Exhibit 10.7
SECURITY AGREEMENT
This SECURITY AGREEMENT (as amended,
restated, supplemented or otherwise modified from time to time,
including all exhibits and schedules hereto, this
“Agreement”) is made as of August 15, 2008,
between PROGRESSIVE GAMING INTERNATIONAL CORPORATION, a Nevada
corporation (the “ Issuer ” or “
Grantor ”), and INTERNATIONAL GAME TECHNOLOGY, a
Nevada corporation, for itself and as agent for the Purchasers
defined below (together with its successors and assigns, if any, in
such capacity “ Agent ”).
W I T N E S S E T H
:
WHEREAS, pursuant to that certain
Note and Warrant Purchase Agreement dated as of August 4, 2008
(as amended, restated, supplemented or otherwise modified from time
to time, including all exhibits and schedules thereto, the “
Note Purchase Agreement ”) among Grantor, each
Subsidiary of the Grantor listed as a “Guarantor” on
the signature pages thereto (such Subsidiaries, together with any
additional entities that become guarantors pursuant to the
requirements of Section 6.01(b) thereof or otherwise,
each a “ Guarantor ” and collectively, jointly
and severally, the “ Guarantors ”), the
noteholders that are, from time to time, parties thereto (each a
“ Purchaser ” and collectively, the “
Purchasers ”), and Agent, the Purchaser Group is
willing to make certain financial accommodations available to
Issuer from time to time pursuant to the terms and conditions
thereof, and
WHEREAS, Agent has agreed to act as
agent for the benefit of the Purchaser Group in connection with the
transactions contemplated by this Agreement, and
WHEREAS, in order to induce the
Purchaser Group to enter into the Note Purchase Agreement and the
other Purchase Documents and to induce the Purchaser Group to make
financial accommodations to Issuer as provided for in the Note
Purchase Agreement, Grantor has agreed to grant a continuing
security interest in and to the Collateral in order to secure the
prompt and complete payment, observance and performance of, among
other things, (a) all of the present and future obligations
(other than the obligations of the Issuer to deliver Conversion
Shares upon conversion of any Note but not any monetary amount due
under any Note, including without limitation, any amounts due for
failure to timely deliver the Conversion Shares) of Grantor arising
from this Agreement, the Note Purchase Agreement, or any other
Purchase Document, and (b) all Obligations of Grantor or any
Guarantor, including, in the case of each of clauses (a) and
(b), reasonable attorneys fees and expenses and any interest, fees
or expenses that accrue after the filing of an Insolvency
Proceeding, regardless of whether allowed or allowable in whole or
in part as a claim in any Insolvency Proceeding (clauses
(a) and (b) being hereinafter referred to as the “
Secured Obligations ”), it being acknowledged and
agreed that for purposes of the definition of “Secured
Obligations,” the “Purchase Documents” shall
exclude the Warrants, the Conversion Shares and the Warrant Shares,
and
NOW, THEREFORE, for and in
consideration of the recitals made above and other good and
valuable consideration, the receipt, sufficiency and adequacy of
which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms . All
capitalized terms used herein (including, in the preamble and
recitals hereof) without definition shall have the meanings
ascribed thereto in the Note Purchase Agreement. Any terms used in
this Agreement that are defined in the Code shall be construed and
defined as set forth in the Code unless otherwise defined herein or
in the Note Purchase Agreement; provided , however ,
that to the extent that the Code is used to define any term herein
and such term is defined differently in different Articles of the
Code, the definition of such term contained in Article 9 of the
Code shall govern. In addition to those terms defined elsewhere in
this Agreement, as used in this Agreement, the following terms
shall have the following meanings:
(a) “ Account ”
means an account (as that term is defined in the Code).
(b) “ Account Debtor
” means any Person who is obligated on an Account, chattel
paper, or a general intangible.
(c) “ Agent ” has
the meaning specified therefor in the preamble to this
Agreement.
(d) “ Agreement ”
has the meaning specified therefor in the preamble to this
Agreement.
(e) “ Books ”
means books and records (including Grantor’s Records
indicating, summarizing, or evidencing Grantor’s assets
(including the Collateral) or liabilities, Grantor’s Records
relating to Grantor’s business operations or financial
condition, and Grantor’s goods or General Intangibles related
to such information).
(f) “ Capital Stock
” has the meaning specified therefor in the Note Purchase
Agreement.
(g) “ Cash and Cash
Equivalents ” has the meaning specified therefor in the
Note Purchase Agreement.
