EMPLOYMENT AGREEMENT

THIS AGREEMENT is made and entered into as of the 28 ^th day of January, 2009 (the “Execution Date”), by and between Shuffle Master, Inc., a Minnesota corporation (the “Company”), and Tim J. Parrott (the “Employee”), a resident of the State of Nevada.

A.           The Company is in the business of developing, manufacturing, distributing and otherwise commercializing card shufflers and its proprietary table games (both live and electronic) (the “Business”), throughout the world.

B.           Company and Employee want to create an at-will employment relationship that protects the Company with appropriate confidentiality and non-compete covenants, and compensates and rewards the Employee for performing his obligations for the full term of this Agreement or such shorter term, as may be determined in accordance with the terms and conditions of this Agreement.

C.           The Company and Employee desire that Employee be employed by the Company on the terms and conditions of this Agreement.

In consideration of the mutual promises contained herein, Employee and the Company agree as follows:

1 .            Employment.

a.           The Company hereby employs Employee as its Chief Executive Officer (“CEO”), reporting to the Board of Directors (the “Board”) of the Company.  Employee shall perform the typical and normal duties of a chief executive officer of a U.S., multi-national public company, and as otherwise directed by the Board.  Subject to the other terms and conditions of this Agreement, Employee’s employment under this Agreement is for a term of approximately four (4) years and nine (9) months (the “Term”), beginning February 2, 2009 (the “Commencement Date”), through October 31, 2013; provided, however, that from the Commencement Date through no later than March 15, 2009, Employee shall be employed as the “CEO-Elect”; and thereafter, on or before March 15, 2009, as the CEO.

While employed by the Company as its CEO:

a.   From the Commencement Date and if employed through October 31, 2009, Employee shall be paid an annual base salary of Five Hundred Thousand Dollars ($500,000), paid in the same intervals as other employees of the Company; and if employed as the Company’s CEO through October 31, 2009, Employee will also be eligible to receive a cash bonus in accordance with the terms and conditions of the executive bonus program authorized by the Compensation Committee of the Board (the “Committee”) and ratified by the Board for other senior management executives of the Company for fiscal year 2009, which, for Employee, shall have a “target” cash bonus of 50% of Employee’s base salary and a maximum cash bonus of 100% of Employee’s base salary, but in no event less than $75,000.  For purposes of determining Employee’s cash bonus, the Committee, the Board and the Employee shall mutually agree upon certain Company financial metrics and certain other non-financial goals which shall be factors in determining the amount of Employee’s cash bonus.

b.   For any subsequent year after fiscal year 2009, Employee will receive an annual base salary of no less than his annual base salary for the immediately prior year of this Agreement and will also be eligible to participate in an executive bonus program and/or in an individual performance bonus program as authorized by the Committee and/or the Board for said period for senior management executives of the Company.

c.   In addition, in the Committee’s sole discretion, the Employee shall be considered for an annual long-term incentive bonus which may take the form, at the Committee’s sole discretion, of either cash, equity or a combination thereof.

d.   At the first regularly scheduled Board meeting after the Commencement Date, Employee shall receive 300,000 options to purchase the Company’s common stock (the “Options”), as per the recommendation of the Committee, and the approval of the Board.  The Options shall not be issued out of any option or equity plan, but shall qualify as an inducement grant under Rule 4350(i)(1)(A)(iv) of the NASDAQ Stock Market Rules.  The Options shall expire ten (10) years from the grant date.  The shares underlying the Options shall be registered on Form S-8 within nine (9) months of the grant date.  Except as otherwise set forth in and subject to paragraph 2(e) hereof, one-quarter (1/4) of the Options shall vest on each 12-month anniversary date of the grant date, commencing on the first 12-month anniversary date thereof and continuing for three years thereafter, such that full vesting will occur at the end of four years.  The exercise price of the Options shall be the Company’s closing stock price on the date of the grant.  All vesting of the Options shall be subject to Employee being employed with the Company on each scheduled vesting date.  Notwithstanding the above vesting schedule, all Options shall accelerate vest in the event of the Employee’s death or total disability while the Employee is employed by the Company, or in the event a Change in Control of the Company closes while the Employee is employed as the Chief Executive Officer of the Company.  Any future stock options, restricted shares or other equity grants (“Equity”), if any, will be at the sole discretion of the Board.

e.   Except as modified herein, any other Equity issued at any time to Employee shall vest in accordance with the terms and conditions set forth in the applicable grant by the Board (upon recommendation of the Committee) and, as otherwise may be applicable, with any relevant terms and conditions of the applicable Company equity incentive plan (the “Plan”), except as modified by the terms and conditions of the applicable grant by the Board.

