EXECUTIVE EMPLOYMENT AGREEMENT

                                 JOSEPH J. LAHTI

         THIS AGREEMENT is made and entered into effective as of the 1st day of
September 2001, by and between SHUFFLE MASTER, INC., a Minnesota corporation
(the "Company"), and Joseph J. Lahti (the "Employee").

                                    RECITALS

         A.       The Company is in the business of developing, manufacturing,
                  distributing and otherwise commercializing gaming equipment,
                  games, and operating systems for gaming equipment and related
                  products and services throughout the United States and in
                  Canada and other countries (the "Business").

         B.       Company and Employee want to create an employment relationship
                  for a specific term that protects the Company and potential
                  successors with appropriate confidentiality and non-compete
                  covenants and rewards the Employee with appropriate
                  consideration therefore, including a stay bonus, and
                  incentivizes him to remain in the employment of the Company.

         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 from the effective
date of this Agreement through January 31, 2005. This employment relationship
may be terminated by Employee at any time subject to certain consequences as
hereinafter set forth, and by the Company only for just cause as hereinafter set
forth. Employee shall initially be employed as Chairman to provide assistance to
the CEO of the Company. Employee shall be employed full-time by the Company
through October 31, 2001; thereafter, Employee shall provide services part-time
as reasonably requested by the CEO regarding acquisitions, matters of strategic
significance, business development, and marketing strategy, but without "line"
responsibility. If Employee resigns or is removed as Chairman, his employment
relationship with the Company and his remuneration pursuant to Section 2 hereof
shall continue unaffected.

         2. SALARY AND BENEFITS. Employee will be paid as follows:

                  (a)      During the period from September 1, 2001 through
                           October 31, 2001, Employee shall be paid a base
                           salary of Forty-two Thousand Six Hundred Forty
                           Dollars ($42,640), paid in the same intervals as
                           other employees of the Company.

                  (b)      If Employee is employed with the Company through
                           October 31, 2001, Employee will be


                                       1
<PAGE>


                           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, as set forth on Exhibit A attached hereto.

                  (c)      During the period from November 1, 2001, through
                           January 31, 2002, Employee will be paid a base salary
                           of Fifty Thousand Dollars ($50,000.00), paid in the
                           same intervals as other employees of the Company
                           during this period.

                  (d)      During the period from February 1, 2002, through
                           January 31, 2003, Employee will be paid a base salary
                           of Two Hundred Thousand Dollars ($200,000.00) plus an
                           amount equal to 33 1/3% of the bonus paid pursuant to
                           subsection (b), above, paid in the same intervals as
                           other employees of the Company.

                  (e)      During the period from February 1, 2003, through
                           January 31, 2004, Employee will be paid a base salary
                           of One Hundred Fifty Thousand Dollars ($150,000.00)
                           plus an amount equal to 33 1/3% of the bonus paid
                           pursuant to subsection (b), paid in the same
                           intervals as other employees of the Company.

                  (f)      During the period from February 1, 2004, through
                           January 31, 2005, Employee will be paid a base salary
                           of One Hundred Thousand Dollars ($100,000.00) plus an
                           amount equal to 33 1/3% of the bonus paid pursuant to
                           subsection (b), paid in the same intervals as other
                           employees of the Company.

                  (g)      Employee has received a stock option grant to
                           purchase one hundred thousand (100,000) shares of the
                           Company's Common Stock in accordance with and subject
                           to the terms and conditions imposed by the Board of
                           Directors at its November 21, 2000 meeting.

                  (h)      In the event of a change in the control of the
                           Company defined as set forth in Section 20 hereof,
                           all amounts that would be payable hereunder through
                           January 31, 2005 shall be due and payable effective
                           as of the date of the change in control and
                           Employee's employment hereunder shall cease as of
                           that date.


         Employee's salary during the period from September 1, 2001 through
October 31, 2001, is set on the expectation (except for vacation days and
holidays) that Employee's time will be spent as reasonably needed to perform his
duties to assist the Company's new Chief Executive Officer. Company will not
require that Employee travel more than two (2) nights per month. The Company
agrees to provide Employee with the general benefits it provides its executive
team through October 31, 2001, and to provide Employee with the general benefits
it provides its non-executive employees thereafter during the term of this
Agreement. Employee will not, however, be eligible to participate in the
Company's non-executive bonus program at any time during the term of this
Agreement, nor will Employee be eligible to participate in the Company's
executive bonus program or the employees stock option plan on or after November
1, 2001.


