ex_10-1.htm


    
      

      

    

     EXHIBIT
10.1

     

     

     

    EMPLOYMENT
AGREEMENT

    


    Linster
(“Lin”) W. Fox

    


    


    THIS AGREEMENT (the
“Agreement”) is made and entered into as of the 1st day of August, 2009, by and
between Shuffle Master, Inc., a Minnesota corporation (the “Company”), and
Linster (“Lin”) W. Fox (the “Employee”), a resident of the State of
California.

    


    RECITALS:

    


    A.           The
Company is in the business of developing, manufacturing, distributing and
otherwise commercializing card shufflers, proprietary table games (both live,
stimulated and electronic) and related gaming products and services (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 the Employee for performing his obligations hereunder.

    


    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.  The
Company hereby employs Employee as its Executive Vice President and Chief
Financial Officer (“CFO”) reporting to the Chief Executive Officer of the
Company.  Employee shall perform the normal duties of that position in
a U.S. public company.  Subject to the other terms and conditions
hereof, Employee’s employment under this Agreement with the Company is for an
initial term of three years and three months (the “Term”), beginning August 1,
2009 (the “Commencement Date”), through October 31, 2012.

    


    2.           Salary, Bonus and
Benefits.  Subject to each of the terms and conditions in this
agreement, and while employed by the Company as its CFO:

    


    
      	
              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.

            


    


    
      
         


      

      
        1

        
          

        

      

      
         


      

    


    
      	
              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.

            


    


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    
      	
              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:

            


    

     

    

      
        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(b) 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 herein, 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:


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    


    
      	
              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;

            


    

    


    provided,
however, that after October 31, 2010, Employee may, with the prior written
consent of the Company (such consent not to be unreasonably withheld), join the
board of directors of one (1) other entity, and further provided that the
provisions of paragraphs 3(a), 3(b), 3(c) and 3(d) are not violated and are
otherwise fully adhered to.

    


    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 (the “Non-Compete Period”) of
twenty-four (24) months thereafter:

    


    
      	
              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.

            


    

    


    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.

            


    


    
      
         


      

      
        4

        
          

        

      

      
         


      

    

     

    
      	
              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.

            


    


    
      
         


      

      
        5

        
          

        

      

      
         


      

    

     

    
      	
              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.

            


    

     

     

    
      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 hereof, the Company may terminate Employee’s full-time
      employment at any time either with or without just cause.  In
      the event of any termination of Employee’s full-time employment with the
      Company 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 25, each one of the following shall
  apply:

              


      

       

        i      Employee
shall be paid a severance amount (the “Severance”) equal to twelve (12) months
of his then monthly base salary (except that, in lieu of 12 months of his then
monthly base salary, the Severance shall be 24 months, in the event that the
provisions of paragraph 6(a)(v) apply); in either case, paid over a period of
twenty-four (24) months from such termination, and paid 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; 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), and
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);

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       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 the amount of his immediate prior year’s
actual cash bonus (excluding any Equity grants or long-term incentive bonuses,
but, as for all senior management executives of the Company, including any spot
bonuses).  The amount, if any, due under this paragraph 6(a)(iii),
shall be paid in 52 equal installments, on each of the Company’s pay dates, over
said 24-month period;

       

       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) for 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 then
Chief Executive Officer of the Company, or his designee, 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.

       

      v      Only in the
event that the Employee’s employment as the CFO of the Company were terminated
within 1 month prior to or following, (and in either case, solely because of the
Change in Control event), an actual Change in Control event, and without
Employee having been offered the same or a comparable position, then, in lieu of
the provisions of paragraph 6(a)(i) therein, the Severance amount shall be 24
months of Employee’s then monthly base salary paid over a period of 24 months
from such termination, paid in equal monthly installments at the same intervals
as other employees of the Company are then being paid their base
salaries.  For purposes of this paragraph, “comparable position” shall
mean (i) a position where the base salary is at least equal to the base salary
received by Employee in the twelve month period before the Change in
Control.  For example, if there were an actual Change in Control event
and the Employee were offered to remain in his CFO or a comparable position,
then a termination without just cause shall not be deemed to have occurred,
regardless of whether or not Employee accepts such position, and there shall be
no Severance payment. For purposes of this Agreement, a “Change in Control
Event” shall mean any of the following:

         

        1.           The
Company is no longer a U.S. listed public company for a period of 3 consecutive
months;

        2.           Fifty
percent (50%) or more of the Company’s Equity is acquired by or merged with
another entity or entities; or

        3.           An
event defined as a Change in Control in any of the Company’s employee stock
plans actually closes.

      

      
         

      

      
        	
                b.  

