P#SK"RV9#U\NT"Z79N/SF529;;2@D%8'JHR>NU7 M]KOLUVP\,P(DY+*I2U!Y_8Z0C[F_0G-=9XQ6T^T^:A07;9H!.,*:!R*@J@VA M;G-/#BBO.<^C"LS<>-)Z^)Y%KA3&TQ^=VP^FVU=RFL.NV MZ'K?6<;/R%;[^*4["O0>,;#*XBM+<"/(0P@O!3I5W2.U9?CUR)P[8+99F&<1 MUO`K2GJI*<$_,FF)I]FD/=6E2B!U`43O[A5RW MQ%:.)$JBIAHF>+*U(U#X$YKSZRW>,/LV2U$+S=L!*DA24+4_-6W6 MHEIXCC'B6Z79YK5E0CM9?;24)3UZJ%4,.%<;Y-OT@P[:WH=*WER?SG+('1)' M;`JCLTV$RAWG6^WR%HBU(C)5;9+DF23RXXQJ*0,D[$U@;I?H%QN]L8<@R(UNB(+K3"&M)? M7MC2,=*L+'Q`U>N*EWV[+9@1X3:F6D.+^]GS[XZU@K?V6_0;]#$B$[G&RVU# M"D*\"*L+Y:H5^:NO#,E3TMQ83(CLH)0ZGS\Z]-CO%^.V\4*;+B`HH5U M3D=#11,E,PHCLF0L(::25*4>@%4'#T5R3*>XBN*.6])&EA*C_--=OB>M<[P3 M?[VU9&R?1(Q#TU0Z'\**@<4S576\0N%X).%+2N44'V$#L?\`KPH-P#D9IV:Y MM(2TVE"1ZJ0`-Z>-Z@7-/37.GH[U-4^BBBLJK;S:V[JTVTZZZV&G$NIY>,Z@ M=NHJO=L9CMRW(X,J5."6WG)*\#1C'8=O"NW%:%KLZ@TLH7S&P%!13C*P.U5" MK]<8:9RUI:6VU+4TDZ5$-)">JN^.F_G6L1H(UL;BIB(:=<2B*V4!"3ZJL@=? M&NTAV2VI(CQ@\#U)V"5RTE+:!(^E2;1<)$Y+Z947T9QI8&D+U9!&1^[X58]304TR)(GL!B5:6'6 MP<@*?Z'Q&VUC0[&PAH?AD`9^E7I4`H))`ST'/T6)_?J_AHYMX_1H?]\K^&K"B@K/2;IS>5RH7, MQG3S5';_`':H;[;[U.OUFE)CQ],5Y2EJ2LD)V[[5L`E()(2`3U/C7F?Y0(][ MN/%4>U6N6ZE+T?66^9I0,$Y)JX:LKWPC$XCF2%/&%Z-5=JLXX4X4N#R[C$1==)4)"#K4GP2?')\JXVG MBB]7%V<)^J*ZU;U%F)H*2\_K MFI-FX?\`L-"!#MMN#P&Z^8K4/]8C)KSKA2`DW%J?.?:?D-LN/-QM:EN+6,D% M785:6?B%R);ITQ#%RE7R2VM2]31#;6/#RQX4TQZ1S+N!_B\0>]Y7\-8SCBSW M&2W*NTM,4L,05-I0%$E*BH;C(Z[5&B<03+I;(%GL$BS#_,!;WM'6<:@5 M#L14ZW66(A33TCB!B>3G3SIB@E6V#ZOTKC1+A,L<[)T-`> MUOX_OK-\3ANU\2)MS,*.\W$BI8&MDJ!.,E6!WR:TC=?]GUL?0'$6VW%*QD%* MEGXBLC$9MTV[.P8EY59U9]'<9)60\$G\1Z5ZK8'"_883BF>45,I_-Z-.DXZ8 M[5YQ,C\,?R]O:;NI"&"P-/\`IG&=..]97>-I9^'WK+"5$@&(&G"5**@M15GQ M/>N"+!$MTCFABTM.DE8):.KS(R:P37$-RCK:MK4F2;4TOTEIYU)0ZMM&^D>1 M.U0.(AO/[=,XB%C<89MCOHJ=""^TQAQ* M;+$CP+.J)!;<2EB.4_G%G&ZUGL*D]7-;>1Q7PW:LM&4P'$ M(U)0T,Y!Z`8I&^,H;]IERPVXR]&V+#HPHD^R/C7GMLX4N=LN,>9=;:M$6,A3 MSNDA6K1OCX[5=<,1WN(N)S=GSJ;)#[B1ND=FT>\#?XU-Q:TT4#AKAQZ;)!5, MDGFN@[E3JNB:KOR?6QUQV??9BN8_*=4A*O('UOK^RN7%EP=N$Y4:)A28JPRW MOC5(7L,?Z(R:V5J@M6RV1X37LLMA.?