Document:

exv10w2

 

Exhibit 10.2

SPECTRE GAMING INC.

SOFTWARE DEVELOPMENT AGREEMENT

THIS SOFTWARE DEVELOPMENT AGREEMENT (the “Agreement”) is made as of March 4,
2004 (the “Effective Date”) between MET Games Inc., a corporation organized
under the laws of the State of Oklahoma (“MET”) with a principal place of
business located at 1611 S. Utica, #194, Tulsa, Oklahoma 74104, and Spectre
Gaming Inc., a corporation organized under the laws of the State of Minnesota
(“Spectre”) with a principal place of business located at 800 Nicollet Mall,
Suite 2690, Minneapolis, Minnesota 55402. MET and Spectre are individually
each a “Party” to this Agreement, and collectively referred to herein as the
"Parties.”

R E C I T A L S

     WHEREAS, MET has been developing and is the owner of software useful for
the operation of certain gaming computers and systems;

     WHEREAS, Spectre desires to engage MET to complete the development of
MET’s gaming software and to purchase MET’s gaming software on the terms set
forth below;

     NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the sufficiency of which are hereby acknowledged, the
Parties hereby agree to the following terms and conditions:

A G R E E M E N T

1. Definitions. In addition to terms defined elsewhere in this Agreement, the
following terms will have the following meanings:

     1.1
“Advance Payment” means a payment of two-hundred fifty thousand
dollars ($250,000) to be paid by Spectre to MET, as set forth in Section 6.1
below.

     1.2 “Bingo” means bingo and bingo-type games, including, without
limitation, when and as played at Indian casinos, charitable events or
institutions or otherwise, as well as “Class II Gaming” as that term is defined
in 25 U.S.C. 2703(7) (2002), and any definitions under such statute as may be
amended from time to time or under any statute that may replace or supercede
the foregoing.

     1.3 “Bingo Software” means the software, including in both object code and
source code formats (as applicable) as developed by MET heretofore and further
developed hereunder in accordance with Section 2, together with any derivative
works or modified, updated, or enhanced versions of such software provided
hereunder by MET, including, without limitation, all Releases (as defined in
Section 4.1 below) or other modifications, bug fixes, updates and releases
thereof that MET may provide to Spectre pursuant to this Agreement.

     1.4 “Confidential Information” means all of the trade secrets, business
and financial information, source codes, machine and operator instructions,
business methods, procedures, know-how and other information of every kind that
relates to the business of either Party and is marked or identified as
confidential, or disclosed in circumstances that would lead a reasonable person
to believe such information is confidential.

     1.5 “Documentation” means the technical documentation for the Bingo
Software to be developed following completion of the Bingo Software, including
flowcharts, program procedures and descriptions (including descriptions of the
source code and build procedures for the object code), procedures for
maintenance and modification, testing data and similar written material
relating to the design, structure and implementation of the Bingo Software.

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     1.6 “Intellectual Property Rights” means any and all known or hereafter
existing worldwide copyrights, trademarks, service marks, trade secrets,
patents, patent applications, know-how, moral rights, contract rights, and
other proprietary rights, and all registrations, applications, renewals,
extensions, and combinations of the foregoing, including, without limitation,
the right to seek to enjoin or sue for the past infringement or
misappropriation of any of the foregoing.

     1.7 “Modifications” means any derivative works or modified, updated, or
enhanced versions of the Bingo Software, including in both object code and
source code formats, developed by Spectre or for Spectre, including, without
limitation, all modifications, bug fixes, updates and releases thereof that
Spectre may develop or have developed.

     1.8 “Programming Notes” means any programmer notes, outlines, descriptions
or other documentation of the Bingo Software that are possessed by MET prior to
or created by MET during the performance of the Development Services (as
defined in Section 2.1(a) below), as well as all descriptions of the build
procedures for compiling the source code and creating the object code.

     1.9 “System” means a gaming computer system that (a) consists of hardware
and software components provided by Spectre and which includes the Bingo
Software, and (b) is intended for use as a Bingo device.

     1.10 “Term” means the term of this Agreement, as set forth in Section 10.1
below.

     1.11 “Restricted Stock” means 800,000 shares of the common stock of
Spectre, which is to be issued on a restricted basis in MET’s name and
transferred to MET in accordance with the terms and conditions of this
Agreement and the terms and conditions of that certain stock purchase and
transfer agreement made by and between the Parties on March 4, 2004 (the “Stock
Transfer Agreement”).

2. Development Services; Acceptance.

     2.1 Completion of the Bingo Software.

     (a) MET will develop the Bingo Software as set forth herein (the
“Development Services”). MET will provide the Development Services and
Bingo Software in accordance with specifications as set forth in Exhibit A
attached hereto, as amended from time to time by the Parties (the
“Specifications”). MET will provide the Development Services and the
Bingo Software in accordance with the milestones and deadlines set forth
in the Specifications (the “Development Schedule”).

     (b) Every other week MET will issue to Spectre written reports
indicating in reasonable detail MET’s progress with the Development
Services in order to confirm progress of the Development Services
according to the Development Schedule (“Progress Reports”). MET will
include in each Progress Report a reasonably detailed description of the
progress of the Development Services, status of the Bingo Software,
milestones or deadlines that have been met or missed, and an explanation
of any errors, problems or situations relevant to the timely performance
of the Development Services according to the Development Schedule.

     (c) MET expressly acknowledges and agrees that it has not and will
not disclose, license, sublicense, transfer or sell the Bingo Software (or
any of MET’s underlying software incorporated or to be incorporated
therein), the Programming Notes, any Enhancements, or any Intellectual
Property Rights in any of the foregoing, to any third party, and MET will
not reproduce, distribute, perform, display, modify, create derivative
works of or other exploit any of the foregoing except solely as required
to perform MET’s obligations hereunder or as otherwise authorized in
writing by Spectre.

     2.2 Software Escrow.

     (a) Contemporaneously with the entry into this Agreement, the Parties
and a third party software escrow agent (the “Escrow Agent”) are entering
into a software escrow agreement (the “Software Escrow Agreement”, and the
escrow associated therewith the “Software Escrow”).

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     (b) MET will maintain in the Software Escrow a current and complete
version of the source code for the Bingo Software and all Programming
Notes, including the build procedures for compiling the source code and
creating the object code (the “Escrowed Materials”), which MET will update
regularly and consistently throughout the performance of the Development
Services (but in no event less than every two weeks).

     (c) The Escrowed Materials will be released to Spectre or its agents
as set forth in this Agreement. Without limiting any of Spectre’s rights
to take possession or make use of the Escrowed Materials as set forth
herein, Spectre may at any time provide written notice to the Escrow Agent
that Spectre has elected to take possession of the Escrowed Materials (an
“Unconditional Escrow Release”). Thereafter, MET shall provide directly
to Spectre rather than to the Escrow Agent the materials called for in
Section 2.2(b) at the same frequencies required therein. An Unconditional
Escrow Release will not relieve MET of any of its obligations hereunder,
including, without limitation, the obligation to provide the Bingo
Software in accordance with the Specifications and the Development
Schedule.

     (d) The Escrowed Materials will be released to Spectre or its agents
upon receipt by the Escrow Agent of a copy of a notice of Acceptance or
Non-Conformance Delivery (as defined in Section 2.3 below).

     2.3 Acceptance.

     (a) MET will deliver the Bingo Software to Spectre in accordance with
the applicable Specifications and Development Schedule. MET will ensure
that the Bingo Software conforms to the Specifications.

     (b) MET will perform bench testing and employ sufficient quality
assurance procedures (as MET reasonably determines) to assure that the
Bingo Software conforms to the Specifications and will adequately test the
Bingo Software accordingly prior to delivery to Spectre. Spectre will
have the right to test the Bingo Software to verify that the Bingo
Software conforms to the Specifications, and MET will cooperate with such
verification testing. MET will deliver to Spectre all Programming Notes
in MET’s possession at the time of the delivery of the Bingo Software for
such testing.

     (c) If the Bingo Software (or any portions thereof) fails to meet any
of the requirements in this Agreement (including, without limitation, the
Specifications), or in the event that MET fails to provide the Bingo
Software in accordance with the Development Schedule, Spectre will notify
MET in writing of such failure. Thereafter, MET will have an additional
45 calendar days (the “Correction Period”) in which to provide, correct or
modify the Bingo Software to meet the requirements therefor and to
resubmit or submit such Bingo Software to Spectre for testing. If the
Bingo Software fails to meet the requirements therefor (including, without
limitation, delivery) at the end of the Correction Period (“Non-Conforming
Software”), then, at Spectre’s option:

     (i) The Correction Period may be extended as may be established
by Spectre.

