exv10w1



 






Exhibit 10.1



(Certain terms related to pricing indicated by ** in this Exhibit 10.1 have
been omitted and have been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities Exchange Act of 1934.)




LICENSE AGREEMENT




     THIS LICENSE AGREEMENT (this “Agreement”) is made as of the 30th day of
June 2004, by and between BALLY GAMING INC., a Nevada corporation, with offices
at 6601 South Bermuda Road, Las Vegas, Nevada 89119 (“Licensor” or “Bally”) and
SPECTRE GAMING, INC. a Minnesota corporation, with offices at 1466 Pioneer
Way, El Cajon, Ca 92020 (“Licensee”). Licensor and Licensee may be referred to
individually as a “Party” and collectively as the “Parties.”



WITNESSETH:




     WHEREAS, Licensor owns or licenses the rights in certain Game Titles;



     WHEREAS, Licensor designs, manufactures and offers for sale certain
Cabinets;



     WHEREAS, Licensee provides equipment and financial expertise to
facilitate the operation of a bingo gaming system and certain types of
equipment that may utilize Game Titles owned or licensed by Licensor and
Cabinets manufactured and sold by Licensor;



     WHEREAS, Licensor is engaged in the business of manufacturing, licensing,
distributing and selling Game Titles and Cabinets; and



     WHEREAS, Licensee desires to license certain Game Titles and to purchase
certain Cabinets from Licensor.



     NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties, intending to be legally bound, covenant
and agree as follows:




	1.	 	CERTAIN DEFINITIONS:





     1.01 “Cabinet” shall mean and include a gaming device, player station,
cabinet or similar equipment on which a Game Title may be operated or played,
together with all patents, trademarks, logos and other intellectual property
associated therewith. “Bally Cabinet” shall mean a Cabinet manufactured by
Licensor and sold to Licensee under the terms of this Agreement. “Spectre
Cabinet” shall mean any Cabinet owned or leased by Licensee or its parent,
subsidiaries or affiliates that is not a Bally Cabinet.



     1.02 “Game Title” shall mean and include an individual game theme and its
related method(s) of game play, paytables, graphical artwork and/or video
images, audio features and all patents, trademarks, logos and other
intellectual property associated therewith, excluding any computer software.



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     1.03 “Bally Game Titles” shall mean and include all of Licensor’s Game
Titles listed on Exhibit A attached hereto and made part hereof. By written
supplementation of Exhibit A and mutual agreement of the Parties, the Licensed
Game Titles may from time to time include additional Game Titles owned or
licensed by Licensor.



     1.04 “License” shall mean an individual Bally Game Title developed for
play and rent, sublicense or distribution in the Territory by Licensee and
which is installed in a Cabinet, made available for play and placed in
commercial operation within the Territory.



     1.05 “Licensee Customer” shall mean any parent, subsidiary, affiliate,
sublicensee or customer of Licensee to which Licensee has rented, assigned, or
sublicensed the right to use or further distribute a License.



     1.06 “Territory” shall mean and include all jurisdictions, locations,
tribal casinos, racinos, facilities, establishments or other markets in which
Licensee or any Licensee Customer may legally distribute, sell, operate,
license or otherwise conduct bingo gaming operations.



     1.07 The “Term” of this Agreement shall be as set forth in Section 3
hereof.




	2.	 	GRANT OF LICENSE:





     2.01 Licensor hereby grants and Licensee hereby accepts, subject to the
terms and conditions hereinafter set forth, a non-exclusive license to utilize
the Bally Game Titles in a Cabinet, to market, maintain, rent, sublicense or
otherwise distribute the Bally Game Titles all within the Territory and whether
pursuant to a rental, lease, sublicense or revenue sharing participation
arrangement.


2.02 Notwithstanding any other terms and conditions hereof to the contrary, the
obligations of the Parties hereunder are subject to all gaming licenses,
permits and other approvals necessary to consummate the transactions
contemplated hereunder and to operate Licenses within the Territory. Licensee
or Licensee’s Customers shall, at its or their sole expense, be responsible for
obtaining any regulatory approval to operate Licenses within the Territory.
Licensor will provide Licensee with all reasonable assistance in obtaining such
approvals.





	3.	 	TERM:





     The license granted hereunder and the other rights and obligations of the
Parties pursuant to this Agreement shall become effective upon the execution of
this Agreement by the Parties and shall continue for a period of three (3)
years unless earlier terminated pursuant to the terms and conditions hereof
(the “Initial Term”); provided that Licensee shall have the perpetual right to
use, market, maintain, rent, sublicense or otherwise distribute (within the
Territory and subject to the applicable restrictions of this Agreement) any
Licenses for which Licensee has paid or incurred a license fee hereunder as of
the termination of this Agreement. Subsequent to the Initial Term, this
Agreement may be extended from year to year upon mutual agreement of the
Parties. The Initial Term and any such subsequent extension thereof shall be
collectively referred to as the “Term.”



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	4.	 	DUTIES OF THE PARTIES:





     4.01 Licensee shall select games that it will develop for marketing,
operation and play in the Territory from the list of Bally Game Titles.
Licensee shall be solely responsible for developing and marketing for lease,
rental, sublicense or distribution in the Territory the Bally Game Titles
chosen by Licensee. Licensee shall develop the selected Bally Game Titles
consistent with the design and quality standards of Licensor, and Licensor
shall have final approval of all Bally Game Titles placed in operation by
Licensee, which approval shall not be unreasonably withheld. With respect to
any Bally Game Title, the rights to which Licensor has licensed from a third
party licensor, Licensor reserves the right to withdraw such Bally Game Title
from the terms of this Agreement and the license granted hereunder if Licensor
is unable to obtain any required consent of such third party licensor to the
terms and conditions of this Agreement.



