Exhibit 10.2
Security Agreement
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of September 30, 2005 ("Security
Agreement"), is made by WINWIN GAMING, INC., a Delaware corporation ("Grantor"),
in favor of SOLIDUS NETWORKS, INC., dba PayByTouch Solutions, a Delaware
corporation ("Secured Party").
RECITALS
A. Secured Party has made and has agreed to make a certain advance of
money (the "Loan") to Grantor as evidenced by that certain Secured Promissory
Note dated September 30, 2005 executed by Grantor in favor of Secured Party (the
"Note"). Concurrently herewith, Secured Party and Grantor are also entering into
a Joint Venture Agreement dated as of September 30, 2005 (the "Joint Venture
Agreement").
B. Secured Party is willing to make the Loan to Grantor, and to enter into
the Joint Venture Agreement with Grantor, but only upon the condition, among
others, that Grantor shall have executed and delivered to Secured Party this
Security Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Secured Party to make the Loan and to
enter into the Joint Venture Agreement and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
intending to be legally bound, Grantor hereby represents, warrants, covenants
and agrees as follows:
1. DEFINED TERMS. When used in this Security Agreement the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"Bankruptcy Code" means Title XI of the United States Code.
"Collateral" shall have the meaning assigned to such term in Section 2 of
this Security Agreement.
"Contracts" means all contracts (including any customer, vendor, supplier,
service or maintenance contract), leases, licenses, undertakings, purchase
orders, permits, franchise agreements or other agreements (other than any right
evidenced by Chattel Paper, Documents or Instruments), whether in written or
electronic form, in or under which Grantor now holds or hereafter acquires any
right, title or interest, including, without limitation, with respect to an
Account, any agreement relating to the terms of payment or the terms of
performance thereof.
"Copyright License" means any agreement, whether in written or electronic
form, in which Grantor now holds or hereafter acquires any interest, granting
any right in or to any Copyright or Copyright registration (whether Grantor is
the licensee or the licensor thereunder) including, without limitation, licenses
pursuant to which Grantor has obtained the exclusive right to use a copyright
owned by a third party.
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"Copyrights" means all of the following now owned or hereafter acquired or
created (as a work for hire for the benefit of Grantor) by Grantor or in which
Grantor now holds or hereafter acquires or receives any right or interest, in
whole or in part: (a) all copyrights, whether registered or unregistered, held
pursuant to the laws of the United States, any State thereof or any other
country; (b) registrations, applications, recordings and proceedings in the
United States Copyright Office or in any similar office or agency of the United
States, any State thereof or any other country; (c) any continuations, renewals
or extensions thereof; (d) any registrations to be issued in any pending
applications, and shall include any right or interest in and to work protectable
by any of the foregoing which are presently or in the future owned, created or
authorized (as a work for hire for the benefit of Grantor) or acquired by
Grantor, in whole or in part; (e) prior versions of works covered by copyright
and all works based upon, derived from or incorporating such works; (f) income,
royalties, damages, claims and payments now and hereafter due and/or payable
with respect to copyrights, including, without limitation, damages, claims and
recoveries for past, present or future infringement; (g) rights to xxx for past,
present and future infringements of any copyright; and (h) any other rights
corresponding to any of the foregoing rights throughout the world.
"Event of Default" means any "Event of Default" as defined in the Note.
"Intellectual Property" means any intellectual property, in any medium, of
any kind or nature whatsoever, now or hereafter owned or acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest, and shall include, in any event, any Copyright, Trademark,
Patent, trade secret, customer list, marketing plan, internet domain name
(including any right related to the registration thereof), proprietary or
confidential information, mask work, source, object or other programming code,
invention (whether or not patented or patentable), technical information,
procedure, design, knowledge, know-how, software, data base, data, skill,
expertise, recipe, experience, process, model, drawing, material or record.
"License" means any Copyright License, Patent License, Trademark License
or other license of rights or interests, whether in-bound or out-bound, whether
in written or electronic form, now or hereafter owned or acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest, and shall include any renewals or extensions of any of the
foregoing thereof.
"Lien" means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Patent License" means any agreement, whether in written or electronic
form, in which Grantor now holds or hereafter acquires any interest, granting
any right with respect to any invention on which a Patent is in existence
(whether Grantor is the licensee or the licensor thereunder).
