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EXHIBIT 10.1

EMPLOYMENT AGREEMENT

TIM J. PARROTT

THIS AGREEMENT is made and entered into as of the 28th 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.

RECITALS

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.

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.

2.  
Salary, Bonus and Benefits.

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.
 

 
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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.
 

 
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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.
 

 
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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.
 

 
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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-month
period, Employee can elect to also have his spouse covered under said Health
Insurance, with the Employee paying the Company the incremental monthly cost
which the Company incurs to so cover his spouse.  (For the avoidance of doubt,
the Company and Employee agree that it is the intent of this language and of
this paragraph 6(a), that this language means, among other things, that Employee
will continue to vest in all Equity awards and receive all benefits during said
24-month period after such termination);

iii)           Employee shall receive, during the 24-month period from such
termination, additional compensation (the “Additional Compensation”) for his
agreeing herein to a covenant not to compete, equal to two times the amount of
his immediate prior year’s actual cash bonus (excluding any Equity grants and
long-term incentive bonuses, but, as for all senior management executives of the
Company, including any spot bonuses), also paid at the same intervals as
Employee is then being paid his base salary;

iv)           During the 24-month period from such termination, Employee shall
be available to perform services on a part-time basis (on a guaranteed “no
dismissal” basis and not subject to any termination, other than for just cause)
of the Company and, subject to Employee’s other professional and/or personal
duties or time commitments, shall be reasonably available, by telephone or
email, to the Chief Executive Officer of the Company, but shall not be required
to be physically in the Company’s offices or to travel on behalf of the Company,
provided, however, that, for the avoidance of doubt, the Employee shall perform
services during such 24 month period at a level of no more than 20 percent of
the average level of bona fide services the Employee performed over the
immediately preceding 36 month period such that the Employee shall have incurred
a “separation from service” within the meaning of Section 1.409A-1(h) of the
Department of Treasury Regulations on the date of the Employee’s termination of
employment; and

v)           One (1) business day before the expiration of the 24-month period
from such termination, any Equity which is or remains unvested as of said day
shall accelerate vest and be fully vested on such day.

b. For purposes hereof, any of the following acts or events, at Employee’s sole
option, and provided Employee elects, within 30 days of any such occurrence, to
treat such occurrence as a termination without just cause, shall constitute a
termination without just cause under this paragraph 6 (but the following is not
the entire list of reasons or events which may constitute a “termination without
just cause”):

i) Any material diminution or reduction of Employee’s Chief Executive Officer
title, position, duties, reporting relationships, or responsibilities, except as
solely caused by the acts or omissions of Employee;

ii) Any material breach by Company of this Agreement that is not cured or begun
to be cured within thirty (30) days  after written notice by Employee of such
breach; or

iii) Employee’s ending of his employment as the Chief Executive Officer (whether
intentionally or otherwise, or by retirement or resignation, and irrespective of
whether or not the Company is offering Employee continuing employment), within
30 days after a Change of Control has closed.
 

 
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c. In the event that, at the end of the Term:

i) The Company elects not to extend or renew Employee’s full-time employment as
the Chief Executive Officer beyond the Term on terms at least as favorably to
Employee as Employee is receiving during the last fiscal year of the Term, then
such non-extension or non-renewal shall be deemed and treated as a termination
without just cause; and

ii) Thereafter, each of the applicable provisions of paragraph 6(a) shall apply
and Employee shall be bound to the provisions of paragraphs 4 and 5 hereof for
the 24-month period of time during which Employee is being paid pursuant to
paragraph 6(a).

d. Employee’s death or total disability shall not be a termination without just
cause under paragraph 6; in either such event, and notwithstanding any other
provisions contained in this Agreement, however, Employee shall still be
entitled to receive:  a lump sum payment of 6 months of his then base salary;
provided Employee is the Chief Executive Officer at the time of such death or
total disability, the acceleration and immediate vesting of all of Employee’s
Equity; and any disability, life insurance, or other benefits to which Employee
is entitled.  For purposes of this Agreement, “Disability” shall mean the total
disability as determined by the Board in accordance with standards and
procedures similar to those under the Company’s long-term disability plan, or,
if none, a physical or mental infirmity which impairs Employee’s ability to
perform substantially his duties for a period of 180 consecutive days, provided,
however, to the extent required for purposes of compliance with Code Section
409A, a disability shall not be deemed to have occurred unless the disability
constitutes a “Disability” within the meaning of Code Section 409A.
 
e. The Company’s obligations to make the payments set forth in paragraph 6(a)
and Employee’s right to any payments, compensation, part-time employment or
other benefits as set forth in paragraph 6(a) is contingent upon and subject to
Employee executing, concurrently upon the cessation of Employee’s full-time
employment with the Company, the Company’s standard form general release (the
“Release”), which Release shall:  (a) generally, release the Company, its
affiliates, and its officers and representatives from any claims, obligations,
losses, damages, acts or omissions, known or unknown, which the Employee has or
may have or may have suffered against the Company, excepting only the Company’s
obligations under this Agreement, pursuant to and subject to its terms and
conditions; and (b) have Employee make certain representations and warranties
regarding his employment with the Company.
 