     4.02 In its sole discretion, Licensor may develop additional Game Titles
and submit them to Licensee for inclusion within the list of Bally Game Titles
set forth on Exhibit “A” hereto. If an additional Game Title is developed by
Licensor, Licensor may submit to Licensee an amendment to Exhibit A adding the
additional Game Title.



     4.03 Licensor shall design, manufacture and offer for sale to Licensee
certain Cabinets. The Cabinets so offered by Licensor and the prices and
discounts therefor shall include such Cabinets, prices and discounts listed on
Exhibit “B” attached hereto and made a part hereof. All Cabinets offered by
Licensor to Licensee hereunder shall be capable of supporting, displaying and
operating a License and shall include the components listed on Exhibit “C”
attached hereto and made part hereof. Licensee shall have final approval of
all Cabinets to be purchased from Licensor under this Agreement, which approval
shall not be unreasonably withheld. Notwithstanding the foregoing, Licensee
may install Licenses in, and thereafter operate, rent, sell, sublicense or
otherwise distribute, Bally Cabinets or Spectre Cabinets at Licensee’s
election, subject to Licensor’s right to approve the use of the installed
License within such Cabinets as provided in Section 4.01 hereof, which approval
may not be unreasonably withheld.



     4.04 Licensor shall make available to Licensee spare and replacement parts
for the Bally Cabinets at Licensor’s current published retail price less a
twenty percent (20%) discount for such spare or replacement parts.



     4.05 Licensor will provide Licensee its standard limited warranty, as set
forth on Exhibit “E” attached hereto and made a part hereof, on all Bally
Cabinets. Licensee may, at its option, purchase extended warranties for the
Bally Cabinets for additional periods of time at a rate of one percent (1%) of
the cost of the applicable Cabinets for each ninety (90) days of extended
warranty period purchased by Licensee. Such warranties shall be assignable by
Licensee to any Licensee Customer.




	5.	 	CONSIDERATION:





     5.01 Licensee shall pay to Licensor a license fee for each License in the
amount as set forth on Exhibit “D” attached hereto and made part hereof. No
license fee shall be due from Licensee with respect to any Bally Game Title or
License installed in a Cabinet and furnished to Licensor for demonstration
purposes under Section 8.01 of this Agreement.



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     5.02 All Bally Cabinets and other goods provided by Licensor under this
Agreement shall be made available to Licensee at the prices and discounts
specified in this Agreement, but in any event on terms and conditions which are
no less favorable than those under which such goods are provided by Licensor to
third parties at comparable volumes. Such terms shall include, without
limitation, the prices charged for the Bally Cabinets, as well as the delivery
schedule of the Bally Cabinets and supplying spare parts.



     5.03 Unless otherwise specified in this Agreement and after the Initial
Order (as hereinafter defined), payment of all license fees for Licenses and
purchase prices for Cabinets and other parts supplied by Licensor shall be made
as follows: Two percent (2%) within ten (10) days of receipt by Licensee (for
purchases of Cabinets and parts) or placement in operation (for Licenses), net
owing within thirty (30) days of such dates, subject to Licensee’s option to
finance such payments under Section 5.04. For purposes of this Section 5.03
and Section 5.04, “placement in operation “ shall mean the date on which a
License is made available for play and is placed in commercial operation in a
Cabinet by Licensee or a Licensee Customer. All payments under this Agreement
shall be made in U.S. dollars. Unless otherwise agreed in writing between the
Parties, payment shall, at the option of Licensee, be made by corporate check
or wire transfer to Licensor.



     5.04 At its option, Licensee may obtain financing from Licensor for any
license fees for Licenses and purchase prices for Cabinets and other parts
supplied by Licensor. The terms of such financing shall be as follows:
Twenty-five percent (25%) down at time of order and the balance paid pursuant
to a note amortized monthly for six months at an interest rate of nine percent
(9%). . Delivery is FOB Las Vegas.




	6.	 	GUARANTEED MINIMUM; GAME TITLE DEVELOPMENT AND SUBSTITUION:




6.01 Licensee guarantees to Licensor a minimum purchase of three thousand
(3,000) Bally Cabinets from Licensor during the Initial Term (the “Guaranteed
Minimum”). Licensee further agrees to purchase at least 100 Bally Cabinets and
to incur license fees on 250 Licenses by June 30, 2004 (the “Initial Order”).
In the event that Licensee purchases less than 3,000 Bally Cabinets from
Licensor during the Initial Term, Licensee shall, in lieu of purchasing such
Bally Cabinets for that period, pay Licensor the amount of $500 times the
difference between the 3,000 Bally Cabinets and the number of Bally Cabinets
actually purchased by Licensee, with such payment being due within 30 days
after the last day of the Term.. During any renewal or extension period of the
Term, there shall be no guaranteed minimum purchase required. Notwithstanding
any other provision of this Agreement, payment of the license fees for the
Initial Order shall not be due and owing until January 1, 2005, and shall not
bear interest until after that date.




     6.02 Notwithstanding the obligations of Section 6.01 hereinabove, if,
during any year of the Initial Term hereof, Licensee has purchased at least
seventy percent (70%) of all its Cabinet purchases for Class II from Licensor,
Licensor shall waive the Guaranteed Minimum for that year.