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"Patents" means all of the following in which Grantor now holds or
hereafter acquires any interest: (a) all letters patent of the United States or
any other country, all registrations and recordings thereof and all applications
for letters patent of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country; (b) all reissues, divisions,
continuations, renewals, continuations-in-part or extensions thereof; (c) all
xxxxx patents, divisionals and patents of addition; (d) all patents to issue in
any such applications; (e) income, royalties, damages, claims and payments now
and hereafter due and/or payable with respect to patents, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; and (f) rights to xxx for past, present and future infringements
of any patent.
"Permitted Lien" means: (a) any Liens existing on the date of this
Security Agreement and set forth on Schedule A attached hereto; (b) Liens for
taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings, provided
the same have no priority over any of Secured Party's security interests created
hereunder; (c) Liens (i) upon or in any Equipment acquired or held by Grantor to
secure the purchase price of such Equipment or indebtedness (including capital
leases) incurred solely for the purpose of financing the acquisition of such
Equipment or (ii) existing on such Equipment at the time of its acquisition,
provided that the Lien is confined solely to the Equipment so acquired,
improvements thereon and the Proceeds of such Equipment; (d) leases or subleases
and licenses or sublicenses granted to others in the ordinary course of
Grantor's business if such are not otherwise prohibited under this Security
Agreement and do not interfere in any material respect with the business of
Grantor; (e) any right, title or interest of a licensor under a license provided
that such license or sublicense does not prohibit the grant of the security
interest granted hereunder; (f) Liens arising solely by virtue of any statutory
or common law provision relating to banker's liens, rights of setoff or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; and (g) liens in favor of a securities
intermediary pursuant to such securities intermediary's customary customer
account agreement; provided that any such Liens shall at no time secure any
indebtedness or obligations other than customary fees and charges payable to
such securities intermediary.
"Secured Obligations" means (a) the obligation of Grantor to repay Secured
Party all of the unpaid principal amount of, and accrued interest on (including
any interest that accrues after the commencement of bankruptcy), the Loan, (b)
the obligation of Grantor to pay any fees, costs or expenses of Secured Party
under the Note, this Security Agreement, or the Joint Venture Agreement, and (c)
all other indebtedness, liabilities and obligations of Grantor to Secured Party,
whether now existing or hereafter incurred, and whether created under, arising
out of or in connection with any written agreement or otherwise.
"Security Agreement" means this Security Agreement and all Schedules
hereto, as the same may from time to time be amended, modified, supplemented or
restated.
"Trademark License" means any agreement, whether in written or electronic
form, in which Grantor now holds or hereafter acquires any interest, granting
any right in and to any Trademark or Trademark registration (whether Grantor is
the licensee or the licensor thereunder).
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"Trademarks" means any of the following in which Grantor now holds or
hereafter acquires any interest: (a) any trademarks, tradenames, corporate
names, company names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof and any applications in connection therewith, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country (collectively, the "Marks"); (b)
any reissues, extensions or renewals thereof; (c) the goodwill of the business
symbolized by or associated with the Marks; (d) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to the
Marks, including, without limitation, damages, claims and recoveries for past,
present or future infringement; and (e) rights to xxx for past, present and
future infringements of the Marks.
"UCC" means the Uniform Commercial Code as the same may from time to time
be in effect in the State of California (and each reference in this Security
Agreement to an Article thereof (denoted as a Division of the UCC as adopted and
in effect in the State of California) shall refer to that Article (or Division,
as applicable) as from time to time in effect; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Secured Party's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean the Uniform Commercial
Code (including the Articles thereof) as in effect at such time in such other
jurisdiction for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related to such
provisions.
In addition, the following terms shall be defined terms having the meaning
set forth for such terms in the UCC: "Account", "Account Debtor", "Chattel
Paper", "Commercial Tort Claims", "Commodity Account", "Deposit Account",
"Documents", "Equipment", "Fixtures", "General Intangible", "Goods",
"Instrument", "Inventory", "Investment Property", "Letter-of-Credit Right",
"Money", "Payment Intangibles", "Proceeds", "Promissory Notes", "Securities
Account", and "Supporting Obligations". Each of the foregoing defined terms
shall include all of such items now owned, or hereafter acquired, by Grantor.
