exv10w3



 











Exhibit 10.3




EMPLOYMENT AGREEMENT




     THIS
EMPLOYMENT AGREEMENT is made and entered into on March 4, 2004 (the
“Effective Date”), by and between Spectre Gaming, Inc., a Minnesota corporation
located at 800 Nicollet Mall, Minneapolis, Minnesota, 55402 (the “Company”),
and Gary Watkins, residing at 1611 S. Yutica, No. 194, Tulsa, Oklahoma 79104
(the “Executive”).



BACKGROUND





	A.	 	The Company desires to employ Executive as the Company’s Vice
President of Operations in accordance with the terms and conditions of
this Agreement, and wishes to obtain reasonable protection against
unfair competition from Executive following termination of employment
and to protect itself against unfair competition and the use of its
confidential business and technical information.






	B.	 	Executive wishes to provide services to the Company in exchange for
compensation and is willing to grant the Company the benefits of the
various covenants contained herein.





AGREEMENT




     Now, Therefore, in consideration of the foregoing facts, the mutual
covenants set forth herein and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:



     1. Employment. The Company hereby employs Executive as the Company’s Vice
President of Operations — Oklahoma, and Executive hereby accepts such
employment and agrees to serve the Company to the best of his ability,
promoting the Company’s interests and business and devoting his full business
time, energy and skill to such employment; provided, however, that Executive
may continue limited involvement in other gaming-related activities, his
automatic teller machine (ATM) business, and his smoke shop.



     2. Duties and Powers. Executive shall have the duty of managing and
supervising the Company’s marketing, sales and service efforts for the
development of the Class II gaming machines for the Native American gaming
markets in Oklahoma, and such other duties as are commonly discharged by the
office of a Vice President of Operations of a for-profit business corporation.
In addition, Executive shall perform such other duties in the nature of a
senior executive as the Company’s Board of Directors (the “Board”), an
executive committee of the Board, or the Company’s Chief Executive Officer
shall reasonably determine from time to time. In furtherance of the foregoing,
Executive shall report to the Company’s Chief Executive Officer, as well as all
other senior executives of the Company.



     3. Term. This Agreement shall commence on the Effective Date and continue
for a two-year (2-year) period thereafter unless earlier terminated pursuant to
Section 8.



     4. Salary. During the term of this Agreement, the Company shall pay to
Executive a salary of Eight Thousand Three Hundred Thirty-Three and 33/100
Dollars ($8,333.34) per month, the equivalent of One Hundred Thousand and
No/100 Dollars ($100,000.00) per year,



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which shall be paid in installments of Four Thousand One Hundred Sixty-Six and
66/100 Dollars ($4,166.67) twice per month.



     5. Discretionary Bonus. In its sole and absolute discretion, the Board
may, but shall not be required to, pay Executive an annual discretionary bonus.



     6. Stock Option Grant. Executive shall receive an option to purchase up
to Two Hundred Thousand (200,000) shares of the Company’s common stock (the
“Option”) at an exercise price equal to the closing price of the Company’s
common stock on the Effective Date. The Option shall vest pro rata in two
equal annual installments of One Hundred Thousand (100,000) shares on January
1, 2005, and January 1, 2006. The Option shall be governed by the terms of a
Stock Option Agreement, in the form attached hereto as Exhibit A, to be
executed and delivered by the parties hereto contemporaneously with this
Agreement, or as soon as practicable thereafter.



     7. Reimbursement of Business Expenses. Upon presentation of appropriate
receipts and/or vouchers, the Company shall reimburse Executive for the
reasonable and necessary expenses he incurs in connection with the performance
of his duties, in accordance with any and all Company’s policies and procedures
governing such expenses.



     8. Termination. Notwithstanding the term set forth in Section 3 hereof,
this Agreement may be earlier terminated as set forth below:




     (a) by the Company without Cause upon 30 days written notice to
Executive;




     (b) by Executive voluntarily upon at least 30 days written notice to
the Company, specifying an effective date for such termination;




     (c) by the Company, immediately upon written notice to Executive for
the following events, each of which would constitute “Cause”: (i)
Executive is convicted of a felony; (ii) Executive has materially
breached this Agreement; (iii) Executive’s material violation of a
Company policy that has a material adverse effect on the Company; or (iv)
Executive’s failure to perform his duties as the Company’s Vice President
of Operations as required by this Agreement, which failure has not been
cured by Executive after ten days written notice thereof to Executive by
the Company; or




     (d) upon the death or disability of Executive. For the purposes of
this Agreement, Executive’s “disability” shall occur if Executive shall
become incapacitated by accident or illness and, in the sole
determination of the Board, shall be unable to perform the duties of the
positions he then occupies with reasonable accommodation for a period of
time of not less than 90 consecutive days, and the Company provides 30
days written notice to the Executive at any time after such period of
disability.