7.           Early Termination by Company for Just Cause.  No matter what
Employee’s position is, the Company may terminate Employee for just cause.  In
the event that the Company terminates the Employee for just cause, the Employee
will remain bound under the provisions of paragraphs 4 and 5, but will not be
entitled to any compensation or benefits following such termination of
employment, other than any accrued but unpaid salary or other benefits required
by applicable law.  Termination for “just cause” shall only mean (and each of
the following shall be deemed non-cumulative):

a. Material dishonesty as to a matter which is materially injurious to the
Company, which act or omission, if curable, is not remedied by the Employee
within thirty (30) days following the Board’s specific written notice stating
such alleged act or omission;

b. The commission of a willful act or omission intended to materially injure the
business of the Company, which act or omission, if curable, is not remedied by
the Employee within thirty (30) days following the Board’s specific written
notice stating such alleged act or omission;

c. A material violation of any of the material provisions of this Agreement,
including without limitation, Sections 4 and/or 5 hereof, or of any Company
policy or procedure pertaining to ethics, any of which violation, if curable, is
not remedied by the Employee within thirty (30) days following the Board’s
specific written notice stating such alleged violation;

d. A determination in writing and in good faith by the Board that the Employee
has failed to make a good faith effort to fully perform his duties as assigned
by the Board, (it being understood that this provision, as well as the same
provision in any other senior management executive employment agreements,
applies to “material” duties), which failure, if curable, is not remedied by the
Employee within thirty (30) days following the Board’s specific written notice
stating such alleged failure;
 

 
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e. The commission of an act or an omission which actually or potentially puts at
risk any of the Company’s gaming licenses or regulatory approvals;

f. Any breach of any fiduciary duty owed by Employee to the Company;

g. Employee’s being accused or convicted of:  (i) any felony; or (ii) any crime
involving moral turpitude to the extent that, in the reasonable judgment of the
Company, the Employee’s credibility or reputation is no longer at an adequate
level in order for Employee to positively represent the Company to the public at
Employee’s current position; or

h. The inability or refusal of Employee to be licensed or approved in any
jurisdiction by a gaming regulator, or if Employee is denied a gaming license or
approval (or any of same is revoked, suspended or conditional) in or by any
jurisdiction, or if Employee’s employment with the Company puts at risk any of
the Company’s licenses or approvals, or if Employee fails to cooperate with
respect to any compliance or regulatory matter.

 
8.           Voluntary Termination by Employee.

a. In the event Employee “voluntarily quits” (as defined in and subject to
paragraph 8(b)) his employment with the Company, Employee will remain bound
under the provisions of paragraphs 4 and 5 hereof, for a period of 24 months
from such voluntary quit, but will not be entitled to receive any compensation
and benefits following his termination of employment except for (and which he
shall receive):  any accrued but unpaid salary; any other benefits required by
law; and any already vested Equity.

b. “Voluntary Quit” means an intentional termination by the Employee without
good reason and without pressure by the Company; and further, provided that, at
the time of such “Voluntary Quit”, there was not a material breach of this
Agreement by the Company, or that just cause under paragraph 7 for Employee’s
termination did not exist.  Notwithstanding the foregoing, “Voluntary Quit”
shall not, in any event, mean and not be deemed to have occurred if Employee,
intentionally or otherwise, by resignation or retirement, and irrespective of
whether or not the Company is offering Employee continuing employment, either
ends his employment pursuant to or under any of the provisions of paragraph 6(b)
hereof, or if there is any termination without just cause.

9.           Change in Control.  A Change in Control of the Company shall mean
any of the following:
 
a. The Company is no longer a U.S. listed public company for a period of 3
consecutive months;
 
b. Fifty percent (50%) or more of the Company’s Equity is acquired by or merged
with another entity or entities; or
 
c. An event defined as a Change in Control in any of the Company’s employee
stock plans occurs.
 