2. GRANT OF SECURITY INTEREST. As collateral security for the full,
prompt, complete and final payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all the Secured Obligations and in
order to induce Secured Party to cause the Loan to be made and to enter into the
Joint Venture Agreement, Grantor hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to Secured Party, and hereby grants to Secured Party,
a security interest in all of Grantor's right, title and interest in, to and
under the following, whether now owned or hereafter acquired (all of which being
collectively referred to herein as the "Collateral"):
(a) All Accounts of Grantor;
(b) All Chattel Paper of Grantor;
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(c) The Commercial Tort Claims of Grantor more particularly
described on Schedule B attached hereto;
(d) All Commodity Accounts of Grantor;
(e) All Contracts of Grantor;
(f) All Deposit Accounts of Grantor;
(g) All Documents of Grantor;
(h) All General Intangibles of Grantor;
(i) All Goods of Grantor, including without limitation, Equipment,
Inventory and Fixtures;
(j) All Instruments of Grantor, including, without limitation,
Promissory Notes;
(k) All Investment Property of Grantor;
(l) All Letter-of Credit Rights of Grantor;
(m) All Money of Grantor;
(n) All Securities Accounts of Grantor;
(o) All Supporting Obligations of Grantor;
(p) All property of Grantor held by Secured Party, or any other
party for whom Secured Party is acting as agent, including, without limitation,
all property of every description now or hereafter in the possession or custody
of or in transit to Secured Party or such other party for any purpose,
including, without limitation, safekeeping, collection or pledge, for the
account of Grantor, or as to which Grantor may have any right or power;
(q) All other goods and personal property of Grantor, wherever
located, whether tangible or intangible, and whether now owned or hereafter
acquired, existing, leased or consigned by or to Grantor; and
(r) To the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and replacements for and
rents, profits and products of each of the foregoing.
If Grantor shall at any time after the date hereof acquire a Commercial
Tort Claim, Grantor shall immediately notify Secured Party in a writing signed
by Grantor of the brief details thereof and grant to Secured Party in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Security Agreement, with such writing to be in form and substance
satisfactory to Secured Party.
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3. RIGHTS OF SECURED PARTY; COLLECTION OF ACCOUNTS.
(a) Notwithstanding anything contained in this Security Agreement to
the contrary, Grantor expressly agrees that it shall remain liable under each of
its Contracts, Chattel Paper, Documents, Instruments and Licenses to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder and that it shall perform all of its duties and obligations
thereunder, all in accordance with and pursuant to the terms and provisions of
each such Contract, Chattel Paper, Document, Instrument, and License. Secured
Party shall not have any obligation or liability under any such Contract,
Chattel Paper, Document, Instrument, or License by reason of or arising out of
this Security Agreement or the granting to Secured Party of a lien therein or
the receipt by Secured Party of any payment relating to any such Contract,
Chattel Paper, Document, Instrument, or License pursuant hereto, nor shall
Secured Party be required or obligated in any manner to perform or fulfill any
of the obligations of Grantor under or pursuant to any such Contract, Chattel
Paper, Document, Instrument, or License, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any such Contract, Chattel
Paper, Document, Instrument, or License, or to present or file any claim, or to
take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at any
time or times.
(b) Secured Party authorizes Grantor to collect its Accounts,
provided that such collection is performed in a prudent and businesslike manner,
and Secured Party may, upon the occurrence and during the continuation of any
Event of Default and without notice, limit or terminate said authority at any
time. At the request of Secured Party, Grantor shall deliver all original and
other documents evidencing and relating to the performance of labor or service
which created such Accounts, including, without limitation, all original orders,
invoices and shipping receipts.
(c) Secured Party may at any time, upon the occurrence and during
the continuance of any Event of Default, without notifying Grantor of its
intention to do so, notify Account Debtors of Grantor, parties to the Contracts
of Grantor, and obligors in respect of Instruments of Grantor and obligors in
respect of Chattel Paper of Grantor that the Accounts and the right, title and
interest of Grantor in and under such Contracts, Instruments and Chattel Paper
have been assigned to Secured Party and that payments shall be made directly to
Secured Party. Upon the occurrence and during the continuance of any Event of
Default, upon the request of Secured Party, Grantor shall so notify such Account
Debtors, parties to such Contracts, obligors in respect of such Instruments and
obligors in respect of such Chattel Paper. Secured Party may, in its name or in
the name of others, communicate with such Account Debtors, parties to such
Contracts, obligors in respect of such Instruments and obligors in respect of
such Chattel Paper to verify with such parties, to Secured Party's satisfaction,
the existence, amount and terms of any such Accounts, Contracts, Instruments or
Chattel Paper.
4. REPRESENTATIONS, WARRANTIES, AND COVENANTS. Grantor hereby represents,
warrants and covenants to Secured Party that:
(a) Except for the security interest granted to Secured Party under
this Security Agreement and Permitted Liens, Grantor is the sole legal and
equitable owner of each item of the Collateral in which it purports to grant a
security interest hereunder, having good and marketable title thereto, free and
clear of any and all Liens.