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     6.03 Licensee shall develop software for marketing and distribution by
Licensee in the Territory with a minimum of four (4) Bally Game Titles during
each year of the Initial Term. During any renewal or extension period of the
Term, Licensee shall provide for the software development of Bally Game Titles
as it believes such games to be economically feasible within the Territory.
Licensee may also create and develop variations of a Bally Game Title
(“Derivative Works”). Any Derivative Work or software based on a Bally Game
Title developed by Licensee shall be the exclusive property of Licensee, and
Licensor shall be prohibited from reverse engineering, copying, designing,
manufacturing, programming, selling, licensing, sublicensing, renting,
distributing or otherwise using such software or Derivative Work except
pursuant to a license agreement mutually acceptable to Licensee and Licensor.
Licensor further agrees that it will not approve the use by any of its other
licensees of a Bally Game Title in a game or product that appears to include
any copy or further derivation of the software or Derivative Works developed by
Licensee, unless such other licensee demonstrates to Licensor that it has not
used Licensee’s software or Derivative Works, or has licensed or otherwise
acquired from Licensee the right to use Licensee’s software or Derivative
Works. All right, title and interest in and to the Bally Game Titles shall at
all times be owned by Licensor.



     6.04 Licensee may, in its discretion, purchase Bally Cabinets to be
utilized with games other than the Bally Game Titles at the prices listed on
Exhibit “B.” In the event that standard Cabinets manufactured by Licensor
require modification for such use, Licensee shall provide Licensor with the
necessary specifications, and Licensor may, in its sole discretion, elect to
manufacture and sell such specified Cabinets to Licensee with adjustments to
the prices listed in Exhibit “B” as necessary to cover the cost of the
modifications specified by Licensee.



     6.05 Licensee may, at its option and without incurring a new license fee,
substitute, install and operate in any Cabinet a License different from the
License already installed and operating in such Cabinet or a Game Title not
licensed from Licensor.




	7.	 	ACCOUNTING:





     7.01 Licensee agrees to generate and make available to Licensor monthly
reports of the number of Licenses placed in operation and in use by Licensee or
Licensee’s Customers. Licensee shall cooperate with Licensor to provide
information from which the Parties may determine the number of units of
Licenses placed in operation during each month and the license fees
attributable thereto.



     7.02 Licensee agrees to keep accurate books of account and records
covering all rentals, sublicenses, and distributions of Licenses and all
license fees due under this Agreement and to permit Licensor at its own expense
to inspect and copy such books of account and records during reasonable
business hours (upon prior reasonable written notice) for the sole purpose of
verifying the reports to be provided hereunder. Licensor shall keep any
information obtained from any such inspection in confidence and shall require
that its accountants do so as well. In the event that any audit by Licensor or
its accountants, appropriately conducted, reveals that Licensee has underpaid
license fees by two percent (2%) or more with respect to any six-month period
which is the subject of such audit, Licensee shall pay to Licensor, within
fifteen days of notice of such deficiency, the amount of any such deficiency
with interest at the rate specified in Section 7.03 hereof from the date such
deficiency was originally due. All books of accounts and records relating to
each report to be provided under this Agreement shall be retained by Licensee
for at least two (2) years after the termination or expiration of this
Agreement, and Licensor’s audit



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rights shall survive termination or expiration of this Agreement. Licensee has
the right to review and challenge Licensor’s audit findings, and no alleged
delinquent amounts shall be due until the propriety of the audit is determined
or agreed by the Parties.




     7.03 If Licensee fails to timely submit accurate reports and to pay
license fees due hereunder, Licensee shall pay interest on overdue amounts at
the monthly rate of one and one-half percent (1.5%) or the highest rate
permitted by law, whichever is the lower.



     7.04 Licensee and Licensor shall each severally be responsible for any
taxes, fees, licensing requirements, licensing expenses, or any other costs and
expenses incurred in the performance of its respective obligations under this
Agreement.




	8.	 	QUALITY OF LICENSED PRODUCTS:





     8.01 Prior to distribution by Licensee, Licensor shall have the right to
determine in its reasonable discretion whether the use of the Bally Game Title
meets Licensor’s standards of merchantability. For such purpose, Licensee will
provide to Licensor free of charge two (2) Spectre Cabinets. Licensee shall
provide Licensor with the hardware and/or software necessary to review each
Bally Game Title to be distributed by Licensee, on either a Spectre Cabinet or
a Bally Cabinet, for approval. Upon expiration or termination of this
Agreement, Licensor shall return any hardware or software provided by Licensee
for such demonstration purposes. All demonstration player stations shall be
capable of running a demonstration of the applicable License but shall not be
capable of play. All such demonstration player stations shall be submitted for
approval in final form (including all applicable artwork and sound). Licensor
may retain such demonstration player stations at its option; provided that,
upon termination of this Agreement, all Spectre Cabinets shall be returned to
Licensee. No license fees shall be due from Licensee on such demonstration
player stations. Licensor agrees that it shall use all commercially reasonable
efforts to expedite its approval of the all Bally Game Titles developed for
distribution by Licensee and submitted to Licensor for approval under this
Agreement. Licensor reserves the right to rescind at any time its approval of
any intended use by Licensee of a Bally Game Title or License, if Licensor
determines that Licensee’s use of the applicable Bally Game Title does not meet
Licensor’s reasonable quality standards and Licensee has not cured the
deficiency within thirty (30) days of notice to Licensee of the deficiency.