After any Change in Control has closed, and unless Employee’s agreement with any
acquirer provides to the contrary, if Employee ends his employment as the Chief
Executive Officer pursuant to paragraph 6(b)(iii), then Employee shall not be
required to be physically present in the Company’s offices or to travel on
behalf of the Company during the applicable 24-month period, but shall be
allowed to perform any work required of him during the 24-month period from a
remote location, and by telephone or email, but, at all times, subject to
Employee’s other duties or time commitments; and, further, notwithstanding any
such Change in Control and the provisions of this paragraph 9, each of the
provisions of paragraphs 4, 5 and 6 shall continue to fully apply to Employee.
 

 
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10.           No Conflicting Agreements.  Employee has the right to enter into
this Agreement, and hereby confirms Employee has no contractual or other
impediments to the performance of Employee’s obligations including, without
limitation, any non-competition or similar agreement in favor of any other
person or entity.
 
11.           Company Policies.  Except as otherwise set forth herein, during
the Term, Employee shall engage in no activity or employment which may conflict
with the interest of the Company, and Employee shall comply with all policies
and procedures of the Company including, without limitation, all policies and
procedures pertaining to ethics; provided, however, this paragraph 11 shall not
apply in the event of a Change in Control.
 
12.           Independent Covenants.  The covenants and agreements on the part
of the Employee contained in paragraphs 4 and 5 hereof shall be construed as
agreements independent of any other provision in this Agreement; thus, it is
agreed that the relief for any claim or cause of action of the Employee against
the Company, whether predicated on this Agreement or otherwise, shall be
measured in damages and shall not constitute a defense or bar to enforcement by
the Company of those covenants and agreements.
 
13.           Injunctive Relief.  In recognition of the irreparable harm that a
violation by Employee of any of the covenants contained in either paragraphs 4
or 5 hereof would cause the Company, the Employee agrees that, in addition to
any other relief afforded by law, an injunction (both temporary and permanent)
against such violation or violations may be issued against him or her and every
other person and entity concerned thereby, it being the understanding of the
parties that both damages and an injunction shall be proper modes of relief and
are not to be considered alternative remedies; provided, however, that the issue
and amount, if any, of damages shall be litigated through arbitration as
required by paragraph 20 below.  Employee consents to the issuance of such
injunctive relief without the posting of a bond or other security.  In the event
any such alleged violation, THE LOSING PARTY AGREES TO PAY THE COSTS, EXPENSES
AND REASONABLE ATTORNEYS’ FEES INCURRED BY THE PREVAILING PARTY IN PURSUING OR
DEFENDING ANY OF ITS RIGHTS WITH RESPECT TO SUCH ALLEGED VIOLATIONS, IN ADDITION
TO THE ACTUAL DAMAGES SUSTAINED BY THE PREVAILING PARTY AS A RESULT THEREOF.
 
14.           Notice.  Any notice sent by registered mail to the last known
address of the party to whom such notice is to be given shall satisfy the
requirements of notice in this Agreement.  Any notices to Employee shall also be
sent to William R. Urga, Esq., Jolley Urga Wirth Woodbury & Standish, 3800
Howard Hughes Parkway, Suite 1600, Las Vegas, NV  89169.
 
15.           Entire Agreement.  This Agreement is the entire agreement of the
parties hereto concerning the subject matter hereof and supersedes and replaces
in its entirety any oral or written existing agreements or understandings
between the Company and the Employee relating generally to the same subject
matter, including without limitation, any Memorandum or Term Sheet relating to
this subject matter.  Company and Employee hereby acknowledge that there are no
agreements, promises, representations or understandings of any nature, oral or
written, regarding Employee’s employment, apart from this Agreement, and
Employee acknowledges that no promises, representations or agreements not
contained in this Agreement have been made or offered by the Company.  This
Agreement supersedes all previous employment agreements between the Company and
the Employee.
 
16.           Severability.  It is agreed and understood by the parties hereto
that if any provision of this Agreement should be determined by an arbitrator or
court to be unenforceable in whole or in part, it shall be deemed modified to
the minimum extent necessary to make it reasonable and enforceable under the
circumstances, and the court shall be authorized by the parties to reform this
Agreement in the least way necessary in order to make it reasonable and
enforceable.
 
17.           Governing Law.  This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada, without giving effect to the
principles of conflicts of laws thereof.
 
18.           Heirs, Successors and Assigns. The terms, conditions, obligations,
agreements and covenants hereof shall extend to, be binding upon, and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors, assigns, and/or acquirers, including any entity
which acquires, merges with, or obtains control of the Company.
 