$]S\>M14T4O2FBG"H"GM]Z93V^]3>* M?1116519L*/.:Y,IH.MY!TGQ'2H:^'[4MQQQ41.IQ6I9"B-1QCQ\/G5H>M(> ME:1'9AL1UK6RV$%8`5@^`P*9+3,5I]$=:0/OH M1O\`.N(%\/5<#_=7^^K3%%!6%-[_`,[!_NU_OJH6;K/XB5#=`Y:L* M4HJ`/7MI^M:JJV?9FILE,D/OQGDI*-;"])4GP-4&6$.OZ%.1V\GV20-R>N*NXW#=O95S'4.2W/QR%E9^NU0^*82C M;XYBVWTI;4A"PA*1A'B2-LC&U$U__]+66:W.KF*DL7AJ5.;0<\W4O3GQ`5CP MZ5,?NMV8>]'%P@OR$[K:9BK6KY:MJD6IWDK"&+?)6ZL?G'5L\I(\M^WD*Z2[ M#(1!QV-;9);YEVN4!$AB7"PH$95'6""#@@C5MN*EI M:OFD!4N"5=SR%?Q5UM5O3;8+<8*4X4Y*EJ&-2B9J=VHBL+-[_3(0]T=7 M\5)R+V?\OB?JROXJM*!UI15^CWO^L8OZJ?XZ7T6]][G&'NB'^.K.BE7%8(EX M[W1C]4__`%2^AW<_^*M#_91_%5E0*@K?0[KWNJ/U8?OK/W'\GYNMP7.E7N9S MU)T90`D!/X0!VK9CO28JT8EG\FT",^RZW)>IJ4;1<=]-X M6D$8P(Z*NL"BE%&S99K!&B[+2,Y*4QT`$_`5T^QW@WRQ,2$:M6D1V\9\<8ZU M;XI,4HK1;YO>YN_W2/W4TVN1K*_M%S41@GE-Y/TJTI#2BM5;92T*2;K(P1V0 M@?\`*JB%P';8+RGVW75/*45%QU*'%9]Y!K4XI*"BFIF.R7%O!LM!10C MV226W((45M.C!<3CJ/$&JVV%OAK@[TPLI M1+F*+@:3MJ<7[*1]*K?RC6^/Z?`G-,*=EJ5^<:1_2-IW.?=4VW2D<3W`7M8T M6NV@\AI7WG``2HCM@;"M(2S6WF7^/%<',%K:YTA74*DN;Y]X`-;8#:L_P>TI M=L=N3J2';BZIY6>R>B1\JT0Z5%P"BBD*DI!).`!DDU`Q]]J,PMYU02A`))-1 M[/Z2ZEV7)U(YZM3;1/L([?$]ZAH"KU*2\=H#2LMI_P`\H=S_`&15VCOC8>%3 M5/HHHK*FJZTF:576DQ504&CI2&JA1TI,4HZ49H$Q2&G9IIH`4N*!TIQ6#Y]J\]AR;C9V M[A84`&++D&,'%KQRU="?BFO9B-Z\XX@X.E7#C"26T+3&D,%Y*T^R'0,#/RK6 M:Q'H$2.B+%;CM#2AI(0D>0Z5W!Q5#PO>?M+A]N0_ZCK(+;VKLI/4U'LW&*;O M?';>F&I#7++C+Y.SBB,VI MF(T'%-)W2#I0@#Q/;W5.A/\`I,9M\H*"XD*TGM5$EIIF(D2$F/#1[#.E M0(.E%`Z450'I24IZ4E`4444"8H'6EHH$/2DIU(:H2FJ`QTIU(:#S.5)]2#P[#6PM MN0DR%+ZN.J)7\#V^%6U%9NK%=%LT:(=2-;B_QNK*U#W$]*F;5$4LK0VL'*"=R`?#-%6M%053][C,Q6ICNI##CG+"B.AS@$^7 MG2IN\=3[;)"@7"YI)Z>IC/[:J&V=:TQ%K4MA#V-!Q@Y).^U=F;>S$E1PRI8# M+CX0"#H4`A)`]? M.>F_]DTEOAM-W%R4"HO.-`*45==_#X54+BER7<)"Y#REMO!2,D>H>FVW@2/C M51:GB)E9PS'D.Y25#2D;XQJ[[8R*1'$*%F.