exv10w1



 




Exhibit 10.1


LICENSE AND DEVELOPMENT AGREEMENT



THIS LICENSE AND DEVELOPMENT AGREEMENT (“Agreement”) is made as of the 24th day
of April, 2002, by and between SIERRA DESIGN GROUP, a Nevada corporation with
offices at 300 Sierra Manor Drive, Reno, NV 89511 (“LICENSOR”) and WMS GAMING
INC., a Delaware corporation with offices at 800 S. Northpoint Blvd., Waukegan,
IL 60085 (“LICENSEE”).


RECITALS:




	A.	 	LICENSOR is a licensed developer and manufacturer of gaming and related
system and platform technologies, and is developing an independent gaming
platform known as the “Alpha Platform,” and herein defined as the “SDG
Platform Rev A.”
	 
	B.	 	LICENSEE is engaged in the business of manufacturing, distributing,
selling and leasing gaming devices and games for use in the gaming
industry.
	 
	C.	 	The parties have previously entered into a letter agreement, dated March
5, 2002 (the “Letter Agreement”), pursuant to which LICENSEE was entitled
to conduct a due diligence review of LICENSOR’s SDG Platform Rev A, and at
LICENSEE’s discretion cause the parties to negotiate in good faith as to a
development and license agreement substantially containing the terms set
forth in the Letter Agreement.
	 
	D.	 	Licensee having completed its due diligence review, the parties now wish
to enter into this Agreement as provided for in the Letter Agreement
whereby LICENSOR shall grant to LICENSEE a license to LICENSOR’S Alpha
Game Platform, both in its current state and as further developed pursuant
to this Agreement, which further developed platform is more specifically
defined herein as the “SDG Platform Rev B” and the parties will agree to
procedures to confirm the development without use of or reliance upon
unauthorized third party proprietary and/or confidential information.



For the reasons recited above, and in consideration of the mutual promises and
covenants set forth in this Agreement, LICENSOR and LICENSEE agree as follows:



	1.	 	Definitions: The following terms will have the following meanings:




	 	 	a.	“Acceptance Criteria,” as it applies to Deliverables (defined
below) shall mean that (i) each Deliverable meets the Specifications
(as defined below), (ii) each Deliverable exhibits no “Critical
Defects” (as defined below) in LICENSEE’s Acceptance Testing and
(iii) any “Serious



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


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	 	 	 	Defects” (as defined below) discovered in LICENSEE’s Acceptance
Testing are subject to a mutually-agreed upon action plan for
resolution.
	 
	 	b.	 	“Acceptance Testing” shall mean the procedures set forth in
Section 4.f.
	 
	 	c.	 	“Affiliate” of an entity shall mean any person or entity
which controls, is controlled by or is under common control of such
entity, where “control” means the power to elect a majority of the
board of directors or similar managing body of the entity in
question.
	 
	 	d.	 	“Critical Defect,” as it relates to a particular Deliverable
(as defined below) or to the SDG Platform Rev B, shall mean that one
or more of the following conditions exists as to a particular
Deliverable (as defined below):
	 
	 	 	 	[*]
	 
	 	e.	 	“Deliverables” shall mean the items to be delivered by
LICENSOR to LICENSEE in connection with each Milestone, as set forth
in Exhibit C. Each Deliverable will include the Design
Documentation (defined below) for that Deliverable.
	 
	 	f.	 	“Derivative Work” shall mean [*].
	 
	 	g.	 	“Design Documentation” shall include, without limitation, all
source code, internally developed tool kits, compiling scripts,
data, written specifications describing Deliverables, technical
documentation, drawings, flow charts, and any other material
necessary to allow a reasonably competent software engineer to
understand, compile, modify, support and maintain the particular
item.
	 
	 	h.	 	“End-user” as it relates to SDG Platform Rev B shall mean (i)
an operator or owner of a gaming establishment which provides the
SDG Platform



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


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	 	 	 	Rev B for the use by its patrons in that operator’s or owner’s
gaming establishment or (ii) patrons of a gaming establishment.
	 
	 	i.	 	“Game Developer” shall mean a person or entity who develops
games to be used with SDG Platform Rev B and uses the SDG Platform
Rev B solely for that purpose.
	 
	 	j.	 	“Game Manufacturer” shall mean any person or entity that
manufactures, assembles, produces, programs, or makes modifications
to any gaming device for use or play.
	 
	 	k.	 	“Gaming Regulatory Approval Date” shall mean the date that
the first of LICENSEE’s gaming devices utilizing the SDG Platform
Rev B has been approved by all appropriate gaming regulators in each
of Nevada, New Jersey and Mississippi.
	 
	 	l.	 	“Initial Correction Cycle” shall have the meaning ascribed to
such term in Section 4.f of this Agreement.
	 
	 	m.	 	“Intellectual Property” means any and all rights existing now
or in the future, including but not limited to patents, copyrights,
trademarks, trade secrets, ideas, designs, concepts, techniques,
discoveries or improvements including any and all devices and
computer software, whether or not patentable and all similar
proprietary rights.
	 
	 	n.	 	“Licensed Property” shall have the meaning ascribed to such
term in Section 2.a of this Agreement.
	 
	 	o.	 	“LICENSEE’s Material” shall mean all tangible items which
LICENSEE provides to LICENSOR in connection with the development of
SDG Platform Rev B.
	 
	 	p.	 	“LICENSOR Technology” shall mean [*].
	 
	 	q.	 	“Milestone” shall mean each development milestone, requiring
various Deliverables, identified by number and letter in Exhibit C,
for example “Milestone 1,” “Milestone 2A,” Milestone 2B,” etc.
	 
	 	r.	 	“Milestone Date” shall mean the dates on which the
Deliverables for the various Milestones are due as set forth in
Exhibit C.



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


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	 	s.	 	“Minor Defect,” as it relates to a particular Deliverable or
to the SDG Platform Rev B, shall mean that one or more of the
following conditions (to the extent applicable) exists:
	 
	 	 	 	[*]
	 
	 	t.	 	“SDG Platform Rev A” shall mean the Alpha Platform as
described in Exhibit A and all related LICENSOR Technology and
Intellectual Property, including all source code, object code,
firmware, hardware, circuit and board design, architecture and
executable code, excluding any SDG platform interfaces to existing
[*] hardware.
	 
	 	u.	 	“SDG Platform Rev A Extensions” shall mean the modifications,
extensions and enhancements to SDG Platform Rev A as are identified
in Exhibit B and all related LICENSOR Technology and Intellectual
Property, including all source code, object code, firmware,
hardware, circuit and board design, architecture and executable
code.
	 
	 	v.	 	“SDG Platform Rev B” shall mean SDG Platform Rev A as
modified, extended and enhanced in accordance with the SDG Platform
Rev A Extensions and all related LICENSOR Technology and/or
Intellectual Property, including all source code, object code,
firmware, hardware, circuit and board design, architecture and
executable code, in all of its stages of development under this
Agreement.
	 
	 	w.	 	“Serious Defect,” as it relates to a particular Deliverable
or to the SDG Platform Rev B, shall mean that one or more of the
following conditions (to the extent applicable) exists:
	 
	 	 	 	[*]



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


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	 	x.	 	“Specifications” shall mean, as set forth in Exhibit B, the
technical, functional, regulatory and other specifications provided
by LICENSEE to LICENSOR, including the requirements for the
Deliverables.
	 
	 	y.	 	“Statement of Defects” shall have the meaning ascribed to
such term in Section 4.f of this Agreement.
	 
	 	z.	 	“Third Party Tools” shall have the meaning ascribed to such
term in Section 4.e of this Agreement.