(h) “ CFC ” has
the meaning specified therefor in the Note Purchase
Agreement.
(i) “ Chattel Paper
” means chattel paper (as that term is defined in the Code)
and includes tangible chattel paper and electronic chattel
paper.
(j) “ Code ”
means the New York Uniform Commercial Code, as in effect from time
to time; provided, however, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment,
perfection, priority, or remedies with respect to Agent’s
Lien on any Collateral is governed by the Uniform Commercial Code
as enacted and in effect in a jurisdiction other than the State of
New York, the term “Code” shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such
attachment, perfection, priority, or remedies.
(k) “ Collateral
” has the meaning specified therefor in Section 2
hereof.
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(l) “ Commercial Tort
Claims ” means commercial tort claims (as that term is
defined in the Code), and includes those commercial tort claims
listed on Schedule 3 attached hereto (“ Commercial
Tort Claims ”).
(m) “ Control Agreement
” means a control agreement, in form and substance customary
for such agreements and satisfactory to Agent, executed and
delivered by Grantor, Agent, and the applicable securities
intermediary (with respect to a Securities Account) or bank (with
respect to a Deposit Account).
(n) “ Copyright Security
Agreement ” means each Copyright Security Agreement
between Grantor and Agent, for the benefit of the Purchaser Group,
in substantially the form of Exhibit A attached hereto,
pursuant to which Grantor has granted to Agent, for the benefit of
the Purchaser Group, a security interest in all its
Copyrights.
(o) “ Copyrights
” means any and all copyrights and copyright registrations,
including, the copyright registrations and recordings thereof and
all applications in connection therewith listed on Schedule 1
attached hereto and made a part hereof, and (i) all reissues,
continuations, extensions or renewals thereof, (ii) all
income, royalties, damages and payments now and hereafter due or
payable under and with respect thereto, including, payments under
all licenses entered into in connection therewith and damages and
payments for past or future infringements or dilutions thereof,
(iii) the right to sue for past, present and future
infringements and dilutions thereof, (iv) the goodwill of
Grantor’s business symbolized by the foregoing and connected
therewith, and (v) all of Grantor’s rights corresponding
thereto throughout the world.
(p) “ Deposit Account
” means a “deposit account” (as that term is
defined in the Code).
(q) “ Equipment ”
means “equipment” (as that term is defined in the Code)
and includes machinery, machine tools, motors, furniture,
furnishings, fixtures, vehicles (including motor vehicles),
computer hardware, tools, parts, and goods (other than consumer
goods, farm products, or Inventory), wherever located, including
all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the
foregoing.
(r) “ Event of Default
” has the meaning specified therefor in
Section 8.01 of the Note Purchase Agreement.
(s) “ Excluded Assets
” means (i) any leases, permits, licenses (including
Gaming Licenses) or other contracts or agreements or other assets
or property to the extent that a grant of a Lien thereon
(x) is prohibited by law or would constitute or result in the
abandonment, invalidation or unenforceability of any right, title
or interest of the Grantor therein pursuant to applicable law,
(y) would require the consent of third parties and such
consent has not been obtained after Grantor has used commercially
reasonable efforts to try to obtain such consent, or (z) other
than as a result of requiring a consent of third parties that has
not been obtained, would result in a breach of the provisions
thereof, or constitute a default under or result in a termination
of, such lease, permit, license, contract or agreement (other than
to the extent that any such provisions thereof would be rendered
ineffective pursuant to Section 9-406, 9-407 or 9-408 of the
Code (or any successor provision or provisions) of any relevant
jurisdiction or any other
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applicable law); provided ,
however , that Excluded Assets shall not include (and,
accordingly, Collateral shall include) any and all Proceeds of any
of such assets; and provided , further , that, with
respect to each Excluded Asset described in this clause (i),
immediately upon the uneffectiveness, lapse or termination of such
prohibition, or the obtaining of any required approvals, the
provisions that would be so breached or such breach, default or
termination or immediately upon the obtaining of any such consent
or approval, the Excluded Assets shall not include, and Grantor
shall be deemed to have granted a security interest in, all such
leases, permits, licenses, contracts and agreements and such other
assets and property as if such prohibition, the provisions that
would be so breached or such breach, default or termination had
never been in effect and as if such consent or approval had not
been required; (ii) the Capital Stock of PGIC NV, a Nevada
corporation; provided that immediately upon approval by the
Nevada Gaming Authorities of the pledge of the Capital Stock of
PGIC NV to Agent, the Capital Stock of PGIC NV shall cease to
constitute Excluded Assets and the Issuer shall be deemed to have
granted a security interest to Agent in the Capital Stock of PGIC
NV; provided , however , that Excluded Assets shall
not include (and, accordingly, Collateral shall include) any and
all Proceeds of the Capital Stock of PGIC NV; (iii) voting
Capital Stock of any Subsidiary of Grantor that is a CFC solely to
the extent that (A) such Capital Stock represents more than
65% of the outstanding voting Capital Stock of such Subsidiary, and
(B) hypothecating more than 65% of the total outstanding
voting Capital Stock of such Subsidiary would result in material
adverse tax consequences (it being acknowledged that only 65% of
the outstanding voting Capital Stock of Progressive Gaming
International (Netherlands) B.V. shall be pledged on the Closing
Date); (iv) the voting Capital Stock of Progressive Gaming
International (Australasia) Pty Ltd (it being acknowledged that the
pledge of such Capital Stock shall be the subject of a separate
pledge agreement executed by the Issuer in accordance with the
Purchase Agreement); and (v) the certificate of deposit held
in account number 9687421116 at Wells Fargo Bank, National
Association which secures the letter of credit for the benefit of
American Express Travel Related Services Company, Inc.
