Exhibit 10.1
**EMPLOYMENT AGREEMENT**
     This Employment Agreement is made and entered into on April 16, 2004 (the“Effective Date”), by and between Spectre Gaming, Inc., a Minnesota corporationlocated at 800 Nicollet Mall, Minneapolis, Minnesota, 55402 (the “Company”),and Russell Mix, with a mailing address of 3100 West Burbank Blvd., Burbank,California 91505 (the “Executive”).
BACKGROUND
     A. The Company desires to employ Executive as the Company’s ChiefExecutive Officer and President in accordance with the terms and conditions ofthis Agreement, and wishes to obtain reasonable protection against unfaircompetition from Executive following termination of employment and to protectitself against unfair competition and the use of its confidential business andtechnical information.
     B. Executive wishes to provide services to the Company in exchange forcompensation and is willing to grant the Company the benefits of the variouscovenants 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 ChiefExecutive Officer and President, and Executive hereby accepts such employmentand agrees to serve the Company to the best of his ability, promoting theCompany’s interests and business and devoting his full business time, energyand skill to such employment; provided, however, that Executive shall beentitled to devote a minimal amount of time to Prolific Publishing, Inc. suchthat there is no impact on Executive’s duties owed to the Company hereunder.
     2. Duties and Powers. While Executive is employed hereunder, andexcluding any periods of vacation, sick, disability or other leave to whichExecutive is entitled, Executive agrees to devote substantially all ofExecutive’s attention and time during normal business hours to the business andaffairs of the Company and, to the extent necessary to discharge theresponsibilities assigned to Executive pursuant hereto and under the Company’sbylaws as amended from time to time, to use Executive’s reasonable best effortsto perform faithfully and efficiently such responsibilities. In addition,Executive shall perform such other duties in the nature of a chief executiveofficer as the Company’s Board of Directors (the “Board”) or an executivecommittee thereof shall reasonably determine from time to time. Executiveshall
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comply with the Company’s policies and procedures; provided, however, thatto the extent such policies and procedures are inconsistent with thisAgreement, the provisions of this Agreement shall control.
     3. Term. This Agreement shall commence on the Effective Date and continuefor a three-year (3-year) period thereafter unless earlier terminated pursuantto Section 9.
     4. Salary. During the term of this Agreement, the Company shall pay toExecutive a salary of Fourteen Thousand One Hundred Sixty-Six and No/Dollars($14,166) per month, the equivalent of One Hundred Seventy Thousand andNo/Dollars ($170,000) per year, which shall be paid in installments of SevenThousand Eighty-Three and No/Dollars ($7,083) twice per month. On or prior tothe one-year anniversary date of this Agreement, the Board will review andevaluate the performance of Executive, and may increase Executive’s salaryhereunder. Notwithstanding the foregoing, in the event the Company attainsoperating profitability for two consecutive fiscal quarters during the termhereof, Executive’s annual salary shall thereupon automatically adjust to TwoHundred Thousand and No/Dollars ($200,000) per year, beginning as of the nextfiscal quarter immediately following such profitable fiscal quarters.
5.      Annual Bonus.(a) Executive and the Board will work together to createa mutually acceptable bonus plan detailing agreed-upon goals andobjectives for the Company for each fiscal year (or portion thereof)within ninety (90) days of the Effective Date. The bonus plan shallprovide that if Executive attains certain goals and objectives identifiedtherein, he shall be entitled to receive a cash bonus equal to at leastone hundred percent (100%) of the salary paid to Executive during suchfiscal year. In addition, the bonus plan may provide, or the Board mayin its discretion determine to grant, additional cash bonus compensationto Executive for meeting certain other criteria (including exceeding allgoals and objectives by certain amounts or percentages) in a maximumamount of up to two hundred percent (200%) of the salary paid toExecutive during such fiscal year (or portion thereof).
(b)      At the election of Executive and with reasonable notice to the Board,all or any portion of any cash bonus payments under paragraph (a) aboveshall be satisfied by the issuance of options to purchase common stock ofthe Company in lieu of cash, with exercise prices equal to the fairmarket value of such common stock on any such date of election. Upon anysuch election, Executive shall receive options whose aggregate value,determined by using the Black-Scholes method of option valuation, areequal to the cash bonus payments to which Executive is entitled.