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(b) No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Collateral exists, except such as may have been filed by Grantor in favor
of Secured Party pursuant to this Security Agreement and except for Permitted
Liens.
(c) This Security Agreement creates a legal and valid security
interest on and in all of the Collateral in which Grantor now has rights and
will create a legal and valid security interest in the Collateral in which
Grantor later acquires rights.
(d) Grantor's taxpayer identification number is set forth in the
signature page hereof. Grantor is a Delaware corporation. Grantor's chief
executive office, principal place of business, and the place where Grantor
maintains its records concerning the Collateral are presently located at the
address set forth on the signature page hereof.
(e) All action necessary or desirable to protect and perfect the
security interest of Secured Party in each item of Collateral consisting of
Chattel Paper, Instruments or Investment Property comprising certificated
securities, including the delivery of all originals thereof, duly endorsed to
Secured Party, has been duly taken. The security interest of Secured Party in
such Collateral is prior in right and interest to all other Liens (other than
Permitted Liens) and is enforceable as such against creditors of and purchasers
from Grantor.
(f) Upon request of Secured Party, Grantor agrees to submit to
Secured Party (i) the name and address of each depository institution at which
Grantor maintains any Deposit Account and the account number and account name of
each such Deposit Account and (ii) the name and address of each securities
intermediary or commodity intermediary at which Grantor maintains any Securities
Account or Commodity Account and the account number and account name of each
such Securities Account or Commodity Account. Grantor agrees to notify Secured
Party within five (5) business days after opening any Deposit Account,
Securities Account or Commodity Account, or closing or changing the account name
or number on any existing Deposit Account, Securities Account, or Commodity
Account.
(g) None of the Investment Property of Grantor has been transferred
in violation of the securities registration, securities disclosure or similar
laws of any jurisdiction to which such transfer may be subject.
(h) Upon request of Secured Party, Grantor agrees to submit a list
of all Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses now owned, held or in which Grantor otherwise has any
interest, and to promptly notify Secured Party of any additions to or deletions
from such list. Except as disclosed to Secured Party in writing, none of
Grantor's Patents, Trademarks or Copyrights have been licensed to any third
party.
5. ADDITIONAL COVENANTS. Grantor covenants and agrees with Secured Party
that from and after the date of this Security Agreement and until the Secured
Obligations have been performed and paid in full:
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5.1 Disposition of Collateral. Grantor shall not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so, other than (a) the sale of Inventory, (b) the granting of
non-exclusive Licenses, and (c) the disposal of worn-out or obsolete Equipment,
all in the ordinary course of Grantor's business.
5.2 Change of Jurisdiction of Organization, Relocation of Business
or Collateral. Grantor shall not change its jurisdiction of organization,
relocate its chief executive office, principal place of business or its records,
or allow the relocation of any Collateral (except as allowed pursuant to Section
5.1 immediately above) from such address(es) provided to Secured Party pursuant
to Section 4(d) above without thirty (30) days prior written notice to Secured
Party.
5.3 Limitation on Liens on Collateral. Grantor shall not, directly
or indirectly, create, permit or suffer to exist, and shall defend the
Collateral against and take such other action as is necessary to remove, any
Lien on the Collateral, except (a) Permitted Liens and (b) the Lien granted to
Secured Party under this Security Agreement. Grantor shall further defend the
right, title and interest of Secured Party in and to any of Grantor's rights
under the Collateral against the claims and demands of all persons whomsoever.
5.4 Limitations on Modifications of Accounts, Etc. Upon the
occurrence and during the continuance of any Event of Default, Grantor shall
not, without Secured Party's prior written consent, grant any extension of the
time of payment of any of the Accounts, Chattel Paper, Instruments or amounts
due under any Contract or Document, compromise, compound or settle the same for
less than the full amount thereof, release, wholly or partly, any person liable
for the payment thereof, or allow any credit or discount whatsoever thereon
other than trade discounts and rebates granted in the ordinary course of
Grantor's business.
5.5 Insurance. Grantor shall maintain insurance policies insuring
the Collateral against loss or damage from such risks and in such amounts and
forms and with such companies as are customarily maintained by businesses
similar to Grantor.
5.6 Taxes, Assessments, Etc. Grantor shall pay promptly when due all
property and other taxes, assessments and government charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Goods, except to the extent the validity thereof is being contested
in good faith and adequate reserves are being maintained in connection
therewith.