(t) “ Gaming Laws
” has the meaning specified therefor in the Note Purchase
Agreement.
(u) “ Gaming License
” has the meaning specified therefor in the Note Purchase
Agreement.
(v) “ Gaming
Subsidiaries ” has the meaning specified therefor in the
Note Purchase Agreement.
(w) “ General
Intangibles ” means general intangibles (as that term is
defined in the Code) and includes payment intangibles, contract
rights, rights to payment, rights arising under common law,
statutes, or regulations, choses or things in action, goodwill
(including the goodwill associated with any Trademark, Patent, or
Copyright), Patents, Trademarks, Copyrights, URLs and domain names,
industrial designs, other industrial or Intellectual Property or
rights therein or applications therefor, whether under license or
otherwise, programs, programming materials, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, including Intellectual
Property Licenses, infringement claims, computer programs,
information contained on computer disks or tapes, software,
literature, reports,
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catalogs, pension plan refunds, pension plan
refund claims, insurance premium rebates, tax refunds, and tax
refund claims, uncertificated securities, and any other personal
property other than commercial tort claims, money, Accounts,
Chattel Paper, Deposit Accounts, goods, Investment Related
Property, Negotiable Collateral, and oil, gas, or other minerals
before extraction.
(x) “ Grantor ”
has the meaning specified therefor in the preamble to this
Agreement.
(y) “ Guarantor ”
and “ Guarantors ” have the meaning specified
therefor in the recitals to this Agreement.
(z) “ Insolvency
Proceeding ” has the meaning specified therefor in the
Note Purchase Agreement.
(aa) “ Intellectual
Property ” means any and all Intellectual Property
Licenses, Patents, Copyrights, Trademarks, the goodwill associated
with such Trademarks, trade secrets and customer lists.
(bb) “ Intellectual
Property Licenses ” means any license of patent,
trademark, copyright or other intellectual property, including
software license agreements with any other party, whether Grantor
is a licensee or licensor under any such license agreement,
including, the license agreements listed on Schedule 1 attached
hereto and made a part hereof, and the right to use the foregoing
in connection with the enforcement of the Purchaser Group’s
rights under the Purchase Documents, including, the right to
prepare for sale and sell any and all Inventory and Equipment now
or hereafter owned by Grantor and now or hereafter covered by such
licenses.
(cc) “ Inventory
” means inventory (as that term is defined in the
Code).
(dd) “ Investment Related
Property ” means (i) any and all investment property
(as that term is defined in the Code), and (ii) any and all of
the following regardless of whether classified as investment
property under the Code: all Pledged Interests, Pledged Operating
Agreements, and Pledged Partnership Agreements.
(ee) “ Issuer ”
has the meaning specified therefor in the recitals to this
Agreement.
(ff) “ Mississippi Gaming
Authorities ” has the meaning specified therefor in the
Note Purchase Agreement.
(gg) “ Negotiable
Collateral ” means letters of credit, letter of credit
rights, instruments, promissory notes, drafts and documents (as
that term is defined in the Code).
(hh) “ Nevada Gaming
Authorities ” has the meaning specified therefor in the
Note Purchase Agreement.
(ii) “ NGC ”
means the Nevada Gaming Commission.
