LICENCE AND DISTRIBUTION AGREEMENT

1.  

Definitions and Interpretation

1.1 

Unless the context otherwise requires, the following expressions have the following meanings:

“Bankruptcy Code”

Title 11 of the United States Code entitled “Bankruptcy” as now and hereafter in effect, or any successor statute;

“Closing Date”

on or before 22 August 2008;

“Compliance Plan”

the compliance plans adopted from time to time in good faith by the board of directors of Sona (initially attached as Schedule 3) or eBet Limited (ACN 059 210 774) (initially attached as Schedule 4) and notified to the eBet Companies or Sona respectively;

"Confidential Information"

all information (whether written, oral or in electronic form) concerning the business and affairs of either the Sona Group or the eBet Companies that the other of them obtains or receives as a result of the discussions leading up to, or the entering into or the performance of this Agreement (including Object Code and Source Code, proprietary processes, and the terms and conditions of this Agreement);

“eBet Products”

the products described in Schedule 2 and any future product developed by EGS from eBet Software;

“eBet Software”

the existing software developed by  EGS as of the Closing Date and described in Schedule 2, and any new software developed by EGS from software which is not eBet Developed Software or Sona Software;

“eBet Territory”

the entire world, except for the Sona Territory;

“Effective Date”

the date of this Agreement, or such later date as the Parties agree in writing;

“EGS”

eBet Gaming Systems Pty. Limited (ACN 086 218 832);

“ELTD”

eBet Limited (ACN 059 210 774);

“Encumbrance”

any security interest, bill of sale, mortgage, charge, lien, pledge, hypothecation, conditional sale, title retention arrangement, trust or power, as or in effect as security for the payment of a monetary obligation or the observance of any other obligation, but does not include an escrow of the Sona Software;

"End-User"

a commercial gaming entity lawfully operating within the jurisdiction;

“ES”

eBet Systems Pty. Limited (ACN 088 033 121);

“Excluded Contracts”

those End-Users currently in contract negotiations with Sona, specifically,   Ladbrokes Racing & Gaming (U.K.); The Tote (U.K.); Dubai World Cup Racing Association (UAE); Japan Racing Association (Japan); Hong Kong Jockey Club (China); Jockey Club of Turkey (Turkey); Phumelela Gaming and Leisure Limited (South Africa) and executing an agreement with Sona after the Closing Date shall be excluded from license fees payable under clause 13;

"GLI"

Gaming Laboratories International, its related bodies corporate and licensed associates in any relevant gaming jurisdiction, or any other internationally recognized independent testing laboratory for technical approvals;

“Indirect Taxes”

any and all sales tax, value added tax, goods and services tax and consumption tax (which, for the avoidance of doubt; shall not include any gaming tax) payable in or to any jurisdiction or authority whatsoever (other than taxes on any income);

“Licences”

the licences granted by Sona to EGS in clause 3.1;

(ACN 132 670 485) of Australia and Sona Mobile Holdings Corp. (EIN 95-3087593) of the USA;

“Object Code”

the Programs created or stored in binary form so that it may be used directly by computers and other information processing equipment to process information and/or perform functions, such Programs being normally translated from Source Code using computer software commonly referred to as a compiler;

"Parties"

the Sona Group and the eBet Companies, and " Party" shall be construed accordingly;

"Products"

the eBet Products, and the eBet Developed Products, whichever is applicable;

“Programs”

in respect of the application computer software packages described in Schedule 1, the sets of instructions, algorithms, statements and related data expressed, fixed, embodied or stored in any manner, and used directly or indirectly in, or required by, computers and other general purpose electronic data processing equipment in order for them to process data and/or perform the functions and/or bring about a specific result;

“Purchase Order”

a purchase order described in clause 8.1;

“Shuffle Master Content”

the Shuffle Master branded gaming and software content as defined and licensed to Sona under the Shuffle Master Agreement;

“Software Medium”

the physical or magnetic medium on which the Programs in Source Code, the Programs in Object Code and the Sona Software Documentation are stored or recorded;

“Sona”

Sona Mobile Inc. (EIN 20 – 0375677);

"Sona Software"

the application computer software packages as more particularly described in Schedule 1 and performing the applications described in Schedule 1, including:

“Sona Territory”