=90 MU&T)U*R=B#G?OD"N:;5':2U)0I:7D-N87D=2=&C MSIU%94W3YTNFEHH&Z:732T4"8HTTM%`W3YT::=10)BC%+10)BEHHH$HQ2T4" M8HTBEHH&Z1YT:13J*!ND4:13J*#_U/8](HT"G44#=`I=(I:*4)I%)H%.HI1" CB6F'!F2IC#92]+4%.J*B=1`P*FT44!1110%%%%`4444'_]D_ ` end GRAPHIC 15 g64891kd2image006.jpg GRAPHIC begin 644 g64891kd2image006.jpg M_]C_X``02D9)1@`!`0$`8`!@``#__@`<4V]F='=A?$]*<'3\-+[[D9^1$[=14XB.YL23WG M&.#YBNC=I:;EE]+KZCL[,(4O*4CR![ZVPK&I+RF[?)VW>8JRTXI39!2K!0HK M`4/YTZO4]VTZ27)C)*74LI"3^B2`,_"N"=#6SU>JVB3.$8KWEKMA@JSGP\>: M>>A,KM_H+P4\ULV*[0Y)'F:BDL*PI.7.`X^VF\73S<,M(3<)RF&<*:94Z-J,=.@R?C6 MC^EH\FTR;>],D+3)=4M3A*2ODYQG'2JA3J2YS8%V$I;$J9;3'"2(2SO95UWD M#Q'0U$OFED,SY#C$MITN'M%`.`(R-PSU%6%K326$`IN M!GBEU]M-NM#$>\N2W(Z+4DB.TE0",D8\._-456[WZXV342HC%X/HTIQ27&W5 ME78`''O3D405J21C'3I6\#3XM[4%IJ6[V<$;4)('*<8YX\*A-Q7[9,D:K;F MOQ9\V*\A@(4TEY2`T_W\?"M]/7%^]6VWPE39(F,N+]+*7CO2$D_2]YZ9\ZLL M.TQH$Z7*83L,L@N)`P,CO'OK%OLT2W2YDB,@)ZVA5 MRN>$O-HCK#JBEO*2HY.9=LN2VYSLY,3L4I9E1%$I0OO+GQIFQI% M^/)FR6[H>VG+2IQPM#((!`VGN.#UJ0O3"UL/,&X.K9?2E+B'$A708R,]":!+ MJEV=&ML*?'N\I*I4UAL=F\I*=B@HEYTRFZV^'!3)4PS$<0M.$Y)*>!_.FO8NB-V1<':;`DN;>_'7K4%)L=] MGV^?+M\V6[+,A':PE.$DJRHC:/,>%(%:GU,;3<7FY3P7;W/GI"U';@K"0E(' M&>3GX59K_&198D%T.B3=D%34(;<94H]<>5;Q-()?T]+LHN?:-R'`9"@C*TKR M%$9]XJCN^]/3<[+$;GR@B4PX7<*R21MP?+K2R5JB[MZ>NQ$O;)MDTL)>2D?. M)!P,@]]6!>GY:I,.6B>$O165-)/9<$*QR1GK[(K@_HIARS/6],I>Z2_V\A]: M0I:U'GX#-.#EZYN$&]VZ"])6\Q<6-P*@`IM>,YSX5)T3=)MTL[DN=*4ZOMUH M&0``$JQW5V8TX436YTB1VTF.SV+!+>$MCQQGK\:B0])2X-H>MD>Z*2R\I2BH MM^VDDYX.:BH+]^G-:KN=,.IN\RY)E(4N6$A;:VLI&T``CGKQ4XVU\V1R#Z3O><0I!> M<&?I9SQ\:BJWIF]7.\QX*O6+JI&T//I6V`A:-V"`<=>*87[5#UKO%O82@F,I MX)DN#HG=D)'EX_96;?I>9;H<6&S-:#<51;S<;S%TO(O M;%W2I+;""T&DI*5**@"3QYTR;L-R[((=FLR,L!EQ+S)4E6/SNO6L2M+**B)EE3<4H+\JX$ MJ<:?22&U$8*DXZ4$6[76_P`"T-R(\MF0\T7%O;0%)4VGGC`ZXKC=]7S5-V=^ MV.I3'F+:2\HI!4"L9V^&0!R*8V_2[UM@PH3;S+C+*5)>[1LY="N%=#X8ZU'? MT5_D8,&&^AIJ)*$G"+=]2W&WWNXPO3MK<6&'FLMI)6H]W3I M6TC4UU:CZ?>=?0SZQ)#X"00G`'(^VI4S2]PD7J9<&Y,8"9%]'6E;9.T>('QK MBYHZIEPU9<[>J6EZ+"2V6R$C*MR< MG)%6NJQ9K'<(.II]U>7&[.