     In the event of any termination occurring by virtue of paragraphs
(a) through (d) above, Executive shall be entitled to compensation and
benefits accrued through the effective date of termination; provided,
however, that if there are any damages to the Company arising by virtue
of a termination undertaken by the Company pursuant to paragraph (c)
above, the Company shall be entitled to offset any amounts owed to
Executive against any such damages. Furthermore, if Executive’s
employment is terminated by the Company pursuant to


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paragraph (a) above,
he shall continue to receive the salary specified in Section 4 for the remainder of the two-year
period indicated in Section 3 (without regard to early termination
pursuant to this Section 8).



     9. Confidential Information.




     (a) Executive will hold all Confidential Information (as defined
below) in the strictest confidence and never use, disclose or publish any
Confidential Information without the prior express written permission of
the Company and its Board. Executive agrees to maintain control over any
Confidential Information obtained, and restrict access thereto to the
Company’s employees, agents or other associated parties who have a need
to use such Confidential Information for its intended purpose. Executive
agrees to advise and inform any party to whom he has provided access to
the Confidential Information of its confidential nature, and further
agrees to ensure that such parties be bound by the terms and obligations
of this Agreement that relate to confidentiality.




     (b) Upon the Company’s request, all records and any compositions,
articles, devices and other items which disclose or embody Confidential
Information, including all copies or specimens thereof in Executive’s
possession, whether prepared or made by Executive or others, will be
delivered to the Company.




     (c) All documents and tangible items provided to Executive by the
Company or created by Executive for use in connection with his employment
by the Company are the sole and exclusive property of the Company and
shall be promptly returned to the Company upon termination of employment
with the Company, together with all copies, recordings, notes or
reproductions of any kind made from or about the documents and tangible
items or the information they contain.




     (d) For purposes of this Agreement and subject to the following
paragraph, the term “Confidential Information” shall mean all information
developed by Executive as a result of his work with, for, on behalf of or
in conjunction with the Company and any information relating to the
Company’s processes and products, including information relating to
research, development, manufacturing, know-how, formulae, product ideas,
inventions, trade secrets, patents, patent applications, systems,
products, programs and techniques and any secret, proprietary or
confidential information, knowledge or data of the Company. All
information disclosed to Executive or to which Executive obtains access,
whether originated by Executive or by others, which is treated by the
Company as “Confidential Information,” or which Executive has a
reasonable basis to believe is “Confidential Information,” will be
presumed to be “Confidential Information.”




     Notwithstanding the foregoing definition, the term “Confidential
Information” will not apply to information which (i) Executive can
establish by documentation was known to Executive prior to its receipt by
Executive from the Company; (ii) is lawfully disclosed to Executive by a
third party not deriving such information from the Company; or (iii) is
presently in the public domain or becomes a part of the public domain
through no fault of Executive.



     10. Inventions. Effective upon the delivery of software and code pursuant
to the Software Development Agreement by and between the Company and MET Games,
Inc., dated March 4,



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2004 (the “Software Agreement”), Executive and Company agree that the following
covenants shall bind the parties:




     (a) Executive agrees that any “Invention” (as defined below) shall
be the sole and exclusive property of the Company, and further agrees to:
(i) promptly and fully inform the Company in writing of such Inventions;
(ii) assign to the Company all of Executive’s rights to such Inventions,
and to applications for patents and/or copyright registrations and to
patents and/or copyright registrations granted upon such Inventions in
the United States or in any foreign country; and (iii) promptly
acknowledge and deliver to the Company, without charge to the Company but
at the Company’s expense, such written instruments and do such other acts
as may be necessary, in the reasonable opinion of the Company, to obtain
and maintain patents and/or copyright registrations and to vest the
entire rights, interest in and title thereto in the Company.




     (b) Executive and the Company understand that the provisions of this
Agreement requiring assignment of Inventions to the Company will not
apply to any particular Invention that: (i) Executive develops entirely
on his own time; and (ii) Executive develops without using Company
equipment, supplies, facilities or trade-secret information; and (iii)
does not result from any work performed by Executive for the Company; and
(iv) does not, at the time of conception or reduction to practice,
directly relate to the Company’s business or to its actual or
demonstrably anticipated research or development. Any such Invention
will be owned entirely by Executive, even if developed by Executive
during the term of this Agreement or otherwise during the time period of
his employment with the Company. Finally, Executive agrees and covenants
that he will not individually file any patent applications relating to
Inventions without first obtaining an express release from a duly
authorized Company representative.




     (c) For purposes of this Agreement, the term “Inventions” means all
discoveries, improvements, inventions, ideas and works of authorship,
whether patentable or copyrightable, conceived or made by Executive
either solely or jointly with others, and relating to any consultation,
work or services performed by Executive with, for on behalf of or in
conjunction with the Company or based on or derived from Confidential
Information.