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(jj) “ NGCB ”
means the State Gaming Control Board in Nevada.
(kk) “ Note Purchase
Agreement ” has the meaning specified therefor in the
recital to this Agreement.
(ll) “ Obligations
” has the meaning specified therefor in the Note Purchase
Agreement.
(mm) “ Patent Security
Agreement ” means each Patent Security Agreement between
Grantor and Agent, for the benefit of the Purchaser Group, in
substantially the form of Exhibit B attached hereto, pursuant to
which Grantor has granted to Agent, for the benefit of the
Purchaser Group, a security interest in all its Patents.
(nn) “ Patents ”
means any and all patents and patent applications, including, the
patents and patent applications listed on Schedule 1 attached
hereto and made a part hereof, and (i) all renewals thereof,
(ii) all income, royalties, damages and payments now and
hereafter due or payable under and with respect thereto, including,
payments under all licenses entered into in connection therewith
and damages and payments for past or future infringements or
dilutions thereof, (iii) the right to sue for past, present
and future infringements and dilutions thereof, and (iv) all
of Grantor’s rights corresponding thereto throughout the
world.
(oo) “ Permitted Liens
” has the meaning specified therefor in the Note Purchase
Agreement.
(pp) “ Person ”
has the meaning specified therefor in the Note Purchase
Agreement.
(qq) “ Pledged
Companies ” means, each Person listed on Schedule 2
hereto as a “Pledged Company”, together with each other
Person, all or a portion of whose Capital Stock, is acquired or
otherwise owned by Grantor after the Closing Date.
(rr) “ Pledged
Interests ” means all of Grantor’s right, title and
interest in and to all of the Capital Stock now or hereafter owned
by Grantor, regardless of class or designation, including, in each
of the Pledged Companies, and all substitutions therefor and
replacements thereof, all proceeds thereof and all rights relating
thereto, including, any certificates representing the Capital
Stock, the right to request after the occurrence and during the
continuation of an Event of Default that such Capital Stock be
registered in the name of Agent or any of its nominees, the right
to receive any certificates representing any of the Capital Stock
and the right to require that such certificates be delivered to
Agent together with undated powers or assignments of investment
securities with respect thereto, duly endorsed in blank by Grantor,
all warrants, options, share appreciation rights and other rights,
contractual or otherwise, in respect thereof and of all dividends,
distributions of income, profits, surplus, or other compensation by
way of income or liquidating distributions, in cash or in kind, and
all cash, instruments, and other property from time to time
received, receivable, or otherwise distributed in respect of or in
addition to, in substitution of, on account of, or in exchange for
any or all of the foregoing.
(ss) “ Pledged Interests
Addendum ” means a Pledged Interests Addendum
substantially in the form of Exhibit C to this
Agreement.
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(tt) “ Pledged Operating
Agreements ” means all of Grantor’s rights, powers,
and remedies under the limited liability company operating
agreements of each of the Pledged Companies that is a limited
liability company.
(uu) “ Pledged Partnership
Agreements ” means all of Grantor’s rights, powers,
and remedies under the partnership agreements of each of the
Pledged Companies that is a partnership.
(vv) “ Proceeds ”
has the meaning specified therefor in Section 2
hereof.
(ww) “ Purchase
Document ” has the meaning specified therefore in the
Note Purchase Agreement.
(xx) “ Purchaser
” and “ Purchasers ” have the meaning
specified therefor in the recitals to this Agreement.
(yy) “ Purchaser Group
” means, individually and collectively, each of the
Purchasers and Agent.
(zz) “ Real Property
” means any estates or interests in real property now owned
or hereafter acquired by Grantor and the improvements
thereto.
(aaa) “ Records ”
means information that is inscribed on a tangible medium or which
is stored in an electronic or other medium and is retrievable in
perceivable form.
(bbb) “ Required
Library ” has the meaning set forth in the Note Purchase
Agreement.
(ccc) “ Security
Interest ” has the meaning specified therefor in
Section 2 in hereof.
(ddd) “ Secured
Obligations ” has the meaning specified in the recitals
to this Agreement
(eee) “ Securities
Account ” means a securities account (as that term is
defined in the Code).