=LW(0593M3@=15GK-:@HHHJ*****"H1VY]WBKF MM25(>5-QM!P$MH404_'&:BW:7=K#9E),DF1,G%MMQ9SV2%*XQ\*?6:'(MPD1 M'49:#RG&G01[042<8\14;549R;!3$%J=GMK.XJ:>2VIL@@@C-;82!:7H\F,M MFXR%);5\ZEY>>T&*4HU*HZT1%W(]">0IEM6_JXDY-.`:MTIY3$9QQ#9=6E)*4)ZJ/A0*M,W5=WMBG'D_/,O+8<(Z*4DXS\:0W M_.I-71+`G)AQ?GI92.I(RD'XTS@-(TGIB3*F$E04N4Z/!2CG;QY\56(\]6F] M%RK^^0+E=5[D@G/4\?8DDU1V=(U=\H;;"<&WVH%9QT4KC^HKT4`#@"JA\F]G M]7Z>$MU/^8FGM%D]=H.$_P`.?C5P!H"@]*,@#-*-3WD62RNR4C<^H]FRC])9 MZ"HJE?*'JQYVFK0BQ6&+;T\EI/M''51))_G32L@H)Z44 MHU/=1:+%)D@_.["EH8ZK/`%%56X7)N5?YMZ=W.1+,CLXR0,[WSQQ5JTO;56Z MS-=J5JD/?.O*6>2I7)_G50L4%R=/A6E!S&MV),U6?RCRN=I\<5Z.G@5:D9`X MHP**,5E6<5C%9HH"LXHK-0:UG`K%%49XK!HHS4&**#UK1QYME"G'%A*4#*B3 M@`51L:X2)D:(G+[R4<9P3R?AUJ!Z7*N>?128T0#\NH>TOW#N'G7)M]#JBS:6 M@^X#AR4OE*#WG)^D?=0-8]!\B#]AKO46##$-HI*RM:SN6L_G&I5 M4`^D*Z5R!&?&N,6Y1YCSS;.Y78JVJ5CC/@*S5C__T/9:*UW"C>GQH-J*X2)L M:*V5ONI0D=YJ)_B&T_MJ/L/]JN"<1[5'_?%!ZT560.:.^M5!7&T@<\^ZLY[J M#&/&L'C@5FHBKE!W*29;&4G:H%P#!\*HJ>OG7+A)MNFVCM$]WC8ZYJGW MR0=7:OAV>)N$%DEEH@<$)'M*'V&LWN_R;AKR:Q;DI7(>0(D=S=PUXJ%;Q)3& MG#/GQMKZX13#BE1X[0_E%'XYKI(SKUQKLF$(:3M0@#V4YKM7D5Q>M85<"<8/G7EFLIDW46 MMXUFMBB1$()4!E*',G)/N_K4W46OITFS./6."\TC;\Y)>1M[,^`'C3_0MC%K MLK$]4)/?3NVQ[7H_3K;; MKR6&FTY6XH\J5WGSYJ^(=K6EM"EJ.U(&2?"JFK4MYO$I]K3<1E<9@X])?40E M9\!XTDU)KYV=;EQ(EOD,,S?FV)2^`KD`_P`*<2K_`&;1%B9A!Q+KS;>`RV^1-6,)83WI2.\CQIY\G-KV>L[FZX9#KDI;2'E M_24D'K\<_P`*?B+-IZR,V*UHBH]MP^TZX>JUGJ::CQ-8`.*VK-:@Q6:QS6!4K MO/E4R+I_>4R;R\9D@=ROH(]PK6XW0MR?5EO`#HP"&Q]'/E55*3:WYA!N;O:) M[H[?LMI_J:9M-AM"4)2$I2,`#H*T05,QT]NX,I2-RB<5QFW./;V.V>7P1E(2 M,E7?Q1$LUC(Z>-01>[<8J9*I324J2#C<-W/=CKFDE]FW";`V0MT-I]:6T.*& M%KR><>'`-!/D3U720NWVY>U*.'Y*>0V/`>)//NJ>RB%9X2&D8:91P!GK_P#M M0TJ@V"WML1T$E60VTCZ3JL_]\U!EQ75.-R[C/++Q_)1VDA6WW>?G13)NZNN3 MT1C%PE?.=W*1XD=U2ITYFWPW93ZL(;3N/GY"JS#6VJX*,MN0SV*\ML;%%;A' M12E=_NJ3?X=RNL=C_+YB(>2MR.E6'%@?]]