5.7 Maintenance of Records. Grantor shall keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral.
Grantor shall not create any Chattel Paper without placing a legend on the
Chattel Paper acceptable to Secured Party indicating that Secured Party has a
security interest in the Chattel Paper.
5.8 Registration of Intellectual Property Rights. Grantor shall
promptly register or cause to be registered (to the extent not already
registered) the most recent version of any Copyright, Copyright License, Patent,
Patent License, Trademark or Trademark License, which, individually or in the
aggregate, is material to the conduct of Grantor's business, with the United
States Copyright Office or Patent and Trademark Office, as applicable,
including, without limitation, in all such cases the filing of applications for
renewal, affidavits of use, affidavits of noncontestability and opposition and
interference and cancellation proceedings. Grantor shall register or cause to be
registered with the United States Copyright Office or Patent and Trademark
Office, as applicable, those additional rights and interests developed or
acquired by Grantor after the date of this Security Agreement which individually
or in the aggregate, are material to the conduct of Grantor's business.
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5.9 Notification Regarding Changes in Intellectual Property. Grantor
shall:
(a) promptly advise Secured Party in writing of any subsequent
ownership right or interest of the Grantor in or to any Copyright, Patent,
Trademark or License;
(b) promptly give Secured Party written notice of any applications
or registrations of intellectual property rights filed with the United States
Patent and Trademark Office, including the date of such filing and the
registration or application numbers, if any; and
(c) (i) give Secured Party not less than 30 days prior written
notice of the filing of any applications or registrations with the United States
Copyright Office, including the title of such intellectual property rights to be
registered, as such title will appear on such applications or registrations, and
the date such applications or registrations will be filed, and (ii) prior to the
filing of any such applications or registrations, shall execute such documents
as Secured Party may reasonably request for Secured Party to maintain its
perfection and priority in such intellectual property rights to be registered by
Grantor, and upon the request of Secured Party, shall file such documents
simultaneously with the filing of any such applications or registrations. Upon
filing any such applications or registrations with the United States Copyright
Office, Grantor shall promptly provide Secured Party with (x) a copy of such
applications or registrations, without the exhibits, if any, thereto, (y)
evidence of the filing of any documents requested by Secured Party to be filed
for Secured Party to maintain the perfection and priority of its security
interest in such intellectual property rights, and (z) the date of such filing.
(d) Secured Party may audit Grantor's Intellectual Property to
confirm compliance with Section 5.8 and this Section 5.9. Secured Party shall
have the right, but not the obligation, to take, at Grantor's sole expense, any
actions that Grantor is required under this Section 5.9 to take but which
Grantor fails to take, after five (5) days' notice to Grantor (provided that no
such notice shall be required if an Event of Default has occurred and is
continuing). Grantor shall reimburse and indemnify Secured Party for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under Section 5.8 or this Section 5.9.
5.10 Defense of Intellectual Property. Grantor shall (a) protect,
defend and maintain the validity and enforceability of its Copyrights, Patents
and Trademarks, (b) use its best efforts to detect infringements of its
Copyrights, Patents and Trademarks and promptly advise Secured Party in writing
of material infringements detected and (c) not allow any of its Copyrights,
Patents or Trademarks to be abandoned, forfeited or dedicated to the public
without the prior written consent of Secured Party.