North, Central and South America (from Canada and Alaska in the north to Argentina and Chile in the south), plus Hawaii and the Caribbean ;

“Source Code”

the Programs created or stored in a computer programming language commonly used for the creation or storage of computer software, including Pascal, Fortran, Basic, Cobol, PLI and C;

“Sub-Licences”

the sub-licences granted by EGS pursuant to clauses 3.1 (a) and (b);

“Territory”

the eBet Territory or the Sona Territory, whichever is applicable;

"Trade Mark"

any trade mark owned by, or licensed to, a Party under which Products are, or are to be, marketed, sub-licensed or distributed under this Agreement;

1.2 

Words importing the singular shall include the plural and vice versa.  Words importing a gender shall include all genders, and words importing persons shall include bodies corporate, unincorporated associations and partnerships.

1.3 

References to clauses and Schedules are references to clauses of, and Schedules to, this Agreement.

1.4 

The Schedules form part of this Agreement and have full force and effect as if expressly set out in the body of this Agreement, and any reference to this Agreement shall include the Schedules.

1.5 

Headings are included for ease of reference only and do not affect the interpretation or construction of this Agreement.

1.6 

Examples and use of the word “including” and similar expressions, do not limit what else may be included.

1.7 

A reference to any thing (including Products) is a reference to the whole and each part of it.

1.8 

References to the “ eBet Companies ” mean ELTD, EGS and ES collectively, unless this Agreement specifically provides otherwise.

1.9 

References to the “ Sona Group ” mean Sona and Sona Innovations Inc. (BN 867622441), collectively, unless this Agreement specifically provides otherwise.

2.  

Closing

2.1 

No later than the Closing Date, the Sona Group shall deliver the following to Jamie Nettleton of Addisons, Commercial Lawyers, of Level 12, 60 Carrington Street, Sydney, New South Wales (“ Sona Agent ”):

2.2 

As soon as practicable after execution of this Agreement, EGS shall pay to the Sona Agent the Second Instalment pursuant to clause 13.2(b).  Further, no later than the Closing Date, the eBet Companies shall deliver the following to the Sona Agent, in Sydney, Australia:

2.3 

Upon receiving a written direction(s) signed by each of the eBet Companies and the Sona Group that the closing conditions referred to in clauses 2.1, 2.2 and 2.3 have been satisfied, each of the Parties acknowledges and agrees that the Sona Agent shall be authorised to release:

2.4 

If these closing conditions are not satisfied on or before 22 August 2008, then this Agreement will terminate.

2.5 

Each of the Parties acknowledges and agrees that the Sona Agent:

2.6 

If the Sona Agent receives a notice, claim, award, order, judgment, demand or direction with respect to the Escrow Materials or otherwise regarding any matter arising under this Agreement that the Sona Agent considers to be conflicting with one or more other such notices, claims, awards, orders, judgments, demands or directions or to be incomplete, ambiguous or otherwise insufficient for the purposes of the Sona Agent, the Sona Agent may retain the Escrow Materials in its possession or control until it has received a written direction in the same terms by each Party or until directed by an award, order or judgment of a Court, whereupon it will make or not make, as the case may be, such disposition in accordance with such directions or such award, order or judgment.

2.7 

The Sona Agent is hereby authorised to comply with and obey an award, order or judgment of a Court and, in the case of such compliance, the Sona Agent will not be liable by reason thereof to any person even if thereafter the award, judgment or order is appealed, reversed, annulled, set aside or vacated.

2.8 

Each of the Parties agrees severally, to hold the Sona Agent, its partners and employees harmless and to indemnify them and each of them to the greatest extent permitted by law against all actions, suits, proceedings, claims, demands, costs, expenses and liabilities whatsoever which may arise or accrue or be taken, commenced, made or sought from or against them in connection with or arising from it acting as agent under this Agreement, including any costs incurred by the Sona Agent on a solicitor/client basis arising from or in connection with any court proceedings or in respect of advice sought by the Sona Agent in connection with this Agreement (including any claims that may be made against it arising from acting in its capacity as an agent under this Agreement).