*N($R7+@4J6L(6Z`-Y^BRD]P\5 M&F/J:-Y_8*X,VMV;&2'&_04(5N9;002GS5YU/]`=_;'?X41//4UC(Q4!R1=D MN*";>RH`\'TG&1]VM/2[OT]5L_\`VO\`IK*F=8[^M+?2KM]6,X\?2O\`IK(D MW6V?3=B3&FMW5R9"NT%*EJ3VFT+'< M14R/\GGIVATSHZG57!X=J$*7[*AG^>*M6J]./ZFA*/J?L)P3A#X>3QY'Q%-[ M:;E;[7&B&U*4MEM*"4OI`R!6OJIBI675EDL3"&'[%(@O)'YC&3GWUWBKN&I] M8P+L+2[%B1$*&]X8W`^1JVJ?F*(W6;=YEU']:P]=949DK>MO9-@?25(0`!4U M<5D`@YV^ZID'1IY9/FMK\5;"Y2_J:7]YO\5-7(XW[34._6HP'4EH)Y;4WQL/E5:MG MR5PF)@D7"6Y+*5;@DG@^^K;ZSE8_V-+^\W^*L>LI7U-+^\W^*FF.=Y0F!IJ> M8K:6^RB.=FE">AV''2N.C(WHVD[>#P7&4N'(P;_`!4>LY7U-+^\W^*H&>:,TN]9R_J>7]YO\5:>M)6W/J67[MS?XJ!I M0>*4^NI&<>I9O_)^*CUT_P#4LW_D_%4#:C(I8U=W%Y#ELF-_\24_T-*[AK!A MLJCQ&7UO[MA^940WY\=?=5#>?<.P4(T9';2G![*/#S/@*U@V]$4KD2%]I)7^ M4=5_(>`I5%N(C,J=AV^9,D.?E'5ME!)\\]WE78NO21NN#,E2>]E#>U/Q.>:" M5(N;LDJCVI"7W!PIU7Y-/Q[Z66UN18Y,D2[>_+?><*_2V4A6\=P/A4^!>XK\ M<*A0G_1\D(4EK`5C@X^/%23=/]SDY_\`;_\`VJ.4F$_=V-KZEQFCRE"?I9\_ M[5O#M"(SG;/.KDOD8*W.X>`'05J[?H[+B&G(\A+CAPE/9\FMC>FP2#$EY!P? MF2:#_]'U1NU6]I[M40F4KSG<$#K7*[OPHT`OSDI6AL@@?ZN['G7)>H(Z"$JC M2P<`X[!1_B*47-V)=)L=R2B:8[`)$<1EX4H]Y.*VC>$S<9SYEI"4ON<=HKE# M"?!`\<=33R%:V8JB[E3SRNKSIW*]WNJ*W?XC8"$QI:$]`/1EX_E4@7J'T';< M?[NO^U$3MO()Q\*SP?$5!]<1/_7/_P#.Y^&L"]0MP22\"?%A?]J8)^**U+B$ MXW*"<],\5TVF@K.HFTKU1;DK9>>0IASZK)M0)=F$2UN0844RE3ED2''5 M\C/YQ\<5(5-BSYDE:%"*@L*=4DN!SHD9]K'F13/OZ"H:+:VT(J6G%MHC9VH2 MTM+B3WI((J/=)[%KMSTV0 M0&64[E'^7\:\^T7>&+!:I,E^/(1$ER5&,%*&`GNQDTPUW/DW72_.,_&J+?\`T=5WF6Z[ MW)UQ3;X0V\3N2AL#]$=35]5\I=A:B;8:'WG4H^;9#9Y[@*\Z@*-ZU+(FR+.] M.6ZX7/16AM3G_4>X4PV&NFM.195P5=FDO.6BW!3R5+1A3I2<@`5;4.ZLU9N< MC+%FMZCE"BG`+5$V%.QE(/&.GV5K`U'J&QQ8&GFK M(5S&V@M6]S.Y'(SCWBA)B9-.I=%,(N$BYB[0MV'FEH"5#_AJ_,.)>9;="<;T M!0!Z@'NKQQR^3+F^FY7EIZ0H/EN);T#V%.#KGQQ5RM_RCP$6_M+PPY!D-K+: MVDC<$D4Q=7CW8^S]N:Z6W6=HNV[T);SNWKAOG[*F M&Q8,"LX%5E[7M@C2S%DRE,.I&2'&R,>1\ZZ'76GDQO23/`8W;`X4'!/A3#8L M1Q6,CPI##UE9+B]V4*49"P,E*&U'`^RDK=W+S&_52/W*JSZYC?JI/[E50U/XQ6>[I2_UQ&_52/W* MJ/7$?'Y.1^Y50V)YY%:(:0WNV)`W')P.M0S>8R4E1;D`#D_,JKBC4MM6<;GQ M[XZQ_2AIH3@9S2J4X+C*-O:.6T; M6I(QQE/'QH+!'