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5.11 Further Assurances; Pledge of Instruments. At any time and from
time to time, upon the written request of Secured Party, and at the sole expense
of Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Secured Party
may reasonably deem necessary or desirable to obtain the full benefits of this
Security Agreement, including, without limitation, (a) using its best efforts to
secure all consents and approvals necessary or appropriate for the grant of a
security interest to Secured Party in any item of Collateral held by Grantor or
in which Grantor has any right or interest, (b) executing, delivering and
causing to be filed any financing or continuation statements (including "in
lieu" continuation statements) under the UCC with respect to the security
interests granted hereby, (c) filing or cooperating with Secured Party in filing
any forms or other documents required to be recorded with the United States
Patent and Trademark Office, United States Copyright Office, or any actions,
filings, recordings or registrations in any foreign jurisdiction or under any
international treaty, required to secure or protect Secured Party's interest in
the Collateral, (d) transferring the Collateral to Secured Party's possession
(if a security interest in such Collateral can be perfected only by possession),
(e) at Secured Party's reasonable request, placing the interest of Secured Party
as lienholder on the certificate of title (or similar evidence of ownership) of
any vehicle, watercraft or other item of Collateral owned by Grantor which is
covered by a certificate of title (or similar evidence of ownership), (f)
executing and delivering and causing the applicable depository institution,
securities intermediary, commodity intermediary or issuer or nominated party
under a letter of credit to execute and deliver a collateral control agreement
with respect to each Deposit Account, Securities Account or Commodity Account or
Letter-of-Credit Right in or to which Grantor now or hereafter has any right or
interest in order to perfect the security interest created hereunder in favor of
Secured Party (including giving Secured Party "control" over such Collateral
within the meaning of the applicable provisions of Article 8 and Article 9 of
the UCC), (g) at Secured Party's reasonable request, executing and delivering or
causing to be delivered written notice to insurers of Secured Party's security
interest in, or claim in or under, any policy of insurance (including unearned
premiums) and (h) at Secured Party's reasonable request, using its best efforts
to obtain acknowledgments from bailees having possession of any Collateral and
waivers of liens from landlords and mortgagees of any location where any of the
Collateral may from time to time be stored or located. Secured Party may at any
time and from time to time file financing statements, continuation statements
(including "in lieu" continuation statements) and amendments thereto that
describe the Collateral as all assets of Grantor or words of similar effect. Any
such financing statements, continuation statements or amendments may be signed
by Secured Party on behalf of Grantor and may be filed at any time in any
jurisdiction. Grantor also hereby authorizes Secured Party to file any such
financing or continuation statement (including "in lieu" continuation
statements) without the signature of Grantor. If any amount payable under or in
connection with any of the Collateral is or shall become evidenced by any
Instrument, such Instrument, other than checks and notes received in the
ordinary course of business and any Instrument in the outstanding or stated
amount of less than $10,000, shall be duly endorsed in a manner reasonably
satisfactory to Secured Party and delivered to Secured Party promptly and in any
event within five (5) business days of Grantor's receipt thereof.
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6. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT; PERFORMANCE BY SECURED
PARTY.
(a) Subject to Section 6(b) below, Grantor hereby irrevocably
constitutes and appoints Secured Party, and any officer or agent of Secured
Party, with full power of substitution, as its true and lawful attorney-in-fact
with full, irrevocable power and authority in the place and stead of Grantor and
in the name of Grantor or in its own name, from time to time at Secured Party's
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute and deliver any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Security Agreement and, without limiting the
generality of the foregoing, hereby gives Secured Party the power and right, on
behalf of Grantor, without notice to or assent by Grantor to do the following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all monies due or to become due under any Collateral and,
in the name of Grantor, in its own name or otherwise to take possession of,
endorse and collect any checks, drafts, notes, acceptances or other Instruments
for the payment of monies due under any Collateral and to file any claim or take
or commence any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by Secured Party for the purpose of collecting any
and all such monies due under any Collateral whenever payable;
(ii) to pay or discharge any Liens, including, without
limitation, any tax lien, levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the terms of
this Security Agreement and to pay all or any part of the premiums therefor and
the costs thereof, which actions shall be for the benefit of Secured Party and
not Grantor;
(iii) to (1) direct any person liable for any payment under or
in respect of any of the Collateral to make payment of any and all monies due or
to become due thereunder directly to Secured Party or as Secured Party shall
direct, (2) receive payment of any and all monies, claims and other amounts due
or to become due at any time arising out of or in respect of any Collateral, (3)
sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other Instruments and
Documents constituting or relating to the Collateral, (4) commence and prosecute
any suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any
other right in respect of any Collateral, (5) defend any suit, action or
proceeding brought against Grantor with respect to any Collateral, (6) settle,
compromise or adjust any suit, action or proceeding described above, and in
connection therewith, give such discharges or releases as Secured Party may deem
appropriate, (7) license, or, to the extent permitted by an applicable License,
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any Copyright, Patent or Trademark throughout the world
for such term or terms, on such conditions and in such manner as Secured Party
shall in its discretion determine and (8) sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof for all
purposes; and
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(iv) to do, at Secured Party's option and Grantor's expense,
at any time, or from time to time, all acts and things which Secured Party may
reasonably deem necessary to protect, preserve or realize upon the Collateral
and Secured Party's security interest therein in order to effect the intent of
this Security Agreement, all as fully and effectively as Grantor might do.
(b) Secured Party agrees that, except upon the occurrence and during
the continuation of an Event of Default, it shall not exercise the power of
attorney or any rights granted to Secured Party pursuant to this Section 6.