2.9 

The Parties acknowledge that it is the intention that Sona actually receives, in respect of the Second Instalment pursuant to clause 13.2(b), the amount of US$175,000 (the “ Deposit Amount ”).  Accordingly, to the extent that Sona receives an amount:

2.10 

The Sona Group hereby grants to EGS (and EGS accepts from the Sona Group):

2.11 

The following provisions govern ownership of Intellectual Property Rights:

2.12 

Unless and until this Agreement is terminated under clause 23.3, EGS shall have quiet enjoyment of the Sona Software for the purpose of the marketing and distribution of the Sona Software in the eBet Territory, and Sona must ensure that neither it nor anyone claiming through it disturbs the quiet enjoyment of the Sona Software by EGS or any End-User under a Sub-Licence.

2.13 

The other Parties may not revoke, interfere with or do anything which prejudices the rights of another Party to the licences or sublicenses granted to it under this Agreement, except as specifically provided in this Agreement

2.14 

The Sona Group may not create or suffer to exist any Encumbrance over the Sona Software except as specifically provided in this Agreement.

2.15 

Sona incurs no liability to any third party or for any third party claims in respect of the marketing and distribution of the Sona Software by EGS, except as specifically provided in this Agreement.

3.  

Appointment of Distributor and Licence of eBet Software and eBet Developed Software

3.1 

The eBet Companies hereby appoint Sona in perpetuity as their non-exclusive distributor (and Sona accepts its appointment) to import and distribute the eBet

3.2 

Products on its own account within the Sona Territory, on the terms of this Agreement.  Further the eBet Companies hereby appoint Sona in perpetuity as their exclusive distributor (and Sona accepts its appointment) to import and distribute the eBet Developed Products on its own account within the Sona Territory, on the terms of this Agreement.  Notwithstanding the exclusive distributorship granted to Sona for the eBet Developed Products under this clause 4.1, the eBet Companies may, on a case by case basis, sell and  distribute the eBet Developed Products to End-Users in the Sona Territory with Sona’s consent, not to be unreasonably withheld;

3.3 

In addition, the eBet Companies grant to Sona (and Sona accepts from the eBet Companies) in the Sona Territory:

3.4 

The eBet Companies incur no liability to any third party or for any third party claims in respect of the marketing and distribution of the Products by Sona, except or specifically provided in this Agreement.

4.  

Obligations of the Parties

4.1 

Neither Sona nor EGS may represent itself as an agent of the other of them for any purpose, nor pledge its credit, nor give any condition or warranty, nor make any representation on the other’s behalf, nor commit it to any contracts.  Further, neither of them may (without the prior written consent of the other) incur any liability on behalf of the other except as specifically provided in this Agreement.

4.2 

Sona and EGS will at all times during the term of this Agreement:

4.3 

on a quarterly basis, submit to each other a sales report in a format to be mutually agreed between them;

4.4 

For the purposes of this Agreement:

4.5 

Sona and EGS will provide each other with the necessary background information relating to End-Users, as requested by the other of them pursuant to clause 34 and the applicable Compliance Plan.

5.  

Testing and Forecasting

5.1 

Sona and EGS are entitled to commence testing the eBet Products and the Sona Software respectively, on and from the Closing Date.  Sona and EGS will provide all reasonable assistance requested by the other of them in connection with this, but:

5.2 

Sona and EGS will provide to each other in a mutually agreed format within seven (7) days after the end of each calendar month, a rolling written forecast of the number of each type of product which each of them expects to sell or distribute during the ensuing 3 months.

5.3 

Information and Support

5.4 

Sona and EGS must provide any information and support reasonably requested by the other of them for the proper and efficient marketing and distribution of the Products under this Agreement.

5.5 

Sona and EGS are entitled to sell the Products showing each other’s logo or any other logo agreed between them.

6.  

Sale of Products

6.1 

EGS will accept any purchase order (based on the EGS standard form attached as Schedule 5 to this Agreement) for the purchase of the Products placed with it by Sona in accordance with the terms of this Agreement, subject only to the right to vary the Product delivery date where delivery is reasonably likely to be delayed due to the application of clause 32.1.

6.2 

EGS shall provide any information and support reasonably requested by Sona to enable it properly and efficiently to sell and distribute the Products under this Agreement.

