AMENDED AND RESTATED
SECURITY AGREEMENT
This Amended and Restated Security Agreement (the "Agreement") is entered
into as of November 24, 1999 by and between B III CAPITAL PARTNERS, L.P., a
Delaware limited partnership ("Secured Party") and SILICON GAMING, INC., a
California corporation ("Grantor").
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound, as collateral security
for the prompt and complete payment when due of its obligations under (i) the
Securities Purchase Agreement, dated as of September 30, 1997, by and between
Grantor and Secured Party, as amended by Amendment No. 1 to Agreement, dated
July 8, 1998 and as further amended by Amendment Xx. 0 xx Xxxxxxxxx, xxxxx
Xxxxxxxx 00, 0000, (xx) the Securities and Purchase Agreement, dated as of
November 24, 1999 (the "1999 Purchase Agreement"), by and between Silicon
Gaming, Inc. and B III Capital Partners, L.P. (collectively, the "Purchase
Agreements"), and as each of the foregoing may from time to time be extended,
renewed, restated, supplemented or further amended, Grantor hereby represents,
warrants, covenants and agrees as follows:
AGREEMENT
1. THE SECURITY. To secure the Indebtedness (as hereinafter defined),
Grantor grants and pledges to Secured Party a security interest in all of
Grantor's right, title and interest (whether now existing or hereafter acquired
or created) in, to and under the following, including without limitation all
proceeds thereof (the "Collateral"):
(a) all equipment and fixtures (including, without limitation,
furniture, vehicles and other machinery and office equipment), together with all
additions and accessions thereto and replacements therefor;
(b) all inventory (including, without limitation, (i) all raw
materials, work in progress and finished goods and (ii) all such goods which are
returned to or repossessed by the Company), together with all additions and
accessions thereto, replacements therefor, products thereof and documents
therefor;
(c) all accounts, chattel paper, contract rights and rights to the
payment of money;
(d) all general intangibles (including, without limitation, (i)
customer and supplier lists and contracts, books and records (including, but not
limited to, any computer-readable memory and any computer hardware or software
necessary to process such memory), insurance policies, tax refunds, contracts
for the purchase of real or personal property (collectively, the "Books and
Records"), (ii) all copyrights, patents, trademarks, trade names, mask works,
trade secrets, and service marks, whether registered or unregistered, and
whether state, federal or common law (including, without limitation, those
copyrights, patents, trademarks and mask works, and pending applications for
registration thereof, listed on Schedules A, B, C, and D hereto), (iii) all
licenses to use, applications for, and other rights to, such patents,
copyrights, trademarks, trade names and service marks (other than licenses whose
terms prohibit the granting of a security interest therein), and (iv) all
goodwill of the Company);
(e) all deposit accounts, money, certificated and uncertificated
securities, instruments and documents; and
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(f) all proceeds of the foregoing (including, without limitation,
whatever is receivable or received when Collateral or proceeds is sold,
collected, exchanged, returned, substituted or otherwise disposed of, whether
such disposition is voluntary or involuntary, including rights to payment and
return premiums and insurance proceeds under insurance with respect to any
Collateral, and all rights to payment with respect to any cause of action
affecting or relating to the Collateral).
2. THE INDEBTEDNESS. The Collateral secures and will secure all obligations
and Indebtedness. For the purposes of this Agreement, "Indebtedness" shall mean
all obligations and liabilities of Grantor under the Purchase Agreements and the
Transaction Documents (as defined in the 1999 Purchase Agreement) entered into
in connection therewith and with respect to Indebtedness and obligations of
Silicon Gaming, Inc. whether now existing or hereafter incurred or created,
whether voluntary or involuntary, whether due or not due, whether absolute or
contingent (including but not limited to obligations as a guarantor of the
indebtedness of another), and whether incurred directly or acquired by Secured
Party by assignment or otherwise. Unless Grantor shall have otherwise agreed in
writing, "Indebtedness" shall not include "consumer credit" subject to the
disclosure requirements of the Federal Truth in Lending Act or any regulations
promulgated thereunder.
3. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants to
Secured Party as follows:
(a) Exhibits A, B, C, and D to this Agreement are complete lists of
all copyright registrations and applications, patent registrations and
applications, trademark and service xxxx registrations and applications, and
mask work registrations and applications respectively in which Grantor has any
right, title, or interest, throughout the world.
(b) Grantor has full power and authority to execute this Agreement and
perform its obligations hereunder, and to subject the Collateral to the security
interest transferred hereby, and Grantor has entered and will enter into written
agreements with each of its present and future employees, agents and consultants
which will enable it to comply with the covenants herein contained.
(c) Grantor is the lawful owner of the entire right, title and
interest in and to all the Collateral, free and clear of all liens, charges,
encumbrances, claims of infringement, setoffs, counterclaims, licenses, shop
rights, and covenants not to xxx third persons, except in favor of Secured
Party, liens securing the Senior Discount Notes and otherwise as Secured Party
has consented to in writing.