Grantor hereby ratifies, to the extent permitted by law, all that said attorney
shall lawfully do or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Section 6 is a power coupled with an interest and shall
be irrevocable until the Secured Obligations are completely and indefeasibly
paid and performed in full.
(c) If Grantor fails to perform or comply with any of its agreements
contained herein and Secured Party, as provided for by the terms of this
Security Agreement, shall perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses, including reasonable
attorneys' fees and costs, of Secured Party incurred in connection with such
performance or compliance, together with interest thereon at a rate of interest
equal to the highest per annum rate of interest charged on the Loan, shall be
payable by Grantor to Secured Party within five (5) business days of demand and
shall constitute Secured Obligations secured hereby.
7. RIGHTS AND REMEDIES UPON DEFAULT. After any Event of Default shall have
occurred and while such Event of Default is continuing:
(a) Secured Party may exercise in addition to all other rights and
remedies granted to it under this Security Agreement, the Note and under any
other instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the UCC. Without
limiting the generality of the foregoing, Grantor expressly agrees that in any
such event Secured Party, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Grantor or any other person (all
and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the UCC and other applicable law), may
(i) reclaim, take possession, recover, store, maintain, finish, repair, prepare
for sale or lease, shop, advertise for sale or lease and sell or lease (in the
manner provided herein) the Collateral, and in connection with the liquidation
of the Collateral and collection of the accounts receivable pledged as
Collateral, use any Trademark, Copyright, or process used or owned by Grantor
and (ii) forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, assign, give an
option or options to purchase or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange or broker's board or at any
of Secured Party's offices or elsewhere at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
To the extent Grantor has the right to do so, Grantor authorizes Secured Party,
on the terms set forth in this Section 7 to enter the premises where the
Collateral is located, to take possession of the Collateral, or any part of it,
and to pay, purchase, contact, or compromise any encumbrance, charge, or lien
which, in the opinion of Secured Party, appears to be prior or superior to its
security interest. Secured Party shall have the right upon any such public sale
or sales, and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of said Collateral so sold, free of any
right or equity of redemption, which equity of redemption Grantor hereby
releases. Grantor further agrees, at Secured Party's request, to assemble the
Collateral and make it available to the Secured Party at places which Secured
Party shall reasonably select, whether at Grantor's premises or elsewhere.
Secured Party shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale as provided in Section 7(f), below
and only after so paying over such net proceeds and after the payment by Secured
Party of any other amount required by any provision of law, need Secured Party
account for the surplus, if any, to Grantor. To the maximum extent permitted by
applicable law, Grantor waives all claims, damages, and demands against Secured
Party arising out of the repossession, retention or sale of the Collateral.
Grantor agrees that Secured Party need not give more than ten (10) days' notice
of the time and place of any public sale or of the time after which a private
sale may take place and that such notice is reasonable notification of such
matters. Grantor shall remain liable for any deficiency if the proceeds of any
sale or disposition of the Collateral are insufficient to pay all amounts to
which Secured Party is entitled from Grantor, Grantor also being liable for the
attorney costs of any attorneys employed by Secured Party to collect such
deficiency.
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(b) As to any Collateral constituting certificated securities or
uncertificated securities, if, at any time when Secured Party shall determine to
exercise its right to sell the whole or any part of such Collateral hereunder,
such Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under Securities Act of 1933, as amended
(as so amended the "Act"), Secured Party may, in its discretion (subject only to
applicable requirements of law), sell such Collateral or part thereof by private
sale in such manner and under such circumstances as Secured Party may deem
necessary or advisable, but subject to the other requirements of this Section
7(b), and shall not be required to effect such registration or cause the same to
be effected. Without limiting the generality of the foregoing, in any such event
Secured Party may, in its sole discretion, (i) in accordance with applicable
securities laws, proceed to make such private sale notwithstanding that a
registration statement for the purpose of registering such Collateral or part
thereof could be or shall have been filed under the Act; (ii) approach and
negotiate with a single possible purchaser to effect such sale; and (iii)
restrict such sale to a purchaser who will represent and agree that such
purchaser is purchasing for its own account, for investment, and not with a view
to the distribution or sale of such Collateral or part thereof. In addition to a
private sale as provided above in this Section 7(b), if any of such Collateral
shall not be freely distributable to the public without registration under the
Act at the time of any proposed sale hereunder, then Secured Party shall not be
required to effect such registration or cause the same to be effected but may,
in its sole discretion (subject only to applicable requirements of law), require
that any sale hereunder (including a sale at auction) be conducted subject to
such restrictions as Secured Party may, in its sole discretion, deem necessary
or appropriate in order that such sale (notwithstanding any failure so to
register) may be effected in compliance with the Bankruptcy Code and other laws
affecting the enforcement of creditors' rights and the Act and all applicable
state securities laws.