>MD%25,M..O/+"-Y!*ED^9]W=363):C,%UYS8A/))'-5Q]V M$H-/HFNB8VL+[54992>",8QTYKJW*A*)[RH-O5R),A3492GG6SAR7( M)4$G_2GIFFT9E]EXE4]4A"1A:%I3P>[ITJN6O4[,.TQX@A3`^E)W+<84$!1/ M))QSUK-KO4=A4YJ9)VAQQ1[78K*LC'''&*(R/!Z<&@TU3579J5'2849))<;*]W:9\NZK'BLVJK][5*3?;<([RPA27"ZV%D;PD9'\: MA0-6+7;XKLF,2[)2XM*4K&"`>@SU/E3N=:53+G&F"2IL1TJ3V8'"MPP:4+T4 ME5J3;?3UJCI!`WH!*1G(*3W$>-('C,E;LE]I4=QM+)2`M6,+R.ZNY`ZXKDS$ M>;D/N+DJ<;<*2VV1PW@2F[-25**X8$6WQ1RE&W@JQX\&K3H2=(O4A84^[Z'"C MML>CK'TU$&+E(=L4ER M(Q-"2^/1UA2%`=4\>^KL3"?TI$?5MW;M;+!E276X\102-K>0-Q&/`9KTNRVS MU7;V8[CO;O(3AQ]0]I9JG3=*-Q($)5B]);GP7"XAU]A9[7)YW'%=K?)UJ;@R M].>:;C!>76VXSGT?(8J:N+VH;0<8`'/A7CAU@6=0ZAD2(ZG7G$+CQW&TY#0" ML#/@"<ZO(F],3D)COI8FYF2%(G-*:5]#=G= MTZ'%(.C5Y8@7FUKBP'+FU`B)X91VF'5<;>>)2IQ"@G:#QCBG.F+9Z19[N;S&>C2+L MZ2XDM*RD`Y'=6O$B7I!MNS_)ZS*F1'9"5[G5,-HWGE1QM3_&JXC4UG@V&U673\B3(A)?;5*(*T%L[4^2>.!5=UO8'[ M[>XDNW)0A*$!+BU,J!!R3D\<]U66:EE1CK&9$@R9SD"+;VW6BB''2WAU2NY1 M'Z/G3ZS7>SZ4TS$8D36UR%I+A:9(6XM2N>!U[ZX1M+Z?CPG3=WWIDF0G8N1( M024Y_0R/9KM9[?HNQE3K3R7W4JQVLH;UI/EQQ4N>+(WT:Z]=;Y>;X['>92^I MMMI#J"E24I'-;ZOT[$2RN]Q)*;=/CIW=N%!`7CG!\7D! MN/SM\U8Z"JY&8=U2^).J+LVQ&W;FX++A3G'Z515QTE>)%[T['G24!+JLI5@8 MW$=]/.?&E4>[V2,PAEB9'0VA("4I.`!77U_:?K!G[U9,,.ZLTN]?VG'^T&?O M4?X@M/[>Q]ZHN&-8VU`_Q!:/K!G[U'K^T_6#'WJ)B>4UKMP:A?X@M/U@S]ZL M&_6GZP9^]0?_TO7\<\<4;0.X8'E2[_$5F&/_`!*/ST]NL'4MEZ>M(P/AV@K3 M,29LQJ"QVCF5$G:A">5+/@D=]1&H."/<*TIB0B+%)R2EI).5'/`I M6SJ1M](#-MN*E'H#&*1]IXKEZLM0K4C;F\2 M%H'YBYIV_8"*(8MRU(CJR6PS)*%+2%!*4I'))Z56VF M-0:J3VF]JT0%G.&L*>6/?W445J7&?3ZR:7ME@84W#;)4LY6XX=RE^\TR]&:_ M03]T445-JXV[!K]6C[HH[!K]6C[HHHJ&#L&L?DT?=%'8-?JT?=%%%%'H[7ZM M'W11V#7ZM'W1110'8-?JT?=%8,=H\%M'W1110:&!%5UC-'WMBM3;81ZQ&#_\ M2?[445=&/5D+NB,#_P")-!M<$_\`DV,_^TG^U%%-')%CMR):Y/HC14M(3@MC M:!Y#%=O5EO\`V&-^Z3_:BBH#U9`_88W[I/\`:L^K8'[%'_=)_M110'JV!^PQ ;_P!TG^U`MT%*@I,*.".\-)_M1102:***#__9 ` end -----END PRIVACY-ENHANCED MESSAGE-----