     6. Stock Option Grant. Executive shall receive a non-qualified option topurchase up to Six Hundred Thousand (600,000) shares of the Company’s commonstock (the “Option”) at an exercise price of One Dollar and Fifty Cents ($1.50)per share. 60,000 shares of the Option shall vest immediately as of theEffective Date. The remaining Option shares shall vest as follows:
     (a) 60,000 shares shall vest on the one-year anniversary of theEffective Date;
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     (b) 60,000 shares shall vest on the two-year anniversary of theEffective Date;
     (c) 60,000 shares shall vest on the three-year anniversary of theEffective Date;
     (d) 60,000 shares shall vest on the four-year anniversary of theEffective Date; and
     (e) The remaining 300,000 shares shall vest on the ten-yearanniversary of the Effective Date or as set forth below, if earlier:
     (i) 60,000 shares shall vest upon the trading of the Company’scommon stock at a per-share price of $3.00 or higher for a periodof twenty (20) consecutive days;
     (ii) 60,000 shares shall vest upon the trading of theCompany’s common stock at a per-share price of $5.00 or higher fora period of twenty (20) consecutive days;
     (iii) 60,000 shares shall vest upon the trading of theCompany’s common stock at a per-share price of $7.00 or higher fora period of twenty (20) consecutive days;
     (iv) 60,000 shares shall vest upon the trading of theCompany’s common stock at a per-share price of $9.00 or higher fora period of twenty (20) consecutive days; and
     (v) 60,000 shares shall vest upon the trading of the Company’scommon stock at a per-share price of $10.00 or higher for a periodof twenty (20) consecutive days.
     The Option shall be governed by the terms of a Stock Option Agreement, inthe form attached hereto as Exhibit A, to be executed and delivered by theparties hereto contemporaneously with this Agreement or as soon as reasonablypracticable thereafter (the “Stock Option Agreement”).
     7. Other Benefits. Executive shall be entitled to participate in orreceive benefits under any employee-benefit plan made available by the Companyin the future to its executives and key management employees, subject to and ona basis consistent with the terms, conditions and overall administration ofsuch plans. Nonetheless, in its sole discretion the Company may amend orterminate any such employee-benefit plan providing benefits generally to itsemployees or its executive officers. Executive shall be entitled to anaggregate of three (3) weeks of paid vacation in each calendar year.
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     8. Reimbursement of Business Expenses.Upon presentation of appropriate receipts and/or vouchers, the Company shallreimburse Executive for the reasonable and necessary expenses he incurs in connectionwith the performance of his duties, inaccordance with any and all Company’s policies and procedures governing suchexpenses.
     9. Termination.Notwithstanding the term set forth in Section 3hereof, 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 with Good Reason upon 30 days written notice to theCompany, where “Good Reason” means: (i) a Change in Control of theCompany (as defined in the Stock Option Agreement); (ii) a materialbreach of this Agreement by the Company; or (iii) any material andadverse diminishment of Executive’s responsibilities and authority underthis Agreement;
     (c) by Executive voluntarily upon at least 30 days written notice tothe Company, specifying an effective date for such termination;
     (d) 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 materially adverse effect on the Company; (iv)Executive’s failure to perform his duties as the Company’s ChiefExecutive Officer as required by this Agreement, which failure has notbeen cured by Executive after ten days written notice thereof toExecutive by the Company; or (v) Executive’s consistent failure to meetthe Company’s goals and objectives as identified by the Board;
     (e) 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 (e) 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 (d)above, the Company shall be entitled to offset any amounts owed toExecutive against any such damages. Furthermore, if Executive’semployment is terminated pursuant to paragraphs (a) or (b) above, heshall continue to receive the salary payments specified in Section 4 forthe one-year period immediately following the effectiveness of any suchtermination (the “Severance Payments”).
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     10. 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’srequest, all records and any compositions, articles, devices and otheritems which disclose or embody Confidential Information, including allcopies or specimens thereof in Executive’s possession, whether preparedor made by Executive or others, will be delivered 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.
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     (e) The Company shall in turn keep allpersonal nonpublic information about Executive that the Company may now have orhereafteracquire in strict confidence and shall not disclose any such personal nonpublicinformation except asrequired by law or ordered by a court of competent jurisdiction, or withthe consent, express or implied, of Executive himself.
     11. Inventions. Executive and Company agree that the followingcovenants shall bind the parties:
     (a) Executive agrees that any “Invention” (as defined below) shall be thesole and exclusive propertyof the Company, and further agrees to: (i) promptly and fully inform theCompany in writing of such Inventions; (ii) assign to the Company all ofExecutive’s rights to such Inventions, and to applications for patentsand/or copyright registrations and to patents and/or copyrightregistrations granted upon such Inventions in the United States or in anyforeign country; and (iii) promptly acknowledge and deliver to theCompany, without charge to the Company but at the Company’s expense, suchwritten instruments and do such other acts as may be necessary, in thereasonable opinion of the Company, to obtain and maintain patents and/orcopyright registrations and to vest the entire rights, interest in andtitle thereto in the Company.
