EMPLOYMENT AGREEMENT

a.  

From the Commencement Date and if employed through July 31, 2010, Employee shall be paid a monthly base salary based on an annual base salary of Three Hundred Thousand Dollars ($300,000), paid in the same intervals as other employees of the Company; and if employed through October 31, 2009, Employee will also be eligible to receive a discretionary, pro-rata bonus for the fourth fiscal quarter of fiscal year 2009 worked by Employee.

b.  

After the first 12 months of Employee’s employment, Employee will continue to receive an annual base salary of no less than his annual base salary for the immediately prior 12 months 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 Board of Directors of the Company (the “Board”) for the other senior management executives of the Company for fiscal year 2010 and thereafter, which, for fiscal year 2010, shall have a target bonus of no less than 50% of Employee’s base salary; provided that, if Employee is still employed by the Company as its CFO through July 31, 2010, then Employee’s fiscal year 2010 bonus shall be no less than $40,000 (the “Minimum Bonus”), which Minimum Bonus shall be due and paid on August 1, 2010.

c.  

At the first regularly scheduled Board meeting held after the Commencement Date, Employee shall receive 60,000 options to purchase the Company’s common stock (the “Options”), as per the recommendation of the Compensation Committee (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(d) 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.  The vesting of the Options on each such anniversary date shall be subject to Employee being employed with the Company on each such anniversary 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 as the Chief Financial Officer of the Company, or in the event a change in control of the Company closes while the Employee is employed as the Chief Financial 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 Committee and the Board.

d.  

Except as modified herein, any 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 and, as otherwise may be applicable, with any relevant terms and conditions of Shuffle Master, Inc.’s 2004 Equity Incentive Plan (the “Plan”), as amended, or any subsequent plan, except as modified by the terms and conditions of the applicable grant by the Committee and the Board.

e.  

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

f.  

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.  Notwithstanding the foregoing, and subject to paragraph 3 hereof, Employee may (i) engage in charitable or civic activities and (ii) manage his personal investments so long as such activities individually, and in the aggregate, do not interfere with his performance of duties for the Company.

g.  

During Employee’s employment with the Company, the Company will promptly 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.

h.  

A relocation expense reimbursement (collectively “Relocation Expenses”) will be provided in order to assist Employee and his spouse to move from Rancho Bernardo, California, to Las Vegas.  The Relocation Expenses, not to exceed $20,000, shall be for actual costs related to the relocation of Employee and his spouse from Rancho Bernardo, California, to Las Vegas, including the actual, verifiable and reasonable expenses of moving his furniture and household effects, plus transportation for Employee and his spouse from Rancho Bernardo, California, to Las Vegas, and up to three (3) months of paid rent at an “Oakwood-type” apartment in Las Vegas if Employee requires temporary housing in Las Vegas between August 1, 2009 and October 31, 2009.  If, prior to twelve months after the date that Employee and his spouse relocate to Las Vegas, Employee leaves the Company’s employment voluntarily (or is terminated with just cause), then Employee agrees to reimburse the Company for the costs of the Relocation Expenses paid by the Company on a pro rated basis based upon the number of months Employee was employed by the Company.

i.  

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

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 hereof.

c.  

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

d.  

Employee informs and obtains the prior written consent of the Chief Executive Officer of the Company;

a.  

Directly or indirectly own, manage, operate, participate in, consult with or work for any business, which is engaged in the Business anywhere in the world.  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).

c.  

Directly or indirectly provide any services to any person, company or entity, which is engaged in the Business anywhere in the world.

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 published or 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 23 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 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.