     (ii) Spectre may require that the source code for the
Non-Conforming Software, together with all Programming Notes
therefor, be released (both directly from MET and also from the
Software Escrow, and the Escrow Agent shall so release the Escrowed
Materials upon notice from Spectre) and provided to a third party
selected and engaged by Spectre (it being acknowledged and agreed
that such third party may not disclose the source code for the
Non-Conforming Software to Spectre or any third party), solely to
allow such third party to analyze such source code and Programming
Notes to determine the scope of effort and modification that might
be required to bring the Non-Conforming Software into compliance
with the Specifications (the “Third Party Review”) and to provide
such assessment to Spectre. The Third Party Review will be at
Spectre’s expense. Following the Third Party Review (or at any time
if Spectre chooses to forego a Third Party Review), Spectre may
elect, at Spectre’s sole discretion:

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     (A) to terminate this Agreement (a “Non-Conformance
Termination"), provide written notice to MET of such
Non-Conformance Termination, return (or cause to be returned)
to MET the applicable Non-Conforming Software and Programming
Notes, in which case MET will refund to Spectre any
consideration previously given to MET (including, without
limitation, the Advance Payment), or

     (B) to take delivery (a “Non-Conformance Delivery") of
the Non-Conforming Software (in source code and object code
forms, including, without limitation, all copies then in MET’s
possession together with all of the Escrowed Materials) and
Programming Notes in such non-conforming condition, provide
written notice to MET of such Non-Conformance Delivery, in
which case Spectre may correct or complete, or cause to be
corrected or completed, the Non-Conforming Software, which
correction or completion will be at MET’s sole cost and
expense (the “Correction Expenses”).

     (d) In accordance with the terms hereof, following delivery to
Spectre of Bingo Software that conforms to the Specifications, Spectre
will provide MET written notice of Spectre’s acceptance of the Bingo
Software (“Acceptance”). Acceptance of the Bingo Software and Programming
Notes does not relieve MET of any of its other obligations,
representations or warranties with respect to the Bingo Software,
Programming Notes or other materials due from MET hereunder, nor will
Acceptance be deemed to limit, waive or restrict any remedy available to
Spectre pursuant to this Agreement.

3. Transfer of Purchase Materials.

     3.1 Spectre Materials.

     (a) Subject to Spectre’s written notice of Acceptance,
Non-Conformance Delivery or Unconditional Escrow Release, Spectre hereby
purchases from MET, and MET hereby irrevocably sells and transfers to
Spectre, the Bingo Software and Programming Notes, and all of MET’s
Intellectual Property Rights therein or related thereto (individually and
collectively, the “Purchase Materials”), and notwithstanding the
generality of the foregoing, for the purposes of Section 11, Spectre shall
be deemed to be the Disclosing Party and MET shall be deemed to be the
Receiving Party with respect to all of the Purchase Materials irrespective
of which Party actually disclosed and received information, and the
exceptions set forth in Section 11.2(a) shall not apply to such
information.

     (b) Promptly upon Spectre’s notice of Acceptance, Non-Conformance
Delivery or Unconditional Escrow Release, at no further cost or expense to
Spectre, MET will execute and deliver to Spectre an assignment agreement
for the Purchase Materials substantially in the form attached hereto as
Exhibit B (the “Assignment", and, as applicable, “Execution And Delivery
Of The Assignment"). Thereafter, from time to time at Spectre’s request
and expense, MET will execute and deliver any instrument and take any
other lawful actions that may be necessary (as determined by Spectre) to
evidence, maintain, effectuate, register, seek protection of or defend any
and all of Spectre’s rights in the Purchase Materials and any
Modifications, Enhancements (as defined in Section 4.3 below) or
derivative works thereof.

     (c) Without limiting the foregoing, all Modifications, Enhancements,
all Confidential Information of Spectre provided to MET hereunder, all
rights and interests related to Spectre’s business other than the Bingo
Software and Releases (including, without limitation, the Systems, all
“themes” or concepts therefor, all marketing strategies and customer
lists), and any and all rights to any stored information or data regarding
Spectre customers or related business activities used or obtained in
connection with any Systems, and all Intellectual Property Rights in each
of the foregoing, are and will remain the exclusive property of Spectre.

     3.2 Acknowledgement of Marketing and Trademarks. MET hereby acknowledges
and agrees that Spectre may market, distribute, license, service and otherwise
exploit the Bingo Software and Systems in any manner in Spectre’s discretion,
subject only to the applicable restrictions and terms set forth herein.
Spectre may market, distribute, license, service and otherwise exploit the
Bingo Software,

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Modifications, Enhancements and Systems, or any portions thereof, under any trademarks or
trade names of Spectre’s choosing. Spectre has no obligation to market or
distribute the Bingo Software, Modifications, Enhancements or Systems, or any
portions thereof, in connection with any of MET’s names, trademarks or logos.
The use, if any, of MET’s names, trademarks or logos will be subject to
reasonable terms as may be agreed upon by the Parties in the event Spectre
elects to use any such MET names, trademarks or logos in connection with the
marketing or distribution of the Systems.

4. Maintenance And Support Services; Enhancements.

     4.1 Maintenance.

     (a) MET will provide the following maintenance services
(“Maintenance”) for the Bingo Software: (i) MET will promptly remedy any
failure of the Bingo Software to conform to its Specifications or other
recurring material failures of the Bingo Software that cause the Bingo
Software or Systems to be inoperable, to operate improperly or to produce
results different from those described in the applicable Specifications
(each such failure, an “Error”), and (ii) MET will make available to
Spectre via electronic download (or such other means as approved by
Spectre) all Error corrections, bug fixes, updates and other maintenance
releases of the Bingo Software as required by Spectre (collectively
“Releases”). MET’s obligations under this paragraph shall expire one year
following Acceptance or Non-Conformance Delivery.

     (b) MET will determine if an Error or other required Maintenance is
attributable to (i) the Bingo Software or Enhancements developed by MET or
(ii) any Modifications or Enhancements not developed by MET. Maintenance
attributable to the Bingo Software or Modifications or Enhancements
developed by MET will be at no additional charge to Spectre; Maintenance
that arises solely due to any Modifications or Enhancements not developed
by MET will be subject to a time and materials charge, which will be at
MET’s best commercial rates for similar services, as agreed upon by the
Parties.

     4.2 Support.

     (a) MET will provide to Spectre the following support services
(“Support”): MET will provide Second Level (as defined below) and Third
Level (as defined below) remote technical support resources. “Second
Level” remote technical support consists of telephone consultations with a
technician experienced with the Bingo Software during normal business
hours (8 a.m. - 4:30 p.m. Central Time, Monday through Friday.) If a
problem cannot be resolved by Second Level support it will be escalated to
“Third Level” support, which will include subject matter experts trained
in the development and use of the Bingo Software. These resources may be
contacted by Spectre’s support services staff during the same hours as
Second Level support to assist in isolating and resolving problems with
the Systems. The Parties agree to meet to develop additional terms of a
mutually acceptable technical support plan, including contact information
and problem escalation procedures; provided, however, that such additional
terms will not be binding unless set forth in a writing signed by the
Parties. All MET employees and contractors will at all times be
adequately trained to provide the Second Level and Third Level support
services, provide such services in a professional manner at a level at
least as good as industry standard, and will comply at all times with all
relevant laws and policies applicable to such services. MET’s obligations
under this paragraph shall expire one year following Acceptance or
Non-Conformance Delivery.

     (b) MET will determine if required Support is attributable to (i) the
Bingo Software or any Enhancements made by MET or (ii) any Modifications
or Enhancements not developed by MET. Support required for the Bingo
Software or Enhancements developed by MET will be at no additional charge
to Spectre; Support for any Modifications or Enhancements not developed by
MET will be subject to a time and materials charge, which will be at MET’s
best commercial rates for similar services, as agreed upon by the Parties.

     4.3 Enhancements. If Spectre elects to update, modify or enhance the
Bingo Software by adding new features or functionality, or by seeking to make
other material modifications not covered by MET’s obligations to provide
Releases (“Enhancements”) and elects not to

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develop such Enhancements itself,
then Spectre will offer MET an opportunity to bid for the development of such
Enhancements, which Spectre will provide to MET prior to offering any third
party the right to develop such Enhancements. Provided that MET responds to
such offer within 2 weeks of such notice, and Spectre determines, in Spectre’s
sole discretion, that MET’s bid to develop such Enhancements is in all respects
materially equivalent or preferable to any bid that Spectre might obtain from a
third party, then Spectre will engage MET to develop such Enhancement, provided
that the Parties can reach mutually acceptable terms and conditions for such
development. Subject to the foregoing, Spectre has no obligation to engage MET
to develop any Enhancements, and Spectre at all times reserves the right to
develop internally Enhancements. Spectre’s obligations under this paragraph
shall expire one year following Acceptance or Non-Conformance Delivery.