(fff) “ Source Code
” means a complete copy of the annotated source code for each
current version or versions (including all a.x and a.x.y releases
but excluding the a.x.y versions that are bug fixes) and related
materials of or for each item of computer software programs or
other technology of Grantor constituting the Required Library,
in machine-readable form on machine-readable storage medium
suitable for long-term storage and compatible with
commonly-available computer systems then in use by
Grantor’s licensees of the computer software programs
comprising the Required Library and which, when compiled, will
produce the object code version of said software, including without
limitation all existing encryption code, system documentation and
flowcharts, algorithm and subroutine descriptions, memory and
overlay maps, name and/or label conventions, program narrators,
source code listings and other documentation and commentary
necessary or desirable for a reasonably competent
computer
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programmer to install, maintain, service, and
otherwise use the software programs comprising the Required
Library, and with respect to the currently shipping versions of the
software programs comprising the Required Library, to modify and
enhance such software programs, without the aid of Grantor, as may
be necessary or desirable for the Agent, as agent, to benefit
from its rights under the Note Purchase Agreement and this
Agreement.
(ggg) “ Source Code Escrow
Agreement ” means a source code escrow agreement with
respect to the Source Code, in form and substance satisfactory
to Agent, among Grantor, the Guarantors, Agent, and
an escrow agent satisfactory to Agent in its sole and absolute
discretion.
(hhh) “ Supporting
Obligation ” means Supporting Obligation (as such term is
defined in the Code), and includes letters of credit and guaranties
issued in support of Accounts, Chattel Paper, documents, General
Intangibles, instruments, or Investment Related
Property.
(iii) “ Trademarks
” means any and all trademarks, trade names, registered
trademarks, trademark applications, service marks, registered
service marks and service mark applications, including, the trade
names, registered trademarks, trademark applications, registered
service marks and service mark applications listed on Schedule 1
attached hereto and made a part hereof, and (i) all renewals
thereof, (ii) all income, royalties, damages and payments now
and hereafter due or payable under and with respect thereto,
including, payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements
or dilutions thereof, (iii) the right to sue for past, present
and future infringements and dilutions thereof, (iv) the
goodwill of Grantor’s business symbolized by the foregoing
and connected therewith, and (v) all of Grantor’s rights
corresponding thereto throughout the world.
(jjj) “ Trademark Security
Agreement ” means each Trademark Security Agreement
between Grantor and Agent, for the benefit of the Purchaser Group,
in substantially the form of Exhibit D attached hereto, pursuant to
which Grantor has granted to Agent, for the benefit of the
Purchaser Group, a security interest in all its
Trademarks.
(kkk) “ URL ”
means “uniform resource locator,” an internet web
address.
2. Grant of Security .
Grantor hereby unconditionally grants, assigns and pledges to
Agent, for the benefit of the Purchaser Group, a continuing
security interest (hereinafter referred to as the “
Security Interest ”) in all personal property of
Grantor whether now owned or hereafter acquired or arising and
wherever located, including Grantor’s right, title, and
interest in and to the following, whether now owned or hereafter
acquired or arising and wherever located (the “
Collateral ”):
(a) all of Grantor’s
Accounts;
(b) all of Grantor’s
Books;
(c) all of Grantor’s Chattel
Paper;
(d) all of Grantor’s interest
with respect to any Deposit Account or Securities
Account;
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(e) all of Grantor’s Equipment
and fixtures;
(f) All of Grantor’s General
Intangibles;
(g) all of Grantor’s
Inventory;
(h) all of Grantor’s
Investment Related Property;
(i) all of Grantor’s
Negotiable Collateral;
(j) all of Grantor’s rights in
respect of Supporting Obligations;
(k) all of Grantor’s interest
with respect to any Commercial Tort Claims;
(l) all of Grantor’s money,
Cash and Cash Equivalents, or other assets of Grantor that now or
hereafter come into the possession, custody, or control of Agent or
any other member of the Purchaser Group;
(m) all of the proceeds and
products, whether tangible or intangible, of any of the foregoing,
including proceeds of insurance or commercial tort claims covering
or relating to any or all of the foregoing, and any and all
Accounts, Books, Cash and Cash Equivalents, Chattel Paper, Deposit
Accounts, Securities Accounts, Equipment, General Intangibles,
Inventory, Investment Related Property, Negotiable Collateral,
Supporting Obligations, Commercial Tort Claims, money, or other
tangible or intangible property resulting from the sale, lease,
license, exchange, collection, or other disposition of any of the
foregoing, the proceeds of any award in condemnation with respect
to any of the property of Grantor, any rebates or refunds, whether
for taxes or otherwise, and all proceeds of any such proceeds, or
any portion thereof or interest therein, and the proceeds thereof,
and all proceeds of any loss of, damage to, or destruction of the
above, whether insured or not insured, and, to the extent not
otherwise included, any indemnity, warranty, or guaranty payable by
reason of loss or damage to, or otherwise with respect to any of
the foregoing Collateral (the “Proceeds”). Without
limiting the generality of the foregoing, the term
“Proceeds” includes whatever is receivable or received
when Investment Related Property or proceeds are sold, exchanged,
collected, or otherwise disposed of, whether such disposition is
voluntary or involuntary, and includes, proceeds of any indemnity
or guaranty payable to Grantor or Agent from time to time with
respect to any of the Investment Related Property.