                                       2
<PAGE>


         3. OUTSIDE CONSULTING. Employee may render consulting services to other
businesses from time to time if Employee meets all of the following
requirements:

                  (a)      the consulting services are not rendered to any
                           business which may compete with the Company in any
                           area of the Business;

                  (b)      the consulting services do not relate to any products
                           or services which form part of the Business.

         Company acknowledges that Employee currently provides consulting
services to, serves on the Board of Directors of, and/or holds equity positions
in various companies, as set forth in a confidential memorandum to the General
Counsel of the Company dated concurrently herewith.

         4. NON-COMPETITION. Employee's non-compete period has been extended for
two (2) years so that Employee shall not, for a period of five (5) years (which
includes the two (2) year extension) following November 1, 2001, nor shall the
Employee while employed by the Company or its successor:

                  (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
                           United States or Canada (provided, that the foregoing
                           shall not prohibit Employee from owning up to 1% of
                           any publicly traded company in the Business);

                  (b)      either alone or in conjunction with any other person,
                           partnership or business, directly or indirectly,
                           solicit or divert or attempt to solicit or divert any
                           of the employees or agents of the Company or its
                           affiliates to work for or represent any competitor of
                           the Company or its affiliates or to call upon any of
                           the customers of the Company or its affiliates for
                           any gaming related products or services.

                  The foregoing covenants shall benefit as well any successor to
the Company.

         5. PAYMENT FOR NON-COMPETE COVENANT. In consideration of only the
covenants in Section 4 hereof, including the extended two (2) year period of
non-competition, the Company agrees to compensate Employee as follows:

                  (a)      On January 5, 2002 (if Employee is employed by the
                           Company on such date) and on each January 5,
                           thereafter, that Employee is employed by the Company
                           through January 5, 2006, the Company shall pay to
                           Employee the sum of One Hundred Fifty Thousand
                           ($150,000.00);

                  (b)      Upon the termination for any reason of Employee's
                           employment whether voluntary or involuntary, or in
                           the event of a change in control of the Company, the
                           Company shall pay to Employee a sum equal to Seven
                           Hundred Fifty Thousand ($750,000.00) on or before the
                           date of termination as compensation for the five-year
                           covenant set forth above, less a credit, if any, for
                           each One Hundred Fifty Thousand ($150,000.00) payment
                           previously made to Employee under Section 5 (a).

                  All such payments shall be subject to applicable withholding.


                                       3
<PAGE>


         6. 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 working hours. Employee agrees that
                           all such inventions, discoveries, software and
                           writing shall be and remain the sole and exclusive
                           property of the Company, and Employee hereby agrees
                           to assign, and hereby assigns all of Employee's
                           right, title and interest in and to any such
                           inventions, discoveries, software and writings to the
                           Company. Employee agrees to keep complete records of
                           such inventions, discoveries, software and writings,
                           which records shall be and remain the sole property
                           of the Company, and to execute and deliver, either
                           during or after Employee's employment with the
                           Company, such documents as the Company shall deem
                           necessary or desirable to obtain such letters patent,
                           utility models, inventor's certificates, copyrights,
                           trademarks or other appropriate legal rights of the
                           United States and foreign countries as the Company
                           may, in its sole discretion, elect, and to vest title
                           thereto in the Company, its successors, assigns, or
                           nominees.

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

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

                  (d)      The three immediately preceding paragraphs do not
                           apply to inventions in which a Company claim or any
                           rights will create a violation of Chapter 47
                           Minnesota Revised Statutes, Section 1-181.78,
                           reproduced below and constituting the written
                           notification of its Subdivision 3.

                           SUBDIVISION 1. ANY PROVISION IN AN EMPLOYMENT
                           AGREEMENT WHICH PROVIDES THAT AN EMPLOYEE SHALL
                           ASSIGN OR OFFER TO ASSIGN ANY OF THE EMPLOYEE'S
                           RIGHTS IN AN INVENTION TO THE EMPLOYER SHALL NOT
                           APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT,
                           SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF THE
                           EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON
                           THE EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT
                           RELATE (A) DIRECTLY TO THE BUSINESS OF THE EMPLOYER
                           OR (B) TO THE EMPLOYER'S ACTUAL OR DEMONSTRABLY
                           ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH
                           DOES NOT RESULT FROM ANY WORK PERFORMED BY THE
                           EMPLOYEE FOR THE EMPLOYER. ANY PROVISION WHICH
                           PURPORTS TO APPLY TO SUCH AN INVENTION IS TO THAT
                           EXTENT AGAINST THE PUBLIC POLICY OF THIS STATE AND IS
                           TO THAT EXTENT VOID AND UNENFORCEABLE.