5. Certain Obligations of MET.

     5.1 Documentation. Following Spectre’s Acceptance or Non-Conformance
Delivery of the Bingo Software, Spectre may develop (or have developed) the
Documentation for the Bingo Software. In connection therewith, MET will cause
to be available to Spectre, at no charge or cost to Spectre and at MET’s sole
cost and expense, all programmers and technicians who developed the Bingo
Software (individually and collectively, the “Programmers”), which Programmers
will provide sufficient background, interviews, know-how, documents and
materials to Spectre to enable the development of the Documentation so that a
reasonably skilled computer programmer could understand, maintain, enhance and
modify the Bingo Software consistent with industry standards. MET hereby
represents and warrants to Spectre that such Programmers will be available at
reasonable times to Spectre, at MET’s facilities, without unreasonable delays
or restrictions placed on such availability, and that such Programmers will
cooperate in good faith with Spectre’s efforts to produce the Documentation.
The duration of MET’s obligations to ensure the availability and cooperation of
the Programmers will expire upon the later of the following dates (such date,
"Documentation Finalization”): (a) Spectre’s written confirmation to MET that
Spectre has completed its development of the Documentation, or (b) 6 months
from Spectre’s Acceptance or Non-Conformance Delivery of the Bingo Software.
MET’s liability for breach of its obligations under this paragraph shall be
limited to forfeiture to Spectre of those 10,000 shares of Restricted Stock
constituting the Documentation Holdback (as defined below in Section
6.2(b)(iii)).

6. Advance Payment and Stock Transfer.

     6.1 Advance Payment. On the Effective Date, Spectre will make a one-time
payment to MET for the amount of the Advance Payment.

     6.2 Stock Transfer. In consideration of the Development Services, the sale
of the Bingo Software to Spectre, the Maintenance and Support to be provided by
MET hereunder and MET’s other obligations and covenants as established herein,
Spectre will provide to MET the Restricted Stock on the following basis in
accordance with the Stock Transfer Agreement (and the Stock Transfer Agreement
shall prevail with respect to any inconsistencies between this Agreement and
the Stock Transfer Agreement):

     (a) Restricted Stock. Spectre will cause to be issued to MET the
Restricted Stock subject to the terms, conditions and restrictions set
forth in this Agreement and in the Stock Transfer Agreement.

     (b) Removal of Restrictions. The Restricted Stock will be released
from the applicable restrictions in accordance with the Stock Transfer
Agreement and the following:

     (i) If at any time prior to Acceptance or Non-Conformance
Delivery, Spectre exercises its right to demand an Unconditional
Escrow Release of the Escrowed Materials, then upon release of the
Escrowed Materials to Spectre and further upon Execution And
Delivery Of The Assignment the restrictions on 790,000 shares of the
Restricted Stock will be lifted. Notwithstanding such Unconditional
Escrow Release and the subsequent lifting of the restrictions on
such 790,000 shares of the Restricted Stock, all of MET’s
obligations, representations and warranties will continue in
accordance with this Agreement, and Spectre will retain the right to
seek all applicable legal and equitable remedies with respect to any
failure or breach of MET hereunder.

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     (ii) If Spectre does not exercise
its right to take an Unconditional Escrow Release of the Escrowed Materials and,
pursuant to Section 2.3(c)(ii)(B), Spectre takes a Non-Conformance Delivery, then upon release of the
Escrowed Materials to Spectre and further upon Execution And Delivery Of The
Assignment the restrictions on 400,000 shares of the Restricted
Stock will be lifted. Of the remaining 400,000 shares of Restricted
Stock, 390,000 shares (the “Assurance Amount”) will remain
restricted until MET has paid Spectre for the Correction Expenses
and any damages that may be due under this Agreement.

     (iii) Following the lifting of the restrictions under either
subsection (i) or (ii) above, 10,000 shares of such Restricted Stock
will remain subject to restriction until the Documentation
Finalization (the “Documentation Holdback”).

     (iv) If this Agreement is terminated prior to Acceptance or
Non-Conformance Delivery due to MET’s breach or failure to perform,
or in the event of a Non-Conformance Termination, then all 800,000 shares of the Restricted Stock will be forfeited to Spectre.

     6.3 Maintenance and Support Fees. For Maintenance or Support attributable
to Modifications or Enhancements not developed by MET, Spectre will pay MET for
Maintenance and Support on a time and materials basis, to be charged by MET at
MET’s best commercial rates for such services.

     6.4 Expenses. Each Party will bear all of its own costs and expenses
associated with its performance hereunder, and Spectre will bear the fees
charged by the Escrow Agent.

     6.5 Taxes. Spectre will be responsible for and pay all taxes, duties,
levies, and other similar charges (and any related interest and penalties)
imposed as a result of the existence or operation of this Agreement including,
but not limited to, any tax which Spectre is required to withhold or deduct
from payments to MET (individually and collectively, “Taxes”); provided,
however, that the foregoing will not apply to income taxes that are due from
MET due to revenue generated under this Agreement or any personal or real
property of MET (including any taxes related to the Restricted Stock). Spectre
will be responsible for and will pay directly to the appropriate taxing
authorities all sales, use, consumption and transfer taxes, registration
charges and transfer fees applicable in respect of this Agreement. Spectre will
remit payment for any Taxes due or owing on account of its employees,
contractors or principals.

7. Representations and Warranties; Guaranty by Watkins.

     7.1 By Each Party. Each Party, respectively, represents and warrants
that: (a) it has the full right, power, and authority to execute and deliver
this Agreement and to perform its terms; (b) it is in good standing under the
laws of its state of formation, and is, or will be, qualified to do business as
a foreign corporation in each other state where such qualification is necessary
in order for it to comply with its obligations under this Agreement; and (c) it
will perform all services and obligations required hereunder in a professional
and workmanlike manner.

     7.2 By MET.

     (a) MET hereby represents and warrants that (i) the services provided
by MET (including, without limitation, the Development Services and all
Maintenance and Support services) will be performed in a professional and
workmanlike manner; (ii) the Bingo Software will conform to the
Specifications; (iii) MET exclusively owns all (and has not granted any
third party any licenses to any) Intellectual Property Rights in and to
the Bingo Software, Programming Notes, and Enhancements provided by MET
hereunder, and MET has all other right, title and interest in and to such
materials to convey such materials as necessary to comply with this
Agreement; (iv) no later than five days following the Effective Date MET
shall have obtained from each of its employees or contractors written
agreements that convey to MET all such Intellectual Property Rights and
other rights as necessary to comply with this Agreement; (v) the Bingo
Software and Programming Notes will be free and clear of all security
interests or other liens and other encumbrances when provided to Spectre
hereunder (excluding any security interests that Spectre itself may
register in the Bingo Software); (vi) except as set forth in Exhibit D
attached hereto, the Bingo Software does not contain any third party
software; (vii) the Bingo Software does not contain any open source
software, including, without limitation, any software subject to terms
that grant, or purport to grant, to any third party any rights to

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or immunities under any of MET’s or Spectre’s Intellectual Property
Rights that are incorporated, embedded or reflected in the Bingo Software
or any Enhancements developed by MET, including, without limitation,
software licensed or distributed under licenses or distribution models
such as (or similar to) GNU’s General Public License (a/k/a “GPL”) or
Lesser/Library GPL (a/k/a “LGPL”); (viii) the Bingo Software and all
Enhancements developed by MET will comply with all applicable laws and
regulations for software for use with Bingo, including, without
limitation, for bingo-related gaming; (ix) the Bingo Software and all
Enhancements developed by MET will be provided without any virus, trojan
horse, worm, backdoor, disabling feature (including any ability to disable
remotely), time bomb or other limiting or malicious code (except to the
extent, if any, set forth in the Specifications); (x) neither MET nor any
of MET’s employees or officers are subject to any non-compete or similar
obligations of restricted performance or loyalty (whether imposed by
contract, at common law or otherwise) that will in any way limit, impair,
restrict, conflict with or prohibit MET’s performance and obligations
hereunder; (xi) neither the Bingo Software, any Enhancement developed by
MET or any Programming Notes infringes or misappropriates any Intellectual
Property Right of any third party or violated any agreement with any third
party (including any agreement between Gary Watkins (“Watkins”) and any
third party or any Programmer and any third party); and (xii) no claim is
pending or threatened against (or by) MET based on circumstances or
allegations that if true as alleged would constitute or result in a breach
of any warranties made by MET, and MET has no knowledge of any allegations
or circumstances that could reasonably be believed to provide a basis on
which any such claim might be brought against (or by) MET.

     (b) In the event Spectre provides MET notice of any failure of the
Bingo Software, Enhancement or Programming Notes to meet any of the
foregoing warranties, MET will, within 30 days of Spectre’s notice of such
failure, at MET’s sole expense: (i) repair or replace the non-conforming
Bingo Software, Enhancement or Programming Notes, (ii) provide a
substitute product that offers the same features and functionality of the
non-conforming Bingo Software, Enhancement or Programming Notes; or (iii)
procure any rights necessary to render the non-conforming Bingo Software,
Enhancement or Programming Notes compliant with the applicable warranty.

     7.3 Restrictions. The warranties granted under this Section 7 do not
apply solely to the extent that: (a) Spectre modifies the Bingo Software,
Release, Enhancement or Programming Notes, if such materials would not have
been in violation of the applicable warranty but for such modification; or (b)
Spectre uses the Bingo Software or Programming Notes is used in conjunction
with Systems not intended for Bingo if such materials would not have been in
violation of the applicable warranty but for such uses.

