Exhibit 10.3
**EMPLOYMENT AGREEMENT**
     THISEMPLOYMENT AGREEMENT is made and entered into on March 4, 2004 (the“Effective Date”), by and between Spectre Gaming, Inc., a Minnesota corporationlocated 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 VicePresident of Operations in accordance with the terms and conditions ofthis Agreement, and wishes to obtain reasonable protection againstunfair competition from Executive following termination of employmentand to protect itself against unfair competition and the use of itsconfidential business and technical information.
B. Executive wishes to provide services to the Company in exchange forcompensation and is willing to grant the Company the benefits of thevarious covenants contained herein.
**AGREEMENT**
     Now, Therefore, in consideration of the foregoing facts, the mutualcovenants set forth herein and for other good and valuable consideration thereceipt 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 VicePresident of Operations — Oklahoma, and Executive hereby accepts suchemployment and agrees to serve the Company to the best of his ability,promoting the Company’s interests and business and devoting his full businesstime, energy and skill to such employment; *provided, however*, that Executivemay continue limited involvement in other gaming-related activities, hisautomatic teller machine (ATM) business, and his smoke shop.
     2. Duties and Powers. Executive shall have the duty of managing andsupervising the Company’s marketing, sales and service efforts for thedevelopment of the Class II gaming machines for the Native American gamingmarkets in Oklahoma, and such other duties as are commonly discharged by theoffice of a Vice President of Operations of a for-profit business corporation.In addition, Executive shall perform such other duties in the nature of asenior executive as the Company’s Board of Directors (the “Board”), anexecutive committee of the Board, or the Company’s Chief Executive Officershall reasonably determine from time to time. In furtherance of the foregoing,Executive shall report to the Company’s Chief Executive Officer, as well as allother senior executives of the Company.
     3. Term. This Agreement shall commence on the Effective Date and continuefor a two-year (2-year) period thereafter unless earlier terminated pursuant toSection 8.
     4. Salary. During the term of this Agreement, the Company shall pay toExecutive a salary of Eight Thousand Three Hundred Thirty-Three and 33/100Dollars ($8,333.34) per month, the equivalent of One Hundred Thousand andNo/100 Dollars ($100,000.00) per year,
1

 

which shall be paid in installments of Four Thousand One Hundred Sixty-Six and66/100 Dollars ($4,166.67) twice per month.
     5. Discretionary Bonus. In its sole and absolute discretion, the Boardmay, but shall not be required to, pay Executive an annual discretionary bonus.
     6. Stock Option Grant. Executive shall receive an option to purchase upto 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’scommon stock on the Effective Date. The Option shall vest *pro rata*in twoequal annual installments of One Hundred Thousand (100,000) shares on January1, 2005, and January 1, 2006. The Option shall be governed by the terms of aStock Option Agreement, in the form attached hereto as Exhibit A, to beexecuted and delivered by the parties hereto contemporaneously with thisAgreement, or as soon as practicable thereafter.
     7. Reimbursement of Business Expenses. Upon presentation of appropriatereceipts and/or vouchers, the Company shall reimburse Executive for thereasonable and necessary expenses he incurs in connection with the performanceof his duties, in accordance with any and all Company’s policies and proceduresgoverning 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 toExecutive;
     (b) by Executive voluntarily upon at least 30 days written notice tothe Company, specifying an effective date for such termination;
     (c) by the Company, immediately upon written notice to Executive forthe following events, each of which would constitute “Cause”: (i)Executive is convicted of a felony; (ii) Executive has materiallybreached this Agreement; (iii) Executive’s material violation of aCompany policy that has a material adverse effect on the Company; or (iv)Executive’s failure to perform his duties as the Company’s Vice Presidentof Operations as required by this Agreement, which failure has not beencured by Executive after ten days written notice thereof to Executive bythe Company; or
     (d) upon the death or disability of Executive. For the purposes ofthis Agreement, Executive’s “disability” shall occur if Executive shallbecome incapacitated by accident or illness and, in the soledetermination of the Board, shall be unable to perform the duties of thepositions he then occupies with reasonable accommodation for a period oftime of not less than 90 consecutive days, and the Company provides 30days written notice to the Executive at any time after such period ofdisability.
     In the event of any termination occurring by virtue of paragraphs(a) through (d) above, Executive shall be entitled to compensation andbenefits accrued through the effective date of termination; *provided,however*, that if there are any damages to the Company arising by virtueof a termination undertaken by the Company pursuant to paragraph (c)above, the Company shall be entitled to offset any amounts owed toExecutive against any such damages. Furthermore, if Executive’semployment is terminated by the Company pursuant to
2