                           SUBDIVISION 2. NO EMPLOYER SHALL REQUIRE A PROVISION
                           MADE VOID AND UNENFORCEABLE BY SUBDIVISION 1 AS A
                           CONDITION OF EMPLOYMENT OR CONTINUING EMPLOYMENT.

                           SUBDIVISION 3. IF AN EMPLOYMENT AGREEMENT ENTERED
                           INTO AFTER AUGUST 1, 1997 CONTAINS A PROVISION
                           REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN
                           ANY OF THE EMPLOYEE'S RIGHTS IN ANY INVENTION TO AN
                           EMPLOYER, THE EMPLOYER MUST ALSO, AT THE TIME THE
                           AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO
                           THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN
                           INVENTION FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY
                           OR TRADE SECRET INFORMATION OF THE EMPLOYER WAS


                                       4
<PAGE>


                           USED AND WHICH WAS DEVELOPED ENTIRELY ON THE
                           EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE
                           (A) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (B)
                           TO THE EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED
                           RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES NOT RESULT
                           FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE
                           EMPLOYER.

                  (e)      Employee will not publish or otherwise disclose,
                           either during or after Employee's employment with the
                           Company, any unpublished 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.

                  (f)      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.
                           Employee agrees to maintain in confidence all
                           confidential information pertaining to the Business
                           or the Company to which Employee has access
                           including, but not limited to, confidential
                           information relating to the Company's products,
                           inventions, trade secrets, formulas, compositions,
                           customer information and lists, research projects,
                           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
                           confidential 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 public without fault on
                           employee's part, or as required by law.

         7. TERMINATION WITHOUT JUST CAUSE; STAY BONUS. In the event of the
termination of Employee's employment by the Company without just cause, as
defined in Section 8, the Employee will receive all compensation that would be
provided under this Agreement through January 31, 2005 including all salary,
benefits and bonuses; in addition, any stock option previously granted to the
Employee (not already exercisable and vested) will become exercisable and all
stock options will become fully vested on the first day immediately following
Employee's last day of employment. Employee will be entitled to exercise said
options in accordance with the terms of the Company's stock option plan as
amended from time to time. In the event of such a change in control Employee
will reasonably cooperate with the Company, and exercise his stock options in a
way as to not hinder the progress or closing of the sale or merger transaction,
and in no event later than three (3) months following the closing.


                                       5
<PAGE>


         In the event Employee does not voluntarily resign as the Chairman of
the Board of Directors of Shuffle Master, Inc., on or before February 1, 2002,
Employee will be paid a stay bonus of Two Hundred Fifty Thousand Dollars
($250,000.00) on February 2, 2002.

         8. TERMINATION BY COMPANY FOR JUST CAUSE. The Company may only
terminate Employee for just cause. In the event the Company terminates the
Employee for just cause, the Employee will remain bound under the covenant not
to compete and confidentiality obligations contained in Sections 4 and 6 and
will not be entitled to the remaining salary and general employment benefits
(e.g. health insurance, dental, life) to be provided following the date of such
termination. Notwithstanding any termination for just cause, Employee is
entitled to the accelerated non-compete payments provided for in Section 5 of
this Agreement. Termination for "just cause" shall be limited to:

                  (a)      dishonesty as to a matter which is materially
                           injurious to the Company;

                  (b)      the commission of a willful act or omission intended
                           to materially injure the business of the Company; or

                  (c)      a substantial violation of the provisions of Sections
                           4 and 6 hereof.