     7.4 Disclaimers. THE EXPRESS WARRANTIES IN SECTIONS 7.1 AND 7.2 ARE IN
LIEU OF ALL OTHER WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, AND ALL OTHER
WARRANTIES ARE DISCLAIMED, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND
NON-INFRINGEMENT. THE EXPRESS WARRANTIES IN THIS SECTION 7 DO NOT APPLY TO
DAMAGE RESULTING FROM ABUSE OR COMPUTER OR ELECTRICAL MALFUNCTION.

     7.5 Guaranty by Gary Watkins. Watkins, in his personal capacity, hereby
unconditionally guarantees to Spectre MET’s performance and all obligations,
representations and warranties of MET undertaken and set forth in this
Agreement; provided, however, that Watkins’ liability under this guaranty shall
be limited to $250,000. Watkins acknowledges having been provided with a copy
of this Agreement and having consulted with counsel concerning Watkins’s
obligations hereunder.

     7.6 Acknowledgement by Spectre. Spectre acknowledges that it has been made
aware of the existence of certain litigation and certain contractual
obligations, as set forth in Exhibit C, it being acknowledged and agreed by the
Parties that Spectre has not reviewed or examined any particular documents with
respect to such litigation (including, without limitation, any pleadings,
briefs, motions or other documentation or materials) and that Spectre has not
made, assumed or provided any advice or conclusion with respect to such
litigation or the outcome or

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settlement (or potential outcome or
potential settlement) thereof, and that MET and its attorneys have stated that the representations and warranties of Section 7.2,
and in particular those of Section 7.2(a)(x), (xi) and (xii), are not impacted in any
way by such litigation and contractual obligations.

     8. Indemnification.

     8.1 By MET. MET will defend, indemnify and hold Spectre (and its
officers, employees and customers) harmless from and against and claim, loss or
damage (including, without limitation, reasonable attorneys’ fees) arising from
(a) any claim that the Bingo Software, any Enhancement developed by MET or any
Programming Notes infringes or misappropriates any Intellectual Property Right
of any third party; (b) any breach of any representation or warranty provided
by MET, or (c) any negligent or willful conduct of MET in relation to this
Agreement. If prior to Acceptance of the Bingo Software, any Enhancement
developed by MET or any Programming Notes (or any portion thereof) becomes, or
in MET’s opinion is likely to become, the subject of an infringement claim, MET
may, at its option and expense, either: (i) procure for Spectre the right to
continue using the relevant material; (ii) replace or modify relevant material
so that it becomes non-infringing but maintains compliance with the applicable
Specifications.

     8.2 Indemnification Mechanics. In the event of any obligation of
indemnification as set forth in this Section 8, the party to be indemnified
will: (a) notify the indemnifying Party promptly in writing of any action,
claim or suit to be the basis of indemnification; (b) give the indemnifying
Party sole control of the defense thereof and any related settlement
negotiations; and (c) cooperate and, at the indemnifying Party’s reasonable
request and expense, assist in such defense. In no event may the indemnifying
Party make any admission or agree to the entry of any judgment for money to be
entered on behalf of the indemnified party without the prior express written
consent of the indemnified party.

9. Limitation Of Liability. TO THE GREATEST EXTENT ALLOWED UNDER APPLICABLE
LAW, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
EXCEPT FOR AN ACTION ARISING UNDER SECTION 8: (1) IN NO EVENT WILL EITHER PARTY
BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL, INDIRECT, EXEMPLARY, SPECIAL, OR
INCIDENTAL DAMAGES INCURRED BY THE OTHER PARTY, AND (2) SPECTRE’S TOTAL
CUMULATIVE LIABILITY IN CONNECTION WITH THIS AGREEMENT, WHETHER IN CONTRACT OR
TORT OR OTHERWISE, WILL NOT EXCEED THE AMOUNT OF THE ADVANCE PAYMENT TO BE PAID
BY SPECTRE TO MET HEREUNDER.

10. Term And Termination.

     10.1 Term. The “Term” of this Agreement will commence on the Effective
Date and will continue until terminated pursuant to Section 10.2 below or any
other provision of this Agreement expressly providing for termination.

     10.2 Termination. Either Party may terminate this Agreement issued
hereunder if the other Party materially breaches any provision of this
Agreement and does not cure such breach within 30 days after being provided
with written notice thereof. Spectre may terminate this Agreement at any time
upon 30 days’ written notice to MET, provided that Spectre has paid to MET the
Advance Payment in accordance with this Agreement.

     10.3 Survival. Sections 1, 2.2, 2.3, 3, 5, 6, 7, 8, 9, 10.3, 11 and 12,
and any provisions necessary to interpret or enforce any of the foregoing, will
survive the termination of this Agreement.

11. Confidentiality.

     11.1 Protection. The Party receiving Confidential Information (“Receiving
Party”) from the other Party (“Disclosing Party”) will not use any Confidential
Information of the Disclosing Party for any purpose not expressly permitted by
this Agreement, and will disclose the Confidential Information of the
Disclosing Party only to the employees or contractors of the Receiving Party
who have a need to know such Confidential Information for purposes of this
Agreement and who have signed a written agreement imposing a duty of
confidentiality no less restrictive than the Receiving Party’s duty hereunder.
The Receiving Party will protect the Disclosing Party’s Confidential
Information from

9

 

unauthorized use, access, or disclosure
in the same manner as the Receiving Party protects its own confidential or proprietary
information of a similar nature and with no less than reasonable care.

     11.2 Exceptions. The Receiving Party’s obligations under Section 11.1
with respect to any Confidential Information of the Disclosing Party will
terminate if and when the Receiving Party can document that such information:
(a) was already lawfully known to the Receiving Party at the time of disclosure
by the Disclosing Party without an obligation of confidentiality; (b) is
disclosed to the Receiving Party by a third party who had the right to make
such disclosure without any confidentiality restrictions; (c) is, or through no
fault of the Receiving Party has become, generally available to the public; or
(d) is independently developed by the Receiving Party without access to, or use
of, the Disclosing Party’s Confidential Information. In addition, the
Receiving Party will be allowed to disclose Confidential Information of the
Disclosing Party to the extent that such disclosure is (i) approved in writing
by the Disclosing Party; (ii) necessary for the Receiving Party to enforce its
rights under this Agreement in connection with a legal proceeding arising from
or related to this Agreement; or (iii) required by law or by the order or a
court of similar judicial or administrative body. In the event that the
Receiving Party is required to disclose any Confidential Information of the
Disclosing Party pursuant to subsection (iii) above, the Receiving Party will
notify the Disclosing Party of such required disclosure promptly and in writing
and cooperate with the Disclosing Party, at the Disclosing Party’s reasonable
request and expense, in any lawful action to contest or limit the scope of such
required disclosure.

     11.3 Return of Confidential Information. The Receiving Party will return
to the Disclosing Party or destroy all Confidential Information of the
Disclosing Party in the Receiving Party’s possession or control and permanently
erase all electronic copies of such Confidential Information promptly upon the
written request of the Disclosing Party or the termination of this Agreement,
whichever comes first. At the Disclosing Party’s request, the Receiving Party
will certify in writing that it has fully complied with its obligations under
this Section 11.3.

12. General Provisions.

     12.1 Compliance with Laws.

     (a) Each Party will comply, and will cause its shareholders,
directors, officers and employees and all of their respective affiliates
to comply, with all applicable laws concerning its performance of this
Agreement and undertaking of other obligations hereunder.

     (b) Without limiting the foregoing, (i) MET will not, and will not
attempt to, and will not allow or encourage any of its employees or agents
to profit from the trading of any securities based on any material
non-public information about Spectre obtained by MET, (ii) MET will inform
its employees and contractors of the foregoing restrictions, and (iii) MET
will obtain or cause to be obtained all necessary governmental licenses,
permits or other authority required for MET to perform its obligations
hereunder.

     (c) Spectre will obtain or cause to be obtained all necessary
governmental licenses, permits or other authority required to market,
place and operate the Systems in Bingo-approved casino environments.

     12.2 Assignment. Prior to Spectre’s Acceptance of the Bingo Software, MET
will not assign, delegate or transfer, including by operation of law, sale of
assets, merger and otherwise, any of its rights or obligations (in whole or in
part) under this Agreement to any third party (including, without limitation,
any other divisions, affiliates, parents or business partners) without
Spectre’s prior written consent, which will not be unreasonably withheld. Upon
Spectre’s Acceptance of the Bingo Software, MET may, in MET’s sole discretion,
assign, delegate and transfer this Agreement, and all rights and licenses set
forth herein, to any third party, provided that MET provides Spectre advance
written notice of such assignment at least 45 days prior to making such
assignment. At any time, Spectre may, in Spectre’s sole discretion, assign,
delegate and transfer this Agreement, and all rights and licenses set forth
herein, to any third party. Any attempted assignment, delegation or transfer
in violation of the foregoing will be void and will be of no force or effect.
Subject to the foregoing, this Agreement will inure to the benefit of and will
be binding on each Party’s successors and permitted assigns.