2.   License: LICENSOR hereby grants to LICENSEE, under all of LICENSOR’S
Technology and/or LICENSOR’s Intellectual Property rights, a perpetual,
irrevocable, non-transferable (except as otherwise provided herein), worldwide,
fully-paid (subject to the terms herein) and royalty-free, right and license
(the “License”) to:



	 	a.	 	Manufacture, have manufactured, use, copy, incorporate,
integrate, embed, compile, link, market, advertise, sublicense to
End Users and as otherwise provided herein, distribute (directly and
through multiple levels of distribution), transmit, lease, lend,
publicly perform, display, modify and create Derivative Works of (i)
the SDG Platform Rev A (ii) the SDG Platform Rev B, (iii) each of
the component parts of each of the foregoing (including, without
limitation, source code, object code, firmware and hardware), (iv)
Derivative Works provided by LICENSOR to LICENSEE pursuant to
Section 5.f and (v) the Design Documentation to each of the
foregoing (the items described in (i) through (v) are individually
and collectively referred to herein as the “Licensed Property”); and
	 
	 	b.	 	Exercise all of the foregoing rights set forth in Section 2.a
above, as to any Derivative Works of the Licensed Property created
by LICENSEE. [*]
	 
	 	c.	 	[*].



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


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	 	 	 	LICENSOR shall retain exclusive title to and ownership of the
Licensed Property, subject to the rights of LICENSEE set forth in
this Agreement and LICENSEE’s right in and to LICENSEE’s Material.
Except as provided in this Agreement, there are no express or
implied licenses to Derivative Works from one party to the other
created under this Agreement, and nothing in this Agreement
relating to Derivative Works shall affect the rights and
restrictions of the parties with respect to the Licensed Property,
Licensor’s Technology and Intellectual Property underlying the
Derivative Works.
	 
	 	d.	 	The LICENSEE’s rights may be sub-licensed by LICENSEE to [*]
(collectively, a “Permitted Sub-License”). Notwithstanding anything
to the contrary in this Agreement, LICENSEE shall be entitled to
provide source code and Design Documentation of the Licensed
Property to state and/or federal gaming regulators as necessary or
appropriate to obtain and maintain any required regulatory approval.
	 
	 	e.	 	This Agreement and the rights constituting the License are
not transferable by LICENSEE except to Affiliates of LICENSEE or to
any successor-in-interest to LICENSEE, or to the portion of
LICENSEE’S business that exploits the Licensed Property whether by
way of asset sale, merger, stock sale or otherwise. Notwithstanding
anything to the contrary contained herein, the parties agree that
neither LICENSEE nor its permitted



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


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	 	 	 	successors or assigns shall themselves, or assist or license or
otherwise authorize any other party to, convert any current
LICENSOR games or terminals for use with the Licensed Property.
	 
	 	f.	 	The rights constituting the License shall be exclusive as to
LICENSEE except that:




	 	(i)	 	LICENSOR may itself directly exercise any
rights with respect to the Licensed Property [*],
	 
	 	(ii)	 	LICENSOR may license the Licensed Property to
[*], and
	 
	 	(iii)	 	LICENSOR may license the Licensed Property to
[*].



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


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	 	(iv)	 	Notwithstanding anything to the contrary in
this Agreement, LICENSOR shall be entitled to provide source
code and Design Documentation of the Licensed Property to
state and/or federal gaming regulators as necessary or
appropriate to obtain and maintain any required regulatory
approval.




	 	g.	 	This Agreement and the Licensed Property may not be sold,
assigned or otherwise transferred by LICENSOR except to Affiliates
of LICENSOR or to any successor-in-interest to LICENSOR, or to the
portion of LICENSOR’s business that exploits the Licensed Property,
whether by way of asset sale, merger, stock sale or otherwise.
Notwithstanding anything to the contrary contained herein, the
parties agree that neither LICENSOR nor its permitted successors or
assigns shall themselves, or assist or license or otherwise
authorize any other party to, convert any current LICENSEE games or
terminals for use with the Licensed Property.
	 
	 	h.	 	[*]. Other than as explicitly set forth herein, this
Agreement grants no licenses to any other Intellectual Property, and
nothing herein shall require LICENSEE to provide or license to
LICENSOR any modifications or Derivative Works to the Licensed
Property created by LICENSEE.



3.       License Fee; Penalties: Subject to the terms contained herein, in
consideration of the License and LICENSOR’s other agreements set forth herein,
LICENSEE agrees to pay LICENSOR a one-time license fee(s) (including the Bonus
License Fee(s) described below, the “License Fees”), and LICENSOR agrees to pay
penalties to LICENSEE as follows:



	 	a.	 	LICENSEE will pay [*] to LICENSOR as an initial license fee,
as follows: (i) [*] will be paid in via wire funds transfer on the
later of signing this Agreement and delivery by LICENSOR to LICENSEE
of a complete copy of the SDG Platform Rev A in both object and
source code forms, along with Design Documentation thereof, (ii) [*]
will be paid by applying the advance fee of [*] previously paid to
LICENSOR under the terms of the Letter Agreement, and (iii) [*] will
be paid upon receipt of Independent



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


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	 	 	 	Confirmation or completion of the Expert’s Recommendations in the
Independent Report (as said terms are defined in Section 4.c).
	 
	 	b.	 	Provided LICENSOR is not in breach of any of its
representations and warranties set forth in this Agreement, LICENSOR
will have the opportunity to earn additional Bonus License Fee(s),
up to an aggregate of [*], based upon LICENSOR achieving certain
agreed Milestones, including Milestones to be achieved by the
applicable Milestone Dates, all as set forth in the attached
Exhibits C and D and Section 4.
	 
	 	c.	 	LICENSOR shall pay penalties to LICENSEE as required by
Exhibit D.




	4.	 	Independent Development:




	 	a.	 	LICENSOR agrees to use its best efforts to develop the
Deliverables in a professional and workman-like manner in accordance
with the Specifications and task descriptions in Exhibit B,
including, without limitation, completion of each Milestone, and
delivery to LICENSEE of all applicable Deliverables, in accordance
with Exhibit C.
	 
	 	b.	 	The parties acknowledge that it is their intent that the
development of the Licensed Property by LICENSOR be wholly original
and that no confidential, proprietary or trade secret information of
any third party be used or relied upon in the development of the
Licensed Property in breach of third party rights, it being
understood that LICENSOR will be using certain open source programs
and is entitled to use publicly available hardware components in the
boards. LICENSOR has taken, and agrees to continue to take, certain
measures to ensure such independent development, including but not
limited to the following: (i) development of the core technology for
SDG Platform Rev A and SDG Platform Rev B has been, and will
continue to be, confined to LICENSOR’s [*] facility[*], (ii) no
LICENSOR employee who has had access to [*] proprietary and/or
confidential information, including source code, provided to
LICENSOR for purposes of its game development for the [*] platform
(“[*] Provided Information”), has been or will be involved in
development of the Licensed Property, and (iii) to the best of
LICENSOR’s knowledge, no employee who has been, or is currently
expected to be, involved in development of the Licensed Property is
bound by any agreement that would prohibit such person from
developing the Licensed Property.
	 
	 	c.	 	To further ensure and confirm that the Licensed Property is
not based on [*]Provided Information, within [*] after the date