 
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19.           Waiver of Breach.  The waiver by either the Company or the
Employee of any breach of any provision of this Agreement shall not operate as
or be deemed a waiver of any subsequent breach by either the Company or the
Employee.
 
20.           Dispute Resolution.  Except for the Company’s right (either
pursuant to paragraph 13 hereof or otherwise) to injunctive relief to enforce
the provisions of paragraphs 4 and 5 hereof, the exclusive forum for the
resolution of any dispute arising under this Agreement or any question of
interpretation regarding the provisions of this Agreement (other than disputes
relative to paragraphs 4 or 5 hereof) shall be resolved by arbitration, to be
held in Clark County, Nevada, in accordance with the rules of the American
Arbitration Association (“AAA”).  Such arbitration shall be before an
arbitrator, chosen in accordance with the rules then in effect of the AAA.  In
the event the Employee and Company fails within a reasonable period of time to
agree on an arbitrator, the arbitrator shall be chosen by the AAA.  The decision
of the arbitrator shall be final, conclusive and binding upon the Company and
Employee.
 
21.           Amendment.  This Agreement may be amended only by a document in
writing signed by each of the Employee, a Corporate Officer (other than
Employee), and the Chairman of the Compensation Committee of the Company, and no
course of dealing or conduct of the Company shall constitute a waiver of any of
the provisions of this Agreement.
 
22.           Fees and Costs.  In any action bought by one party against the
other pursuant to this Agreement or in the event of any dispute over the meaning
of this Agreement, the successful party, in addition to recovering its awarded
damages and other relief, shall be entitled to recover its attorney’s fees and
costs from the unsuccessful party.
 
23.           D & O Policy.  During the Term and for the five (5) year period
thereafter, the Company shall maintain director and officer liability insurance
which shall cover, among others, Employee, and, in connection therewith,
Employee shall be entitled to any applicable indemnification and defense cost
provisions, if any, as provided for in the Company’s By-Laws or under any
applicable director and officer liability insurance policy.  Employee’s coverage
under any director and officer liability insurance policy shall be no less than
that of the most senior corporate officer of the Company, or, in the event of a
Change in Control, no less than that of the most senior corporate officer of any
acquiring entity.

24.           Non-Disparagement and Cooperation.
 
a. During any period of time wherein the Company is paying any base salary to
Employee, whether during the Term hereof or during any time after the
termination or expiration of this Agreement, and for a period of five (5) years
thereafter, Employee shall not disparage or otherwise make any negative comments
about the Company, its policies, products, employees or management.  The Company
may enforce these non-disparagement provisions by resort to injunctive relief as
set forth in paragraph 13, in addition to any other damages that it may be
entitled to under this Agreement or otherwise at law.  Notwithstanding the
foregoing, nothing in this paragraph 24(a) shall preclude Employee from fully
pursuing any legitimate claims he may have or from testifying truthfully in an
arbitration or other legal proceeding.

b. Employee agrees to fully cooperate with the Company and its affiliates during
the entire scope and duration of any litigation or administrative proceedings
involving any matters with which Employee was involved during Employee's
employment with the Company.  Such cooperation shall be subject to the
reasonable demands of any subsequent employment undertaken by Employee, and
Company shall cover any reasonable out-of-pocket expenses of Employee in so
cooperating, excluding, any attorney’s fees incurred by Employee, unless said
attorney’s fees are expressly authorized, permitted, or required under paragraph
23 of this Agreement.

c. In the event Employee is contacted by parties or their legal counsel involved
in litigation adverse to the Company or its affiliates, Employee (i) agrees to
provide notice of such contact as soon as practicable; and (ii) acknowledges
that any communication with or in the presence of legal counsel for the Company
(including without limitation the Company's outside legal counsel, the Company's
inside legal counsel, and legal counsel of each related or affiliated entity of
the Company) shall be privileged to the extent recognized by law and, further,
will not do anything to waive such privilege unless and until a court of
competent jurisdiction decides that the communication is not privileged.  In the
event the existence or scope of the privileged communication is subject to legal
challenge, then the Company must either waive the privilege or pursue litigation
to protect the privilege at the Company's sole expense.
 

 
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25.           Limitation on Benefits.
 