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Continuing Operations –

Discontinued Operations –

BUSINESS OVERVIEW (In Thousands)

ACQUISITIONS

DISPOSITIONS

CONSOLIDATED RESULTS OF OPERATIONS

OPERATING EXPENSES

OTHER INCOME (EXPENSE)

SEGMENT OVERVIEW

UTILITY PRODUCTS SEGMENT OPERATING RESULTS

LIQUIDITY

LONG-TERM LIABILITIES

CAPITAL RESOURCES

STOCK REPURCHASE AUTHORIZATIONS

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Resolution Amending Articles of Incorporation

“Material Adverse Effect” means an event, transaction, condition or change which has a material adverse effect on the business of the Company in the amount of €50.000 or more (a “Material Adverse Effect”).

2.1.2 CASAG herewith also grants its written consent to the sale and transfer of the Unlimited KG Share, as contemplated herein, under Article VII(1) of the articles of incorporation (“KG-Vertrag”) of the Company .

(b) Closing Transactions. The Parties shall consummate the following “Closing Transactions” on the Closing Date in the following chronological order:

(i) Signing of this Agreement (in Vienna).

(ii) Signing of an application and filing with the Commercial Register, the application substantially in the form of Exhibit B (both in Vienna).

(iii) Payment and receipt of the full and unreduced amounts of (x) the Limited KG Payment as set forth in Section 2.3 which shall consist of the Cash Payment, and the Shares Payment, and (y) the Unlimited KG Payment as set forth in Section 2.4.

The Limited KG Payment, is set forth in Section 2.3 and shall be delivered by SHFMMS to CASAG as follows:

(B) SHFMMS shall cause the delivery, in New York of the Shares Payment by delivery of a stock certificate registered in the name of CASAG.

The Unlimited KG Payment is set forth in Section 2.4 and shall be delivered by SHFM by intra-bank funds transfer of immediately available funds to an account or accounts designated by CAI;

(iv) The Lease Agreements and the Patent Transfer Agreement, shall be signed by all respective parties to such agreements.

(vi) Registration of the Buyers as shareholders of the Company in the Commercial Register.

All Closing transactions described herein are part of the Closing of this Agreement and the transactions contemplated thereby and shall be deemed simultaneously occurred.

2.3 The Limited KG Payment.

(a) The Cash Payment shall be twenty five million nine hundred thirty one thousand Euros (€25,931,000) The Cash Payment shall be payable by intra-bank transfer at Closing.