f.   During the Term, the Company agrees to provide Employee with the same benefits it provides all of the other senior executive-level employees of the Company.  Employee will not, however, be eligible to participate in the Company’s non-executive bonus program.

g.   Except as otherwise set forth herein, Employee’s salary is set in the expectation that Employee’s full professional time during the Term will be devoted to Employee’s duties hereunder.

h.   During Employee’s employment with the Company, the Company will pay or reimburse Employee for reasonable travel and other expenses incurred by Employee in the furtherance of or in connection with the performance of Employee’s duties.  Such reimbursement will be in accordance with Company policies in existence from time to time.  Separate from the foregoing and consistent with its practices for the other senior executive-level employees of the Company, the Company shall pay all gaming licensing fees of and all gaming investigative costs relating to Employee.

i.   Notwithstanding any other provision contained in this Agreement which may be to the contrary:

i)           Employee shall be an employee-at-will with no guaranteed term of employment, and either Employee or the Company shall be entitled to terminate said employment with or without any prior notice, or with or without any cause; and

ii)           Except as otherwise expressly set forth in paragraph 2(a) hereof, Employee is not guaranteed any bonus (or specific amount thereof) which may be mentioned in this Agreement.

3.             Outside Services or Consulting.   Except as otherwise set forth in this Agreement, Employee, during the Term, shall devote Employee’s full professional time and best professional efforts to the Company.  Employee may render other professional or consulting services to other persons or businesses from time to time during the Term, only if Employee meets all of the following requirements:

a.   The services do not interfere in any manner with the Employee’s ability to fulfill all of his duties and obligations to the Company;

b.   The services are not rendered to any business which may compete with the Company in any area of the Business or do not otherwise violate paragraph 4 of this Agreement;

c.   The services do not relate to any products or services, which form part of the Business; and

d.   Employee informs and obtains the prior consent of the Board.

e.   Provided that paragraphs 3(a), 3(b) and 3(c) are not violated and as otherwise fully adhered to, the Company consents to Employee’s involvement in his family-owned businesses, as listed in Exhibit A hereto.

4.             Non-competition.   In consideration of the provisions of this Agreement, Employee hereby agrees that he shall not, during the Term and for a period of twenty-four (24) months thereafter (the “Non-Compete Period”):

a.   Directly or indirectly own, manage, operate, participate in, consult with or work for any business, which is engaged in the shuffler or table games (live and electronic) part of the Business anywhere in the world, or which is engaged in any other part of the Business in the United States.  Notwithstanding the foregoing, it is understood and agreed that Employee may hold up to one percent (1%) of the shares of any publicly traded company;

b.   Either alone or in conjunction with any other person, partnership or business, directly or indirectly, solicit, hire, or divert or attempt to solicit, hire or divert any of the employees, independent contractors, or agents of the Company (or its affiliates or successors) to work for or represent any competitor of the Company (or its affiliates or successors), or to call upon, on behalf of a competitor of or to the Business, any of the customers of the Company (or its affiliates or successors); and

c.   Directly or indirectly provide any services to any person, company or entity, which is engaged in the shuffler or table games (live and electronic) part of the Business anywhere in the world, or which is engaged in any other part of the Business in the Untied States.

5.           Confidentiality; Inventions.

a.   Employee shall fully and promptly disclose to the Company all inventions, discoveries, software and writings that Employee may make, conceive, discover, develop or reduce to practice either solely or jointly with others during Employee’s employment with the Company, whether or not during usual work hours.  Employee agrees that all such inventions, discoveries, software and writing shall be and remain the sole and exclusive property of the Company, and Employee hereby agrees to assign, and hereby assigns all of Employee’s right, title and interest in and to any such inventions, discoveries, software and writings to the Company.  Employee agrees to keep complete records of such inventions, discoveries, software and writings, which records shall be and remain the sole property of the Company, and to execute and deliver, either during or after Employee’s employment with the Company, such documents as the Company shall deem necessary or desirable to obtain such letters patent, utility models, inventor’s certificates, copyrights, trademarks or other appropriate legal rights of the United States and foreign countries as the Company may, in its sole discretion, elect, and to vest title thereto in the Company, its successors, assigns, or nominees.

b.   “Inventions,” as used herein, shall include inventions, discoveries, improvements, ideas and conceptions, developments and designs, whether or not patentable, tested, reduced to practice, subject to copyright or other rights or forms of protection, or relating to data processing, communications, computer software systems, programs and procedures.

