WINWIN GAMING, INC. SECURITY AGREEMENT
EXECUTIVE
COPY
WINWIN
GAMING, INC.
This
Security Agreement is entered into as of April 21, 2006 (the “Agreement”),
by
and among WinWin Gaming, Inc., a Delaware corporation (“Borrower”),
the
parties listed on Exhibit A
hereto
(the “Secured
Parties”)
with
reference to the following facts:
A. Concurrently
herewith, Borrower is selling secured convertible notes and warrants pursuant
to
the terms of a Secured Convertible Note and Warrant Purchase Agreement dated
of
even date herewith (the “Purchase
Agreement”)
by and
among Borrower and the Secured Parties.
B. As
an
inducement to the Secured Parties to enter into the Purchase Agreement and
to
acquire the secured convertible promissory notes provided for thereunder (the
“Notes”),
Borrower agreed to secure the repayment of the Notes with a security interest
in
certain assets of Borrower.
C. The
parties hereto desire that the all of the Secured Parties be pari
passu
with one
another as to the debt represented by the Notes and the security interest
securing the repayment thereof on the terms and conditions set forth
herein.
AGREEMENT
Borrower
and the Secured Parties hereby agree as follows:
1. Certain
Definitions.
For
purposes of this Agreement, capitalized terms used herein which are not defined
herein shall have the meanings set forth in the Purchase Agreement. All terms
used herein which are defined in Division 1 or Division 9 of the UCC (as defined
below) shall have the meanings given therein unless otherwise defined in this
Agreement or the Purchase Agreement; provided, however, that if a term is
defined in Division 9 of the UCC differently than in another Article of the
UCC,
the term has the meaning specified in Division 9. In addition, the following
terms shall have the following meanings:
(a) “Borrower’s
Books”
means
all of Borrower’s books and records including ledgers, records indicating,
summarizing, or evidencing such Borrower’s properties or assets or liabilities,
all information relating to Borrower’s business operations or financial
condition, and all computer programs, disc or tape files, printouts, runs,
or
other computer prepared information, and the equipment containing such
information.
(b) “Collateral”
shall
mean the property described on Exhibit
B
annexed
hereto and made a part hereof to this Agreement.
(c) “Copyrights”
means
all copyrights and applications for copyright, domestic or foreign, together
with the underlying works of authorship (including titles), whether or not
the
underlying works of authorship have been published and whether said copyrights
are statutory or arise under the common law, and all other rights and works
of
authorship, all rights, claims, and demands in any way relating to any such
copyrights or works, including royalties and rights to ▇▇▇ for past, present,
or
future infringement, and all rights of renewal and extension of copyright,
including, but not limited to, those described on Exhibit
C
annexed
hereto and made a part hereof; and the right to ▇▇▇ for past, present and future
infringements of any of the foregoing.
(d) “Debt”
means
(a) indebtedness or liability for borrowed money; (b) obligations evidenced
by
bonds, debentures, notes, or other similar instruments; (c) obligations for
the
deferred purchase price of property or services (including trade obligations);
(d) obligations as lessee under capital leases; (e) current liabilities in
respect of unfunded vested benefits under Plans covered by ERISA; (f)
obligations under letters of credit; (g) obligations under acceptance
facilities; (h) all contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person or entity, or otherwise to
assure a creditor against loss; and (i) obligations secured by any Liens,
whether or not the obligations have been assumed.
(e) “Intellectual
Property Collateral”
means
the following properties and assets owned or held by Borrower or in which
Borrower otherwise has any interest, now existing or hereafter acquired or
arising: (a) all Patents; (b) all Copyrights; (c) all Trademarks; (d) all trade
secrets, confidential information, customer lists, license rights, advertising
materials, operating manuals, methods, processes, know how, sales literature,
drawings, specifications, blue prints, descriptions, inventions, name plates,
and catalogs; and (e) all licenses of any Patents, Trademarks or Copyrights;
and
(f) the entire goodwill of or associated with the businesses now or hereafter
conducted by Borrower connected with and symbolized by any of the aforementioned
properties and assets.
(f) “Lien”
means,
with respect to any asset: (a) any mortgage, lien, charge, security interest,
or
encumbrance of any kind in respect of such asset (or any agreement to give
any
of the foregoing, whether or not contingent on the occurrence of any future
event); or (b) any undertaking (whether or not contingent) by a Person to grant
any mortgage, lien, pledge, charge, security interest, or encumbrance to another
Person on such asset.
(g) “Obligations”
means
(a) all obligations of Borrower under the Purchase Agreement and each of the
Notes, whether for payment of principal, interest (including, without
limitation, interest accruing after the commencement of any case, proceeding
or
other action relating to the bankruptcy, insolvency or reorganization of
Borrower), fees, breakage costs, indemnities, expenses or otherwise; (b) the
performance of all obligations of Borrower under the Purchase Agreement and
each
of the Notes, whether for payment of principal, interest (including, without
limitation, interest accruing after the commencement of any case, proceeding
or
other action relating to the bankruptcy, insolvency or reorganization of
Borrower), fees, breakage costs, indemnities, expenses or otherwise; (c) all
loans, advances, indebtedness, and other obligations owed by Borrower to Secured
Parties of every description whether now existing or hereafter arising
(including those owed by Borrower to others and acquired by Secured Parties
by
purchase, assignment, or otherwise), whether or not for the payment of money,
whether or not evidenced by any note or other instrument, whether direct or
indirect, absolute or contingent, due or to become due, joint or several,
primary or secondary, liquidated or unliquidated, secured or unsecured, original
or renewed or extended, whether arising before, during or after the commencement
of any insolvency proceeding in which Borrower is a debtor, any obligations
arising pursuant to any letter of credit transactions and any other financial
accommodations, obligations to perform or forbear from performing acts; (d)
all
obligations of Borrower under this Agreement; (e) the repayment of (i) any
amounts that Secured Parties may advance or spend for the maintenance or
preservation of the Collateral; and (ii) any other expenditures that Secured
Parties may make under the provisions of this Agreement or for the benefit
of
Borrower; (f) all amounts owed under any modifications, renewals or extensions
of any of the foregoing obligations; (g) all other amounts now or in the future
owed by Borrower to Secured Parties whether or not of the same kind or class
as
the other obligations owed by Borrower to Secured Parties; and (h) any of the
foregoing that arises after the filing of a petition by or against Borrower
under the Bankruptcy Code, even if the obligations do not accrue because of
the
automatic stay under Bankruptcy Code §362 or otherwise.
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(h) “Patents”
means
all patents and patent applications, domestic or foreign, all licenses relating
to any of the foregoing, and all income and royalties with respect to any
licenses, all rights to ▇▇▇ for past, present or future infringement thereof,
all rights arising therefrom and pertaining thereto and all reissues, divisions,
continuations, renewals, extensions, and continuations in part thereof
including, but not limited to, those described on Exhibit
D
annexed
hereto and made a part hereof; and the right to ▇▇▇ for past, present and future
infringements of any of the foregoing.
(i) “Permitted
Liens”
means:
(i) Liens imposed by law, such as carriers’, warehousemen’s, materialmen’s
and mechanics’ liens, or Liens arising out of judgments or awards against
Borrower with respect to which Borrower at the time shall currently be
prosecuting an appeal or proceedings for review; (ii) Liens for taxes not
yet subject to penalties for nonpayment and Liens for taxes the payment of
which
is being contested in good faith and by appropriate proceedings and for which,
to the extent required by generally accepted accounting principles then in
effect, proper and adequate book reserves relating thereto are established
by
Borrower; (iii) Liens (a) upon or in any equipment acquired, licensed,
leased or held by Borrower to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (b) existing on such equipment at the time of its
acquisition, provided
that the
Lien is confined solely to the property so acquired and improvements thereon,
and the proceeds of such equipment and other equipment financed by the holder
of
such Lien; (iv) Liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower’s
business not interfering in any material respect with the business of Borrower
and any interest or title of a lessor or licensor under any lease or license,
as
applicable; (v) Liens incurred or deposits made in the ordinary course of
the Borrower’s business in connection with worker’s compensation, unemployment
insurance, social security and other like laws; (vi) Liens to which the
holders of a majority of the outstanding principal amount due and owing under
the Notes (the “Majority
Note Holders”)
have
expressly consented in writing; and (ix) Liens incurred in connection with
the extension, renewal or refinancing of the indebtedness secured by the Liens
described in clauses (i) through (iii) hereof provided that any extension,
renewal or replacement lien shall be limited to the property encumbered by
the
existing Lien and the principal amount of the indebtedness being extended,
renewed or replaced does not increase.
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(j) “Person”
means
an individual, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture,
or
governmental authority.
(k) “Trademarks”
means
all state (including common law), federal and foreign trademarks, service marks,
and trade names, and applications for registration of such trademarks, service
marks and trade names, all of the goodwill of the business connected with the
use of, and symbolized by, each trademark; all licenses relating to any of
the
foregoing and all income and royalties with respect to any licenses, whether
registered or unregistered and wherever registered, all rights to ▇▇▇ for past,
present, or future infringement or unconsented use thereof, all rights arising
therefrom and pertaining thereto and all reissues, extensions and renewals
thereof, including, but not limited to, those described on Exhibit
E
annexed
hereto and made a part hereof; and the right to ▇▇▇ for past, present and future
infringements of any of the foregoing.
(l) “UCC”
means
the Uniform Commercial Code as in effect in the State of New York, as the same
may be amended from time to time.
(a) Grant.
In
order to secure the payment, performance and observance of the Obligations
in
accordance with the terms thereof, Borrower hereby grants to Secured Parties,
for the benefit of the Secured Parties, a continuing security interest in,
and a
right of set off against, as applicable, all right, title and interest of
Borrower in all personal property of Borrower, whether now owned or existing
or
hereafter acquired or arising and regardless of where located including, without
limitation, the Collateral.
(b) Relative
Priorities.
The
security interests of the Secured Parties in the Collateral shall rank
pari
passu
with one
another as to all Obligations as defined below.
(c) Borrower
Remains Liable.
Anything herein to the contrary notwithstanding, (i) Borrower shall remain
liable under any contracts, agreements and other documents included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Secured Parties of any of the rights
hereunder shall not release Borrower from any of its duties or obligations
under
such contracts, agreements and other documents included in the Collateral,
and
(iii) no Secured Party shall have any obligation or liability under any
contracts, agreements and other documents included in the Collateral by reason
of this Agreement, nor shall any Secured Party be obligated to perform any
of
the obligations or duties of Borrower thereunder or to take any action to
collect or enforce any such contract, agreement or other document included
in
the Collateral.
(d) Continuing
Security Interest.
Borrower agrees that this Agreement shall create a continuing security interest
in the Collateral which shall remain in effect until the indefeasible payment
and performance in full of all of the Obligations or the conversion of the
principal and accrued interest under the Notes into equity securities as
described in the Notes.
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(e) Other
Actions as to Any and All Collateral.
Borrower further agrees, at the request and option of Secured Parties, to take
any and all other actions Secured Parties may determine to be necessary or
useful for the attachment, perfection and priority of, and the ability of
Secured Parties to enforce, Secured Parties’ security interest in any and all of
the Collateral, including, without limitation, (a) executing, delivering and,
where appropriate, filing financing statements and amendments relating thereto
under the UCC, to the extent, if any, that Borrower’s signature thereon is
required therefor; (b) causing Secured Parties’ name to be noted as secured
party on any certificate of title for a titled good if such notation is a
condition to attachment, perfection or priority of, or ability of Secured
Parties to enforce, Secured Parties’ security interest in such Collateral; (c)
complying with any provision of any statute, regulation or treaty of the United
States as to any Collateral if compliance with such provision is a condition
to
attachment, perfection or priority of, or ability of Secured Parties to enforce,
Secured Parties’ security interest in such Collateral; (d) obtaining
governmental and other third party waivers, consents and approvals in form
and
substance satisfactory to Secured Parties, including, without limitation, any
consent of any licensor, lessor or other person obligated on Collateral; (e)
obtaining waivers from mortgagees and landlords in form and substance
satisfactory to Secured Parties; and (f) taking all actions under any earlier
versions of the UCC or under any other law, as reasonably determined by Secured
Parties to be applicable in any relevant Uniform Commercial Code or other
jurisdiction, including any foreign jurisdiction.
(f) Right
to Inspect.
Secured
Parties (through any of its officers, employees, or agents) shall have the
right, upon reasonable prior notice, from time to time during Borrower’s usual
business hours, to inspect Borrower’s Books and to make copies thereof and to
check, test, and appraise the Collateral in order to verify Borrower’s financial
condition or the amount, condition of, or any other matter relating to, the
Collateral.
(g) Discharge
Liens.
In
order to protect or perfect any security interest which Secured Parties is
granted hereunder, Secured Parties may, upon an Event of Default, in its sole
discretion, discharge any lien or encumbrance or bond or the same, pay any
insurance, maintain guards, warehousemen, or any personnel to protect the
Collateral, pay any service bureau, or, obtain any records, and all costs for
the same shall be added to the Secured Obligations and shall be payable on
demand.
3. Borrower’s
Representations, Warranties and Covenants.
Borrower
hereby represents, warrants and covenants to the Secured Parties
that:
(a) Location.
Borrower’s principal place of business is the address set forth on the signature
page to this Agreement, and Borrower keeps its records concerning accounts,
contract rights and other property at that location. Borrower will promptly
notify the Secured Parties in writing of the establishment of any new place
of
business where any of the Collateral is kept. Borrower is a corporation
organized under the laws of the State of Delaware.
(b) Books
and Records.
Borrower
will at all times keep accurate and complete records of the Collateral and
will
keep such Collateral insured to the extent similarly situated companies insure
their assets of a like type or nature.
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(c) Ownership
and Liens.
Borrower has title to, or valid leasehold interests in, all of its properties
and assets, real and personal, including the Collateral and properties and
assets and leasehold interests reflected in the financial statements delivered
to Secured Parties pursuant to the Purchase Agreement (other than any properties
or assets disposed of in the ordinary course of business), and none of the
properties and assets, real and personal, including the Collateral owned by
Borrower and none of its leasehold interests is subject to any Lien, except
for
Permitted Liens and Liens set forth in Schedule 1.3 to the Purchase
Agreement.
(d) Other
Financing Statements.
Other
than financing statements, security agreements, equipment leases and related
filings, chattel mortgages, assignments, copyright security agreements or
collateral assignments, patent or trademark security agreements or collateral
assignments, fixture filings and other agreements or instruments executed,
delivered, filed or recorded for the purpose of granting or perfecting any
Lien
or executed, delivered, filed or recorded in connection with the Notes
(collectively, “Financing
Statements”),
no
effective Financing Statement naming Borrower as debtor, assignor, grantor,
mortgagor, pledgor or the like and covering all or any part of the Collateral
is
currently on file in any filing or recording office in any jurisdiction, except
for Financing Statements relating to the Liens set forth in Schedule 1.3 to
the
Purchase Agreement.
(e) Notices,
Reports and Information.
Borrower
will notify the Secured Parties of any material claim made or asserted against
the Collateral by any person or entity and of any change in the composition
of
the Collateral or other event which could materially adversely affect the value
of the Collateral or the Secured Parties’ Lien thereon.
(f) Separate
Obligations and Liens.
Borrower
acknowledges and agrees that (i) the Obligations represent separate and
distinct indebtedness, obligations and liabilities of Borrower to each of the
Secured Parties, which Borrower is separately obligated to each Secured Party
to
pay and perform, in each case regardless of whether or not any indebtedness,
obligation or liability to any other Secured Party or any other person or
entity, or any agreement, instrument or guaranty that evidences any such other
indebtedness, liability or obligation, or any provision thereof, shall for
any
reason be or become void, voidable, unenforceable or discharged, whether by
payment, performance, avoidance or otherwise; (ii) the Lien that secures
each of the Secured Parties’ respective Obligations (a) is separate and
distinct from any and all other Liens on the Collateral, and (b) is
enforceable without regard to whether or not any other Lien shall be or become
void, voidable or unenforceable or the indebtedness, obligations or liabilities
secured by any such other Lien shall be discharged, whether by payment,
performance, avoidance or otherwise.
(g) Other
Agreements.
Except
for agreements that the Borrower has entered into with Solidus Networks, Inc.,
the Borrower is not a party to any indenture, loan, or credit agreement, or
to
any lease or other agreement or instrument or subject to any charter or
corporate restriction which could have a material adverse effect on the
business, properties, assets, operations, or conditions, financial or otherwise,
of Borrower, or the ability of Borrower to carry out its obligations under
this
Agreement, the Purchase Agreement, or any other agreement by and between Secured
Parties and Borrower. Borrower is not in default in any respect in the
performance, observance, or fulfillment of any of the obligations, covenants,
or
conditions contained in any agreement or instrument material to its business
to
which it is a party.
-6-
(h) Powers.
Borrower
has the right and full power and authority to enter into this Agreement and
to
perform its obligations in accordance with the terms of this Agreement, without
the consent or approval of any other Person, except as already obtained. This
Agreement is enforceable against Borrower in accordance with its terms, except
as may be limited by applicable bankruptcy insolvency, moratorium,
reorganization, or other laws affecting creditor’s rights and remedies
generally.
(i) No
Violation.
Neither
the execution, delivery nor performance by Borrower of this Agreement violates
any provision of law or Borrower’s Certificate of Incorporation or Bylaws, each
as amended to date, or results in a breach of or constitutes a default under
any
contract, obligation, indenture or other instrument to which Borrower is a
party
or by which Borrower may be bound.
(j) Insurance.
Borrower shall maintain insurance relating to Borrower’s ownership and use of
the Collateral in amounts and of a type that are reasonable and customary to
businesses similar to Borrower’s.
4. Negative
Covenants.
Borrower covenants and agrees that, until the indefeasible payment and
performance in full of the outstanding Obligations, Borrower will not do any
of
the following without the prior written consent of the Majority Note Holders,
unless required to do so pursuant to the provisions of any senior debt existing
as of the date hereof:
(a) Sell,
lease, assign, transfer, or otherwise dispose of, any of its now owned or
hereafter acquired material assets (including, without limitation, shares of
stock and indebtedness of subsidiaries, accounts, and leasehold interests),
except: (1) inventory disposed of in the ordinary course of business; (2) the
sale or other disposition of assets no longer used or useful in the conduct
of
its business; or (3) that any subsidiary may sell, lease, assign, or otherwise
transfer its assets to Borrower;
(b) Wind
up,
liquidate or dissolve itself, reorganize, merge or consolidate with or into,
or
convey, sell, assign, transfer, lease, or otherwise dispose of (whether in
one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person, or acquire
all
of substantially all of the assets or the business of any Person, or permit
any
subsidiary to do so, except that (1) any subsidiary may merge into or transfer
assets to Borrower; and (2) any subsidiary may merge into or consolidate with
or
transfer assets to any other subsidiary;
(c) Create,
incur, assume or be or remain liable with respect to any Debt, other than (1)
Debt of Borrower in favor of Secured Parties arising under any agreement by
and
between Borrower and Secured Parties; (2) accounts payable to trade creditors
for goods or services incurred in the ordinary course of business, as presently
conducted, and paid within the specified time, unless contested in good faith
and by appropriate proceedings; (3) Debt of Borrower secured by Permitted Liens;
and (4) Debt set forth on Schedule
1.3
of the
Purchase Agreement;
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(d) Create,
incur, assume or suffer to exist any Lien with respect to any of its assets,
or
assign or otherwise convey any right to receive income, including the sale
of
any accounts, except for Permitted Liens; and
(e) Assume,
guarantee, endorse, or otherwise be or become directly or contingently
responsible or liable, (including, but not limited to, an agreement to purchase
any obligation, stock, assets, goods, or services, or to supply or advance
any
funds, assets, goods, or services, or an agreement to maintain or cause such
Person to maintain a minimum working capital or net worth or otherwise to assure
the creditors of any Person against loss), for obligations of any Person, except
guaranties by endorsement of negotiable instruments for deposit or collection
or
similar transactions in the ordinary course of business.
5. Financing
Statements.
Borrower
authorizes the Secured Parties to file a financing statement describing the
Collateral. Borrower shall cooperate with Secured Parties in obtaining control
with respect to Collateral consisting of: (a) deposit accounts; (b) investment
property; (c) letter of credit rights; and (d) electronic chattel
paper.
6. Borrower’s
Rights Until Default.
So long
as an Event of Default does not exist, Borrower shall have the right to possess
the Collateral, manage its property, operate its business and sell its inventory
in the ordinary course of business.
7. Event
of Default.
An Event
of Default, as defined in the Notes, shall be deemed to be an Event of Default
hereunder.
8. Rights
and Remedies on Event of Default.
(a) After
any
Event of Default shall have occurred and while such Event of Default is
continuing, the Majority Note Holders, acting on behalf of the Secured Parties,
shall have the right to any or all of the Collateral, by any available judicial
procedure, or without judicial process (provided, however, that it is in
compliance with the UCC), to exercise any and all rights afforded to a secured
party under the UCC or other applicable law. Without limiting the generality
of
the foregoing, the Majority Note Holders, acting on behalf of the Secured
Parties, shall have the right to sell or otherwise dispose of the Collateral
(subject to applicable state and federal securities laws), either at public
or
private sale, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such terms and conditions, all as
Secured Parties, in their sole discretion (as determined by holders of a
majority of the outstanding principal amount under the Notes), may deem
advisable, and Secured Parties shall have the right to purchase all or any
part
of the Collateral at any such sale; provided that the Majority Note Holders,
acting on behalf of the Secured Parties, shall give Borrower ten (10) days
advance notice of such sale. The proceeds of any such sale, or other Collateral
disposition shall be applied, first to the expenses of retaking, holding,
storing, processing and preparing for sale, selling, and the like, and to
reasonable attorneys’ fees and legal expenses for one attorney representing
Secured Parties, and then to the Obligations and to the payment of any other
amounts required by applicable law, after which Secured Parties shall account
to
Borrower for any surplus proceeds.
-8-
(b) All
of
the Secured Parties’ rights and remedies with respect to the Collateral, whether
established hereby or by any other agreements, instruments or documents or
by
law shall be cumulative and may be exercised singly or
concurrently.
(c) If
there
are insufficient funds to pay in full in cash each of the Notes, funds available
therefor shall be distributed and paid among the Secured Parties in a manner
so
that each Secured Party receives his or its Pro Rata Share (as hereinafter
defined; provided, however, that the foregoing shall in no way offset the
conversion of the Notes in accordance with their terms, which Notes may be
converted without regard to conversion of any other Notes) thereof. For purposes
hereof, “Pro
Rata Share”
shall
mean, as to any Secured Party, the aggregate unpaid principal amount, plus
accrued but unpaid interest, under all Notes held by such Secured Party as
compared to the aggregate unpaid principal amount, plus accrued but unpaid
interest, under all Notes held by the Secured Parties. If any Secured Party
receives any payment under or with respect to such Secured Party’s Notes in
excess in trust of an amount equal to his or its Pro Rata Share, such Secured
Party shall be deemed to hold such excess for the benefit of the other Secured
Parties and shall promptly remit such amount to and among the Secured Parties
so
as to ensure all Secured Parties receive their full Pro Rata Share of all cash
payments, under or with respect to the Notes.
(d) Borrower
hereby assigns, transfers and conveys to Secured Parties, effective upon the
occurrence and continuance of an Event of Default if Secured Parties so elect,
and in any event upon the acceleration of the Obligations, all Intellectual
Property Collateral together with any goodwill associated therewith, all to
the
extent necessary to enable Secured Parties to realize on the Collateral and
any
successor or assign to enjoy the benefits of the Collateral. This right and
assignment shall inure to the benefit of all successors, assigns and transferees
of Secured Parties and its successors, assigns and transferees, whether by
voluntary conveyance, operation of law, assignment, transfer, foreclosure,
deed
in lieu of foreclosure or otherwise. Such right and assignment is and is to
be
granted free of charge, without requirement that any monetary payment whatsoever
(including, without limitation, any royalty or license fee) be made to Borrower
or any other person by Secured Parties (except that if Secured Parties shall
receive proceeds from the disposition of any such Collateral, such proceeds
shall be applied to the Obligations in accordance with the UCC.
(e) Upon
the
exercise by Secured Parties of any power, right, privilege, or remedy pursuant
to this Agreement which requires any consent, approval, registration,
qualification, or authorization of any governmental authority, Borrower agrees
to execute and deliver, or will cause the execution and delivery of, all
applications, certificates, instruments, assignments, and other documents and
papers that Secured Parties or any purchaser of the Collateral may be required
to obtain for such governmental consent, approval, registration, qualification,
or authorization.
9. No
Waivers by Secured Parties.
No
failure to exercise and no delay in exercising any right, power, or remedy
hereunder shall impair any right, power, or remedy which Secured Parties may
have, nor shall any such delay be construed to be a waiver of any of such
rights, powers, or remedies, or any acquiescence in any breach or default
hereunder; nor shall any waiver by Secured Parties of any breach or default
by
Borrower hereunder be deemed a waiver of any default or breach subsequently
occurring. All rights and remedies granted to Secured Parties hereunder shall
remain in full force and effect notwithstanding any single or partial exercise
of, or any discontinuance of action begun to enforce, any such right or remedy.
The rights and remedies specified herein are cumulative and not exclusive of
each other or of any rights or remedies which Secured Parties would otherwise
have.
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10. Indemnification.
Borrower hereby agrees to indemnify Secured Parties, any affiliate thereof,
and
its directors, officers, employees, agents, counsel, and other advisors (each
an
“Indemnified
Person”)
against, and hold each of them harmless from, any and all liabilities,
obligations, losses, claims, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements of any kind or nature whatsoever, including
the reasonable fees and disbursements of counsel to an Indemnified Person
(including allocated costs of internal counsel), which may be imposed on,
incurred by, or asserted against any Indemnified Person, in any way relating
to
or arising out of this Agreement or the transactions contemplated hereby or
any
action taken or omitted to be taken by it hereunder (the “Indemnified
Liabilities”);
provided that Borrower shall not be liable to any Indemnified Person for any
portion of such Indemnified Liabilities to the extent they are found by a final
decision of a court of competent jurisdiction to have resulted from such
Indemnified Person’s gross negligence or willful misconduct. If and to the
extent that the foregoing indemnification is for any reason held unenforceable,
Borrower agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law.
11. Certain
Waivers.
Borrower waives, to the fullest extent permitted by law, (a) any right of
redemption with respect to the Collateral, whether before or after sale
hereunder; (b) all rights, if any, of marshalling of the Collateral or other
collateral or security for the Obligations; (c) any right to require Secured
Parties (i) to proceed against any Person; (ii) to exhaust any other collateral
or security for any of the Obligations; (iii) to pursue any remedy in Secured
Parties’ power; or (iv) to make or give any presentments, demands for
performance, notices of nonperformance, protests, notices of protests, or
notices of dishonor in connection with any of the Collateral; (d) all claims,
damages, and demands against Secured Parties arising out of the repossession,
retention, sale, or application of the proceeds of any sale of the Collateral;
and (e) demand, protest, notice of protest, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Secured Parties
on which Borrower may in any way be liable.
12. General
Provisions.
(a) Amendment
and Waiver.
Neither
this Agreement nor any provisions hereof may be changed, waived, discharged
or
terminated, nor may any consent to the departure from the terms hereof be given,
orally (even if supported by new consideration), but only by an instrument
in
writing signed by the Majority Note Holders and by Borrower. Any waiver or
consent so given shall be effective only in the specific instance and for the
specific purpose for which given.
(b) Action
by Majority Note Holders.
All
action required or permitted to be taken by the Majority Note Holders, shall
be
taken by approval, consent, vote or resolution authorized by the holders of
the
Notes representing at least a majority of the principal amount of all then
outstanding Notes.
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(c) Notices.
Any
notice required or permitted under this Agreement shall be given in writing
and
in accordance with Section 9.6
of the
Purchase Agreement (for purposes of which the term “Purchasers”
shall
mean the Secured Parties hereunder), except as otherwise expressly provided
in
this Agreement, to a Secured Party’s address for notice specified on such
Secured Party’s signature page hereto.
(d) Entire
Agreement.
This
Agreement, together with the Purchase Agreement, the Stock Pledge Agreement,
Investor Rights Agreement, the Notes and the Warrants (as defined in the
Purchase Agreement), constitutes the entire contract between the Secured Parties
and Borrower relative to the subject matter hereof. Any previous agreement
between the Secured Parties and Borrower with respect to the subject matter
hereof is superceded by this Agreement, the Purchase Agreement, the Stock Pledge
Agreement, Investor Rights Agreement, the Notes and the Warrants. If and to
the
extent of any conflicts between the terms hereof and the provisions in the
Notes
regarding the security interest therein granted, the terms of this Agreement
shall control.
(e) Successors
and Assigns.
Except
as otherwise expressly provided in this Agreement, the provisions of this
Agreement shall inure to the benefit of, and be binding upon, the respective
successors and assigns of the parties hereto. Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations
or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(f) Interpretation.
This
Agreement and all agreements relating to the subject matter hereof are the
product of negotiation and preparation by and among each party and its
respective attorneys, and shall be construed accordingly.
(g) Governing
Law.
This
Agreement and all transactions contemplated hereunder and/or evidenced hereby
shall be governed by, construed under, and enforced in accordance with the
internal laws of the State of New York, without regard to its conflicts of
laws
principles.
(h) Choice
of Venue; Waiver of Right to Jury Trial.
(i) THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
DEEMED MADE, EXECUTED, PERFORMED AND CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, IN EACH CASE WHICH ARE LOCATED IN THE COUNTY OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH
PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK
PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM IN
ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT
BROUGHT IN ANY OF THE AFORESAID COURTS THAT ANY SUCH COURT LACKS PERSONAL
JURISDICTION OVER SUCH PARTY. EACH PARTY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO ANY SUCH PARTY AT ITS ADDRESS FOR NOTICES AS PROVIDED
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING
COMMENCED HEREUNDER OR UNDER ANY OTHER DOCUMENT THAT SUCH SERVICE OF PROCESS
WAS
IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE
PARTY UNDER THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN
ANY
OTHER JURISDICTION.
-11-
(ii) EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE
TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENT BROUGHT IN
THE
COURTS REFERRED TO IN CLAUSE (i) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES
AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(iii) EACH
OF
THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL
BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE OTHER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR
THEREBY.
(i) Counterparts.
This
Agreement may be signed in any number of counterparts, each of which shall
be an
original, with the same effect as if all signatures were upon the same
instrument. Delivery of an executed counterpart of the signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement, and any party delivering such an executed
counterpart of the signature page to this Agreement by facsimile to any other
party shall thereafter also promptly deliver a manually executed counterpart
of
this Agreement to such other party, provided that the failure to deliver such
manually executed counterpart shall not affect the validity, enforceability,
or
binding effect of this Agreement.
-12-
(j) Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
(k) Severability.
In the
event any one or more of the provisions contained in this Agreement is held
to
be invalid, illegal or unenforceable in any respect, then such provision shall
be ineffective only to the extent of such prohibition or invalidity, and the
validity, legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
(l) Further
Acts.
Borrower shall, on a continuing basis, make, execute, acknowledge and deliver,
and file and record in the proper filing and recording places, all such
Financing Statements and take all such action as may be necessary or advisable
or may be requested by the Secured Parties to carry out the intent and purposes
of this Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN
WITNESS WHEREOF,
this
Security Agreement has been executed by the parties hereto as of the date first
above written.
| WINWIN GAMING, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ |
||
| Title: President & CEO | ||
|
Address
for Notice:
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
||
SECURED
PARTY
COUNTERPART
SIGNATURE PAGE TO
| SECURED PARTY: | ||
| |
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| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |
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| Print Name: | Patriot Capital Limited | |
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| Address: |
12/E
Novel Industrial ▇▇▇▇▇▇▇▇
▇▇▇-▇▇▇
▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
Sha Wan, Kowloon
Hong
Kong
|
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SECURED
PARTY
COUNTERPART
SIGNATURE PAGE TO
| SECURED PARTY: | ||
| |
|
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| By: | /s/ ▇▇▇▇ Tunnery | |
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| Print Name: | MLA Capital, Inc. | |
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| Address: |
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇
▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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SECURED
PARTY
COUNTERPART
SIGNATURE PAGE TO
SECURITY
AGREEMENT
| SECURED PARTY: | ||
| |
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| By: | /s/ N.J. ▇▇▇▇▇ | |
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| Print Name: | Ridgewood Ltd. | |
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| Address: |
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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SECURED
PARTY
COUNTERPART
SIGNATURE PAGE TO
SECURITY
AGREEMENT
| SECURED PARTY: | ||
| |
|
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| By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ | |
|
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| Print Name: | ▇▇▇▇▇▇ ▇▇▇▇▇ | |
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||
| Address: |
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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SECURED
PARTY
COUNTERPART
SIGNATURE PAGE TO
SECURITY
AGREEMENT
| SECURED PARTY: | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ | |
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| Print Name: | Calico Capital Group | |
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||
| Address: |
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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