     8.02 If Licensor disapproves of any Bally Game Title or License submitted
by Licensee for approval hereunder, Licensor shall furnish at the time notice
of disapproval is given to Licensee a written explanation of the reason(s) for
such disapproval and recommendations for suggested changes, and Licensee shall
resubmit such item after changes have been made for Licensor’s approval.



     8.03 If Licensor’s approval is not received by Licensee within fifteen
(15) business days after Licensor’s receipt of the applicable demonstration
player stations submitted for approval, Licensor’s approval shall be deemed to
have been granted.



     8.04 Licensee shall have the right to determine in its reasonable
discretion whether any Bally Cabinet or part furnished by Licensor to Licensee
under the terms of this Agreement meets Licensee’s standards of merchantability
within the Territory. Licensee may reject any Cabinet not meeting such
standards. If Licensee rejects any Bally Cabinet, Licensee shall at the time
of such rejection furnish Licensor notice of such rejection and an explanation
of the reason(s) and



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recommendations for suggested changes. Licensor shall resubmit a rejected Bally
Cabinet for Licensee’s approval after modifications have been made.





	9.	 	INTELLECTUAL PROPERTY RIGHTS:





     Licensor shall retain all right, title and interest in and to all
intellectual property associated with all Bally Game Titles, except as granted
to Licensee hereunder. All software or Derivative Works based on Bally Game
Titles developed by Licensee for use in the Territory shall be considered the
intellectual property of Licensee.




	10.	 	MANUFACTURE, MARKETING AND DISTRIBUTION:





     10.01 Licensor shall manufacture and ship to a destination specified by
Licensee all Bally Cabinets ordered by Licensee within sixty (60) days of
receiving a purchase order therefor.




10.02 Licensee agrees that it will rent, sublicense and distribute the
Licenses and that it will make and maintain adequate arrangements for the
distribution of same using commercially reasonable efforts to effect
distribution throughout the Territory.
10.03 Licensee shall develop software and Derivative Works based on the
Bally Game Titles for sale, rent, sublicense or distribution, including all
artwork, designs, copy, literary text, other computer software, and
advertising and promotional material of any sort incorporating or based on
the Bally Game Titles, using its own employees or independent contractors
or affiliates. Such affiliates or contractors will comply with Licensee’s
compliance program.




	11.	 	REPRESENTATIONS AND WARRANTIES:





     11.01 Licensee hereby represents and warrants that it is free to enter
into and fully perform this Agreement; that Licensee is a limited liability
company validly existing under the laws of the State of Minnesota and qualified
to conduct business in the state of its formation; that Licensee or Licensee’s
Customers has or will acquire all licenses and permits required to allow
Licensee to rent, sublicense or distribute Licenses in the Territory, including
without limitation any required by a regulatory body (“Commission”).



     11.02 Licensor hereby represents and warrants that it is free to enter
into and fully perform this Agreement; that Licensor is a corporation validly
existing under the laws of the State of Nevada; that Licensor is the sole owner
or licensee of the Bally Game Titles and has the full and exclusive power to
grant the rights and licenses to the Bally Game Titles as described herein; and
that Licensor has obtained all necessary gaming or other licenses, including
without limitation any required by a Commission, to perform the terms and
conditions of this Agreement.



12. INDEMNIFICATION:




12.01 Each Party agrees to indemnify, defend and hold the other (including
officers, directors, agents and employees of such Party or its parents,
subsidiaries, affiliates, customers and sublicensees) harmless against any
loss, damage, expense or cost (including reasonable attorneys’ fees)
arising out of any claim, demand, suit or judgment resulting from or
relating to any breach of any warranty or representation set forth in
Section 11 above.



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Each Party shall promptly inform the other in writing of any such claim,
demand, suit or judgment.



     12.02 In connection with any such claim, demand or suit referred to
above, the party so indemnifying (the “Indemnitor”) agrees to defend, contest
or otherwise protect the indemnified party (the “Indemnitee”) against any such
suit, action, investigation, claim or proceeding at the Indemnitor’s own cost
and expense. The Indemnitee shall have the right, but not the obligation to
participate, at its own expense, in the defense thereof by counsel of its own
choice. In the event that the Indemnitor fails timely to accept the defense and
indemnity of and to defend, contest or otherwise protect against any such suit,
action, investigation, claim or proceeding, the Indemnitee shall have the right
upon twenty (20) days’ prior written notice (or such shorter period as shall be
necessary under the circumstances of the suit, action or proceeding) to the
Indemnitor to defend, contest or otherwise protect against the same and make
any compromise or settlement thereof and recover the entire cost thereof from
the Indemnitor, including without limitation, reasonable attorneys’ fees,
disbursements and all reasonable amounts applied as a result of such suit,
action, investigation, claim or proceeding or compromise or settlement thereof.
The obligations hereunder shall survive the termination or expiration of this
Agreement for a period of three years, except for claims of intellectual
property infringement which shall survive expiration or termination of this
Agreement for a period of six years.




12.03 Licensee agrees that it will obtain and maintain during the Term at
its own expense, general liability insurance (including coverage for
product liability) from a recognized and qualified insurance company naming
Licensor as additional insured in the amount of at least Three Million
Dollars ($3,000,000.00) per occurrence against any claims, suits, losses or
damages, including attorneys’ fees, arising out of the marketing,
distribution, sale or use of the Bally Cabinets by Spectre. Such policy
shall be non-cancelable except after thirty (30) days’ prior written notice
to Licensor. As proof of such insurance, a fully paid certificate of
insurance will be submitted to Licensor by Licensee for Licensor’s prior
written approval before any Bally Cabinet is distributed or sold, and at
the latest within thirty (30) days after the date of this Agreement.