6.3 

In respect of each Product sold by EGS to Sona under this Agreement and on-sold to an End-User:

6.4 

From time to time, Sona may request new Products from EGS.  Each request shall be accompanied by a specification detailing the functional requirements of the new Product.  EGS shall not be obliged to supply such product; however, if it does intend to do so, it will provide Sona with a rough timeline of when such product may be made available.

6.5 

EGS will endeavour to provide Sona with a quarterly update on the latest Product releases and Product enhancements and upgrades available for sale to the market.

6.6 

Purchase Orders

6.7 

Each Purchase Order placed with EGS must contain the description and number of Products which Sona wishes to buy, and a designated delivery point. The Purchase Order must contain those general commercial terms and conditions substantially in the form as those set forth in the pro-forma purchase order, attached to and incorporated within this Agreement as Schedule 5.  Where there is a conflict between a Purchase Order and this Agreement, the terms and conditions of the Purchase Order shall prevail.

6.8 

Any Purchase Order complying with clause 8.1 will be accepted by EGS within 7 working days after its receipt.

6.9 

It is at the moment Sona receives acceptance of a conforming Purchase Order from EGS that a contract of sale is made between Sona and EGS for the sale of the Products specified in Sona’s Purchase Order (“ Contract of Sale ”). Each Contract of Sale is subject to the terms and conditions of this Agreement and the relevant Purchase Order (on the priority basis outlined in clause 9.1, to the exclusion of all other terms and conditions.

6.10 

Sona may cancel or modify a Purchase Order at any time before EGS has acted on it.  Unless agreed otherwise in writing on behalf of EGS (and subject to Sona paying the costs of EGS incurred up to the date of cancellation), Sona may not cancel or modify a Purchase Order which EGS has acted upon.

6.11 

EGS will use its reasonable endeavours to meet all Purchase Orders for the Products in accordance with its standard terms of delivery.

6.12 

Subject to clause 9.3  EGS is entitled (upon giving not less than 90 days prior written notice to Sona) to modify one or more of the Products or Product components as it thinks fit, if (for any reason) the production of such Product or component has been permanently discontinued.  EGS is entitled to make changes to the specifications of a Product which does not adversely affect that Product, and shall give notice of such changes to Sona as soon as reasonably practicable.

6.13 

EGS may discontinue the supply of any group of Products pertaining to a single manufacturer's brand, provided it gives not less than 180 days prior written notice to Sona of such discontinuance and provided further EGS maintains the discontinued Products for End-Users during the applicable balance of the warranty period under clause 8.3(a).

7.  

Collection and delivery of Products

7.1 

If the Products which Sona orders from EGS are in stock, then EGS will endeavour to deliver the ordered Products to Sona within 30 days after the day EGS receives Sona’s Purchase Order or, if later, by the date set out in Sona’s Purchase Order.

7.2 

If the Products which Sona orders from EGS are not in stock, then EGS will use all reasonable endeavours to obtain the ordered Products and deliver them once they are in stock.

7.3 

The Products shall be delivered Ex-Works (Incoterms 2000) at a pre-agreed delivery point as designated in the relevant Purchase Order.

7.4 

Risk of loss of or damage to the Products specified in a Purchase Order passes to Sona upon delivery to Sona in accordance with clause 10.3.

8.  

Title to Products

8.1 

EGS owns each Product which Sona orders from EGS until payment in full is received by EGS, or as otherwise agreed in writing between EGS and Sona, at which time title to that Product passes from EGS to Sona.

9.  

Acceptance of Products

9.1 

If Sona does not receive all of the Products it has ordered or it finds that any of the Products do not conform to the terms and conditions set out in this Agreement or the relevant Contract of Sale, then Sona must notify EGS of this fact in writing (which may include by email) within 10 days after the date of delivery of the Products.  If EGS does not receive notification from Sona within this period, then Sona will be deemed to have accepted that:

9.2 

If Sona notifies EGS that it has not received all of the Products it ordered, then Sona must promptly provide EGS with reasonable evidence supporting its claim. If EGS accepts Sona’s claim, then it will (by way of full and final settlement of all its obligations and liabilities to Sona in relation to the claim) either:

9.3 

Notwithstanding clause 12.1, If Sona notifies EGS that any of the Products which Sona received were damaged whilst they were at the risk of EGS or do not conform to the terms and conditions set out in this Agreement or the Contract of Sale, then Sona must promptly provide EGS with reasonable evidence supporting its claim. If EGS accepts its claim, then it will (by way of full and final settlement of all its obligations and liabilities to Sona in relation to the claim) either:

10.  