         9. TERMINATION BY EMPLOYEE. In the event Employee voluntarily
terminates his employment with the Company (or its successor) prior to February
1, 2005, Employee will remain bound under the confidentiality and non-compete
obligations of Sections 4 and 6 and will not be entitled to the remaining salary
and general employment benefits (e.g. health insurance, dental, life) to be
provided following the date of such voluntary termination. Notwithstanding any
voluntary termination by employee, Employee is entitled to the accelerated
non-compete payments provided for in Section 5 of this Agreement. Voluntary
termination means an intentional termination by the Employee without good reason
and without pressure by the Company. Voluntary termination does not mean a
termination caused by the death or disability of the Employee. In the event a
termination occurs due to the death or disability of Employee, Employee is
entitled to and will receive the full benefits (including salary) remaining
through January 31, 2005 under this Agreement at the time of such termination.

         10. NO CONFLICTING AGREEMENTS. Employee has the right to enter into
this Agreement, and hereby confirms Employee has no contractual or other
impediments to the performance of Employee's obligations including, without
limitation, any non-competition or similar agreement in favor of any other
person or entity.


                                       6
<PAGE>


         11. COMPANY POLICIES. During the period of Employee's employment,
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.

         12. INDEPENDENT COVENANTS. The covenants on the part of the Employee
contained in Sections 4 and 6 hereof shall be construed as agreements
independent of any other provision in this Agreement; 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 to enforcement by the Company of those
covenants.

         13. INJUNCTIVE RELIEF; ATTORNEYS' FEES. In recognition of the
irreparable harm that a violation by Employee of any of the covenants contained
in Sections 4 and 6 hereof would cause the Company, the Employee agrees,
notwithstanding the provisions of Section 17 hereof, 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. Employee consents to the issuance
of such injunction relief without the posting of a bond or other security. In
the event of any such violation, the successful party in any action for an
injunction is entitled to recover from the unsuccessful party the successful
party's costs, expenses and reasonable attorneys' fees incurred in such
injunction action, in addition to any other actual damages sustained by the
successful party.

         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.

         15. ENTIRE AGREEMENT. This Agreement is the entire agreement of the
parties hereto concerning the subject matter hereof and supercedes and replaces
any oral or written existing agreements between the Company and the Employee
relating generally to the same subject matter. Company and Employee hereby
acknowledge that there are no agreements or understandings of any nature, oral
or written, regarding Employee's employment, apart from this Agreement.


                                       7
<PAGE>


         16. SEVERABILITY. It is further agreed and understood by the parties
hereto that if any provision of this Agreement should be determined by a 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.

         17. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota, without giving effect to the
principles of conflicts of laws thereof. Except as provided in Section 13
hereof, any dispute relating hereto or arising hereunder shall be resolved by
binding arbitration pursuant to the procedures of the American Arbitration
Association held in Minneapolis, Minnesota. In the event that injunctive relief
is sought, pursuant to Section 13 hereof or otherwise, said action shall be
venued in the federal or state courts located in Minneapolis, Minnesota.

         18. HEIRS, SUCCESSORS AND ASSIGNS. The terms, conditions, 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 and
assigns.

         19. EXCISE TAX PAYMENTS.

                  (a)      In the event that any payment or benefit (within the
                           meaning of Section 28OG(b)(2) of the Internal Revenue
                           Code of 1986, as amended (the "Code")), paid or
                           payable to the Employee or for his benefit or
                           distributed or distributable pursuant to the terms of
                           this Agreement or otherwise in connection with, or
                           arising out of, his employment with the Company or a
                           Change in Control of the Company (a "Payment" or
                           "Payments"), would be subject to the excise tax
                           imposed by Section 4999 of the Code or any interest
                           or penalties are incurred by the Employee with
                           respect to such excise tax (such excise tax, together
                           with any such interest and penalties, are hereinafter
                           collectively referred to as the "Excise Tax"), then
                           the Employee will be entitled to receive an
                           additional payment (a "Gross-Up Payment") in an
                           amount such that after payment by the Employee of all
                           taxes (including any interest or penalties, other
                           than interest and penalties imposed by reason of the
                           Employee's failure to file timely a tax return or pay
                           taxes shown as due on his return, imposed with
                           respect to such taxes and the Excise Tax), including
                           any Excise Tax imposed upon the Gross-Up Payment, the
                           Employee retains an amount of the Gross-Up Payment
                           equal to the Excise Tax imposed upon the Payments.