     11. Restrictive Covenants. Executive agrees that during the period
Executive is employed by the Company (commencing on the date of this
Agreement), and for the longer of a one-year period thereafter or any such
period of time during which Executive is receiving salary as provided in the
ultimate paragraph of Section 8, as applicable, Executive will not, without the
prior express written consent of the Company, directly or indirectly, engage in
any of the following actions:




     (a) render services, advice or assistance to any corporation,
person, organization or other entity which engages in the marketing,
selling, production, design or development of any product, good, service
or procedure which is or may be used as an alternative, or which is or
may be sold in competition with any product, good, service or procedure
marketed, sold, produced, designed or developed by the Company (including
products, goods, services or procedures being researched or under
development by the Company currently or during Executive’s employment
with the Company), or engage in any such activities in any capacity
whatsoever, including without limitation as an



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     employee, independent contractor, officer, director, manager,
beneficial owner, partner, member or shareholder; provided, however, that
Executive may be a shareholder of a corporation required to file periodic
reports with the Securities and Exchange Commission under Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, where his total
holdings are less than one percent (1%) of the issuing corporation’s
issued and outstanding publicly traded securities; or




     (b) induce, solicit, endeavor to entice or attempt to induce any
customer, supplier, licensee, licensor or other business relation of the
Company to cease doing business with the Company, or in any way interfere
with the relationship between any such customer, vendor, licensee,
licensor or other business relation and the Company; or




     (c) induce, solicit or endeavor to entice or attempt to induce any
employee of the Company to leave the employ of the Company, or to work
for, render services or provide advice to or supply confidential business
information or trade secrets of the Company to any third person or
entity, or to in any way interfere adversely with the relationship
between any such employee and the Company.



     12. Conflicts of Interest. Executive agrees that he will not, directly or
indirectly, transact business with the Company for his own benefit, or as
agent, owner, partner or shareholder of any other entity; provided, however,
that any such transaction may be entered into if approved by all of the
disinterested members of the Board after full disclosure. Because the terms of
the Software Agreement were negotiated prior to the effectiveness of this
Agreement, the parties acknowledge and agree that the Software Agreement shall
not be treated as a conflict of interest under this Section.



     13. Further Assurances. Each party shall, without further consideration,
execute such additional documents as may be reasonably required in order to
carry out the purpose and intent of this Agreement.



     14. General Provisions.




     (a) This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Oklahoma. The venue for any action
hereunder shall be in the State of Oklahoma.




     (b) If any provision of this Agreement shall be held by any court of
competent jurisdiction to be illegal, invalid or unenforceable, such
provision shall be construed and enforced as if it had been more narrowly
drawn so as not to be illegal, invalid or unenforceable, and such
illegality, invalidity or unenforceability shall have no effect upon and
shall not impair the enforceability of any other provision of this
Agreement.




     (c) This Agreement contains the entire understanding of the parties
with regard to all matters contained herein, except for the terms and
conditions of the Stock Option Agreement referenced in Section 6. There
are no other agreements, conditions or representations, oral or written,
expressed or implied, with regard to the matters contained in this
Agreement other than those referenced in this paragraph. This Agreement
supersedes all prior agreements relating to the matters contained herein.



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     (d) This Agreement is and shall be binding upon the heirs, personal
representatives, legal representatives, successors and assigns of the
parties hereto; provided, however, that Executive may not assign this
Agreement.




     (e) This Agreement may be amended only in writing, signed by both
parties. Any waiver by either party of compliance with any provision of
this Agreement by the other party shall not operate or be construed as a
waiver of any other provision of this Agreement, or of any subsequent
breach by such party of a provision of this Agreement.




     (f) Any notice to be given under this Agreement by either Executive
or the Company shall be in writing and shall be effective upon personal
delivery or delivery by mail, registered or certified, postage prepaid
with return receipt requested. Mailed notices shall be addressed to the
party at the address set forth at the beginning of this Agreement, but
each party may change its or his address by written notice in accordance
with this paragraph. Notice delivered personally shall be deemed given
as of actual receipt and mailed notices shall be deemed given as of three
business days after mailing.




     (g) This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which shall
constitute one and the same agreement. Signatures delivered by facsimile
and other means of electronic communication shall be valid and binding to
the same extent as original signatures.



     IN WITNESS WHEREOF, the parties have executed this Employment Agreement to
be effective as of the Effective Date.



	 	 	 
	

	 	COMPANY:
	 
	 	 
	

	 	SPECTRE GAMING, INC.
	

	 	a Minnesota corporation
	 
	 	 
	

	 	/s/ Ronald Eibensteiner
	

	 	
 
	

	 	RONALD E. EIBENSTEINER, Chief Executive Officer
	 
	 	 
	

	 	EXECUTIVE:
	 
	 	 
	

	 	/s/ Gary Watkins
	

	 	
 
	

	 	Gary Watkins







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