10

 

     12.3 Independent Contractor Relationship. The Parties are independent
contractors, and nothing herein will be construed to create a partnership,
agency, joint venture, or employer-employee relationship. Neither MET nor any
of its employees or contractors is entitled to participate in any plans,
arrangements or policies (including bonuses, vacations, sick leave, stock
options, medical plans and other benefits) that Spectre may provide or make
available for Spectre’s employees. MET retains exclusive liability for
complying with all applicable state and federal laws governing MET’s
relationships with its employees and contractors, including payment of
employment and other taxes based on the compensation provided to MET pursuant
to this Agreement. Neither MET nor any of its employees is entitled to
workers’ compensation benefits pursuant to the contractual relationship
established hereunder.

     12.4 Notices. All notices, consents, and approvals under this Agreement
must be delivered in writing by electronic mail, courier, electronic facsimile
(fax), or certified or registered mail, (postage prepaid and return receipt
requested) to the other Party at the address for each Party set forth below,
and will be effective upon receipt or three (3) business days after being
deposited in the mail as required on the cover page of this Agreement,
whichever occurs sooner. Either Party may change its address by giving notice
of the new address to the other Party.

     If to MET addressed as follows

MET Games Inc.

Attention: Gary Watkins

1611 S. Utica, #194

Tulsa, Oklahoma 74104

     and if to Spectre addressed as follows:

Spectre Gaming, Inc.

Attention: Ronald E. Eibensteiner

800 Nicollet Mall, Suite 2690

Minneapolis, Minnesota 55402

     12.5 Governing Law. This Agreement will be governed by and interpreted in
accordance with the laws of the State of Oklahoma without reference to its
choice of law rules. The United Nations Convention on Contracts for the
International Sale of Goods does not apply to this Agreement.

     12.6 Waivers. Any waiver or failure to enforce any provision of this
Agreement on one occasion will not be deemed a waiver of any other provision or
of such provision on any other occasion.

     12.7 Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be unenforceable, such provision will be changed
and interpreted to accomplish the objectives of such provision to the greatest
extent possible under applicable law and the remaining provisions of this
Agreement will continue in full force and effect.

     12.8 Entire Agreement. This Agreement and the exhibits and schedules
attached hereto (which are hereby incorporated by reference), together with the
Stock Transfer Agreement and the Software Escrow Agreement, constitute the
entire agreement between the Parties regarding the subject hereof and supersede
all prior or contemporaneous agreements, understandings, and communication,
whether written or oral.

[REST OF PAGE
INTENTIONALLY LEFT BLANK - SIGNATURE PAGE FOLLOWS]

11

 

     IN WITNESS WHEREOF, the Parties by their duly-authorized representatives
have executed this Agreement as of the Effective Date.

	 	 	 	 	 	 	 
	MET GAMES INC.	 	SPECTRE GAMES INC.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Gary Watkins
	 	By:
	 	/s/ Ronald Eibensteiner
	

	 	
 
	 	 	 	
 
	Print Name:

	 	 	 	Print Name:	 	 
	

	 	
 
	 	 	 	
 
	Title:

	 	 	 	Title:	 	 
	

	 	
 
	 	 	 	
 

IN RESPECT OF THE GUARANTY BY GARY WATKINS

In accordance with Section 7.5 and in

consideration of my obligations to MET and the

benefits I will receive from the execution and

performance of this Agreement, I, Gary Watkins,

personally guaranty the performance and

obligations of MET hereunder:

                    /s/ Gary Watkins

12

 

EXHIBIT A

SPECIFICATIONS FOR BINGO SOFTWARE AND DOCUMENTATION AND DEVELOPMENT SCHEDULE

Development Schedule

     The Bingo Software will be completed and delivered to Spectre no later
than ninety (90) days after the Effective Date. Testing by MET will
start the day after the Bingo Software is completed and continue for
thirty (30) days.

Specifications for Bingo Software:

HIGH-LEVEL OVERVIEW OF GAMING SYSTEM

	 	•	 	The Class II gaming system is a “real-time” BINGO gaming
platform that incorporates network management systems and electronic
player stations packaged in traditional class III style presentation.
The gaming system is designed to operate in a client / server
architecture. The gaming system is referred to as “real-time” BINGO
because the balls are drawn at the time of play. (Balls are not
pre-drawn or pre-determined). Once the player has purchased a card at
the game terminal and executes “play”, the gaming system draws the
system-configured number of balls (referred to as the ball draw)
determines the results of the ball draw (whether the numbers drawn
will result in a win or not) and sends the results of the ball draw
to the game terminal. If the result is a win, the winning pattern,
including the display of the winning numbers drawn, are displayed at
the game terminal in a graphical-type representation of a BINGO card
and the drawn numbers are displayed in a graphical-type grid for the
players/ users information.
	 
	 	•	 	The gaming system includes a point of sale module which
facilitates the distribution of player winnings and provides detailed
audit / accounting features for the financial details of game
playing. The point of sale module has the ability to read the
bar-coded information that is printed on the ticket / coupon that the
game terminal dispenses when the player elects to “cash out”. The
point of sale module includes the ability to read a coupon (paper)
with a bar code imprinted on it. The module will translate the
“meaning” of the barcode imprint (through the use of a bar-code
reader / wand) and compare it with the game terminal information that
has been stored on the primary database. This occurs to confirm /
validate the information on the coupon with the information that the
server has been sent regarding the game play activity that has taken
place at the game terminal that the coupon originated at. If the
information matches, the cashier is “okayed” to distribute the
winnings in the form of a cash payout to the player (coupon holder).
This point of sale module runs on a separate computer terminal but is
connected to the game system via a network interface card and a
communication protocol (TCP/IP over Ethernet) that permits
communication between the primary database, which resides at the
server level, and the point of sale module (residing at the client
level). The point of sale module “talks” directly with the primary
database and contains a subset of the primary database on the local
computer (POS terminal) hard disk. The point of sale module requires
each user (cashier) to sign in to the module with a unique username
and password. Features of the module then track the activity of the
user (cashier) for the session. When the user closes out of their
shift (session) the module reconciles the transactions that have
taken place and sends the contents of the local database to the
primary database. The user (cashier) then signs out.
	 
	 	•	 	The gaming system includes a management terminal module that
serves as an information center for the casino manager. This module
will monitor and display on screen a Game Floor Status that includes
floor information on the status of game terminals and connected
peripherals such as the bill acceptor, card reader, and coupon
printer. A Report Module that allows for the display and

13

 

	 	 	 	printing of pre-defined EOD (end of day) reports. There are
approximately five (5) or six (6) pre-defined reports that meet the
regulatory requirements of NIGC and IGRA. A Site Management Module
that is used to set up the particulars of the facility (casino) that
the gaming system is being installed at. A Game Management Module that
will display to the user the current set up of each game (not
terminal). A Game Terminal Module that will display to the user the
game terminal configuration information. This module will display
information only. The user will be required to provide a userid and
password to gain access to the module. The module will operate on a
personal computer of standard configuration including a hard disk drive
and the necessary hardware to permit communication with the gaming
system (see description in point of sale module above).
	 
	 	•	 	The game terminals will be similar to a class III gaming device
in that it will have the style of a traditional Class III gaming
machine including three (3) mechanical reels which will display the
result of the “ball draw” referred to in the gaming system
description above.
	 
	 	•	 	The system provides instantaneous play cycles, comparable to
traditional casino games, and supports the delivery of distinctive
and compelling entertainment for the end user. The gaming system
will respond immediately to the play execution of the player much in
the same way a traditional Class III machine respond to the pull of
the “arm” or depressing of the “play” button. The user experience
will be similar to as if playing a Class III-type game device. The
gaming system will include bonus-rounds that the player will be
presented to when a pre-determined event (BINGO game pattern i.e.
black out, “V” or some combination of pattern, credits associated
with win, and / or number of bets made) awards the player with a
playing bonus. This will be presented with some method of “moving”
the mechanical reels. It will not (for this release) involve any
presentation of bonus that involves player interaction.
	 
	 	•	 	The system provides the casino operator/ manager one of the
most comprehensive and intelligent systems capable of:

	 	•	 	Player participation management In the Spectre release of
the gaming system, player participation / tracking will not be
available.
	 
	 	•	 	Cash audit and management reporting. Described above in
Management Terminal Module.

	 	•	 	The application architecture is such that it allows for game
engine enhancement and / or modification should it being challenged,
or the current definitions of Class II devices change. The gaming
system (software) is architected in such a way (Object Oriented [OO]
application development) that it can be modified to suit changes of a
regulatory nature or changes based on new technology, play/gaming
methods, etc.. The gaming system will also provide for management
of the playing particulars (at the server level), i.e. number of
balls drawn (ties in with RNG and “math” component of gaming system).
This will permit the operator to “tweak” the gaming system depending
on the current play environment (i.e. time of day, week, month,
holiday, tournaments, special occasions, etc.)
	 
	 	•	 	The gaming system is a linked interactive Class II game system
that incorporates network, database and on-line transaction
processing technologies with powerful tools to manage player
participation (player tracking not available in Spectre release) and
regulatory reporting. Based on MICS. The gaming system will
support up to 500 concurrent play stations
	 
	 	•	 	The system provides a complete game floor solution for Class II
compacted and non-compacted facilities. The system operates on
high-speed networks 100 Mb Ethernet in a real-time 24x7
environment.
	 