(c) Grantor agrees that in any sale of any of such Collateral,
whether at a foreclosure sale or otherwise, Secured Party is hereby authorized
to comply with any limitation or restriction in connection with such sale as it
may be advised by counsel is necessary in order to avoid any violation of
applicable law (including compliance with such procedures as may restrict the
number of prospective bidders and purchasers, require that such prospective
bidders and purchasers have certain qualifications and restrict such prospective
bidders and purchasers to persons who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or resale of such Collateral), or in order to obtain any required
approval of the sale or of the purchaser by any governmental authority, and
Grantor further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall Secured Party be liable nor accountable to Grantor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
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(d) Grantor also agrees to pay all fees, costs and expenses of
Secured Party, including, without limitation, attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies hereunder.
(e) Grantor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in connection
with this Security Agreement or any Collateral. (f) The Proceeds of any sale,
disposition or other realization upon all or any part of the Collateral shall be
distributed by Secured Party in the following order of priorities:
FIRST, to Secured Party in an amount sufficient to pay in full the
costs of Secured Party in connection with such sale, disposition or other
realization, including all fees, costs, expenses, liabilities and advances
incurred or made by Secured Party in connection therewith, including, without
limitation, attorneys' fees;
SECOND, to Secured Party in an amount equal to the then unpaid
Secured Obligations; and
FINALLY, upon payment in full of the Secured Obligations, to Grantor
or its representatives, in accordance with the UCC or as a court of competent
jurisdiction may direct.
8. INDEMNITY. Grantor agrees to defend, indemnify and hold harmless
Secured Party and its officers, employees, and agents against (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Security
Agreement and (b) all losses or expenses in any way suffered, incurred, or paid
by Secured Party as a result of or in any way arising out of, following or
consequential to transactions between Secured Party and Grantor, whether under
this Security Agreement or otherwise (including without limitation, reasonable
attorneys fees and expenses), except for losses arising from or out of Secured
Party's gross negligence or willful misconduct.
9. LIMITATION ON SECURED PARTY'S DUTY IN RESPECT OF COLLATERAL. Secured
Party shall be deemed to have acted reasonably in the custody, preservation and
disposition of any of the Collateral if it takes such action as Grantor requests
in writing except during an Event of Default, but failure of Secured Party to
comply with any such request shall not in itself be deemed a failure to act
reasonably, and no failure of Secured Party to do any act not so requested shall
be deemed a failure to act reasonably.
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10. REINSTATEMENT. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor's property and assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
11. MISCELLANEOUS.
11.1 Waivers; Modifications. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Grantor and Secured Party.
11.2 Termination of this Security Agreement. Subject to Section 10
hereof, this Security Agreement shall terminate upon the payment and performance
in full of the Secured Obligations.
11.3 Successor and Assigns. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor, and shall, together with the rights and remedies of Secured
Party hereunder, inure to the benefit of Secured Party, any future holder of any
of the Secured Obligations and their respective successors and assigns. No sales
of participations, other sales, assignments, transfers or other dispositions of
any agreement governing or instrument evidencing the Secured Obligations or any
portion thereof or interest therein shall in any manner affect the lien granted
to Secured Party hereunder.
11.4 Governing Law. In all respects, including all matters of
construction, validity and performance, this Security Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of California applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws, except to
the extent that the UCC provides for the application of the law of a different
jurisdiction.
[Signature pages follow.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
ADDRESS OF GRANTOR WINWIN GAMING, INC., as Grantor
0000 X. Xxxxxxx Xxxx. By: /s/ Xxxxxxx Xxxxxx
Suite 200 ---------------------------------
Xxx Xxxxx, XX 00000 Printed Name: Xxxxxxx Xxxxxx
-----------------------
Title: CEO/President
------------------------------
TAXPAYER IDENTIFICATION NUMBER JURISDICTION OF ORGANIZATION
OF GRANTOR OF GRANTOR
00-0000000 Delaware
ACCEPTED AND ACKNOWLEDGED BY:
SOLIDUS NETWORKS, INC., as Secured Party
By: /s/ Xxx X. Xxxxxx
------------------------------------
Printed Name: Xxx X. Xxxxxx
--------------------------
Title: Executive Vice President
---------------------------------
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