                  (b)      An initial determination as to whether a Gross-Up
                           Payment is required pursuant to this Agreement and
                           the amount of such Gross-Up Payment shall be made at
                           the Company's expense by an accounting firm selected
                           by the Employee and reasonably acceptable to the
                           Company which is designated as one of the ten (10)
                           largest accounting firms in the United States (the
                           "Accounting Firm"). The Accounting Firm shall provide
                           its determination (the "Determination"), together
                           with detailed supporting calculations and
                           documentation, to the Company and the Employee
                           promptly following the date of termination of the
                           Employee's employment, if applicable, or such other
                           time as requested by the Company or the Employee. The
                           Gross-Up Payment, if any, as determined pursuant to
                           this Section 19(b) shall be paid by the Company to
                           the Employee within five days of the receipt of the
                           Determination. In the event that the tax returns of
                           either Employee or the Company are audited with
                           respect to this issue, the same accounting firm shall
                           be retained in connection with the audit and any
                           appeal, and the amount of the


                                       8
<PAGE>


                           Gross-Up Payment shall be subject to revision,
                           depending upon the final outcome of the audit.

                  (c)      Notwithstanding anything contained in this Agreement
                           to the contrary, in the event that, according to the
                           Determination, an Excise Tax will be imposed on any
                           Payment or Payments, the Company shall pay to the
                           applicable government taxing authorities as Excise
                           Tax withholding, the amount of the Excise Tax that
                           the Company has actually withheld from the Payment or
                           Payments.

         20. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" is defined as a completed transaction or series of transactions,
regardless of form, by which any person, entity or group of persons and
entities, acting together, obtain control, directly or indirectly, of more than
50% of the voting power of the Company and shall include, but not be limited to,
mergers, tender offers, sales of assets, proxy contests involving a change in
control of the Board, and the like.

         21. WAIVER OF CONFLICT OF INTEREST. Employee has been represented in
this matter by Moss & Barnett; the Company has been represented by Thomas G.
Barry, Jr., General Counsel. The parties acknowledge that Moss & Barnett has
previously represented both the Employee and the Company on other matters, both
unrelated and related. Both parties nonetheless waive any potential or actual
conflict of interest relating to Moss & Barnett's representation of Employee in
this matter. The Company further waives any objections to Moss & Barnett's
continued representations of Employee in this matter, and Employee waives any
objections to Moss & Barnett's continued representation of the Company in other
matters.



         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.


By: /s/ Gary W. Griffin                          /s/ Joseph J.Lahti
    ---------------------------------------      -------------------------------
    Its: Chief Financial Officer                 Joseph J. Lahti
         ----------------------------------



By: /s/ Patrick R. Cruzen
    ---------------------------------------
    Its: Chairman of Compensation Committee
         ----------------------------------


                                       9
<PAGE>


                                    EXHIBIT A

         Employee may earn a percentage of Employee's base salary as a bonus
during fiscal year 2001, which will vary depending on the percentage of targeted
income before taxes (REDACTED; CONFIDENTIAL TREATMENT REQUESTED) earned by the
Company:

COMPANY EARNINGS
AS % OF TARGETED INCOME
BEFORE TAXES                  BONUS
------------                  -----

a.       Less than 90%        0

b.       90%                  $102,336.00 (40% of base salary)

c.       90% - 100%           $102,336.00 + $2,558.40 for each increase of one
                              percent (1%) over ninety percent (90%)

d.       100%                 $127,920.00 (50% of base salary)

e.       100% - 120%          $127,920.00 + $1,279.20 for each increase of one
                              percent over 100%

f.       120%                 $153,504.00 (60% of base salary)

g.       over 120%            60% of base salary plus an additional 1% of base
                              salary for each increase of one percent over 120%.

         For example, if the Company earns 100% of its targeted income before
taxes during fiscal 2000, Employee would be paid a performance bonus of
$127,920.00 ($255,840.00 x 50%). If the Company earns 90% of its targeted income
before taxes during fiscal 2000, Employee would be paid a performance bonus of
$102,336.00 ($255,840.00 x 40%). If the Company earns 120% of its targeted
income before taxes, then Employee's performance bonus would be $153,504.00
($255,840.00 x 60%). If the Company earns more than 120% of its targeted income
before taxes, Employee's performance bonus would further increase by an amount
equal to one percent ( 1% ) of his base salary for each percent by which the
percentage increase in income before taxes exceeds the target. In no event shall
the amount of the bonus exceed twice Employee's annual base salary.


                                       10

Source: OneCLE Business Contracts.