	 	•	 	It is easy to manage / configure both from a technical
perspective and a management perspective. The gaming system includes
a Maintenance Module that assists with the servicing of game terminals. It is
activated by use of the “RED” key, which initiates a
sign

14

 

	 	 	 	in box in the video display area of the game terminal. The
service technician is required to provide a userid and password in
order to view the Maintenance Menu. The menu items will present
selections such as Replay of last (previous) “x” games (where “x”
represents the archive at the game terminal), Daily Cash Reports,
Maintenance on Game Terminal interconnected devices (bill acceptor,
card reader, coupon printer), etc. This module will also be used to
“zero out” the terminal.
	 	 	 	 
	 
	 	•	 	The game terminal module will provide a Player Help Module that
will be displayed in the video display area. It will be interacted
with via “touch” (touch screen functionality) and will allow the
player to view basic help on game play. The player will also be able
to view all winning BINGO patterns with the corresponding win
(credits / points) via the help screen module including the game
ending pattern.
	 
	 	•	 	The linked/networked system allows operators to manage and
monitor player activity to ensure maximum player participation and
entertainment.

15

 

MODULE DESCRIPTIONS AND FUNCTIONAL SPECIFICATIONS AND REQUIREMENTS

The gaming system consists of the following modules, descriptions and
functional specifications and requirements for each as follows:

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 42
	Common
	 	(1) Messaging
	 	MSM
	 	DATE 03/04/04

	Functional:	 	Client and server use to exchange data
	 
	 	 	 	 	 	 
	 	 	Client request to server
	 
	 	 	 	 	 	 
	 	 	In game case send client game responses to display
	 
	 	 	 	 	 	 
	 	 	Client listens for messages from server
	 
	 	 	 	 	 	 
	 	 	Server monitors heartbeat from client
	 
	 	 	 	 	 	 
	Scenario:	 	Player plays game
	 
	 	 	 	 	 	 
	 	 	Server acknowledges
	 
	 	 	 	 	 	 
	 	 	Server converts currency input at terminal into credits
	 
	 	 	 	 	 	 
	 	 	Customer plays game
	 
	 	 	 	 	 	 
	Technical:	 	Messages move in pairs (send receive)
	 
	 	 	 	 	 	 
	 	 	Standard messaging format between client and server
Currently unencrypted.
	 
	 	 	 	 	 	 
	 	 	Message encryption will not be part of Spectre release of product.
Clarification — the ability to encrypt messages between the server
(s) and the client(s) will NOT included as part of the product that
will be delivered at the end of the development schedule.
	 
	 	 	 	 	 	 
	Dependencies:	 	Dependency on other common modules
	 
	 	 	 	 	 	 
	 	 	Dependency on actual physical infrastructure
	 
	 	 	 	 	 	 
	Expectations:	 	Does not apply -

16

 

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 43
	Common
	 	(2) Transport
	 	TLM
	 	DATE 03/04/04

	Functional:	 	Encapsulates TCP/IP communication layer
	 
	 	 	 	 	 	 
	Scenario:	 	This module manages all communication between client and server
	 
	 	 	 	 	 	 
	Technical:	 	Part of protocol is same for all applications of this nature
	 
	 	 	 	 	 	 
	Dependencies:	 	Dependency on other common modules
	 
	 	 	 	 	 	 
	 	 	Dependency on actual physical infrastructure
	 
	 	 	 	 	 	 
	 	 	Dependency on MSM
	 
	 	 	 	 	 	 
	Expectations:	 	Has to be there or no transference of communication would take place

17

 

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 44
	Common
	 	(3) Database
	 	DBM
	 	DATE 03/04/04

	Functional:	 	This module permits the client to interact with the primary database that resides at the
server level. Client uses this module to communicate with the database back and forth.
It serves as a wrapper that wraps around the API (part of Interbase) to permit the
communication. Allows for more efficiency when making modifications, as the
modifications only have to be made once.
	 
	 	 	 	 	 	 
	Scenario:	 	There is a portion of this module that will manage the game result archiving.
	 
	 	 	 	 	 	 
	Technical:	 	All modules are embedded within the application and run at all times while the
application is running.
	 
	 	 	 	 	 	 
	Dependencies:	 	Dependency on other common modules
	 	 	Dependency on actual physical infrastructure
	 
	 	 	 	 	 	 
	Expectations:	 	Does not apply -

18

 

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 45
	Common
	 	(4) Event Logging
	 	ELM
	 	DATE 03/04/04

	Functional:	 	Provides common interface for all modules that are part of the application. This
log resides at the server level.
	 
	 	 	 	 	 	 
	Scenario:	 	If something fails at the client whether software or hardware, an event of this
failure will be logged in this log.
	 	 	An administrator-type user will be able to view this log at the server.
	 
	 	 	 	 	 	 
	Technical:	 	Embedded within application
	 
	 	 	 	 	 	 
	Dependencies:	 	Dependency on other common modules
	 
	 	 	 	 	 	 
	 	 	Dependency on actual physical infrastructure
	 
	 	 	 	 	 	 
	Expectations:	 	Will be available for viewing at the server level. As txt type file.

19

 

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 46
	Common
	 	(5) Multi-threading
	 	MTM
	 	DATE 03/04/04

	Functional:	 	This application is written for a single processor — however,
it can be re-engineered to address two (2) or more.
Multi-threading defined means sharing a single CPU between
multiple tasks (threads) in a way to minimize the time required
to switch threads. This is accomplished by sharing as much as
possible of the program execution environment between the
different threads so that very little state needs to be saved
and restored when changing threads.
	 
	 	 	 	 	 	 
	Scenario:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Technical:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Dependencies:	 	Dependency on other common modules
	 
	 	 	 	 	 	 
	 	 	Dependency on actual physical infrastructure
	 
	 	 	 	 	 	 
	Expectations:	 	Does not apply -

20

 

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 47
	Common
	 	(6) Device
	 	DVM
	 	DATE 03/04/04

	Functional:	 	Base class for all devices
	 
	 	 	 	 	 	 
	 	 	Ties all other modules together
	 
	 	 	 	 	 	 
	Scenario:	 	Must be present for MTM and POS — for all devices including server and game
terminal.
	 
	 	 	 	 	 	 
	Technical:	 	This module assists the server in managing and acknowledging devices in an
intangible way; the id’s are stored in the database. These ids will be the same as
what are used at the MTM.
	 
	 	 	 	 	 	 
	Dependencies:	 	Dependency on other common modules
	 
	 	 	 	 	 	 
	 	 	Dependency on actual physical infrastructure
	 
	 	 	 	 	 	 
	Expectations:	 	We will be able to see the result of this module at the MTM and the POS.

21

 

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 48
	Common
	 	(7) Miscellaneous
	 	MMM
	 	DATE 03/04/04

	Functional:	 	A bucket for storing
utilities and tools  - not fully
developed at this time. Examples are formats for
date, time, currency, etc. Information that is
global to the system.
	 
	 	 	 	 	 	 
	Scenario:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Technical:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Dependencies:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Expectations:
	 	 	 	 	 	 

22

 

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 49
	Project
	 	(8) Game Engine
	 	GEM
	 	DATE 03/04/04

	Description	 	This module runs at the client and the server.
	 
	 	 	 	 	 	 
	 	 	Base Game
	 
	 	 	 	 	 	 
	 	 	Holds very primitive info about the game being or to be played. This information
is initially pulled from the server and then remains resident in RAM at the server
level for future reference or until the RAM is cleared. Assist with overall
performance. The base game class serves the primary object from which all other
game combinations are inherited.
	 
	 	 	 	 	 	 
	 	 	Game Configuration
	 
	 	 	 	 	 	 
	 	 	Builds on the Game Base, with more precise information about particular game, i.e.
lines to be played, balls to be drawn, pointers to other structures.
Game Level
	 
	 	 	 	 	 	 
	 	 	This module involves the results of the BINGO card with the reels (video or
mechanical). The results come from the server.
Tournament Play
	 
	 	 	 	 	 	 
	 	 	This module will NOT be part of the final release (the Spectre release)
	 
	 	 	 	 	 	 
	 	 	Game Play
	 
	 	 	 	 	 	 
	 	 	The results of the game from the server and displayed at the client.
	 
	 	 	 	 	 	 
	 	 	Prize Table
	 
	 	 	 	 	 	 
	 	 	Primary prize table for the entire system. Each game is numbered and therefore
each game will get a different set of BINGO patterns based on the buy in level,
lines played, etc. There will be a number of patterns that the server has to
select from. Exact number not provided.
	 
	 	 	 	 	 	 
	 	 	Progressive Prize
	 
	 	 	 	 	 	 
	 	 	This is tied to the prize table. For example all machines playing “game one” will
contribute to the “game one” progressive jackpot.