 

paragraph (a) above,he shall continue to receive the salary specified in Section 4 for the remainder of the two-yearperiod indicated in Section 3 (without regard to early terminationpursuant to this Section 8).
     9. Confidential Information.
     (a) Executive will hold all Confidential Information (as definedbelow) in the strictest confidence and never use, disclose or publish anyConfidential Information without the prior express written permission ofthe Company and its Board. Executive agrees to maintain control over anyConfidential Information obtained, and restrict access thereto to theCompany’s employees, agents or other associated parties who have a needto use such Confidential Information for its intended purpose. Executiveagrees to advise and inform any party to whom he has provided access tothe Confidential Information of its confidential nature, and furtheragrees to ensure that such parties be bound by the terms and obligationsof 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 ConfidentialInformation, including all copies or specimens thereof in Executive’spossession, whether prepared or made by Executive or others, will bedelivered to the Company.
     (c) All documents and tangible items provided to Executive by theCompany or created by Executive for use in connection with his employmentby the Company are the sole and exclusive property of the Company andshall be promptly returned to the Company upon termination of employmentwith the Company, together with all copies, recordings, notes orreproductions of any kind made from or about the documents and tangibleitems or the information they contain.
     (d) For purposes of this Agreement and subject to the followingparagraph, the term “Confidential Information” shall mean all informationdeveloped by Executive as a result of his work with, for, on behalf of orin conjunction with the Company and any information relating to theCompany’s processes and products, including information relating toresearch, development, manufacturing, know-how, formulae, product ideas,inventions, trade secrets, patents, patent applications, systems,products, programs and techniques and any secret, proprietary orconfidential information, knowledge or data of the Company. Allinformation disclosed to Executive or to which Executive obtains access,whether originated by Executive or by others, which is treated by theCompany as “Confidential Information,” or which Executive has areasonable basis to believe is “Confidential Information,” will bepresumed to be “Confidential Information.”
     Notwithstanding the foregoing definition, the term “ConfidentialInformation” will *not*apply to information which (i) Executive canestablish by documentation was known to Executive prior to its receipt byExecutive from the Company; (ii) is lawfully disclosed to Executive by athird party not deriving such information from the Company; or (iii) ispresently in the public domain or becomes a part of the public domainthrough no fault of Executive.
     10. Inventions. Effective upon the delivery of software and code pursuantto the Software Development Agreement by and between the Company and MET Games,Inc., dated March 4,
3

 

2004 (the “Software Agreement”), Executive and Company agree that the followingcovenants shall bind the parties:
     (a) Executive agrees that any “Invention” (as defined below) shallbe 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 topatents and/or copyright registrations granted upon such Inventions inthe United States or in any foreign country; and (iii) promptlyacknowledge and deliver to the Company, without charge to the Company butat the Company’s expense, such written instruments and do such other actsas may be necessary, in the reasonable opinion of the Company, to obtainand maintain patents and/or copyright registrations and to vest theentire rights, interest in and title thereto in the Company.
     (b) Executive and the Company understand that the provisions of thisAgreement requiring assignment of Inventions to the Company will *not*apply to any particular Invention that: (i) Executive develops entirelyon his own time; and (ii) Executive develops without using Companyequipment, 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 ordemonstrably anticipated research or development. Any such Inventionwill be owned entirely by Executive, even if developed by Executiveduring the term of this Agreement or otherwise during the time period ofhis employment with the Company. Finally, Executive agrees and covenantsthat he will not individually file any patent applications relating toInventions without first obtaining an express release from a dulyauthorized Company representative.
     (c) For purposes of this Agreement, the term “Inventions” means alldiscoveries, improvements, inventions, ideas and works of authorship,whether patentable or copyrightable, conceived or made by Executiveeither solely or jointly with others, and relating to any consultation,work or services performed by Executive with, for on behalf of or inconjunction with the Company or based on or derived from ConfidentialInformation.
     11. Restrictive Covenants. Executive agrees that during the periodExecutive is employed by the Company (commencing on the date of thisAgreement), and for the longer of a one-year period thereafter or any suchperiod of time during which Executive is receiving salary as provided in theultimate paragraph of Section 8, as applicable, Executive will not, without theprior express written consent of the Company, directly or indirectly, engage inany 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, serviceor procedure which is or may be used as an alternative, or which is ormay be sold in competition with any product, good, service or proceduremarketed, sold, produced, designed or developed by the Company (includingproducts, goods, services or procedures being researched or underdevelopment by the Company currently or during Executive’s employmentwith the Company), or engage in any such activities in any capacitywhatsoever, including without limitation as an
4