              	
                For
      purposes hereof, any of the following acts or events shall, at Employee’s
      sole option, constitute a termination without just cause under this
      paragraph 6:

                 

              


      

       

      
        i        
any material diminution or reduction of Employee’s title, position, reporting
relationship, duties or responsibilities, except as caused by the acts or
omissions of Employee; or

         

        ii   any material breach by Company
of this Agreement that is not cured within thirty (30) days after written notice
by Employee of such breach.

         

      

      Notwithstanding
the foregoing, for purposes of this Agreement, a termination without just cause
shall not be deemed to have occurred unless Employee provides the Company with
notice of the first occurrence of an event described above within 30 days of the
first existence of such event, and the Company is provided at least 30 days to
cure the condition and fails to do so.

      


      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      
        	
                c.  

              	
                In
      the event that, at the end of the Term, the Company elects not to extend
      or renew Employee’s full-time employment 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 in such case, 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
      termination of employment by reason of 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 herein, however,
      Employee shall still be entitled upon a termination of employment by
      reason of death or Disability to receive:  a lump sum payment of
      6 months of his then base salary; the acceleration and immediate vesting
      of all 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 and
      Employee’s right to any payments, compensation, part-time employment or
      other benefits as set forth in paragraph 6 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 truthful
      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 his termination of employment under this Agreement, other
than any accrued but unpaid salary or other benefits required by applicable
law.  Termination for “just cause” shall include, without limitation
(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 an act or omission intended or likely to materially injure
      the Business or reputation 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
      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;

            


    


    
      
         


      

      
        8

        
          

        

      

      
         


      

    

    
      	
              d.  

            	
              A
      determination in good faith by Employee’s direct supervisor that the
      Employee has failed or refused to perform his duties as assigned by his
      supervisor or his designee (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 or
      refusal, if curable, is not remedied by the Employee within thirty (30)
      days following the written notice stating such alleged
      failure;

            


    

     

    
      	
              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 or act 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 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.

            


    

    


    9.           Cooperation with Change in
Control.  Employee will reasonably cooperate with the Company
in the event of a Change in Control.  Change in Control shall be
defined as in the Company’s 2004 Employee Equity Incentive Plan.

     

    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

     


    
      
         


      

      
        9

        
          

        

      

      
         


      

    


    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 of 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 necessity of the Company posting a bond or
other security.

     

    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 notice to Employee shall also be sent, only as a
courtesy, to Employee’s attorney, as follows:  Larry A. Walraven,
Walraven & Lehman LLP, 120 Vantis Suite 535, Aliso Viejo, CA
92656.

     

    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.  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
or offer letters, oral or written, 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.

      
        
           


        

        
          10

          
            

          

        

        
           


        

      



    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 obtain control
of the Company.

     

    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 both the
Employee and a Corporate Officer (other than Employee) 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.         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.  The
Company shall also offer employee its standard indemnification
agreement.

     

    23.         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 three (3)
      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 23(a) shall preclude Employee from fully
      pursuing any legitimate claims he may have or from testifying truthfully
      in an arbitration or other legal
proceeding.

            


    


    
      
         


      

      
        11

        
          

        

      

      
         


      

    

     

    
      	
              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 22
hereof.

            


    

    


    
      	
              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.

            




    24.       
 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 280G 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 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.

     


    
      
         


      

      
        12

        
          

        

      

      
         


      

    


    25.         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 paragraph 25 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.

            


    

     


    
      
         


      

      
        13

        
          

        

      

      
         


      

    

     

    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.

               

            	 
      	
              Linster
      (“Lin”) W. Fox

               

            
	
               

              By:

            	
               

              /s/
      Tim Parrott

            	 
      	
               

              By:

            	
               

              /s/
      Linster Fox

            
	
               

              Its:

            	
               

              CEO

            	 
      	 
      	 
      


    

    


    


    


    Approved:

    


    Compensation
Committee

    


    
      	
               

              By:

            	
               

              /s/
      Lou Castle

            	 
      	 
      	 
      
	
               

              Its:

            	
               

              Chairman

            	 
      	 
      	 
      


    

    
 

     

     

     

    14