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| a.   | From      the Commencement Date and if employed through October 31, 2008, Employee      shall be paid an annual base salary of no less than Two Hundred Fifty      Thousand Dollars ($250,000.00), paid in the same intervals as other      employees of the Company; and if employed through October 31, 2008,      Employee will also be eligible to receive an executive bonus in accordance      with the terms and conditions of the executive bonus program authorized by      the Board of Directors of the Company (the “Board”) for other senior      management executives of the Company for fiscal year 2008, which, for      fiscal year 2008, shall have a target bonus of no less than 50% of      Employee’s base salary. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | For      any subsequent year after Fiscal Year 2008, Employee will receive an      annual base salary of no less than his annual base salary for the      immediately prior year of this Agreement, as adjusted upward by the      Company, 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 for said period. |
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| c.   | Stock      option, restricted shares or other equity grants (“Equity”), if any, will      be at the sole discretion of theBoard. |
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| 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”) or any subsequent plan, except as modified by the terms and      conditions of the applicable grant by theBoard. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| 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. |
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| 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 consent of the Chief Executive Officer of      the Company. |
|----------------|---------------------------------------------------------------------------------------------------------|

| a.   | Directly      or indirectly own, manage, operate, participate in, consult with or work      for any business, which is engaged in the Business anywhere in the      world.  Notwithstanding the foregoing, it is understood and      agreed that Employee may hold up to one percent (1%) of the shares of any      publicly traded company. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

| 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.  Because Employee, as of the Execution Date, a) is over      55 years of age; b) has been either a “C-level” employee with the Company      or the Company’s General Counsel for at least the last 6 consecutive      years; and c) has been employed by the Company for at least the last 6      consecutive years and was over the age of 50 in each of these years,      therefore, in the event of any termination of Employee’s full-time      employment with the Company without just cause (including a termination      without just cause that qualifies as a “Company Termination Without Just      Cause”, as defined in paragraph 6(b) hereof), or in the event that      Employee’s full-time employment is not extended or renewed 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 Section      26, each one of the following shallapply: |
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| (1)   | the      Employee is 55 years of age orolder; |
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| (2)   | the      Employee has been either a “C-level” employee with the Company or the      Company’s General Counsel for at least the last 6 consecutive years;      and |
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| (3)   | the      Employee has been employed with the Company for at least the last 6      consecutive years, and was over the age of 50 in each of those      years. |
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| b.   | For      purposes hereof, any of the following acts or events shall, at Employee’s      sole option, and at any time after any such occurrence, constitute a      termination without just cause under this paragraph 6 (but the following      is not the entire list of reasons or event which may constitute a      “termination without just cause”): |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | In      the event that, at the end of theTerm: |
|----------------|------------------------------------------------|

| 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; any disability, life insurance, or other benefits to which      Employee is entitled; and the continuation of the Health Insurance for the      rest of Employee’s life.  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. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| c.   | a      material violation of any of the material provisions of Sections 4 and/or      5 hereof, which violation is not remedied by the Employee within thirty      (30) days following the Board’s specific written notice stating such      alleged violation; or |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 either the CEO or the Board, which failure is not remedied by      the Employee within thirty (30) days following the CEO’s specific written      notice stating such alleged failure from the  Board; |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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;      and Employee shall nonetheless still be entitled to receive the Health      Insurance coverage, from the date of any “voluntary quit” and for the rest      of Employee’s life, as described in paragraph  6(a)(v). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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.  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. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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. |
|----------------|--------------------------------------------------------------------------------------------------------------|

| 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 24(a) shall preclude Employee from fully      pursuing any legitimate claims he may have or from testifying truthfully      in an arbitration or other legalproceeding. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 23hereof. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 soleexpense. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 26 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’sdeath. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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. |
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| EMPLOYER:                                                  |   | EMPLOYEE:                                             |
|------------------------------------------------------------|--------|-------------------------------------------------------|
|  SHUFFLE      MASTER, INC.                            |   |  JERRY      SMITH                                |
|   BY:   /s/ Mark L.      Yoseloff |   |   BY:   /s/ Jerry      Smith |
|  ITS:  Chief Executive      Officer         |   |                                                  |

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

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