 

     employee, independent contractor, officer, director, manager,beneficial owner, partner, member or shareholder; *provided, however*, thatExecutive may be a shareholder of a corporation required to file periodicreports with the Securities and Exchange Commission under Section 13 or15(d) of the Securities Exchange Act of 1934, as amended, where his totalholdings are less than one percent (1%) of the issuing corporation’sissued and outstanding publicly traded securities; or
     (b) induce, solicit, endeavor to entice or attempt to induce anycustomer, supplier, licensee, licensor or other business relation of theCompany to cease doing business with the Company, or in any way interferewith 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 anyemployee of the Company to leave the employ of the Company, or to workfor, render services or provide advice to or supply confidential businessinformation or trade secrets of the Company to any third person orentity, or to in any way interfere adversely with the relationshipbetween any such employee and the Company.
     12. Conflicts of Interest. Executive agrees that he will not, directly orindirectly, transact business with the Company for his own benefit, or asagent, owner, partner or shareholder of any other entity; *provided, however*,that any such transaction may be entered into if approved by all of thedisinterested members of the Board after full disclosure. Because the terms ofthe Software Agreement were negotiated prior to the effectiveness of thisAgreement, the parties acknowledge and agree that the Software Agreement shallnot 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 tocarry out the purpose and intent of this Agreement.
     14. General Provisions.
     (a) This Agreement shall be interpreted and enforced in accordancewith the laws of the State of Oklahoma. The venue for any actionhereunder shall be in the State of Oklahoma.
     (b) If any provision of this Agreement shall be held by any court ofcompetent jurisdiction to be illegal, invalid or unenforceable, suchprovision shall be construed and enforced as if it had been more narrowlydrawn so as not to be illegal, invalid or unenforceable, and suchillegality, invalidity or unenforceability shall have no effect upon andshall not impair the enforceability of any other provision of thisAgreement.
     (c) This Agreement contains the entire understanding of the partieswith regard to all matters contained herein, except for the terms andconditions of the Stock Option Agreement referenced in Section 6. Thereare no other agreements, conditions or representations, oral or written,expressed or implied, with regard to the matters contained in thisAgreement other than those referenced in this paragraph. This Agreementsupersedes all prior agreements relating to the matters contained herein.
5

 

     (d) This Agreement is and shall be binding upon the heirs, personalrepresentatives, legal representatives, successors and assigns of theparties hereto; *provided, however*, that Executive may not assign thisAgreement.
     (e) This Agreement may be amended only in writing, signed by bothparties. Any waiver by either party of compliance with any provision ofthis Agreement by the other party shall not operate or be construed as awaiver of any other provision of this Agreement, or of any subsequentbreach by such party of a provision of this Agreement.
     (f) Any notice to be given under this Agreement by either Executiveor the Company shall be in writing and shall be effective upon personaldelivery or delivery by mail, registered or certified, postage prepaidwith return receipt requested. Mailed notices shall be addressed to theparty at the address set forth at the beginning of this Agreement, buteach party may change its or his address by written notice in accordancewith this paragraph. Notice delivered personally shall be deemed givenas of actual receipt and mailed notices shall be deemed given as of threebusiness 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 shallconstitute one and the same agreement. Signatures delivered by facsimileand other means of electronic communication shall be valid and binding tothe same extent as original signatures.
     IN WITNESS WHEREOF, the parties have executed this Employment Agreement tobe 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
6