23

 

	 	 	 	 	 	 	 
	 	 	Map Table
	 
	 	 	 	 	 	 
	 	 	Used to map BINGO results to slot results. Part of database it works in
conjunction with Base Game, and game id (“game one” example).
	 
	 	 	 	 	 	 
	 	 	BINGO Card
	 
	 	 	 	 	 	 
	 	 	Container for BINGO numbers that are drawn at server and sent down and displayed in
card grid at client.
	 
	 	 	 	 	 	 
	 	 	Card Deck BINGO
	 
	 	 	 	 	 	 
	 	 	Ten (10) decks of 250 cards this is a static set of cards that is initiated at the
boot of the server. Players are not dealt cards sequentially but each player will
be given a different card with a different number from a different deck.
	 	 	Ball Draw
	 
	 	 	 	 	 	 
	 	 	Container at client with results of balls drawn at server. Information originates
at the server.
	 
	 	 	 	 	 	 
	 	 	Result Scan
	 
	 	 	 	 	 	 
	 	 	The process of taking the card being played and the balls drawn and looking for
matches between the two on the BINGO card.
	 
	 	 	 	 	 	 
	 	 	Bonus Rounds
	 
	 	 	 	 	 	 
	 	 	Will be demonstrated in various reel movements — no specifics provided.
	 
	 	 	 	 	 	 
	 	 	Note: Player Interactive Bonus Game Rounds and Player Interactive Bonus-type Game
features will not be included in the Spectre release of the software.

24

 

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 51
	Project
	 	(9) Player Tracking
	 	PTM
	 	DATE 03/04/04

	Description	 	Player:
	 
	 	 	 	 	 	 
	 	 	Container for player data, player ID and credits to be played (or played). Player types can
be anonymous cash player (who is a player that has inserted cash into the machine without
having a player card initiated). This player will be assigned a player / user id by the
system automatically at the start of the game. The numbers are assigned using the “next
number” feature of the database. Once the number has been used it will never be used again.
	 
	 	 	 	 	 	 
	 	 	In the case of a player card being initiated, this player id number is assigned by the same
means described above (from the same source).
	 
	 	 	 	 	 	 
	 	 	Player Info:
	 
	 	 	 	 	 	 
	 	 	Container for contact-type information on the player. Anonymous cash players have a null
pointer for this container as information (contact) is not collected on them.
	 
	 	 	 	 	 	 
	 	 	Player Status:
	 
	 	 	 	 	 	 
	 	 	Tracks the activities
of all players - further details have yet to be determined.
	 
	 	 	 	 	 	 
	Scenario:	 	Player (cash) starts game, all game activity is tracked, available at server level via
report.

Contact fields in POS for setting up player cards. Note - player cards will not be a
feature in the Spectre release.
	 
	 	 	 	 	 	 
	Technical:	 	Runs at client level and at POS (when available) Incorporated into game history / archiving

25

 

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 52
	Project
	 	(10) Management
	 	MTM
	 	DATE 03/04/04

	Description	 	Game Floor Status GFM
	 
	 	 	 	 	 	 
	 	 	Will provide floor information on status of terminal peripherals i.e. bill acceptor,
card reader, coupon printer.
	 
	 	 	 	 	 	 
	 	 	Report Module RPM
	 
	 	 	 	 	 	 
	 	 	All EOD (End of Day) reports will be run from this module (total five [5] or six [6].
Ad hoc reporting will not be available for the Spectre release.
	 
	 	 	 	 	 	 
	 	 	Site Management SMM
	 
	 	 	 	 	 	 
	 	 	This module is used to set up the facility (casino). Example is provided.
	 
	 	 	 	 	 	 
	 	 	Game Management Module GMM
	 
	 	 	 	 	 	 
	 	 	Displays current set up
of each game but does not permit re-configuration - is read
only from the management terminal.
	 
	 	 	 	 	 	 
	 	 	Game Terminal GTM
	 
	 	 	 	 	 	 
	 	 	Provides game configuration information on game device terminals - cannot be
re-configured from here - is read only from management terminal
	 
	 	 	 	 	 	 
	 	 	Note: the “dash
board - graphical” representation of the Management Terminal will not
be included in the Spectre release.

26

 

Software Specifications:

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 53
	Project
	 	(11) Game Terminal
	 	GTM
	 	DATE 03/04/04

	Description:	 	Game Device Class
	 
	 	 	 	 	 	 
	 	 	This module represents the internal hardware of the game
terminal. See Bally machine spec attached and original
MET Device class breakdown.
	 
	 	 	 	 	 	 
	 	 	Player Tracking Information
	 
	 	 	 	 	 	 
	 	 	A subset of the main player tracking system except it is
more specific to the actual device collecting the
history of the game play at the terminal. Will hold “x”
complete game transaction (exact number has yet to be
determined). This information is used for game dispute
resolution and audit purposes. This data will
eventually reside in the database at the server level.
	 
	 	 	 	 	 	 
	 	 	Maintenance Module
	 
	 	 	 	 	 	 
	 	 	This module supports the “service mode” of the gaming
terminal. Inserting and turning the “red” key displays
the service menu on the video screen. The service tech
will input a password and be presented with a service
menu that will displaying various service related items,
such as: Replay of last “x” games, Daily Cash Report,
Maintenance Reports on GT Devices, EOD (End of Day) Cash
Report, Cash in/Cash Out Report, etc. An activity that
will zero out the terminal. All reports will be
printed out via the coupon printer; only other output
means will be via the screen. This screen will be
“touch” enabled.
	 
	 	 	 	 	 	 
	 	 	Process Visual Game Module
	 
	 	 	 	 	 	 
	 	 	BINGO Card Image, Ball Draw Image, Player Stats Image
(all will display on “touch” screen monitor.)
	 
	 	 	 	 	 	 
	 	 	Player Help Screen
	 
	 	 	 	 	 	 
	 	 	Accessed via the
“touch” screen - will display to player
all winning BINGO patterns including game ending
pattern. Will provide text-based help screens to player
(basic instructions). The user will not be able to
interact (play) the game via the “touch” screen.

27

 

	 	 	 	 	 	 	 
	Module	 	Name	 	AKA	 	 
	
	 	
	 	
	 	EXHIBIT A, PAGE 54
	Project
	 	(12) Cashier
	 	POS
	 	DATE 03/04/04

	Functional:	 	Note: For the Spectre release, this module will NOT be able
to create player cards, the player-tracking module will not
be included.
	 
	 	 	 	 	 	 
	 	 	In the Spectre release, the POS (Point of Sale) module will
only be able to read bar-coded coupons (output from the game
terminal) and distribute winnings (cash) based on the
terminal coupon. It will not be able to take cash / credits
in due to the player tracking module not be completely
active.
	 
	 	 	 	 	 	 
	 	 	Bar Code Content:
	 
	 	 	 	 	 	 
	 	 	     •      Ticket number (same as coupon number)
	 
	 	 	 	 	 	 
	 	 	     •      Terminal (game device) number
	 
	 	 	 	 	 	 
	 	 	     •      Date
	 
	 	 	 	 	 	 
	 	 	     •      Time
	 
	 	 	 	 	 	 
	 	 	     •      Total winning (in currency not credits)
	 
	 	 	 	 	 	 
	 	 	Will be tracked on UserID primary key in database. All data
related to the coupon will be traceable via the UserID
	 
	 	 	 	 	 	 
	 	 	Cash Drawer
	 
	 	 	 	 	 	 
	 	 	The cash drawer will be triggered (open) based on an event
(i.e. bar code read and subsequent payout, “bleeds”, etc.
All events related to the opening of the cash drawer will be
tracked in the audit log in the database. It will be written
to the primary database at the server level and the subset
database that resides on the hard drive of the POS terminal
(actual fields not provided)
Data redundancy has been addressed.

28

 

	 	 	 	 	 	 	 
	Module
	 	Name
	 	AKA
	 	 
	 	 	(13) Game Terminal	 	 	 	EXHIBIT A, PAGE 55
	Project
	 	Configuration
	 	GCM
	 	DATE 03/04/04

	Functional:	 	The primary purpose of this module is to configure the compact flash devices
that will reside in each game player terminal. It will be used in a
manufacturing scenario only; not for field use.
	 
	 	 	 	 	 	 
	 	 	Usage will require a personal computer running linux (preferably same version as
system is at)
	 
	 	 	 	 	 	 
	 	 	A device that permits interfacing to a compact flash device.
	 