Prices, Fees and Expenses

10.1 

The prices at which EGS Sub-Licenses the Sona Software to End-Users in the eBet Territory and the prices at which Sona distributes Products to End-Users in the Sona Territory, will be determined following consultation between EGS and Sona, acting reasonably in light of each party’s special understanding of their Territory market position and experience.  EGS is free to set its own prices for eBet Developed Products, and subject to the above, the price at which the Sona Software will be Sub-Licensed to End-Users.

10.2 

EGS will pay a once – only licence fee in advance to Sona of US$2,500,000 in respect of the grant of their Licences, in three instalments as follows:

10.3 

Beginning the calendar month following EGS commencing to distribute and Sub-License the Sona Software and for each calendar month during the term of this Agreement thereafter, EGS will pay to Sona from the proceeds received by EGS from the sale and distribution of products containing the Sona Software, additional license fees amounting to 20% of all EGS Net Revenues in excess of a cumulative total of US$ 5,000,000 earned and received by EGS from the sale and distribution of  those products, including licence fees and software maintenance fees charged in respect of those products.

10.4 

For the purposes of clause 13.3, “ EGS Net Revenues” means the gross revenues received by EGS from the sale of products containing the Sona Software (including the corresponding license and software maintenance fees) LESS:

(c) 

10.5 

The definition of EGS Net Revenues shall not include any deductions for:

10.6 

Beginning the month following Sona commencing to distribute and sub-license the Products and for each month during the term of this Agreement thereafter, Sona will pay to EGS from the proceeds received by Sona from the sale and distribution of  Products, a licence fee amounting to 20% of all Sona Net Revenues in excess of a cumulative total of US$5,000,000 earned and received by Sona from the sale and

10.7 

distribution of Products, including licence fees and software maintenance fees charged in respect of those Products.

10.8 

For the purpose of clause 13.6, “Sona Net Revenues” means the gross revenues received by Sona from the sale of Products except under the Excluded Contracts (including the corresponding license and software maintenance fees) LESS:

10.9 

The definition of Sona Net Revenues shall not include any deductions for:

10.10 

Any amounts under this clause 13 that are not paid on time shall incur interest on the outstanding amount (which shall be payable in the same currency as the outstanding amount due) at the rate of 2% above the base lending rate from time to time of National Australia Bank Limited for the relevant currency, accruing on a daily basis and compounding at the end of each calendar month from the time the outstanding amount becomes overdue, until payment is made in full;

10.11 

Sona will pay EGS for its time-worked fees and related expenses for services rendered by EGS in the course of revising the Products to accommodate the customisation requirements of specific End-Users in the Sona Territory (including customisation to accommodated different market requirements within the Sona Territory).  Requests for these services must be submitted to EGS in writing.  Estimates costs for these services will be calculated in advance and submitted to Sona for written approval. For the avoidance of doubt, Sona will have sole

10.12 

responsibility for ensuring that any modifications made to the eBet Software and the eBet Developed Software meet all regulatory requirements in the Sona Territory.

10.13 

Notwithstanding the Licence granted to EGS under clause 3.1(b), Sona may sub-license and distribute (pursuant to clause 4) the Sona Software to those End-Users in the eBet Territory listed as Excluded Contracts without any liability on Sona to pay EGS a percentage of the Sona Net Revenues under clause 13.8. Further, EGS will provide to Sona the necessary sales support to facilitate such distribution.

10.14 

All payments to be made by the Parties under this clause 13 shall be in U.S. Dollars and by international wire transfer.

10.15 

Where the payment of licence fees under this Agreement is based upon the percentage of EGS Net Revenues or Sona Net Revenues, and a Party is required to obtain regulatory approval from a Gaming Government Agency prior to receiving such percentage the Parties mutually agree to negotiate the payment of a fair and reasonable monthly flat fee in such jurisdiction until the relevant Gaming Government Agency grants the necessary approvals.

11.  

Taxes

11.1 

In addition to all payments made by Sona or EGS under clause 13, the paying party shall pay any Indirect Taxes chargeable in respect of those payments.