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


9






 



	 	 	 	hereof, the parties will engage, and share in the costs of, a
recognized independent expert (the “Expert”) to review relevant
publicly available information using such methods as the Expert
deems appropriate and make a written determination (the
“Independent Report”) as to the similarity of [*]Provided
Information to LICENSOR’s Technology included in the Licensed
Property. In performance of his engagement, the Expert will not
be provided with access to [*]Provided Information. The Expert
shall sign a written confidentiality and non-disclosure agreement,
agree that in performance of the engagement he will not breach any
third party agreement to which he is bound, and shall not provide
to LICENSEE, in the Independent Report or otherwise, any
[*]Provided Information. The Independent Report, which the parties
shall endeavor to complete within [*] after the date hereof shall
either (1) confirm, to the extent the Expert can and/or subject to
such assumptions the Expert deems reasonable, that the Licensed
Property is not based upon the [*]Provided Information (the
“Independent Confirmation”), (2) suggest areas in which the
Licensed Property may be similar to or based on the [*]Provided
Information and recommendations for changes to the Licensed
Property to preclude any such similarities (“Expert’s
Recommendations”) or (3) determine that development of the
Licensed Property seems likely to have used or been based on the
[*]Provided Information (“Critical Problem”). In the event of
Expert’s Recommendations, LICENSOR and LICENSEE shall mutually
agree on the necessary changes in order to obtain an Independent
Confirmation. LICENSOR will then implement the necessary changes
in order to obtain Independent Confirmation. In the event of a
Critical Problem, LICENSEE may elect to terminate this Agreement,
in which case LICENSOR shall refund the License Fees then paid to
date less LICENSOR’s demonstrable costs (not including any
overhead or employee/consultant bonuses or benefits) in the
development of the Licensed Property directly incurred under the
terms of this Agreement or under the Letter Agreement; provided
however, if it can be reasonably shown that LICENSOR acted in bad
faith in using [*]Provided Information in the development of the
Licensed Property, LIENSOR shall refund all the License Fees
without any deductions for costs. The parties shall use their
best efforts to cooperate with the Expert. If the anticipated
terms of the Expert’s engagement prove impractical, the parties
may agree to alternative arrangements designed to achieve as
nearly as possible the same purposes.
	 
	 	d.	 	To the extent possible, and in an effort to expedite the
development process, when the Deliverables for a given Milestone are
suitable for LICENSOR’s Quality Assurance procedures (“QA”),
LICENSOR shall provide a copy of the Deliverables to LICENSEE such
that each party



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


10






 



	 	 	 	shall undertake QA in parallel. The parties will jointly determine
a suitable QA period for the Deliverables in each Milestone, and
each such period shall be divided in half (herein, the “First Half
QA Period” and “Second Half QA Period”). LICENSEE shall as soon as
reasonably possible, but no less frequently than weekly, notify
LICENSOR of defects, non-conformities and other issues arising
during its QA. If LICENSOR fixes defects or non-conformities
discovered during its QA, it will to the extent practical, provide
such fixes to LICENSEE. LICENSOR shall use its best efforts to
correct defects and non-conformities and otherwise address issues
which arise during the First Half QA Period by the end of the
Second Half QA Period. LICENSOR shall use its best efforts to
correct defects and non-conformities and otherwise address issues
which arise during the Second Half QA Period as soon as possible.
	 
	 	e.	 	Upon completion of each Milestone, LICENSOR shall deliver to
LICENSEE all applicable Deliverables, including Design Documentation
thereof, along with a list of all third party tools used in the
development of said Deliverables (“Third Party Tools”).
	 
	 	f.	 	Following the end of the Second Half QA Period for a
Milestone, and separate and apart from the QA process, LICENSOR
shall make a new delivery of the Deliverables for said Milestone,
LICENSEE shall test and evaluate such Deliverables for conformity to
the Acceptance Criteria. LICENSEE shall provide LICENSOR within [*]
after delivery of such Deliverables with written notice that the
Acceptance Criteria as to the Deliverables has been met, or a
written statement of defects or other non-conformity to the
Acceptance Criteria (“Statement of Defects”). Critical and Serious
Defects will be promptly fixed by LICENSOR and, as to any Minor
Defects, or as otherwise mutually agreed in writing by LICENSEE and
LICENSOR the period for the fix on a case by case basis may be
extended or deferred to a later date. The Acceptance Criteria shall
also be deemed to have been met if written acceptance or a written
Statement of Defects have not been made within said [*] period.
Unless otherwise agreed to as provided for above, LICENSOR shall
correct such defects and non-conformities and return the corrected
Deliverables to LICENSEE within no more than [*] from receipt of
LICENSEE’s Statement of Defects and LICENSEE shall then have up to
an additional [*] to test and evaluate such Deliverable for
conformity to the Acceptance Criteria (the “Initial Correction
Cycle”). The foregoing process shall continue until the Deliverables
are in conformity with the Acceptance Criteria.
	 
	 	g.	 	The Deliverables will not contain any “back door,” “time
bomb,” “Trojan horse,” “worm,” “drop dead device” or “virus” (as
these terms are commonly used in the computer software field), or
other software routines



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


11






 



	 	 	 	designed to permit unauthorized access, to disable or erase the
software or data, or to perform any other similar type of
function. LICENSOR also agrees that none of LICENSEE’s Materials
will be included as part of SDG Platform Rev B. No government
funding or college or university facilities will be used in the
development of the SDG Platform Rev A Extensions, excluding from
this sentence any open source Linux code, which originated in
places unknown and unknowable to LICENSOR.
	 
	 	h.	 	In order for LICENSOR to claim that LICENSEE has not provided
any LICENSEE’s Materials required in the development of the SDG
Platform Rev B, LICENSOR must provide written notice to LICENSEE
within [*] of the alleged failure. Any delay caused by LICENSEE’s
failure to provide LICENSEE’s Materials in a timely fashion, or due
to an inability, not caused by LICENSOR, to obtain a third party
license needed for a feature included in the Specifications, shall
cause a time extension for the applicable Milestone Date equal to
the delay for the Milestone affected by that delay and all
subsequent Milestone Dates, and establishes a new Milestone Date for
each of the affected Milestones.



5.       LICENSOR Responsibilities: During the term of this Agreement, LICENSOR
agrees that:



	 	a.	 	LICENSOR shall use its best efforts to create the SDG
Platform Rev A Extensions in accordance with the Milestones and
Deliverables set forth in Exhibit C and otherwise perform its
obligations under this Agreement.
	 
	 	b.	 	LICENSOR shall be responsible for providing the resources
necessary for completing the SDG Platform Rev A Extensions, any host
systems, tools or test harnesses required to verify that
Specifications are being met, and shall provide secondary support in
the form of training for LICENSEE’S game developers, QA assistance
and assistance with suppliers and cause its personnel performing
services at LICENSEE’S facilities to conform to LICENSEE’S
reasonable and generally applicable office or facility policies.
	 
	 	c.	 	LICENSOR shall designate a Project Manager for the
development of the SDG Platform Rev A Extensions. Among the Project
Manager’s duties shall be responsibility for LICENSOR’S compliance
with Exhibit E.
	 
	 	d.	 	LICENSOR shall provide LICENSEE’S project managers with
access upon reasonable notice to LICENSOR’S development facilities
and Design Documentation for the SDG Platform Rev A Extensions as
they are being developed. LICENSOR will provide LICENSEE with weekly



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


12






 



	 	 	 	backups for all source code and Design Documentation created for
the SDG Platform Rev A Extensions.
	 
	 	e.	 	For a period of [*] from the Gaming Regulatory Approval Date,
LICENSOR will support and maintain the Licensed Property at its
cost. Such support and maintenance shall include telephone support,
and any correction or fixes necessary to cause the Licensed Property
to continue to perform in accordance with the Specifications or as
otherwise mutually agreed in writing by the parties. If Critical
Defects are reported to LICENSOR, LICENSOR will use its best efforts
to provide an initial call back within [*] if the report from
LICENSEE is made during normal business hours (i.e. 8 a.m.-5 p.m.
Pacific Time) or within [*] if the report is made outside of normal
business hours, and, regardless of when the report is made, to begin
corrective actions within [*] but in no event more than [*] after
LICENSEE’S notice. If Serious Defects are reported to LICENSOR,
LICENSOR will use its best efforts to provide an initial call back
within [*], and to begin corrective actions within [*]. If Minor
Defects are reported, LICENSOR will use its best efforts to provide
an initial call back within [*], and begin corrective actions within
[*]. For Critical and Serious Defects problem resolution efforts
will be on-going (i.e. without material interruption in such
efforts). LICENSOR’S resolution time is dependent on LICENSEE
providing appropriate and sufficient data regarding the defects in
question. Reports of defects and other communication between the
parties regarding resolution of defects shall be made to the parties
indicated in Exhibit F. Either party can change or add to the
person(s) designated as their Support Contact on Exhibit F upon
notice to the other party. LICENSOR shall only be responsible for
correcting defects which can be reasonably shown to relate to code
or other technology contained in the SDG Platform Rev B and any
Derivative Works created by LICENSOR which has been licensed under
Section 2.a(iv). Such support and maintenance shall not require
on-site visits, unless the on-site visit is likely to significantly
increase the chances for correction.
	 
	 	f.	 	For a period of [*] from the Gaming Regulatory Approval Date,
LICENSOR will provide all updates, enhancements and revisions to the
Licensed Property and all compatible technologies, systems and
related features (including the Design Documentation therefor) which
LICENSOR develops or has the right to use or market, at LICENSEE’S
cost, all on reasonable terms to be negotiated in good faith, such
terms to be no less favorable to LICENSEE than the terms LICENSOR
provides to any third party.



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


13






 



	 	g.	 	For a period of [*] from the Gaming Regulatory Approval Date,
LICENSOR will consider in good faith any additional proposals by
LICENSEE to further enhance the Licensed Property beyond that
contemplated by the Agreement. LICENSOR will agree that (i) the fees
charged for such additional development shall not exceed those fees
charged by LICENSOR to any other customer of LICENSOR for the same
or similar services, (ii) LICENSOR will use its best efforts to
schedule such development and assign such specific personnel as
reasonably requested by LICENSEE, and (iii) the development will
receive highest internal priority at LICENSOR and no such
development will be “bumped downward” or given reduced priority, as
to allocation of personnel or time schedule for meeting milestones
without consent from LICENSEE.
	 
	 	h.	 	LICENSOR shall assist LICENSEE in achieving all certification
requirements. LICENSOR shall provide, at its cost, [*] prototype
units at each revision level. Additional prototypes to be displayed
by LICENSEE at the [*] may be purchased by LICENSEE for an amount
equal to LICENSOR’S cost thereof.
	 
	 	i.	 	LICENSOR will provide training for LICENSEE’S personnel with
respect to the Licensed Property and comply with the vendor
requirements as provided on Exhibit E.
	 
	 	j.	 	LICENSOR shall at all times employ development and
engineering personnel needed to perform its obligations hereunder on
a timely basis.
	 
	 	k.	 	Following the execution of this Agreement, if there arises
litigation or a claim to the effect that the LICENSOR does not own
the Licensed Property or that the exercise by LICENSEE of any rights
granted hereunder with respect thereto will infringe on the
Intellectual Property rights of any third party, LICENSOR will
promptly notify LICENSEE.



6.       LICENSEE Responsibilities: During the term of this Agreement, LICENSEE
agrees that:



	 	a.	 	LICENSEE shall be responsible for its own individual game
development and shall provide secondary support for LICENSOR’S
development efforts, and transitional personnel, all in the form of
monitoring progress and preparing for the transition to LICENSEE of
the SDG Platform Rev B. LICENSEE is solely responsible for its own
game development, QA of its own development efforts, testing and
regulatory submissions, with LICENSOR to provide support as provided
in Section 5.



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


14






 



	 	b.	 	LICENSEE shall, at its own expense, be responsible for all
laboratory testing, submissions, certifications and approvals,
including all UL and CSA.
	 
	 	c.	 	LICENSEE shall, at its own cost, provide LICENSOR with gaming
hardware, in fully operational form, for every configuration that
LICENSOR is required to support. LICENSEE will provide [*] terminals
with base configuration, and [*] additional terminal for each
additional configuration LICENSOR will be supporting under the
Agreement. Upon written demand, LICENSOR will return all equipment
provided, with the exception of [*] units that it will keep for
support purposes, upon final delivery of the SDG Platform Rev B.
	 
	 	d.	 	LICENSEE shall provide all other hardware and/or software
utilized in testing, development and other related uses. LICENSEE
shall retain all ownership rights in any such hardware and software.
	 
	 	e.	 	LICENSEE shall be responsible for all its own pilot and
production runs of devices containing Licensed Products. LICENSEE
shall provide LICENSOR with LICENSEE part numbers for preparation of
schematics, spec sheets and as otherwise needed, and for all
post-development supplier relationships.
	 
	 	f.	 	LICENSEE shall promptly notify LICENSOR if it discovers that
the Licensed Property infringes any third party patent rights.



7.       LICENSOR Representations and Warranties: LICENSOR represents and warrants
as follows (such representations and warranties to be deemed restated on each
delivery of a Deliverable constituting Licensed Property or a portion or
component thereof or Derivative Works provided under Section 5.f).



	 	a.	 	LICENSOR has the right to enter into this Agreement, is a
corporation duly organized, validly existing, and in good standing
under the laws of Nevada, has the power and authority, corporate or
otherwise, to execute and deliver this Agreement and to perform its
obligations hereunder, and has by all necessary corporate action
duly and validly authorized the execution and delivery of this
Agreement and the performance of its obligations hereunder.

	 
	 	b.	 	To the best of LICENSOR’S present knowledge and belief, (i)
LICENSOR is capable of creating the SDG Platform Rev A Extensions in
accordance with the phases, Milestones and Deliverables set forth in
Exhibit C; (ii) SDG Platform B will be capable of performing in
accordance with the Specifications set forth in Exhibit B, and (iii)



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


15






 



	 	c.	 	LICENSEE’S gaming machines utilizing SDG Platform Rev B will,
in all material respects, perform in a commercially acceptable
manner in accordance with applicable gaming regulations.
	 
	 	d.	 	(i) the Licensed Property is original to LICENSOR; (ii) no
confidential or proprietary information of a third party was used or
relied upon in developing the Licensed Property; (iii) LICENSOR is
the owner and has all right, title and interest to the Licensed
Property and is authorized to grant the rights and licenses to the
Licensed Property as described herein, (iv) the Licensed Property
does not infringe any third party copyright or trade secret and (v)
to the best of LICENSOR’S knowledge, the Licensed Property does not
infringe any third party patent (provided however, in connection
with LICENSOR’s restatement of the representation in this subsection
(v), in the event that, after the date hereof, LICENSOR first
obtains knowledge that the Licensed Property infringes a patent
issued before or after the date hereof, this subsection (v) shall
not be breached if LICENSOR provides LICENSEE with prompt notice of
such patent).
	 
	 	e.	 	There are no outstanding liens, encumbrances, third party
rights, agreements or understandings of any kind, either written,
oral or implied, regarding the Licensed Property which conflict with
any provisions of this Agreement or with LICENSOR’S performance of
its obligations hereunder.
	 
	 	f.	 	As of the date of this Agreement, there is no pending
litigation or claim, nor has LICENSOR been advised of such, or other
claim that the LICENSOR does not own the Licensed Property or that
the exercise by LICENSEE of any rights granted hereunder with
respect thereto will infringe on the Intellectual Property rights of
any third party.
	 
	 	g.	 	LICENSOR is solvent and generally able to pay its debts as
such debts become due, and has sufficient funds to carry on its
business and engage in the transactions contemplated herein.
LICENSOR is not in default or breach under any agreement by which
LICENSOR is bound or obligated which would have material adverse
effect on the ability of LICENSOR to perform its obligations under
this Agreement.
	 
	 	h.	 	A substantially complete and correct copy of SDG Platform Rev
A has been delivered to LICENSEE on or prior to the date hereof and
such copy meets the specifications set forth in Exhibit A.
	 
	 	i.	 	All Third Party Tools are commercially available for purchase
or license except as expressly set forth in this agreement.