4. GRANTOR'S COVENANTS. Grantor covenants and warrants that unless
compliance is waived by Secured Party in writing:
(a) Grantor will properly preserve the Collateral; defend the
Collateral against any adverse claims and demands; and keep accurate Books and
Records.
(b) Grantor has notified Secured Party in writing of, and will notify
Secured Party in writing prior to any change in the locations of (i) Grantor's
place of business or Grantor's chief executive office if Grantor has more than
one place of business and (ii) any Collateral, including the Books and Records.
(c) Grantor will notify Secured Party in writing prior to any change
in Grantor's name, identity or business structure.
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(d) Grantor will maintain and keep in force insurance covering
Collateral designated by Secured Party against fire and extended coverages. Such
insurance shall require losses to be paid on a replacement cost basis, be issued
by insurance companies acceptable to Secured Party and include a loss payable
endorsement in favor of Secured Party in a form acceptable to Secured Party.
(e) Grantor has not granted and will not grant any security interest
in any of the Collateral except to Secured Party and the security interest of
the holders of the Senior Discount Notes and the New Notes, and will keep the
Collateral free of all liens, claims, security interests and encumbrances of any
kind or nature, except the security interest of Secured Party and to the holders
of the (i) Senior Discount Notes and (ii) New Notes.
(f) Grantor will not sell, lease, agree to sell or lease, or otherwise
dispose of, or remove from Grantor's place of business (i) any inventory except
in the ordinary course of business as heretofore conducted by Grantor or (ii)
any other Collateral except with the prior written consent of Secured Party.
(g) Grantor will promptly notify Secured Party in writing of any event
which affects the value of any Collateral, the ability of Grantor or Secured
Party to dispose of any Collateral, or the rights and remedies of Secured Party
in relation thereto, including, but not limited to, the levy of any legal
process against any Collateral and the adoption of any marketing order,
arrangement or procedure affecting the Collateral, whether governmental or
otherwise.
(h) If any Collateral is or becomes the subject of any negotiable
document of title including any warehouse receipt or xxxx of lading, Grantor
shall immediately deliver such document to Secured Party.
(i) Until Secured Party exercises its rights to make collection,
Grantor will diligently collect all Collateral.
5. ADDITIONAL OPTIONAL REQUIREMENTS. Grantor agrees that Secured Party may
at its option at any time, whether or not the indebtedness is in default:
(a) Require Grantor to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver daily such
collections and proceeds to Secured Party in kind.
(b) Require Grantor to deliver to Secured Party (i) copies of or
extracts from the Books and Records, and (ii) information on any contracts or
other matters affecting the Collateral.
(c) Examine the Collateral, including the Books and Records, and make
copies of or extracts from the Books and Records, and for such purposes enter at
any reasonable time upon the property where any Collateral or any Books and
Records are located.
(d) Require Grantor to deliver to Secured Party any instruments or
chattel paper.
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(e) Require Grantor to obtain Secured Party's prior written consent to
any sale, lease, agreement to sell or lease, or other disposition of any
inventory except such sales or dispositions made in the ordinary course of
business.
(f) Notify any account debtors, any buyers of the Collateral, or any
other persons of Secured Party's interest in the Collateral.
(g) Upon the occurrence and during the continuance of an Event of
Default, require Grantor to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Secured Party's
exclusive control.
(h) Upon the occurrence and during the continuance of an Event of
Default, demand and collect any payments and proceeds of the Collateral. In
connection therewith Grantor irrevocably authorizes Secured Party to endorse or
sign Grantor's name on all checks, drafts, collections, receipts and other
documents, and to take possession of and open the mail addressed to Grantor and
remove therefrom any payments and proceeds of the Collateral.
6. DEFAULTS. Any one or more of the following shall be a default hereunder:
(a) Grantor shall fail to pay any indebtedness to Secured Party when
due.
(b) Grantor shall breach any term, provision, warranty or
representation under this Agreement, or under any other security agreement,
contract between Grantor and Secured Party, or any other obligation of Grantor
to Secured Party.
(c) Any custodian, receiver or trustee shall be appointed to take
possession, custody or control of all or a substantial portion of the assets of
Grantor.
(d) Grantor shall become insolvent or unable to pay debts as they
mature or admits in writing its inability to pay its debts as they become due,
shall fail in business, shall make a general assignment for the benefit of
creditors or shall voluntarily file under any bankruptcy or similar law.
(e) Any involuntary petition in bankruptcy shall be filed against
Grantor.
(f) Any levies of attachment, executions, tax assessments or similar
processes shall be issued against the Collateral and shall not be released
within ten days thereof.
(g) Any financial statements, profit and loss statements, borrowing
certificates or schedules, or other statements furnished by Grantor to Secured
Party prove false or incorrect in any material respect.
7. SECURED PARTY'S REMEDIES AFTER DEFAULT. In the event of any default,
Secured Party may do any one or more of the following:
(a) Declare any Indebtedness secured hereby immediately due and
payable, without notice or demand.
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(b) Enforce the security interest given hereunder pursuant to the
Uniform Commercial Code (as enacted in the applicable jurisdiction) and any
other applicable law, including, without limitation, any gaming law.