If any payment or benefit received or to be received by Employee (including any
payment or benefit received pursuant to any employee stock plan or otherwise)
would be (in whole or part) subject to the excise tax imposed by Section 4999 or
Section 280(g) of the Internal Revenue Code, or any successor provision thereto,
or any similar tax imposed by state or local law, or any interest or penalties
with respect to such excise tax (such tax or taxes, together with any such
interest and penalties, are hereafter collectively referred to as the “Excise
Tax”), then, the payments and benefits provided hereunder shall be reduced in
the manner selected by Employee to the extent necessary to make such payments
and benefits not subject to such Excise Tax, (with payments scheduled later in
time being reduced first, and those scheduled earlier in time being reduced
last), but only if such reduction results in a higher after-tax payment to
Employee after taking into account the Excise Tax and any additional taxes
Employee would pay if such payments and  benefits were not reduced.
 
26.           Section 409A Compliance.
 
a. This Agreement is intended to comply with Section 409A of the Code (to the
extent applicable) and, to the extent it would not adversely impact the Company,
the Company agrees to interpret, apply and administer this Agreement in a manner
necessary to comply with such requirements and without resulting in any
diminution in the value of payments or benefits to the Employee. Notwithstanding
any other provisions of this Agreement, the Company does not guarantee that
payments will be exempt or comply with Section 409A of the Code, nor will the
Company indemnify, defend or hold harmless Employee with respect to the tax
consequences of any such failure.
 
b. It is intended that (i) each installment of the payments provided under this
Agreement is a separate “payment” for purposes of Section 409A of the Code, (ii)
that the payments satisfy, to the greatest extent possible, the exemptions from
the application of Section 409A of the Code provided under Treasury Regulations
1.409A-1(b)(4), 1.409A-1(b)(9)(iii), and 1.409A-1(b)(9)(v) and (iii) all amounts
set forth in Section 6 shall be payable only upon a termination of the
Employee’s employment that constitutes a “separation from service” within the
meaning of Treasury Regulation 1.409A-1(h).

c. Notwithstanding anything to the contrary in this Agreement, if the Company
determines (i) that on the date the Employee’s employment with the Company
terminates, the Employee is a “specified employee” (as such term is defined
under Treasury Regulation 1.409A-1(i)(1)) of the Company and (ii) that any
payments to be provided to the Employee pursuant to this Agreement are or may
become subject to the additional tax under Section 409A(a)(1)(B) of the Code or
any other taxes or penalties imposed under Section 409A of the Code if provided
at the time otherwise required under this Agreement then such payments shall be
delayed until the date that is six months after the date of the Employee’s
“separation from service” with the Company, or, if earlier, the date of the
Employee’s death.  Any payments delayed pursuant to this Section 24 shall be
made in a lump sum on the first day of the seventh month following the
Employee’s “separation from service” (as such term is defined under Treasury
Regulation 1.409A-1(h)), or, if earlier, the date of the Employee’s death.

d. To the extent that any reimbursement, fringe benefit or other, similar plan
or arrangement in which the Employee participates during the term of Employee’s
employment under this Agreement or thereafter provides for a "deferral of
compensation" within the meaning of Section 409A of the Code, (i) the amount
eligible for reimbursement or payment under such plan or arrangement in one
calendar year may not affect the amount eligible for reimbursement or payment in
any other calendar year (except that a plan providing medical or health benefits
may impose a generally applicable limit on the amount that may be reimbursed or
paid), and (ii) subject to any shorter time periods provided herein or the
applicable plans or arrangements, any reimbursement or payment of an expense
under such plan or arrangement must be made on or before the last day of the
calendar year following the calendar year in which the expense was incurred.

27.           Directorship.
 
No later than the first Board meeting after Employee becomes CEO, and subject to
the other terms and conditions contained in this Agreement, the Board shall
appoint Employee as a member of the Board, to serve until any successor to
Employee is elected or appointed by the Board; provided, however, that Employee
agrees to resign as a director at the same time as his employment as CEO
ends.  Notwithstanding the foregoing, the Board shall have no obligation to
appoint Employee as a member of the Board in the event that Employee’s becoming
a member would result in the Board being comprised of less than a majority of
Independent Directors, with such term “Independent” being as defined by both the
applicable NASDAQ rules and the applicable rules of Institutional Shareholder
Services.
 

 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day, month and year first above written.

EMPLOYER:
 
EMPLOYEE:
 
SHUFFLE MASTER, INC.
 
 
TIM J. PARROTT
 
 
BY:   /s/ Mark L. Yoseloff
 
 
 
BY:   /s/ Tim J. Parrott
 
ITS:  Chief Executive Officer
   

APPROVED:
   
 
COMPENSATION COMMITTEE
   
 
 
BY:   /s/ Lou Castle
   
 
ITS:  Chairman
   

 
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