16






 







	 	j.	 	EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR
EXPRESSLY DISCLAIMS AND MAKES NO OTHER REPRESENTATION OR WARRANTY
OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT
LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.



8.       LICENSEE Representations and Warranties: LICENSEE has the right to enter
into this Agreement, is a corporation duly organized, validly existing, and in
good standing under the laws of Delaware, has the power and authority,
corporate or otherwise, to execute and deliver this Agreement and to perform
its obligations hereunder, and has by all necessary corporate action duly and
validly authorized the execution and delivery of this Agreement and the
performance of its obligations hereunder.


9.       Term: The term of this Agreement shall commence on the date first set forth
above and shall continue thereafter in perpetuity unless or until terminated
earlier by mutual agreement of the parties or pursuant to Sections 4.c, 10 or
14.c hereof.



	10.	 	Regulatory Compliance:




	 	a.	 	Performance of this Agreement in each jurisdiction is
contingent upon each party possessing or receiving any necessary
initial and continuing approvals and licenses from the regulatory
authorities in each of the jurisdictions where the parties operate
and that have jurisdiction over the parties or the subject matter of
this Agreement. Each party shall cooperate with any requests,
inquiries or investigations of any regulatory authorities or law
enforcement agencies. If any license or approval necessary for
either party to perform under this Agreement is denied, suspended,
or revoked, this Agreement shall terminate immediately, and the
parties shall engage in good faith negotiations to provide for an
appropriate fee proration, and neither party shall have any
additional rights hereunder; provided, however, that if the denial,
suspension, or revocation affects performance of this Agreement, in
part only (e.g. in a jurisdiction), the parties shall continue to
perform under this Agreement to the extent it is unaffected by the
denial, suspension, or revocation.
	 
	 	b.	 	The parties acknowledge that each party operates under
privileged licenses in a highly regulated industry, maintains a
compliance program to protect and preserve its name, reputation,
integrity, and good will through a thorough review and determination
of the integrity and fitness, both initially and thereafter, of any
person or company that performs work for the parties or their
respective Affiliates, 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. Each party shall cooperate with the
other party and its compliance committee as reasonably requested and
provide the committee



17






 







	 	 	 	with such information as it may reasonably request on appropriate
notice. Either party may terminate this Agreement in the event
that either party or its respective compliance committee discovers
facts with respect to the other party or this Agreement that
would, in the reasonable opinion of that party or its committee or
both, jeopardize the gaming licenses, permits, or status of that
party or any of its Affiliates, with any gaming commission, board,
or similar regulatory or law enforcement authority. If reasonable
and appropriate, the parties may provide notice of, and attempt to
resolve, any problems and concerns, relating to such facts. In
the event of such termination, the parties shall engage in good
faith negotiations to provide for an appropriate fee proration.
	 
	 	c.	 	Where references are made in this Section 10 to “appropriate
fee proration” it is intended that fees paid or payable by LICENSEE
to LICENSOR would be reduced or refunded on a proportionate basis to
reflect the relative reduction in revenues reasonably anticipated to
be suffered by LICENSEE as a result of termination or revision of
this Agreement and the licenses granted hereunder, in whole or in
part, as compared to revenues reasonably anticipated had this
Agreement or such license not been so terminated or revised.
Appropriate fee proration shall also consider additional factors
such as the basis of termination and the relative degree of fault of
the parties.




	11.	 	Confidentiality:




	 	a.	 	In connection with this Agreement, either party may disclose
Confidential Information to the other. In such event, the party
receiving Confidential Information (“Receiving Party”) shall hold
in confidence all Confidential Information disclosed to it by the
other party (“Disclosing Party”) until such time, if ever, that
such Confidential Information becomes available to the public
without breach of this Agreement or the Receiving Party is
authorized in writing by the Disclosing Party to disclose such
Confidential Information as set forth in such writing. A
Receiving Party shall not disclose any Confidential Information of
the disclosing party to any third person, except to the Receiving
Party’s employees, agents, consultants, or contractors or
requesting regulatory authority or to Game Developers or Game
Manufacturers, in each instance, who have a reasonable need to
know such information and only to the extent necessary to exercise
rights permitted in this Agreement and in connection with the
performance of this Agreement. The Receiving Party shall be
responsible to the Disclosing Party for any violation of the terms
hereof by any of the employees, agents or consultants,
contractors, Game Developers or Game Manufacturers of the
Receiving Party. In addition to the foregoing, the Receiving
Party shall safeguard the Confidential Information of the



18






 







	 	 	 	Disclosing Party with the same degree of care that it utilizes to
safeguard its own proprietary information of a similar character,
and in any case shall use reasonable care to safeguard such
Confidential Information. No Receiving Party shall use
Confidential Information of the Disclosing Party except in the
furtherance of this Agreement, unless otherwise expressly
authorized to do so in writing by the Disclosing Party.
	 
	 	b.	 	“Confidential Information” means any information disclosed by
the Disclosing Party to the Receiving Party pursuant to this
Agreement in a context which would cause a reasonable person to
believe the information is intended to be treated as confidential,
including but not limited to, the Licensed Property and documents
expressly designated as confidential, and information related to
either party’s manufacturing processes, products, employees,
facilities, equipment, security systems, information systems,
finances, product plans, marketing plans, suppliers, or
distributors; provided, however that “Confidential Information”
shall not include information that: (i) is now available or becomes
available to the public without breach of this Agreement; (ii) is
explicitly approved for release by written authorization of the
Disclosing Party; (iii) is lawfully obtained from a third party or
parties without a duty of confidentiality to the Disclosing Party;
(iv) is of a type typically disclosed to a third party by the
Disclosing Party without a duty of confidentiality; (v) is known to
the Receiving Party prior to disclosure; or (vi) is at any time
developed by the Receiving Party independently of any such
disclosure(s) from the Disclosing Party. Notwithstanding anything
to the contrary herein, the Licensed Property shall be considered
Confidential Information of each of the parties hereto and may only
be disclosed pursuant to the terms contained herein.



12.      Insurance Obligations: Each party shall purchase and maintain (and shall
pay all premiums and deductibles related to) commercial liability insurance,
including products liability, for the Licensed Property from a recognized and
qualified insurance company naming the other party as additional insured in the
amount of at least [*] million per occurrence against any claims, suits, losses
or damages, including attorneys’ fees, arising out of any alleged defects in or
the packaging, manufacture, marketing, distribution, sale or use of the
Licensed Property. The insurance purchased and maintained by LICENSOR shall
include errors and omissions insurance. Such policies shall be non-cancelable
except after thirty (30) days’ prior written notice to the other party.