	 	 	 	 	 	 
	 	 	This module which will consist of:
	 
	 	 	 	 	 	 
	 	 	     •      The kernel and some utilities of the OS
	 
	 	 	 	 	 	 
	 	 	     •      The game application software
	 
	 	 	 	 	 	 
	 	 	     •      Information specific to the facility (database)
	 
	 	 	 	 	 	 
	 	 	     •      Control numbers for the device
	 
	 	 	 	 	 	 
	 	 	     •      Information specific to the game terminal that the compact flash will be
installed in
	 
	 	 	 	 	 	 
	Scenario:	 	     1.     User will sign on to personal computer that has GCM installed
	 
	 	 	 	 	 	 
	 	 	     2.     User will connect interface cable to compact flash
	 
	 	 	 	 	 	 
	 	 	     3.     User will either (a) select facility name from existing data, or (b) input
facility information into input screen

	 
	 	 	 	 	 	 
	 	 	     4.     User will enter particulars to compact flash (not provided)
	 
	 	 	 	 	 	 
	 	 	     5.      User will execute to download to flash
	 
	 	 	 	 	 	 
	 	 	     6.      User will receive validation message
	 
	 	 	 	 	 	 
	 	 	     7.      Compact flash is ready to be installed in game terminal
	 
	 	 	 	 	 	 
	Technical:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Dependencies:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Expectations:
	 	 	 	 	 	 

29

 

EXHIBIT B

ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS

     This Assignment of Intellectual Property Rights (hereinafter the
"Assignment”) is made between MET Games Inc., a corporation organized under the
laws of the State of Oklahoma (“MET”) with a principal place of business
located at 1611 S. Utica, #194, Tulsa, Oklahoma 74104, and Spectre Gaming Inc.,
a corporation organized under the laws of the State of Minnesota (“Spectre”)
with a principal place of business located at 800 Nicollet Mall, Suite 2690,
Minneapolis, Minnesota 55402.

     WHEREAS, the parties hereto have entered into that certain Development and
Exclusive License Agreement, dated    , 2004 (the “Agreement”), pursuant
to which Spectre has an option to purchase certain software, documentation and
other materials from MET; and

     WHEREAS, pursuant to the terms of the Agreement, Spectre has elected to
exercise such option;

     NOW, THEREFORE, for good and valuable consideration, including, without
limitation, as set forth in the Agreement, the receipt and sufficiency of which
are hereby acknowledged, MET makes the following assignment to Spectre:

1. MET hereby irrevocably assigns, transfers and sells to Spectre all of MET’s
worldwide rights, title and interest (as may now or in the future exist) in and
to the work, items and materials described in Schedule 1 attached hereto, and
all related documentation therefore, (such work, items, materials and
documentation, individually and collectively, the “Work”), including, without
limitation, all Intellectual Property Rights (as defined in the Agreement) in
the Work; all source code, object code, copyrights, copyright applications,
copyright registrations, copyrightable subject matter in the Work in any form
or media (whether now known or existing); all rights of reproduction,
distribution, performance and display, the right to prepare derivative works;
all rights to make, have made, sell, distribute, use and otherwise exploit the
Work and Systems (as defined in the Agreement) containing or utilizing the
Work; and any and all causes of action heretofore accrued in MET’s favor for
infringement or misappropriation of the aforesaid rights.

2. MET’s assignment and transfer of the Work hereunder includes all rights of
paternity, integrity, disclosure and withdrawal and any other rights that may
be known as or referred to as “moral rights” (collectively “Moral Rights”). To
the extent such Moral Rights cannot be assigned under applicable law and to the
extent the following is allowed by the laws in the various countries where
Moral Rights exist, the MET hereby irrevocably waives such Moral Rights and
consents to any action or use of the Work consistent with the terms of this
Agreement that would violate such Moral Rights in the absence of such consent.
The MET will confirm, in writing if requested by Spectre, any such waivers and
consents from time to time as requested by Spectre.

3. MET hereby represents and warrants to Spectre the following:

     a. MET did not engage any other individual or entity, other than employees
of MET working within the scope of their employment, to assist MET in the
creation or development of the Work, except for an independent contractors who
have, by written assignment, assigned to MET all rights, title and interest in
and to the Work;

     b. MET is the sole and exclusive owner of all copyright rights and all
other rights throughout the world in the Work;

     c. The Work has not heretofore been pledged, hypothecated or otherwise
encumbered and is, in all respects, free and clear (with the sole exception of
any of Spectre’s rights therein that are established pursuant to the
Agreement);

30

 

     d. The Work has not heretofore been licensed by MET to any party other
than Spectre and MET has not entered into any contract or agreement or made any
commitment that will or may impair Spectre’s rights hereunder (with the sole
exception of any of Spectre’s rights therein that are established pursuant to
the Agreement); and

     e. The validity of the copyrights in the Work has never been questioned.

4. At any time, and from time to time after the execution of this Assignment,
MET will forthwith, upon Spectre’s written request and at Spectre’s reasonable
cost and expense, take any and all steps to execute, acknowledge and deliver to
Spectre any and all further instruments and assurances necessary or expedient
in order to vest or perfect the aforesaid rights and causes of action more
effectively in Spectre and to facilitate Spectre’s enjoyment and enforcement of
said rights and causes of action.

5. MET hereby constitutes and appoints Spectre as MET’s true and lawful
attorney-in-fact, with full power of substitution in MET’s name and stead, to
take any and all steps, including proceedings at law, in equity or otherwise,
to execute, acknowledge and deliver any and all instruments and assurances
necessary or expedient in order to vest or perfect the aforesaid rights and
causes of action more effectively in Spectre or to protect the same or to
enforce any claim or right of any kind with respect thereto. This includes,
but is not limited to, any rights with respect to the Work that may have
accrued in MET’s favor from the date of creation of the Work to the Effective
Date of this Assignment. MET hereby acknowledges and declares the foregoing
power of attorney is coupled with an interest and is irrevocable.

6. MET hereby acknowledges and agrees that the assignment and other obligations
of MET set forth herein are made in consideration of those rights, covenants,
liabilities and obligations exchanged by MET and Spectre in the Agreement and
that no further consideration or payment is required in exchange for MET’s
undertakings pursuant to this Assignment.

7. The Assignment is subject to and made part of, and will at all times by
governed by, the Agreement by and between the parties. All terms and
conditions of the Agreement not inconsistent herewith are applicable hereto.

     IN WITNESS WHEREOF, MET has executed this Assignment as of the date below.

	 	 	 
	Date:                                                         
	 	 
	 
	 	 
	MET Games Inc.

	 	Spectre Gaming Inc.
	 
	 	 
	By:                                                         

	 	By:                                                         
	 
	 	 
	                                                         

	 	                                                         
	Printed Name

	 	Printed Name
	 
	 	 
	                                                         

	 	                                                         
	Title

	 	Title

31

 

Schedule 1

For purposes of this Assignment, the Work assigned by MET to Spectre consists
of the Bingo Software, all Enhancements made thereto by MET, and all
Programming Notes therefor developed by or for MET, as such terms are defined
in the Agreement between the Parties.

Without limiting the foregoing, the Work includes the following:

	1.	 	Messaging Module (MSM)
	 
	2.	 	Transport Layer Module (TLM)
	 
	3.	 	Database Module (DBM)
	 
	4.	 	Event Logging Module (ELM)
	 
	5.	 	Multi-threading Module (MTM)
	 
	6.	 	Device Module (DVM)
	 
	7.	 	Miscellaneous Module (MMM)
	 
	8.	 	Game Engine Module (GEM)
	 
	9.	 	Game Play Module (GPM)
	 
	10.	 	Player Tracking Module (PTM)
	 
	11.	 	Database Module (DBM)
	 
	12.	 	Management Terminal Module (MTM)
	 
	13.	 	Game Floor Status Module (GFM)
	 
	14.	 	Report Module (RPM)
	 
	15.	 	Site Management Module (SMM)
	 
	16.	 	Game Terminal Module (GTM)
	 
	17.	 	Point of Sale (POS)
	 
	18.	 	Player Station Configuration Module (PSM)
	 
	19.	 	Maintenance Module
	 
	20.	 	Player Help Module

32

 

Exhibit C

Litigation and Contractual Obligations

Litigation.

In the Court of Common Pleas, State of South Carolina, County of Greenville,

SC 2003-CP-23-1493, BestCheck, Inc. v. Millennium Entertainment Technology, LLC
and Gary Watkins

In the Court of Common Pleas, State of South Carolina, County of Greenville,

SC 2003-CP-23-1494, Galaxy Gaming, Inc. v. Gary Watkins

In the Court of Common Pleas, State of South Carolina, County of Greenville,

SC 2003-CP-23-3950, Crescent Enterprises, LLC v. Gary Watkins

In the Court of Common Pleas, State of South Carolina, County of Greenville,

SC 2003-CP-23-3951, Crescent Enterprises, LLC v. Gary Watkins

In the District Court of Tulsa County, State of Oklahoma,

CJ 2003-5381 Watkins v. Crescent/Nova

Contractual Obligations.

Non-Competition
[sic], Cofidentiality [sic] and Non-Interference Agreement
dated as of April 5, 2002 by and between Galaxy Gaming, Inc. and Gary Watkins.

33

 

Exhibit D

Third Party Software

The Bingo Software requires the use of, but does not itself incorporate, the
following third party software:

	 	•	 	InterBase v6.x Server for Linux (Database Software)
	 
	 	•	 	Red Hat Enterprise Linux AS (Server Software)
	 
	 	•	 	RedHat Linux 9.0 (Client operating system)

34exv10w3

 

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,

1

 

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

2

 

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,

3

 

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

4

 

     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.

5

 

     (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

6

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