     (b) Executive and the Company understand that the provisions of thisAgreement requiring assignment of Inventions to the Company will notapply 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.
     12. Restrictive Covenants. Executive agrees that during the periodExecutive is employed by the Company (commencing on the date of thisAgreement), including any period thereafter during which Executive isreceiving Severance Payments, Executive will not, without the priorexpress written consent of the Company, directly or indirectly, engage inany of the following actions:
     (a) render services, advice or assistance toany corporation, person, organization or other entity which engages inthe marketing, selling, production, design ordevelopment of any product, good, service or procedure which is ormay be used as an alternative, or which is or may be sold in competitionwith any product, good, service or procedure marketed, sold, produced,designed or developed by the Company (including products, goods, servicesor procedures being researched or under development by the Companycurrently or during Executive’s
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employment with theCompany), or engage in any such activities in any capacity whatsoever, including withoutlimitation as an employee, independent contractor, officer, director,manager, beneficial owner, partner, member or shareholder; provided,however, that Executive may be a shareholder of a corporation required tofile periodic reports with the Securities and Exchange Commission underSection 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 issuingcorporation’s issued 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.
     13. 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, of which Executive is a member director asof the date hereof, after full disclosure.
     14. 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.
     15. Arbitration.
     (a) The parties will, to the greatest extent possible, endeavor toresolve any disputes relating to the Agreement through amicablenegotiations. Failing an amicable settlement, any controversy, claim ordispute arising under or relating to this Agreement, including theexistence, validity, interpretation, performance, termination or breachof this Agreement, will finally be settled by binding arbitration beforea single arbitrator (the “Arbitration Tribunal”) which will be jointlyappointed by the parties. The Arbitration Tribunal shall self-administerthe arbitration proceedings utilizing the Commercial Rules of theAmerican Arbitration Association (“AAA”); provided, however, the AAAshall not be involved in administration of the arbitration. Thearbitrator must be a retired judge of a state or federal court of theUnited States or a licensed lawyer with at least five years ofcorporate or commercial law experience and have at least an AVrating by Martindale Hubbell. If the parties cannot agree on anarbitrator, either party may request the AAA to appoint an arbitratorwhich appointment will be final.
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     (b) The arbitration will be held in that particular State andmunicipal location in which the Company’s headquarters, at the time ofany such arbitration’s institution, is located. Each party will havediscovery rights as provided by the Federal Rules of Civil Procedurewithin the limits imposed by the arbitrator; provided, however, that allsuch discovery will be commenced and concluded within 60 days of theselection of the arbitrator. It is the intent of the parties that anyarbitration will be concluded as quickly as reasonably practicable. Oncecommenced, the hearing on the disputed matters will be held four days aweek until concluded, with each hearing date to begin at 9:00 a.m. and toconclude at 5:00 p.m. The arbitrator will use all reasonable efforts toissue the final written report containing award or awards within a periodof five business days after closure of the proceedings. Failure of thearbitrator to meet the time limits of this Section 15 will not be a basisfor challenging the award. The Arbitration Tribunal will not have theauthority to award punitive damages to either party. Each party willbear its own expenses, but the parties will share equally the expenses ofthe Arbitration Tribunal. The Arbitration Tribunal shall awardattorneys’ fees and other related costs payable by the losing party tothe successful party as it deems equitable. This Agreement will beenforceable, and any arbitration award will be final and non-appealable,and judgment thereon may be entered in any court of competentjurisdiction. Notwithstanding the foregoing, claims for injunctiverelief, may be brought in a state or federal court in the particularState and municipal location in which the Company’s headquarters is thenlocated.
     16. General Provisions.
     (a) This Agreement shall be interpreted and enforced in accordancewith the laws of the State of Minnesota without regard to itsconflicts-of-law provisions. The venue for any action hereunder shall bein that particular State in which the Company’s headquarters shall, atthe time of any such action’s institution, be located.
     (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.
     (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 because the services to be rendered hereunder are unique andpersonal in nature.
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     (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) The parties hereby mutually represent and warrant that they areauthorized to execute and deliver this Agreement, that this Agreementwill be valid and enforceable against each party upon their execution anddelivery of the same, and that there are no restrictive agreementsbinding them which may affect their ability to perform their respectiveobligations hereunder.
     (h) If any party is made or shall become a party to any litigation(including arbitration) commenced by or against the other party involvingthe enforcement of any of the rights or remedies of such party, orarising on account of a default of the other party in its performance ofany of the other party’s obligations hereunder, then the parties shallbear their own expenses and attorneys’ fees.
     (i) 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.
Signature Page Follows
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     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 E. Eibensteiner   RONALD E. EIBENSTEINER, Chairman    EXECUTIVE:    /s/ Russell Mix   Russell Mix
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