     12.04 Licensor and Licensee shall each notify the other promptly upon
learning of any infringing, unauthorized use of the other’s intellectual
property which is the subject of this Agreement.




	13.	 	EVENTS OF DEFAULT AND TERMINATION:





     13.01




     (a) Licensee shall be deemed to be in default of this Agreement, and
Licensor shall have the right to immediately terminate this Agreement or
notify Licensee that Licensor has revoked the license granted herein in
the event Licensee fails after thirty (30) days’ written notice to
Licensee to make any payment due and owing under the terms of this
Agreement, furnish any statement in accordance herewith, or reasonably
comply with any other of Licensee’s obligations hereunder.



     (b) If during the Term of this Agreement Licensee is unable to pay its
liabilities when due, or makes any assignment for the benefit of creditors, or
files any petition under any federal or state bankruptcy statute, or be
adjudicated a bankrupt or insolvent, or if any receiver is



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appointed for its business or property, or if any trustee in bankruptcy
shall be appointed under the laws of the United States or any state, and in the
case of an involuntary filing only, such impediment is not removed within
thirty (30) days from the inception of same, Licensor may terminate this
Agreement upon written notice.




     (c) If during the Term of this Agreement any of Licensee’s gaming licenses
are suspended, revoked or otherwise made ineffective by any gaming regulatory
agency, or Alliance Gaming Corporation’s Compliance Committee disapproves or
withdraws its approval as provided in Section 15.02 hereof, either party shall
have the immediate right to terminate this Agreement.



     13.02




     (a) Licensor shall be deemed to be in default of this Agreement, and
Licensee shall have the right to immediately terminate this Agreement, in
the event Licensor fails, after thirty (30) days’ written notice to
Licensor, to reasonably comply with any of Licensor’s obligations
hereunder.




     (b) If, during the Term of this Agreement, Licensor is unable to pay
its liabilities when due, or shall make any assignment for the benefit of
creditors, or files any petition under any federal or state bankruptcy
statute, or be adjudicated a bankrupt or insolvent, or if any receiver is
appointed for its business or property, or if any trustee in bankruptcy
shall be appointed under the laws of the United States or any state, and
in the case of an involuntary filing only, such impediment is not removed
within thirty (30) days from the inception of same, Licensee may
terminate this Agreement upon written notice.




     (c) If during the Term of this Agreement any of Licensor’s gaming
licenses are suspended, revoked or otherwise made ineffective by any
gaming regulatory agency, or Licensee disapproves or withdraws its
approval as provided in Section 15.03 hereof; Licensee shall have the
immediate right to terminate this Agreement.




	14.	 	EXPIRATION OR TERMINATION OF AGREEMENT:





     14.01 Upon any termination of this Agreement, Licensee and any Licensee
Customer shall have the right to continue to use and maintain the Licenses for
which license fees have already been paid or accrued, subject to the continued
payment of any continuing license fees, if applicable, along with the following
requirements:




   (a) all guaranteed minimums incurred prior to the date of
termination shall be due and payable at the end of the applicable time
period (except as provided in Section 13.01(c) and Section 6.02).




   (b) Licensee shall (i) within thirty (30) days following termination
of this Agreement: (i) deliver a preliminary accounting and inventory to
Licensor of all Licenses ordered or on hand and all Licenses sublicensed
up to the date of such termination; (ii) within forty-five (45) days
following such termination, deliver a final accounting and inventory to
Licensor of all Licenses on hand or ordered, and all



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   Licenses sublicensed up to the date of termination of this Agreement; and
(iii) make payment to Licensor of all monies then outstanding under this
Agreement within thirty (30) days following such termination or within
the payment term provisions of this Agreement for installment or financed
purchases and licensing, whichever period is longer.




	15.	 	COMPLIANCE WITH LAWS:





     15.01 This Agreement is contingent on any necessary initial and continued
approvals and licenses from any regulatory authorities having jurisdiction over
the Parties or the subject matter of this Agreement. Each Party shall promptly
apply to the appropriate regulatory authorities for any licenses and approvals
necessary for that Party to perform under this Agreement, shall diligently
pursue its applications and pay all associated costs and fees, and shall
otherwise cooperate with any requests, inquiries, or investigations of any
regulatory authorities or law enforcement agencies in connection with Licensee,
Licensor or their affiliates, or this Agreement. If any license or approval
necessary for either Party to perform under this Agreement is denied,
suspended, or revoked, this Agreement shall be void effective the date of the
denial, suspension, or revocation, provided, however, that if the denial,
suspension, or revocation affects performance of the Agreement in part only,
the Parties may by mutual agreement continue to perform under this Agreement to
the extent it is unaffected by the denial, suspension, or revocation.