11.2 

The receiving Party irrevocably authorises the paying Party to make any deduction or withholding required by applicable law from the payments made under clause 13, and to pay the amount so deducted or withheld to the relevant government agency.

11.3 

Upon request from the paying Party, the receiving Party will provide the paying Party with original receipts from the relevant governmental agency for any amounts so deducted or withheld which constitute a tax, levy, impost or other charge on the paying Party.

12.  

Advertising and Promotion

12.1 

Each of EGS and Sona will:

12.2 

Each of EGS and Sona will provide the other with information on the advertising and promotion of products carried out by it in its Territory.

12.3 

EGS and Sona will, where mutually agreed, participate in fairs and exhibitions where their respective products are to be exhibited.

12.4 

From time to time, EGS and Sona may utilise products as display models, for marketing purposes and at exhibitions, free of any licence or other fees.

12.5 

Sona and EGS (“ Indemnifying Party ”) shall indemnify and hold each other (“ Indemnified Party ”) harmless against all liabilities, losses, fines, assessments, penalties, judgments, claims, allegations, lawsuits, administrative actions, costs, and expenses of any kind and nature (including reasonable attorneys fees) incurred by the Indemnified Party, arising out of or incidental to the advertising and promotional acts performed by the Indemnifying Party permitted under this clause 15.

13.  

Regulatory And Testing Approvals

13.1 

Neither Sona nor EGS have responsibility for obtaining any import licences or permits required for the entry of products into each other’s Territory, or their delivery to End-Users in each other’s Territory.

13.2 

As from the Closing Date, EGS is responsible for obtaining all GLI certifications and Industry Regulatory Approvals required for the use of Products in the eBet Territory and the Sona Territory, unless the Master Services Agreement provides otherwise or the Parties otherwise agree in writing.

13.3 

Sona and EGS warrant to each other that each of them has informed the other of all material laws, regulations and statutory requirements affecting the technical and gaming requirements of relevant  products and the manufacture, sale, packaging and labelling of relevant products which are in force within each other’s Territory (" Local Regulations ") at the date of this Agreement.

13.4 

Sona and EGS must give to the other of them as much advance notice as reasonably possible of any prospective changes in the Local Regulations in their respective Territories.

13.5 

On receipt of notification under clause 16.4, each of Sona and EGS will use its reasonable endeavours to ensure that their products comply with any change in the Local Regulations by the date of implementation of that change, or as soon as is reasonably possible thereafter.

14.  

Training

15.  

Intellectual property Rights

15.1 

There are no implied or conveyed rights of assignment of any Intellectual Property Rights to any Party, other than the rights and licences expressly granted in this Agreement. Further, the Sona Group shall only grant future non-exclusive licenses in the eBet Territory to that portion of Sona Software licensed to EGS under clause 3.1(a) with the prior written consent of EGS, not to be unreasonably withheld

15.2 

If this Agreement is terminated by the eBet Companies under clause 23.3 due to the rejection of this Agreement by or on behalf of Sona under Section 365 of the Bankruptcy Code, all licenses and rights to licenses granted under or pursuant to this Agreement by Sona to EGS are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code.  The Parties agree that EGS, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code, and that upon commencement of a bankruptcy proceeding by or against Sona under the Bankruptcy Code, EGS shall be entitled to a complete duplicate of, or complete access to (as EGS deems appropriate), any such intellectual property and all embodiments of such intellectual property not theretofore previously delivered.  Such intellectual property and all embodiments thereof shall be promptly delivered to EGS (i) upon any such commencement of a bankruptcy proceeding upon written request therefrom by EGS, unless Sona elects to continue to perform all of its obligations under this Agreement, or (ii) if not delivered under (i) above, upon the rejection of this Agreement by or on behalf of Sona upon written request therefrom by EGS.

16.  

Trade Marks And Patents

16.1 

The following provisions apply in respect of Sona Group Trade Marks:

16.2 

16.3 

The eBet Companies hereby grant to Sona the non-exclusive right in the Sona Territory to use their respective Trade Marks in the promotion, advertisement and sale of the Products in accordance with the terms, and for the duration, of this Agreement;

16.5 

Each Party hereby represents and warrants as of the Effective Date and covenants to the other Party that:

16.6 

Each member of the Sona Group warrants that: