EXHIBIT 10.3
AMENDED AND RESTATED SECURITY AGREEMENT
SECURITY AGREEMENT dated as of March 31, 2003, by and between
WinWin Gaming, Inc., a Delaware corporation ("WinWin"), WinWin Acquisition Corp,
a Nevada corporation (the "BORROWER", sometimes referred to herein as the
"GRANTOR"), and Xxxxxxx Xxxxxx and Xxxxxxxx Xxxxx (the "Lender"), as agents and
representatives of the Exchanging Stockholders, as defined in that certain
Secured Debenture of Borrower dated as of the date hereof (the "Debenture"), in
connection with that certain Debenture, dated as of the date hereof, as such
Debenture may be amended, modified or supplemented from time to time, between
the Grantor and the Lender (collectively, the "Loans").
The parties acknowledge the following facts and circumstances:
The Exchanging Stockholders have determined to sell all of
their capital stock of WinWin, Inc., a Nevada corporation, to Borrower, pursuant
to that certain Stock Exchange Agreement, by and among WinWin, Inc., a Nevada
corporation, WinWin Acquisition Corp., a Nevada corporation, WinWin Gaming,
Inc., f/k/a Junum Incorporated, a Delaware corporation, The Xxxxxx Living Trust
("Xxxxxx"), The Falcor Trust ("Falcor") and the other WinWin Stockholders
signatory thereto (together with Xxxxxx and Falcor, the "WinWin Stockholders" or
the "Exchanging Stockholders"). Such capital stock represents 100% of the issued
and outstanding capital stock of WinWin, Inc. The Exchanging Stockholders have
required, to induce them to enter into the transactions set forth in such
agreement, that Junum and Borrower secure their respective obligations to the
Exchanging Stockholders under the Debenture and this Security Agreement
(together, the "Loan Documents"), by granting to the Exchanging Stockholders a
security interest in and to all of the capital stock of Borrower and WinWin,
Inc.
Accordingly, the Grantor and the Lender hereby agree as
follows:
1. DEFINITIONS OF TERMS USED HEREIN. As used herein, the following terms shall
have the following meanings:
(a) "COLLATERAL" means all (i) capital stock of WinWin, Inc., a Nevada
corporation, and (ii) all capital stock of WinWin Acquisition Corp., a Nevada
corporation, and all Proceeds thereof.
(b) "OBLIGATIONS" mean all obligations of Borrower and Junum to Lender,
including, without limitation, (a) the due and punctual payment of the principal
of and interest on the Debenture, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise and (b) the
due and punctual performance of all obligations of the Grantor and/or Junum at
any time and from time to time under any of the Loan Documents.
(c) "PROCEEDS" means any consideration received from the sale,
exchange, lease or other disposition of any asset or property which constitutes
Collateral, any other value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft or other involuntary conversion of
whatever nature of any asset or property that constitutes Collateral.
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2. SECURITY INTERESTS. As security for the payment or performance, as the case
may be, of the Obligations, the Grantor and Junum each hereby creates and grants
to the Lender, its successors and its assigns, a security interest in the
Collateral (the "SECURITY INTEREST"). Without limiting the foregoing, the Lender
is hereby authorized to file one or more financing statements, continuation
statements or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting its Security Interest in the Collateral,
naming the Grantor as debtor and the Lender as secured party. The Grantor agrees
at all times to keep in all material respects accurate and complete accounting
records with respect to the Collateral, including, but not limited to, a record
of all payments and Proceeds received.
3. Borrower represents and warrants to Lender as of the date of this Agreement,
and covenants with Lender, as set forth that it shall pay any liability of Junum
which could reasonably be expected to result in a lien being created on any of
the Collateral, in the sole and absolute determination of Lender. Any breach or
failure of any of the representations, warranties and covenants contained in
this Agreement shall be a breach of this Security Agreement and the Loan
Documents.
4. FURTHER ASSURANCES. The Grantor agrees, at its expense, to execute,
acknowledge, deliver and cause to be duly filed all such further instruments and
documents and take all such actions as the Lender may from time to time
reasonably request for the assuring and preserving of the Security Interest and
the rights and remedies created hereby, including, without limitation, the
payment of any fees and taxes required in connection with the execution and
delivery of this Agreement, the granting of the Security Interest and the filing
of any financing statements or other documents in connection herewith. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument, such note or
instrument shall be promptly pledged and delivered to the Lender, duly endorsed
in a manner satisfactory to the Lender. The Grantor agrees to notify promptly
the Lender of any change in its corporate name or in the location of its chief
executive office, its chief place of business or the office where it keeps its
records relating to the Accounts Receivable owned by it and the location of any
Equipment. The Grantor agrees promptly to notify the Lender if any material
portion of the Collateral is damaged or destroyed.
5. INSPECTION AND VERIFICATION. The Lender and such persons as the Lender may
designate shall have the right, at any reasonable time or times during the
Grantor's usual business hours, and upon reasonable notice (which may be
telephonic), to inspect the Collateral owned by the Grantor, all records related
thereto (and to make extracts and copies from such records), and the premises
upon which any such Collateral is located, to discuss the Grantor's affairs with
the officers of the Grantor and its independent accountants and to verify under
reasonable procedures the validity, amount, quality, quantity, value, and
condition of or any other matter relating to, such Collateral, including, in the
case of Accounts Receivable or Collateral in the possession of a third person,
contacting account debtors and upon the occurrence of an Event of Default or a
third person possessing such Collateral for the purpose of making such a
verification.
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6. TAXES; ENCUMBRANCES. At its option, the Lender may discharge past due taxes,
liens, security interests or other encumbrances at any time levied or placed on
the Collateral and not permitted under the Loan Documents, and may pay for the
maintenance and preservation of the Collateral to the extent a Grantor fails to
do so as required by the Loan Documents, and the Grantor agrees to reimburse the
Lender on demand for any payment made or any expense incurred by it pursuant to
the foregoing authorization; PROVIDED, HOWEVER, that nothing in this Section 6
shall be interpreted as excusing the Grantor from the performance of any
covenants or other promises with respect to taxes, liens, Security Interests or
other encumbrances and maintenance as set forth herein or in the Loan Documents.
7. ASSIGNMENT OF SECURITY INTEREST. If at any time the Grantor shall take and
perfect a security interest in any property of an account debtor or any other
person to secure payment and performance of an Account Receivable, the Grantor
shall promptly assign such security interest to the Lender. Such assignment need
not be filed of public record unless necessary to continue the perfected status
of the security interest against creditors of and transferees from the account
debtor or other person granting the security interest.
8. REPRESENTATIONS AND WARRANTIES. The Grantor represents and warrants to the
Lender that:
(a) TITLE AND AUTHORITY. It has (i) rights, interest in and to the
Collateral in which it is granting a security interest hereunder and (ii) the
requisite power and authority to grant to the Lender the Security Interest in
such Collateral pursuant hereto and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other person other than any consent or approval which has
been obtained.
(b) FILING. Fully executed Uniform Commercial Code financing statements
and other such documents as may be necessary containing a description of the
Collateral shall have been, or shall be delivered to the Lender in a form such
that they can be, filed of record in every governmental, municipal or other
office in every jurisdiction in which any portion of the Collateral is located
necessary to publish notice of and protect the validity of and to establish a
valid, legal and perfected security interest in favor of the Lender in respect
of the Collateral in which a security interest may be perfected by filing in the
United States and its territories and possessions, and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under applicable law with
respect to the filing of Uniform Commercial Code continuation statements.
(c) VALIDITY OF SECURITY INTEREST. The Security Interest constitutes a
valid, legal and perfected first priority security interest in all of the
Collateral for payment and performance of the Obligations.
(d) INFORMATION REGARDING NAMES. It has disclosed in writing to the
Lender any trade names used to identify it in its business or in the ownership
of its properties.
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(e) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Grantor contained in this Agreement shall survive the
execution, delivery and performance of this Agreement until the termination of
this Agreement.
9. CONTINUING OBLIGATIONS OF THE GRANTOR. The Grantor shall remain liable to
observe and perform all the conditions and obligations to be observed and
performed by it under each contract, agreement, interest or obligation relating
to the Collateral, all in accordance with the terms and conditions thereof, and
shall indemnify and hold harmless the Lender from any and all such liabilities.
10. USE AND DISPOSITION OF COLLATERAL. Without the prior written consent of
Lender, the Grantor shall not make nor permit to be made any sale, transfer,
assignment, pledge or hypothecation of the Collateral, or grant any security
interest in the Collateral except for the Security Interest granted herein. The
Grantor shall not make nor permit to be made any transfer of any Collateral, and
the Lender shall remain at all times in possession of the Collateral.
11. REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance of an
Event of Default, the Grantor agrees to deliver each item of Collateral to the
Lender on demand, and it is agreed that the Lender shall have the right to take
any or all of the following actions at the same or different times: with or
without legal process and with or without previous notice or demand for
performance, to take possession of the Collateral and without liability for
trespass (except for actual damage caused by the Lender's gross negligence or
willful misconduct) to enter any premises where the Collateral may be located
for the purpose of taking possession of or removing the Collateral and,
generally, to exercise any and all rights afforded to a secured party under, and
subject to its obligations contained in, the Uniform Commercial Code as in
effect in any state or other applicable law. Without limiting the generality of
the foregoing, the Grantor agrees that the Lender shall have the right, subject
to the mandatory requirements of applicable law, to sell or otherwise dispose of
all or any part of the Collateral, at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery as the Lender shall deem appropriate. Each such purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of the Grantor, and the Grantor hereby waives (to the extent permitted by
law) all rights of redemption, stay and appraisal which the Grantor now has or
may at any time in the future have under any rule of law or statute now existing
or hereafter enacted. Without limiting the foregoing, upon the occurrence and
during the continuance of an Event of Default, immediately upon Lender's demand
Grantor shall transfer all Collateral in its possession, including but not
limited to all proceeds of Collateral, to Lender, and shall execute all
documents reasonably requested by Lender to effectuate the transfer of such
Collateral to Lender.
12. The Lender shall give the Grantor ten (10) days' written notice (which the
Grantor agrees is reasonable notice) of the Lender's intention to make any sale
of Collateral. Such notice, in the case of a public sale, shall state the time
and place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale shall be held
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at such time or times within ordinary business hours and at such place or places
as the Lender may fix and state in the notice (if any) of such sale. At any such
sale, the Collateral, or portion thereof, to be sold may be sold in one lot as
an entirety or in separate parcels, as the Lender may (in its sole and absolute
discretion) determine. The Lender shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Lender may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Lender until the sale price is paid by the purchaser or
purchasers thereof, but the Lender shall not incur any liability in case any
such purchaser or purchasers shall fail to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may be sold again upon
like notice. At any public sale made pursuant to this Section 12, the Lender may
bid for or purchase, free (to the extent permitted by law) from any right of
redemption, stay or appraisal on the part of the Grantor (all said rights being
also hereby waived and released to the extent permitted by law), with respect to
the Collateral or any part thereof offered for sale and the Lender may make
payment on account thereof by using any claim then due and payable to the Lender
from the Grantor as a credit against the purchase price, and the Lender may,
upon compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to the Grantor therefor. For purposes
hereof, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Lender shall be free to carry out such
sale and purchase pursuant to such agreement, and the Grantor shall not be
entitled to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Lender shall have entered into such an
agreement all Events of Default shall have been remedied and the Obligations
paid in full. As an alternative to exercising the power of sale herein conferred
upon it, the Lender may proceed by a suit or suits at law or in equity to
foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver. In
addition, if permitted by law, Lender shall have the right to accept the
Collateral as full payment of the Obligations, and shall not have any obligation
to sell the Collateral at public or private sale, so long as no deficiency
judgment is sought by Lender.
13. APPLICATION OF PROCEEDS. The proceeds of any collection or sale of
Collateral, as well as any Collateral consisting of cash, shall be applied by
the Lender as follows:
(a) FIRST, to the payment of all reasonable costs and expenses incurred
by the Lender in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Obligations, including, but not
limited to, all court costs and the reasonable fees and expenses of its agents
and legal counsel, the repayment of all advances made by the Lender hereunder on
behalf of the Grantor and any other reasonable costs or expenses incurred in
connection with the exercise of any right or remedy hereunder;
(b) SECOND, to the payment in full of principal and interest in respect
of the Loan then outstanding;
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(c) THIRD, to the payment in full of all Obligations (other than those
referred to above) owed to the Lender; and
(d) FOURTH, to the Grantor, its successors and assigns, or as a court
of competent jurisdiction may otherwise direct.
14. Upon any sale of the Collateral by the Lender (including, without
limitation, pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of the Lender or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Lender or such
officer or be answerable in any way for the misapplication thereof.
15. LOCATIONS OF COLLATERAL; PLACE OF BUSINESS.
(a) The Grantor hereby represents and warrants that all the Collateral
is located in Nevada. The Grantor agrees not to establish, or permit to be
established, any other location for Collateral unless all filings under the
Uniform Commercial Code as in effect in any state or otherwise which are
required by this Agreement or the Loan Documents to be made with respect to the
Collateral have been made and the Lender has a valid, legal and perfected first
priority security interest in the Collateral.
(b) The Grantor agrees not to change, or permit to be changed, the
location of its chief executive office unless all filings under the Uniform
Commercial Code or otherwise which are required by this Agreement or the Loan
Documents to be made have been made and the Lender has a valid, legal and
perfected first priority security interest.
16. SECURITY INTEREST ABSOLUTE. All rights of the Lender hereunder, the Security
Interest, and all obligations of the Grantor hereunder, shall be absolute and
unconditional irrespective of (i) any lack of validity or enforceability of the
Loan Documents, any other agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing, (ii) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver of or consent to any
departure from the Loan Documents, or any other agreement or instrument, (iii)
any exchange, release or nonperfection of any other Collateral, or any release
or amendment or waiver of or consent to or departure from any guarantee, for all
or any of the Obligations, or (iv) any other circumstance which might otherwise
constitute a defense available to, or discharge of, the Grantor or any other
obligor in respect of the Obligations or in respect of this Agreement.
17. NO WAIVER. No failure on the part of the Lender to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy by the Lender preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
Lender shall not be deemed to have waived any rights hereunder or under any
other agreement or instrument unless such waiver shall be in writing and signed
by such parties.
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18. LENDER APPOINTED ATTORNEY-IN-FACT. The Grantor hereby appoints the Lender
its attorney-in-fact solely for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Lender may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest.
19. LENDER'S FEES AND EXPENSES. The Grantor shall be obligated to, upon demand,
pay to the Lender the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts or agents which
the Lender may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Lender hereunder, or (iv) the failure by
the Grantor to perform or observe any of the provisions hereof. In addition, the
Grantor indemnifies and holds the Lender harmless from and against any and all
liability incurred by the Lender hereunder or in connection herewith, unless
such liability shall be due to the gross negligence or willful misconduct of the
Lender. Any such amounts payable as provided hereunder or thereunder shall be
additional Obligations secured hereby and by the other Security Documents.
20. BINDING AGREEMENT; ASSIGNMENTS. This Agreement, and the terms, covenants and
conditions hereof, shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Grantor
shall not be permitted to assign this Agreement or any interest herein or in the
Collateral, or any part thereof, or any cash or property held by the Lender as
Collateral under this Agreement, except as contemplated by this Agreement or the
Loan Documents.
21. GOVERNING LAW. (a) This Agreement shall be construed in accordance with and
governed by the laws of the state of California, except to the extent that the
validity or perfection of the security interest hereunder, or remedies
hereunder, which shall be governed by the appropriate jurisdiction relating to
the specific Collateral itself. Venue for any action under this Agreement or any
of the Loan Documents shall be in the Superior Court located in Los Angeles,
California. The prevailing party in any dispute arising hereunder shall be
entitled to recover all of its reasonable attorney's fees and costs of defense,
prosecution or litigation. The Grantor hereby expressly and irrevocably submits
to the jurisdiction of the state and federal courts of the State of California,
city of Los Angeles, for the purpose of any such litigation as set forth above
and irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Grantor further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of California. The Grantor hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Grantor has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Grantor hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other Loan Documents.
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(b) WAIVER OF JURY TRIAL. The parties hereby knowingly, voluntarily and
intentionally waive any rights they may have to a trial by jury in respect of
any litigation based hereon, or arising out of, under, or in connection with,
this agreement, or any course of conduct, course of dealing, statements (whether
oral or written) or actions of any of the parties hereto.
22. NOTICES. All communications and notices hereunder shall be in writing and
given as provided in the Loan Documents.
23. SEVERABILITY. In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable the remaining provisions
contained herein shall not in any way be affected or impaired.
24. SECTION HEADINGS. Section headings used herein are for convenience only and
are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
25. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument. This Agreement shall be effective
when a counterpart which bears the signature of the Grantor shall have been
delivered to the Lender.
26. TERMINATION. This Agreement and the Security Interest shall terminate when
all the Obligations have been fully and indefeasibly paid in cash, at which time
the Lender shall execute and deliver to the Grantor all Uniform Commercial Code
termination statements and similar documents which the Grantor shall reasonably
request to evidence such termination; PROVIDED, HOWEVER, that all indemnities of
the Grantor contained in this Agreement shall survive, and remain operative and
in full force and effect regardless of, the termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Security Agreement as of the day and year first above written.
WINWIN GAMING, INC.,
A Delaware corporation
By: /s/ Xxxxxxxx Xxxxx
--------------------------
Xxxxxxxx Xxxxx
President
By: /s/ Xxxxxxx Xxxxxx
--------------------------
Xxxxxxx Xxxxxx
Secretary
WINWIN ACQUISITION CORP.,
A Nevada Corporation
By: /s/ Xxxxxxxx Xxxxx
--------------------------
Xxxxxxxx Xxxxx
President
By: /s/ Xxxxxxx Xxxxxx
--------------------------
Xxxxxxx Xxxxxx
Secretary
REPRESENTATIVES
By: /s/ Xxxxxxxx Xxxxx
--------------------------
Xxxxxxxx Xxxxx
By: /s/ Xxxxxxx Xxxxxx
--------------------------
Xxxxxxx Xxxxxx