     15.02 Licensee acknowledges that Alliance Gaming Corporation (Licensor’s
parent company), as a company operating under privileged licenses in a highly
regulated industry, maintains the “Alliance Compliance Program” as part of a
compliance program to protect and preserve the name, reputation, integrity, and
good will of Alliance and its subsidiaries and affiliates (including Licensor)
through a thorough review and determination of the integrity and fitness, both
initially and thereafter, of any person or company that performs work for those
companies or with which those companies are otherwise associated, and to
monitor compliance with the requirements established by gaming regulatory
authorities in various jurisdictions around the world. This Agreement and
Licensor’s association with Licensee or Licensee’s Customers are contingent on
the continued approval under the Alliance Compliance Program and its compliance
committee (“Licensor’s Compliance Committee”). Licensee shall cooperate with
Alliance and its Licensor’s Compliance Committee as reasonably requested by
Alliance or the Committee and provide the Committee with such information as it
may request. If Alliance, acting on the reasonable recommendation of the
Committee, withdraws its approval of this Agreement or Licensee for reasons
reasonably related to Licensee’s suitability, then this Agreement shall be void
and neither Party shall have any rights hereunder. In addition, Licensee shall
promptly provide Licensor with all information reasonably requested by the
Compliance Committee of Licensor with respect to Licensee’s (including
Licensee’s officers’, directors’ and controlling shareholders’) financial
condition, litigation, indictments, criminal proceedings, and the like, in
which they are or may have been involved, if any, in order for the Licensor’s
Compliance Committee to determine that no such information would disclose any
fact which would jeopardize, in any manner, any gaming licenses or permits held
by Licensor or its affiliates with any gaming commission, board or similar
regulatory agency. It shall be an event of default under Section 13.01(c)
hereof if Alliance Gaming Corporation or Licensor’s Compliance Committee
obtains from any source information with respect to



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Licensee or this Agreement that would, in the reasonable opinion of
Alliance or the Committee or both, jeopardize the gaming licenses, permits, or
status of Alliance or any of its subsidiaries or affiliates (including
Licensee), with any gaming commission, board, or similar regulatory or law
enforcement authority.




     15.03 Licensor acknowledges that Licensee, as a company operating under
privileged licenses in a highly regulated industry, maintains a compliance
program to protect and preserve the name, reputation, integrity, and good will
of Licensee and its subsidiaries and affiliates through a thorough review and
determination of the integrity and fitness, both initially and thereafter, of
any person or company that performs work for those companies or with which
those companies are otherwise associated, and to monitor compliance with the
requirements established by gaming regulatory authorities in various
jurisdictions around the world. This Agreement and Licensee’s association with
Licensor are contingent on the continued approval under Licensee’s compliance
program. Licensor shall cooperate with Licensee as reasonably requested by
Licensee and provide Licensee with such information as it may request.
Licensee, acting reasonably under its compliance program, shall have the right
to withdraw its approval of this Agreement or Licensor for reasons reasonably
related to Licensee’s suitability, in which case this Agreement shall be void
and neither Party shall have any rights hereunder. In addition, Licensor shall
promptly provide Licensee with all information reasonably requested by Licensee
with respect to Licensor’s (including Licensor’s officers’, directors’ and
controlling shareholders’) financial condition, litigation, indictments,
criminal proceedings, and the like, in which they are or may have been
involved, if any, in order for the Licensee to determine that no such
information would disclose any fact which would jeopardize, in any manner, any
gaming licenses or permits held by Licensee or its subsidiaries or affiliates
with any gaming commission, board or similar regulatory agency. It shall be an
event of default under Section 13.02(c) hereof if Licensee obtains from any
source information with respect to Licensor or this Agreement that would, in
the reasonable opinion of Licensee, jeopardize the gaming licenses, permits, or
status of Licensee or any of its subsidiaries or affiliates with any gaming
commission, board, or similar regulatory or law enforcement authority.




	16.	 	CONFIDENTIAL INFORMATION/NON-SOLICITATION:





     16.01 Licensee shall keep in confidence, not disclose to any third party
and not use for any purpose except its performance under this Agreement,
without the written permission of Licensor, the terms of this Agreement and the
information of Licensor, its affiliates or licensors made known to Licensee
under this Agreement. The foregoing requirement of confidentiality shall not
apply to information that is (a) in the public domain through no wrongful act
of Licensee, (b) disclosed to Licensee by a third party which is under no
obligation of confidentiality with respect to such information and which does
not place Licensee under such an obligation, or (c) required to be disclosed by
applicable rules and regulations of federal, state, local or tribal government
agencies or judicial bodies. This obligation of confidentiality: (i) shall
survive termination or expiration of this Agreement and (ii) shall extend to
any Licensee Customer, affiliates, agents, officers, directors, employees or
subcontractors of Licensee.



     16.02 Licensor shall keep in confidence, not disclose to any third party
and not use for any purpose except its performance under this Agreement,
without the written permission of Licensee, the terms of this Agreement and the
information of Licensee, its affiliates or licensors made known to Licensor
under this Agreement. The foregoing requirement of



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confidentiality shall not apply to information that is (a) in the public domain
through no wrongful act of Licensor, (b) disclosed to Licensor by a third party
which is under no obligation of confidentiality with respect to such
information and which does not place Licensor under such an obligation, or (c)
required to be disclosed by applicable rules and regulations of federal, state,
local or tribal government agencies or judicial bodies. This obligation of
confidentiality: (i) shall survive termination or expiration of this Agreement
and (ii) shall extend to any affiliates, agents, officers, directors, employees
or subcontractors of Licensor.




     16.03 The Parties agree that this Agreement shall be confidential and not
disclosed to any third parties (other than a Party’s attorneys or accountants
with legitimate reason to know) for any reason without the prior written
consent of the other party, unless required by law, regulation or the terms of
this Agreement. No press release or other similar announcement of this
Agreement shall be made by either Party without written consent and approval as
to the form of announcement from the other Party.




	17.	 	MISCELLANEOUS:





     17.01 Each of the parties hereto consents to the exclusive jurisdiction
and venue of the state and federal courts of the State of Nevada, with respect
to any matter relating to this Agreement, and each party hereto consents to the
personal jurisdiction of such courts and shall subject itself to such personal
jurisdiction.



     17.02 A waiver of a default under this Agreement shall not be a waiver of
any other or a subsequent default.



     17.03 Each Party shall be solely responsible for all expenses incurred by
it in the performance of this Agreement. Neither Party shall have the
authority, express or implied, to bind the other Party with respect to any
matter. The Parties acknowledge and agree that this Agreement does not create,
nor is it intended to create, a partnership, joint venture, agency or any other
relationship between the Parties.



     17.04 In any litigation or arbitration arising under or out of this
Agreement, or in any action brought to enforce a judgment or an arbitration
award, the prevailing Party shall be entitled to reasonable attorneys’ fees and
costs (including without limitation appellate fees and costs) from the
non-prevailing Party.



     17.05 This Agreement shall not be assignable by either Party, in whole or
in part, without the prior written consent of the other Party, except that
Licensee shall be free to sublicense or otherwise distribute Licenses subject
to the terms and conditions of this Agreement without obtaining further consent
thereto.



     17.06 This Agreement constitutes the entire agreement and understanding
and supersedes and cancels any and all prior oral or written agreements and
understandings of the Parties relating to the subject matter hereof. This
Agreement shall not be amended or modified in whole or in part except by a
writing signed by the Parties. No waiver by any Party of any violation of any
provision of this Agreement shall be effective unless given in a signed
writing, nor shall any such waiver be deemed a waiver of any further violation
of this Agreement unless expressly so stated in a signed writing. The section
headings of this Agreement are for convenience of reference only, and shall not
constitute any part of this Agreement. In all cases,



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the language in all parts of this Agreement shall be construed simply according
to its fair meaning and not strictly for or against any Party. This Agreement
has been made and shall be interpreted in accordance with the applicable laws
of the State of Nevada. The Parties shall each use their respective reasonable
best efforts to obtain the consent or approval of each person or entity, if
any, whose consent or approval shall be required in order to permit it to
consummate the transactions contemplated hereby, and to execute and deliver
such instruments and to take such other action as may be required to carry out
the transactions contemplated by this Agreement.




     17.07 All notices hereunder shall be in writing and shall be deemed to
have been given or made when (i) delivered by hand; (ii) delivered by facsimile
or overnight delivery service; or (iii) delivered or mailed by registered or
certified mail, postage prepaid, addressed as follows, until notice of another
address and/or facsimile number shall have been received by the other Party.



	 	 	 
	If to Licensor:

	 	Bally Gaming, Inc. Attn: Legal Dept. Telephone: (702) 896-7700 
	

	 	Facsimile No.: (702) 896-7990
	 
	 	 
	If to Licensee:

	 	Spectre Games, Inc. Attn: Russell Mix
	

	 	   Telephone: 619.440.6183 Facsimile No.: 619.440.6231







     17.08 If any one or more of the provisions or part of a provision
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of this Agreement in any other jurisdiction or any other
provision or part of a provision of this Agreement, but this Agreement shall be
reformed and construed in such jurisdiction to give effect to the intent of the
Parties so that it would be valid, legal and enforceable in such jurisdiction
to the maximum extent possible.



     17.09 This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which, taken together, shall
constitute one and the same instrument. Any such counterpart may be executed by
facsimile signature with only verbal confirmation, and when so executed and
delivered shall be deemed an original and such counterpart(s) together shall
constitute only one original.



     17.10 Each Party represents to and agrees with the other that it will
comply with all applicable United States laws including all export
administration regulations regarding the export of software and supporting
equipment and technology from the United States.



     17.11. Neither Party shall be liable to the other Party or any third party
for the failure of Bally Cabinets or Licenses to operate or for failure to
perform its obligations hereunder due to an act of God; fire; casualty;
government codes, ordinances, laws, rules, regulations or restrictions; war or
civil disorder; act or decision of a governmental authority; injunction;
technical difficulties; failure of satellite communications or electrical or
telephone power transmission lines or facilities; strike or labor dispute; or
any other cause beyond the control of either Party or its contractors,
sub-contractors, representatives and agents. In the event of any such
occurrence(s), the performing Party, at its option, may terminate this
Agreement or suspend and defer its performance hereunder without incurring any
liability to the non-performing Party or any entities or individuals whose
claims are predicated upon the operation of the Bally Cabinets or Licenses.



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     17.12. Applicable to Ticket Printing Only. Each Cabinet obtained
hereunder with cashless capability (a “Licensed Cashless Gaming Machine”) is
provided under a limited license to one or more of the following U.S. Patent
Nos. 5,290,033; 5,265,874; 6,048,269; 5,429,361; and 5,470,079. Any use of a
Licensed Cashless Gaming Machine constitutes the acknowledgement of and
agreement to the following “Limited License”:



     a. Licensed Cashless Gaming Machine License Rights. Licensed Cashless
Gaming Machines are licensed for use solely in connection with a cashless
gaming system that is separately licensed under these patents (a “Licensed
Cashless Gaming System”). The use of a Licensed Cashless Gaming Machine with
an unlicensed gaming system that has cashless capability is an unlicensed use.
Licensee agrees to use the cashless functionality of a Licensed Cashless Gaming
Machine only where such Licensed Cashless Gaming Machine is attached to a
Licensed Cashless Gaming System.



     b. Other License Limitations. Each Limited License is expressly limited to
the original Licensed Cashless Gaming Machine (i.e., one serial number per
license). A license may not be transferred from one Cabinet to another. Any
unauthorized transfer voids this license.