*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


19






 



	13.	 	Indemnification; Limitation of Liability:




	 	a.	 	Each party hereto agrees to indemnify and hold the other
(including officers, directors, agents and employees of such party
or its Affiliates) harmless against any loss, damage, expense or
cost, including reasonable attorneys’ fees (collectively, “Damages”)
arising out of or in connection with, resulting from or relating to
any breach of any of such party’s warranties or representations set
forth in Sections 7 or 8 above, respectively (“Indemnified Claims”).
Each party shall promptly inform the other in writing of any such
Indemnified Claim.
	 
	 	b.	 	In connection with any Indemnified Claims, 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 to notify Indemnitee in writing that it will
defend, contest or otherwise protect against any such Indemnified
Claim within ten (10) days after written notice from the Indemnitee,
the Indemnitee shall have the right upon five (5) days’ written
notice 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 any termination or
expiration of this Agreement.
	 
	 	c.	 	Anything herein to the contrary notwithstanding, if
LICENSEE’S use of the Licensed Property as permitted by this
Agreement is enjoined due to an Indemnified Claim for which LICENSOR
is required to indemnify LICENSEE (“LICENSOR’s Indemnified Claim”),
LICENSOR will, at its sole expense, either: (i) procure for LICENSEE
the right to continue to exercise its rights under the License, or
(ii) replace the Licensed Property with non-infringing,
substantially equivalent products or functionality, or (iii)
suitably modify the Licensed Property so that it is not infringing;
or, (iv) in the event (i), (ii) and (iii) are not achievable on
commercially reasonable terms or in a commercially reasonable
manner, at LICENSEE’s option, accept return of the Licensed Property
and refund to LICENSEE all License Fees paid to LICENSOR under this
Agreement. In the event that (1) LICENSEE’s use of the Licensed
Property as permitted by this Agreement is enjoined other than due
to a LICENSOR’s Indemnified Claim or (2) after the date hereof
either party discovers that the Licensed



20






 







	 	 	 	Property infringes a third party patent and there is at that time
no injunction, the parties agree to work together to pursue the
actions set forth in (i) or (iii) above and will share costs with
respect to such actions in an equitable and good faith manner.
	 
	 	d.	 	Neither LICENSOR, LICENSEE nor their respective Affiliates
shall be liable for any incidental, consequential, punitive or
indirect damages of the other arising out of or in connection with
this Agreement. Except with respect to LICENSOR’S Indemnified
Claims, in any action arising out of contract, negligence, strict
product liability, tort or warranty the maximum amount of any
recovery against LICENSOR by LICENSEE shall be limited to the
aggregate fees paid or payable to LICENSOR under Section 3 of this
Agreement.



14.      Security Interest: In order to secure LICENSOR’S obligations to indemnify
LICENSEE under Sections 13.a, and to return or refund License Fees paid as
provided for in Section 4.c, 13.c or Exhibit D (the “Obligations”), LICENSOR
hereby grants to LICENSEE a first priority security interest in and to (a) SDG
Platform Rev A and SDG Platform Rev B, (b) all Intellectual Property and
LICENSOR’S Technology embodied therein, (c) all of LICENSOR’s documentation
relating to the foregoing, and (d) General Intangibles and Proceeds (as defined
in the Uniform Commercial Code in effect in Nevada) relating to or of any of
the foregoing, in all cases now existing or hereafter developed (all of the
foregoing hereafter shall be collectively referred to as “Collateral”).
Notwithstanding the foregoing, product(s) utilizing SDG Platform Rev A and SDG
Platform Rev B shall not be deemed Collateral and shall be and remain the
property of LICENSOR. LICENSOR shall have the sole and absolute right to sell,
lease or license product(s) in the ordinary course of business utilizing SDG
Platform Rev A and SDG Platform Rev B without any form of security interest
attaching to either the product(s) or any proceeds generated from them.
LICENSOR shall execute and/or deliver to LICENSEE, at any time at the request
of LICENSEE, all agreements, instruments or documents that LICENSEE reasonably
may request, including a more formal security agreement, in a form and
substance acceptable to LICENSEE, to perfect and maintain perfected LICENSEE’s
first priority security interest in the Collateral, including, without
limitation, filings with the U.S. Patent and Trademark Office. LICENSOR hereby
authorizes LICENSEE to file UCC-1 Financing Statements and to take any other
steps necessary to perfect and maintain the perfection of LICENSEE’s first
priority lien on the Collateral and hereby appoints LICENSEE as its agent and
attorney-in-fact to execute and/or perform on its behalf all agreements,
documents or instruments necessary to carry out the obligations of LICENSOR
hereunder. LICENSOR shall not grant a security interest in or permit a lien,
claim or encumbrance upon any of the Collateral after the date hereof, except
with the prior written consent of LICENSEE. Upon LICENSOR’s default in
performance of the Obligations, and subsequent failure to cure following 30
days prior written notice. LICENSEE may exercise any one or more of the rights
and remedies accruing to a secured party under the Uniform Commercial Code
under the laws of Nevada and any other applicable law upon default by a debtor.
All of LICENSEE’s rights and remedies under this Agreement are cumulative and
non-exclusive. Accordingly,


21






 


nothing herein shall be construed to limit LICENSEE from pursuing any other
legal or equitable remedy which it may have against LICENSOR. In the event
LICENSEE sells or otherwise disposes of the Collateral and applies the net
proceeds thereof to the Obligations, LICENSOR will be liable to LICENSEE for
the difference between the then outstanding amount of the Obligations and the
net proceeds of such disposition applied to the Obligations, if any. LICENSOR,
with LICENSEE’s approval, may elect to substitute different collateral for the
Collateral, provided such new collateral is of equal or greater value, and in
such event such new collateral shall become the “Collateral” as referred to in
this Section, and the parties will amend any separate security agreement or UCC
financing statement. Provided the Collateral has not been previously
foreclosed upon, and there is then no claim, suit or demand which alleges facts
which constitute a breach of LICENSOR’s representations or warranties set forth
in Section 7, LICENSEE shall release the security interest provided by this
Section [*] from the Gaming Regulatory Approval Date.


15.      Assignment: Except as otherwise provided elsewhere in this Agreement,
neither party may transfer or assign any of the rights or obligations under
this Agreement without the prior written authorization of the other.


16.      Relationship of the Parties: The parties agree that the relationship
between them is that of independent contractors. Neither LICENSOR nor LICENSEE
shall have the right to enter into any commitments or relationships on behalf
of the other, or to bind the other, except to the extent allowed under this
Agreement. Each party shall be responsible for their own taxes, fees and costs.


17.      Entire Agreement: This Agreement constitutes the entire agreement of the
parties and all prior rights, negotiations and representations, including the
Letter Agreement, are merged herein.


18.      No Waiver: The failure of either party to this Agreement to insist upon the
performance of any of the terms and conditions of this Agreement, or the waiver
of any breach of any of the terms and conditions of this Agreement, shall not
be construed as thereafter waiving any such terms and conditions, but the same
shall continue and remain in full force and effect as if no such forbearance or
waiver had occurred.


19.      Effect of Partial Invalidity: The invalidity of any portion of this
Agreement will not and shall not be deemed to affect the validity of any other
provision. In the event that any provision of this Agreement is held to be
invalid, the parties agree that the remaining provisions shall be deemed to be
in full force and effect as if they had been executed by both parties
subsequent to the removal of the invalid provision


20.      Public Announcements: The parties agree to make a mutually-agreeable public
announcement concerning the transaction which is the subject of this Agreement
within a reasonable and appropriate time period following execution hereof.
Except for the


*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


22






 


foregoing and for disclosures and announcements as are required by applicable
law, gaming regulations or stock exchange rules (upon reasonable prior notice
to the other party and opportunity to comment), each party agrees not to make
any public announcements regarding this Agreement without prior written consent
of the other party. In addition, except as required by applicable law, gaming
regulations or stock exchange rules or as may be agreed between the parties,
neither party shall disclose the terms and conditions hereof to any third
party.


21.      Modification Of Agreement: Any modification of this Agreement or additional
obligation assumed by either party in connection with this Agreement shall be
binding only if evidenced in writing signed by each party or an authorized
representative of each party.


22.      Jurisdiction and Applicable Law: This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of Illinois
regardless of the choice of law rules of such state or any other jurisdiction.
All disputes arising out of this Agreement shall be subject to the exclusive
jurisdiction of either the state or federal courts located in Las Vegas or
Reno, Nevada and the parties agree and submit to the personal and exclusive
jurisdiction and venue of these courts.


23.      Notices: Any notice, consent, approval, request, waiver or statement to be
given, made or provided for under this Agreement shall be in writing and deemed
to have been duly given (i) by its delivery personally or by overnight air
courier service; (ii) by its being sent by telefax; provided a copy is also
sent contemporaneously by regular mail and the sender has received a machine
generated automatic confirmation of successful transmission, or (iii) five days
after its being mailed, registered or certified, return receipt requested in a
U.S. Post Office addressed to LICENSOR’S or LICENSEE’S address as set forth on
page one hereof (to the attention of President), or to such other address as
either party may designate by notice given as aforesaid. A copy of any notice
sent to LICENSOR or LICENSEE shall also be sent to the General Counsel of each
company as set forth below:



	 	 	 
	To: Orrin J. Edidin	 	
To: Lars Perry
	c/o: WMS Gaming Inc.	 	
c/o: Sierra Design Group
	800 S. Northwest Blvd	 	
300 Sierra Manor Drive
	Waukegan, IL, 60085	 	
Reno, NV 89511



24.      Remedies for Breach; Attorneys’ Fees and Costs: The parties agree that
except in the case of fraud, remedies that may be sought by a party in the
event of breach of this Agreement by the other party shall include claims for
damages and equitable remedies, including specific performance, injunction and
similar remedies, but shall not include termination of this Agreement or any of
the provisions hereof. If any legal action is brought for the enforcement of
this Agreement or because of an alleged breach of this Agreement, the
successful or prevailing party shall be entitled to recover reasonable
attorneys’ fees and other costs incurred in that action or proceeding, in
addition to any other relief to which such party may be entitled.


23






 


25.      Counterparts: This Agreement may be executed in any number of
counterparts, each which shall be deemed to constitute but one and the same
instrument.


26.      Captions: Captions contained in this Agreement are inserted only as a
matter of convenience and reference. Said captions shall not be construed to
define, limit, extend or describe this agreement of the intent of any provision
hereof.


27.      Execution of Additional Documents: Each party agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to effectuate the provisions of this Agreement.


[signature page follows]



24






 





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



	 	 	 	 	 	 	 
	SIERRA DESIGN GROUP	 	WMS GAMING INC.
	 	 	 	 	 	 	 
	By:	 	
 /s/ Robert A. Luciano
	 	By:
	 	 /s/ Orrin J. Edidin
	 	 	


	 	 	 	

	 	 	
 Robert A. Luciano
	 	 	 	 Orrin J. Edidin




	 	 	 	 	 	 	 
	Title:	 	
President
	 	Title:
	 	 Executive Vice President, General

Counsel and Chief Operating Officer



25






 



EXHIBIT A



Description of SDG Platform Rev A (Alpha Game System)



[*]



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


A-1






 


EXHIBIT B



Development Task and Specifications



and SDG Game System Rev A Extensions



[*]



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


B-1






 


EXHIBIT C



Development Schedule, Deliverables



and Milestones



[*]



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


C-1






 


EXHIBIT D



Bonus License Fees and Penalties



A. Bonus License Fees




	1.	 	Subject to the provisions below in this Section A and those in Section B
regarding Penalties, the Bonuses shall be determined as set forth in this
paragraph 1. Bonuses for Milestones as set forth in Exhibit C may only be
earned (in whole or in part) if (a) delivery of the applicable
Deliverables are made no later than [*] after the applicable Milestone
Date, and (b) the Acceptance Criteria has been met (or deemed met) by the
end of the Initial Correction Cycle. Subject to (b) above, if delivery of
the applicable Deliverable is made no later than [*] after the applicable
Milestone Date, LICENSOR may earn the full Bonus for said Deliverable.
Subject to (b) above, if such delivery is made on the [*] after the
applicable Milestone Date, LICENSOR may earn only [*] of the full Bonus
for said Deliverable. Subject to (b) above, in addition to the [*]
reduction provided for in the prior sentence, for each additional [*]
after the [*] that delivery is delayed, the amount of LICENSOR’s Bonus
which it may earn will be reduced by an additional [*], such that if
delivery is not made by the [*] after the applicable Milestone Date no
Bonus may be earned.
	 
	2.	 	Notwithstanding the provisions of paragraph 1 above, if the Deliverables
in the following Milestones have not been delivered by their respective
Milestone Date, the Bonus for such Milestones shall not be earned:




	 	(a)	 	Milestone 1A [*]
	 
	 	(b)	 	Milestone 2D [*]
	 
	 	(c)	 	Milestone 2E [*]




	3.	 	Subject to the provisions of paragraph 2 above (which provisions shall
continue to be in effect notwithstanding this paragraph), provided
Milestone 2E [*] has been met by its Milestone Date, the Bonuses for
Milestones 1A, 2A, 2B, 2C, 2D and 2E shall be paid within [*] of the
Milestone Date.
	 
	4.	 	Notwithstanding the provisions of paragraph 1 above, but subject to the
provisions of paragraph 2 above (which provisions shall continue to be in
effect notwithstanding this paragraph), if the Milestone Dates for all of
the Jurisdictions (defined below) in Milestone 4C [*] have been met with
no delays, then all Bonuses for the previous Milestones shall be deemed to
be [*] earned, it being understood that no submittals shall take place
unless and until the Acceptance Criteria for all the prior Deliverables
has been met.




*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


D-1






 



	5.	 	Subject to the provisions below on Penalties, Bonuses which are otherwise
earned shall be paid within [*] after Milestone 4E has been met.



B. Penalties.




	1.	 	The penalty shall consist of (a) a reduction of the Bonuses which were
otherwise earned as set forth in Section A above and (b) LICENSOR’s
payment of a refund of the License Fee paid pursuant to Section 3.a. not
to exceed a refund of [*] (the “Refund”).
	 
	2.	 	The penalty, if any, will be determined in accordance with the following.




	 	(a)	 	The maximum amount of the penalty is a [*] reduction in the
earned Bonus plus a Refund of [*] (the “Maximum Penalty”).
	 
	 	(b)	 	The penalty which is actually assessed is based on the date,
in relation to the Milestone Date, on which Milestone 4E [*] as it
relates to approval by all applicable regulators in Nevada, New
Jersey, Mississippi and Gaming Laboratory Inc. (“GLI”) (each herein
a “Jurisdiction”), is met (in this Exhibit D, the “Approval Date”).
Approval by GLI means the first GLI approval for any GLI
jurisdiction.
	 
	 	(c)	 	Subject to (e) below, the Approval Date of each of the four
Jurisdictions listed in (b) above determines [*] of the Maximum
Penalty. For each of the Jurisdictions, considered separately, the
following penalties shall be assessed on a cumulative basis:




	 	 	 
	Approval Date for each Jurisdiction	 	Penalty
	
	 	

	On or before the Milestone Date	 	
None
	 	 	 
	[*] after the Milestone Date	 	
[*] reduction in earned Bonus
	 	 	 
	Each additional [*] up to (and including)

[*] late	 	
a pro rata portion of an additional

[*] reduction in earned Bonus
	 	 	 
	[*] late	 	
Additional [*] reduction in earned Bonus
	 	 	 
	Each additional [*] up to (and including)

[*] late	 	
a pro rata portion of an additional

[*] reduction in earned Bonus
	 	 	 
	Each additional [*] up to exactly

[*] late	 	
an additional pro rata portion of a

Refund of [*]



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


D-2






 



	 	 	[By way of example, assume that the Approval Date for the Jurisdictions
of New Jersey, Mississippi and GLI occurred on or before the Milestone
Date for Milestone 4E, but that the Approval Date for Nevada occurs
exactly [*] after the Milestone Date. The applicable penalty in this
example would be a [*] reduction in earned Bonus plus a Refund of [*].
If, instead the Approval Date for New Jersey and Mississippi occurred on
or before the Milestone Date, but the Approval Date for Nevada and GLI
occurred exactly [*] after the Milestone Date, the applicable penalty
would be a [*] reduction in earned Bonus plus a Refund of [*].]
	 
	 	 	(d) The following shall apply in determining the Approval Date:
	 
	 	 	     (i) If (1) submittal to a Jurisdiction has been met by its Milestone
Date (i.e Milestone 4C), it being understood that no such submittal shall
be made prior to the Acceptance Criteria for all the prior Deliverables
having been met, and (2) Milestone 4E with respect to a Jurisdiction is
ultimately met (A) without any issues relating to the Licensed Property
having been raised by the Jurisdiction during field trials that result in
delays to the Approval Date of the Licensed Property and (B) with respect
to any issues relating to the Licensed Property raised prior to the start
of the field trials by the Jurisdiction, LICENSOR has fixed the problem
and delivered to LICENSEE such fix in an update to the Licensed Property
such that such issues do not create a delay in the Approval Date of the
Licensed Property; then regardless of the actual Approval Date, the
Approval Date for the Jurisdiction for purposes of (c) above shall be
deemed to be the Milestone Date.
	 
	 	 	     (ii) To the extent (d) (i) (1) or (2) above are not met, the
Approval Date for a Jurisdiction shall be calculated as the earlier of
the actual date regulatory approval is awarded, or the Approval Date as
calculated below:
	 
	 	 	(1) The Approval Date shall be the Milestone Date for regulatory approval
as set forth in Milestone 4E in Exhibit C for the Jurisdiction, plus
	 
	 	 	(2) Any delay incurred in delivery of the Licensed Product for Milestone
4C (Sell 1 Regulatory Submittal), it being understood that no such
submittal shall be made prior to the Acceptance Criteria for all the
prior Deliverables having been met, plus
	 
	 	 	(3) Any delay incurred as a result of Critical or Serious Defects arising
with respect to the Licensed Property (excluding any such Defects solely
caused by LICENSEE’s game development and Top Box development) after
submittal to the Jurisdiction, and where such Defects must be fixed by
LICENSOR to gain



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


D-3






 



	 	 	regulatory approval, such delay being calculated as the time difference
between when LICENSOR is notified of such defect and the fix for the
Defect is provided to the LICENSEE.
	 
	 	 	[By way of example, the Milestone Date for Milestone 4E (Regulatory
Approval) as it relates to GLI, as set forth on Exhibit C, is [*]. If
Milestone 4C delivery is [*] late, and a problem is found during
regulatory approval where the fix provided by the LICENSOR takes [*], the
total delay would be calculated as [*], causing the calculated Approval
Date to be [*] which would be [*], which would be calculated as a penalty
of [*] late for purposes of (c) above.]
	 
	 	 	(e) Notwithstanding anything to the contrary herein, including (d)
above, if the actual Approval Date for any of the Jurisdictions is more
than [*] late, then the Maximum Penalty shall apply and, accordingly, the
penalty shall be a [*] reduction in earned Bonus and a Refund of [*].
	 
	 	 	(f) The applicable Refund, if any, will be paid by LICENSOR as soon as
it is determined. LICENSEE may offset the amount of the Refund to which
it is entitled against the amount of Bonuses which are earned, due and
payable.



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


D-4






 


EXHIBIT E



Vendor Management Items



Vendor Management Items:



Initial Deliverables (provided by SDG unless otherwise noted) will be provided
within 1 week of contract signing:


Requirements (provided by WMS)



Milestone schedule (milestone list)


Staffing and Planning (Microsoft project schedule)


Product Development Lifecycle


Product Development Process description


Change Control Process


Issue Management plan


Risk Management plan


Weekly status reports will be written by SDG & conference calls will be held
between SDG and WMS to review (all material to be provided by SDG):


Schedule status – delivery of an updated detailed schedule, current variance
and projected variance of detailed schedule, status (% complete) on items in
progress and status on items expected to be complete, evidence of items
complete.


Current list of project issues/actions, actions, owners, and progress (kept in
excel or other format with action item #, description, originator, owner, due
date, severity/priority, current status and date completed) (we can supply a
template).


Status of risk items & risk management plan



Problem reports on product defects and plans for resolution (in excel or other
format with Problem ID, severity, description, functional area affected,
owner/developer responsible, date for resolution and current status) (we can
supply a template)


Above items must be delivered 24 hours prior to each meeting.


Face-to-Face Program reviews will be held [*] to alternate between [*] and [*]:


*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


E-1






 


SDG will present detailed schedule status, issues status, risk management
status, problem report status as described above in the weekly conference
calls.


SDG will present Schedule and Quality Metrics, including:


# of problems found, inspection rates, prep rates, # open defects, average time
to fix, work & effort over time compared to plan, etc.


Site access to SDG [*] for our program manager in [*] will be provided as
needed (this will be scheduled and coordinated with the SDG program manager).


QA audits will be performed as desired by WMS on each of the following SDG
development phases and work products (these audits will be scheduled in advance
with the SDG program manager):


Requirements



Design


Implementation (coding)


Unit test


Integration test


Config Mgmt (Loadbuilding)


System Test


Training material and Training program will be provided by SDG in advance of
each submission to WMS QA testing. For each delivery, SDG will provide up to
[*] of training on site at [*].


*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


E-2






 


EXHIBIT F



Support Contacts



Licensor’s Support Contact




	 	 	 	 	 
	Name	 	
Robert Crowder
	 	Name
	 	 	 	 	 
	Telephone Number	 	
[*]	 	 
	 	 	 	 	 
	Fax Number	 	
[*]	 	 
	 	 	 	 	 
	Cellular Number	 	
[*]	 	 
	 	 	 	 	 
	e-mail	 	
[*]	 	 



Licensee’s Support Contact




	 	 	 	 	 
	Name	 	
Laurie Lasseter
	 	Name
	 	 	 	 	 
	Telephone Number	 	
[*]	 	 
	 	 	 	 	 
	Fax Number	 	
[*]	 	 
	 	 	 	 	 
	Cellular Number	 	
[*]	 	 
	 	 	 	 	 
	e-mail	 	
[*]	 	 



*Information has been omitted from this document and filed separately with the
Securities and Exchange Commission under a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.



F-1