(c) Enforce the security interest of Secured Party in any deposit
account of Grantor.
(d) Require Grantor to assemble the Collateral, including the Books
and Records, and make them available to Secured Party at a place designated by
Secured Party.
(e) Enter upon the property where any Collateral, including any Books
and Records are located and take possession of such Collateral and such Books
and Records, and use such property (including any buildings and facilities) and
any of Grantor's equipment, if Secured Party deems such use necessary or
advisable in order to take possession of, hold, preserve, process, assemble,
prepare for sale or lease, market for sale or lease, sell or lease or otherwise
dispose of, any Collateral.
(f) Grant extensions and compromise or settle claims with respect to
the collateral for less than face value, all without prior notice to Grantor.
(g) Use or transfer any of Grantor's rights and interests in any
Intellectual Property now owned or hereafter acquired by Grantor, if Secured
Party deems such use or transfer necessary or advisable in order to take
possession of, hold, preserve, process, assemble, prepare for sale or lease,
market for sale or lease, sell or lease, or otherwise dispose of, any
Collateral. Grantor agrees that any such use or transfer shall be without any
additional consideration to Grantor. As used in this paragraph, "Intellectual
Property" includes, but is not limited to, all patent, copyright, trade secrets,
computer software, mask works, service marks, trademarks, trade names, trade
styles, applications for any of the foregoing, customer lists, working drawings,
instructional manuals, and rights in processes for technical manufacturing,
packaging and labeling in which Grantor has any right or interest, whether by
ownership, license, contract or otherwise.
(h) Have a receiver appointed by any court of competent jurisdiction
to take possession of the Collateral, subject to any approvals required pursuant
to any gaming laws.
(i) Take such measures as Secured Party may deem necessary or
advisable to take possession of, hold, preserve, process, assemble, insure,
prepare for sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Grantor hereby irrevocably constitutes and
appoints Secured Party as Grantor's attorney-in-fact to perform all acts and
execute all documents in connection therewith.
8. MISCELLANEOUS.
(a) In the event of a sale of Collateral (whether under power of sale
herein granted, pursuant to judicial process or otherwise), Grantor will duly
execute and acknowledge all documents necessary or advisable to record title to
such Collateral in the name of the purchaser, including, without limitation,
valid and recordable assignments of such collateral.
(b) Any waiver, expressed or implied, of any provision hereunder and
any delay or failure by Secured Party to enforce any provision shall not
preclude Secured Party from enforcing any such provision thereafter.
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(c) This Agreement shall be governed by and construed according to the
laws of the State of California, to the jurisdiction of which Grantor hereby
submits.
(d) All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any single or
partial exercise of any right or remedy shall not preclude the further exercise
thereof or the exercise of any other right or remedy.
(e) All terms not defined herein are used as set forth in the Uniform
Commercial Code (as enacted in the applicable jurisdiction).
(f) In the event of any action by Secured Party to enforce this
Agreement or to protect the security interest of Secured Party in the
Collateral, Grantor agrees to pay the costs thereof, reasonable attorney's fees
and other expenses.
(g) This Agreement and any agreement or document attached hereto,
referred to herein or executed concurrently herewith, integrate all the terms
and conditions mentioned herein or incidental hereto, and supersede all oral
negotiations and prior writings in respect to the subject matter hereof.
(h) Grantor shall, at the request of Secured Party, execute such other
agreements, documents, instruments, or financing statements in connection with
this Agreement as Secured Party may reasonably deem necessary.
(i) All notes, security agreements, subordination agreements and other
documents executed by Grantor or furnished to Secured Party in connection with
this Agreement must be in form and substance satisfactory to Secured Party.
(j) In the event of any action by Secured Party to enforce this
Agreement or to protect the security interest of Secured Party in the
Collateral, or to take possession of, hold, preserve, process, assemble, insure,
prepare for sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, Grantor agrees to pay immediately the costs and
expenses thereof, together with reasonable attorneys' fees and allocated costs
for in-house legal services.
(k) Notwithstanding any contrary provision contained herein, this
Agreement is subject to that certain Intercreditor Agreement dated as of
December 31, 1997, between Silicon Valley Bank and B III Capital Partners, L.P.,
a Delaware limited partnership.
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IN WITNESS WHEREOF, the parties have caused this Security Agreement to be
duly executed by its officers thereunto duly authorized as of the first date
written above.
GRANTOR:
Address of Grantor: SILICON GAMING, INC., a
California corporation
c/o Silicon Gaming, Inc.
0000 Xxxx Xxxxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000 By: _____________________________
Attn: President Title: __________________________
SECURED PARTY:
Address of Secured Party: B III CAPITAL PARTNERS. L.P.,
a Delaware limited partnership
c/o DDJ Capital Management, LLC
000 Xxxxxx Xxxxxx, Xxxxx X-0 By: DDJ Capital III, LLC, its
Xxxxxxxxx, XX 00000 General Partner
Attn: General Counsel
By: DDJ Capital Management, LLC,
its Manager
By: _________________________
Title: ______________________