     IN WITNESS WHEREOF, the Parties have signed this Agreement as of the day
and year first above written.



	 	 	 	 	 	 	 
	SPECTRE GAMES, INC.	 	 	 	BALLY GAMING, INC.
	 
	 	 	 	 	 	 
	


	 	 	 	
	 	 
	Russell Mix, CEO

	 	 	 	Paul Lofgren, Executive Vice President	 	 







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EXHIBIT “A”

GAMES INCLUDED IN THE AGREEMENT




TO BE PROVIDED




15









 








EXHIBIT “B”

AVAILABLE CABINETS, PRICING AND DISCOUNTS




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TYPE OF	 	 	 	 	 	Cumulative Volume Discount

	UNIT
	 	Price With

Printer*
	 	Price Without

Printer*
	 	2,001-3,000

 Cabinets
	 	3,001-4,000 

Cabinets
	 	4,001 or more 

Cabinets

	Casino Slant Top
	 	 	*	*	 	 	*	*	 	 	*	*	 	 	*	*	 	 	*	*
	Upright Round Top
	 	 	*	*	 	 	*	*	 	 	*	*	 	 	*	*	 	 	*	*
	Upright Square Top
	 	 	*	*	 	 	*	*	 	 	*	*	 	 	*	*	 	 	*	*
	Bar Top Units
	 	 	*	*	 	 	*	*	 	 	*	*	 	 	*	*	 	 	*	*






Note 1. Prices and discounts subject to renegotiation after Initial Term of
Agreement.



Note 2. Volume discounts applicable on all Cabinets purchased from Licensor
after a minimum of 2,000 Cabinets. Percentage listed to be deducted from
applicable contract price.





	•	 	Spectre Gaming provides the MPU board/PC board.






	•	 	* Price includes IPP fee, when Printer is purchased.




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EXHIBIT “C”

CABINET COMPONENTS




TO BE PROVIDED




17









 








EXHIBIT “D”

LICENSE FEES




	 	 	 
	Class A license

	 	** per License
	 
	 	 
	Class B license

	 	** per License
	 
	 	 
	Class C license

	 	** per License
	 
	 	 
	Class D license

	 	** per License
	 
	 	 
	Specialty game license

	 	TBD






Licensee will be eligible for a discount on the above license fees when cumulative
License purchases reach the following levels:




	 	 	 
	Licenses Purchased
	 	Discount to be Applied

	1001-1749

	 	** discount
	 
	 	 
	1750-2449

	 	** discount
	 
	 	 
	2500 +

	 	** discount.







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EXHIBIT “E”

STANDARD WARRANTY



For a period of ninety (90) days following installation or for any additional
warranty period purchased by Licensee under Section 4.05, Bally offers the
standard warranty set forth below.




STANDARD LIMITED WARRANTY




     ALL BALLY products are precision built, tested and inspected prior to
shipment, and have been manufactured in compliance with all applicable laws and
regulations of the United States. Bally warrants and guarantees to the original
customer, and any parent, affiliate, subsidiary, customer or sublicensee of the
original customer pursuant to Section 4.05, that all of its new gaming devices
will be free from defects in material and workmanship, which materially and
adversely affect the performance of the gaming device, throughout the entire
warranty period. Minor deviations from any specifications or standards, which
do not so affect the performance of the gaming devices, are not considered to
be defects in materials or workmanship.



     The sole and exclusive remedy in the event of defect is expressly limited
to the adjustment, repair or replacement of defective parts, at the sole
discretion of Bally, to return the product to good working condition. All
component parts not manufactured by Bally are excluded from this warranty. In
no event shall Bally or any of its affiliates, subsidiaries, representatives,
or agents be liable for any direct, indirect, special, incidental or
consequential damages, including loss of use or revenue. This warranty is
valid under all normal use and service of the gaming devices, but is void if
the product is not operated and maintained in accordance with the Bally product
literature and manuals.



     Some states do not allow limitations on how long an implied warranty
lasts, and some states do not allow the exclusion or limitation of incidental
or consequential damages, so the above limitation and exclusion may not apply.
This warranty grants specific legal rights, but original customer and permitted
assignees may also have other rights which vary from state to state.


EXCEPT AS SPECIFICALLY SET FORTH HEREIN, ALL OTHER WARRANTIES, WHETHER EXPRESS
OR IMPLIED, ARE EXCLUDED FROM THIS AGREEMENT, INCLUDING WARRANTIES OF FITNESS
FOR A PARTICULAR USE AND MERCHANTABILITY, AS WELL AS THOSE WHICH MAY ARISE
UNDER USAGE OF TRADE, COURSE OF DEALING, OR COURSE OF PERFORMANCE. NO
AFFIRMATION OF FACT INCLUDING, BUT NOT LIMITED TO, STATEMENTS CONCERNING
SUITABILITY OF USE, PERFORMANCE, PERCENTAGE OF HOLD, OR PAR VALUE OF A BALLY
PRODUCT SHALL BE DEEMED TO BE A WARRANTY OR GUARANTEE FOR ANY PURPOSE.




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