c.   Employee understands that all copyrightable work that Employee may create while employed by the Company is a “work made for hire,” and that the Company is the owner of the copyright therein.  Employee hereby assigns all right, title and interest to the copyright therein to the Company.

d.   Employee has no inventions, improvements, discoveries, software or writings useful to the Company or its subsidiaries or affiliates in the normal course of business, which were conceived, made or written prior to the date of this Agreement.

e.   Employee will not publish or otherwise disclose, either during or after Employee’s employment with the Company, any proprietary or confidential information or secret relating to the Company, the Business, the Company’s operations or the Company’s products or services.  Employee will not publish or otherwise disclose proprietary or confidential information of others to which Employee has had access or obtained knowledge in the course of Employee’s employment with the Company.  Upon termination of Employee’s employment with the Company, Employee will not, without the prior written consent of the Company, retain or take with Employee any drawing, writing or other record in any form or nature which relates to any of the foregoing.  Notwithstanding the foregoing, Employee shall have the right, as reasonably necessary, to retain copies of this Agreement, any employee stock option and restricted stock agreements, any other documents, information or materials related to Employee’s compensation or benefits from the Company (in order to confidentially review such items with Employee’s professional advisors or immediate family members), and any other documents which relate to Employee’s duties or obligations (fiduciary, ethical or otherwise) to the Board or the shareholders.  In addition, and subject to the provisions of paragraph 24 hereof, nothing in this paragraph 5(e) or in paragraph 5(f) below shall be construed to prevent or preclude Employee from responding to legal process or testifying truthfully.

f.   With respect to any confidential information, Employee understands that Employee’s employment with the Company creates a relationship of trust and confidence between Employee and the Company.  Employee understands that Employee may encounter information in the performance of Employee’s duties that is confidential to the Company or its customers.  For the Term hereof, and until the information falls into the public domain, Employee agrees, except in the furtherance of his duties with the Company, to maintain in confidence all information pertaining to the Business or the Company to which Employee has access including, but not limited to, information relating to the Company’s products, inventions, trade secrets, know how, systems, formulas, processes, compositions, customer information and lists, research projects, data processing and computer software techniques, programs and systems, costs, sales volume or strategy, pricing, profitability, plans, marketing strategy, expansion or acquisition or divestiture plans or strategy and information of similar nature received from others with whom the Company does business.  Employee agrees not to use, communicate or disclose or authorize any other person to use, communicate or disclose such information orally, in writing, or by publication, either during Employee’s employment with the Company or thereafter except as expressly authorized in writing by the Company unless and until such information becomes generally known in the relevant trade to which it relates without fault on Employee’s part, or as required by law.  Subject to the foregoing, Employee shall have the rights set forth in the final two grammatical sentences of paragraph 5(e) above.  Confidential information shall not include any information in the public domain or otherwise generally available to the public.

g.   Employee has not and will not disclose to the Company any confidential information of a third party.

6.           Termination Without Just Cause or Non-Extension by Company.

a.   Employee’s employment by the Company is “at will;” therefore, subject to the terms and conditions of this Agreement, the Company may terminate Employee’s full-time employment at any time either with or without just cause.  Further, in the event of any termination of Employee’s full-time employment, without just cause, or in the event that Employee’s full-time employment is not extended or renewed by the Company beyond the Term on terms at least as favorable to Employee as Employee is receiving during the last year of the Term, then Employee will remain bound to the covenants not to compete and confidentiality obligations of paragraphs 4 and 5 of this Agreement, according to their terms, and subject to paragraph 26, the provisions of paragraphs 6(a) through 6(e) shall apply.

i)           Employee shall be paid a severance amount (the “Severance”) equal to twenty-four (24) months of his then monthly base salary paid over a period of twenty-four (24) months from such termination, in equal monthly installments and at the same intervals as other employees of the Company are then being paid their base salaries;

ii)           Employee shall continue to receive, during the 24 months from such termination, the same medical and dental insurance (including without limitation prescription drugs) (collectively, “Health Insurance”), and any other benefits or insurance coverages which Employee would have received had his employment not been so terminated, or not extended, (but in no event less coverage than Employee is receiving on the Execution Date, or that is at least equal to the coverage being received by all other senior executive-level employee); provided, however, if the Employee is not eligible for said Health Insurance, the Company shall pay the COBRA premiums for continuation coverage during the said 24-month period; further provided that, at Employee’s sole option, during said 24-mo