2.5 Late Payment

ARTICLE III DELETED

ARTICLE IV PRE-CLOSING COVENANTS AND AGREEMENTS

ARTICLE V TRANSFER OF RESTRICTED SECURITIES

(d) All rights under this Section 5.3 shall be for the exclusive benefit of SMI as a third party beneficiary (“echter Vertrag zugunsten Dritter”), and, therefore only SMI, but not the Buyers nor any third parties shall have any rights under this Section 5.3.

(a) suffered a Material Adverse Effect or suffered any theft, damage, destruction or casualty loss in excess of €25,000, to its assets, with the exclusion of damages covered by insurance, or suffered any substantial destruction of the Company’s books and records;

(c) issued, sold or transferred any notes, bonds or other debt securities, any equity securities, any securities convertible, exchangeable or exercisable into any interest in the Company or other equity securities, or warrants, options or other rights to acquire any interest in the Company;

(d) borrowed any amount or incurred or become subject to any Indebtedness or other Liabilities, except current Liabilities incurred in the Ordinary Course of Business;

(e) discharged or satisfied any Lien or paid any Liability (other than current Liabilities paid in the Ordinary Course of Business or other than Intercompany Liabilities) or prepaid any amount of Indebtedness;

(f) subjected any portion of their properties or assets to any Lien;

(h) suffered any Material extraordinary losses or waived any rights of Material value, unless in the Ordinary Course of Business;

(i) entered into, amended in a Material respect, or terminated any Material Contract or taken any other Material action or entered into any other Material transaction other than in the Ordinary Course of Business;

(j) entered into any other Material transaction or Materially changed any business practice;

(k) made or granted or promised any bonus or any wage, salary or compensation increase (other than the required increases (none of which are Material) under the collective

(n) made any Material capital expenditure;

(o) made any loans or advances to, or guarantees for the benefit of, any Persons (other than (a) guarantees to customers in the Ordinary Course of Business and consistent with the policies and practices disclosed to Buyers or SMI and (b) a loan of EUR 3.000 granted to one employee of the Company);

(p) made any charitable contributions, pledges, or paid any association fees or dues in excess of EUR 25,000;

(q) changed or authorized any change in its organizational documents other than CARD’s transformation into a limited partnership as per December 31, 2003;

(r) materially delayed or postponed the repair and maintenance of its properties or the payment of accounts payable, accrued Liabilities and other Liabilities;

(s) instituted any court proceeding or settled any claim pending in court or lawsuit involving equitable or injunctive relief or involving more than EUR 10,000 in the aggregate;

(t) granted any performance guarantees to their customers other than in the Ordinary Course of Business and consistent with the policies and practices within the Knowledge of Buyers or SMI;

(v) engaged in any transaction with Sellers or its Affiliates other than on arm’s-length terms;

(w) lost, had suspended, conditioned or revoked any License; or

(x) committed or agreed to any of the foregoing.

(iii) no party to the lease or sublease has repudiated any provision thereof and there are no disputes, Material oral agreements or forbearance programs in effect as to the lease or sublease;

(iv) neither the Company nor any of its Subsidiaries has assigned, transferred, conveyed, mortgaged, hypothecated, deeded in trust or encumbered any of its rights and interests in the leases or subleases;

(v) such leases or subleases do not prohibit the transactions contemplated hereunder and under the other Transaction Documents.

(c) Except as set forth on Schedule 6.10(c), the Company and its Subsidiaries own good and marketable title to, or a valid leasehold interest in, free and clear of all Liens, all of the personal property and assets which are shown on the Latest Financial Statements or acquired thereafter by them.

(a) neither Party nor any of their Affiliates has, at Closing, any Knowledge of any breach or untruth of any representation or warranty or any obligation contained in Section 6.12, and

(b) no breach or untruth of any representation or warranty or any obligation contained in Section 6.12 is disclosed or contained on any Schedule, Exhibit or disclosure bundle or on any document, information or material that is disclosed on or in the Schedules.

(ii) Contract for the employment of any officer, individual employee or other person on a full-time or consulting basis or any notice, severance or change-of-control agreements;

(iii) Contract or indenture relating to the borrowing of money or to mortgaging, pledging or otherwise placing a Lien on any of their assets;

(iv) Contracts with respect to the lending or investing of funds;

BUSINESS OVERVIEW
(In Thousands)

ARTICLE III

DELETED

ARTICLE IV

PRE-CLOSING COVENANTS AND AGREEMENTS

ARTICLE V

TRANSFER OF RESTRICTED SECURITIES