The foregoing to the contrary
notwithstanding, “Collateral” shall not include the
Excluded Assets.
3. Security for Obligations .
This Agreement and the Security Interest created hereby secures the
payment and performance of all the Secured Obligations, whether now
existing or arising hereafter. Without limiting the generality of
the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Secured Obligations and would be owed
by Grantor to Agent, the Purchaser Group or any of them, but for
the fact that they are unenforceable or not allowable due to the
existence of an Insolvency Proceeding involving Grantor.
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4. Grantor Remains Liable .
Anything herein to the contrary notwithstanding, (a) Grantor
shall remain liable under the contracts and agreements included in
the Collateral, including, the Pledged Operating Agreements and the
Pledged Partnership Agreements, to perform all of the duties and
obligations thereunder to the same extent as if this Agreement had
not been executed, (b) the exercise by Agent or any other
member of the Purchaser Group of any of the rights hereunder shall
not release Grantor from any of its duties or obligations under
such contracts and agreements included in the Collateral, and
(c) none of the members of the Purchaser Group shall have any
obligation or liability under such contracts and agreements
included in the Collateral by reason of this Agreement, nor shall
any of the members of the Purchaser Group be obligated to perform
any of the obligations or duties of Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned
hereunder. Until an Event of Default shall occur and while it
remains continuing, except as otherwise provided in this Agreement,
the Note Purchase Agreement, or the other Purchase Documents,
Grantor shall have the right to possession and enjoyment of the
Collateral for the purpose of conducting the ordinary course of its
business, subject to and upon the terms hereof and of the Note
Purchase Agreement and the other Purchase Documents. Without
limiting the generality of the foregoing, it is the intention of
the parties hereto that record and beneficial ownership of the
Pledged Interests, including, all voting, consensual, and dividend
rights, shall remain in the Grantor until the occurrence and
continuance of an Event of Default and until Agent shall notify
Grantor of Agent’s exercise of voting, consensual, or
dividend rights with respect to the Pledged Interests pursuant to
Section 15 hereof.
5. Representations and
Warranties . Grantor hereby represents and warrants as
follows:
(a) The exact legal name of Grantor
is set forth on the signature page of this Agreement.
(b) Schedule 4 attached
hereto sets forth all Real Property owned by Grantor as of the
Closing Date.
(c) Grantor is the sole legal and
beneficial owner, nonexclusive licensee, or exclusive licensee of
all Intellectual Property that is necessary to, or economically
desirable in connection with, the conduct of its business as
currently contemplated. As of the Closing Date, Grantor has no
interest in, or title to, any Intellectual Property Licenses (other
than Intellectual Property Licenses to use commercial off-the-shelf
software, which Intellectual Property Licenses to use such
commercial off-the-shelf software each individually have a fair
market value of less than $500), Patents, Trademarks, or registered
Copyrights except as set forth on Schedule 1 attached
hereto. This Agreement is effective to create a valid and
continuing Lien on such Copyrights, Intellectual Property Licenses
(except to the extent the same is an Excluded Asset), Patents and
Trademarks and, upon filing of the Copyright Security Agreement
with the United States Copyright Office and filing of the Patent
Security Agreement and the Trademark Security Agreement with the
United States Patent and Trademark Office, and the filing of
appropriate financing statements in the jurisdictions listed on
Schedule 5 hereto, all action necessary or desirable to
protect and perfect the Security Interest in and to Grantor’s
United States Patents, United States Trademarks, or United States
Copyrights has been taken and such perfected Security Interests are
enforceable as such as against any and all creditors of and
purchasers from
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Grantor, except as may be limited by applicable
bankruptcy, insolvency, reorganization moratorium or other similar
laws and except as limited by general principles of equity. Grantor
has no interest in any Copyright registered with the United States
Copyright Office that is necessary in connection with the operation
of the Issuer’s business, except for those registered
Copyrights, identified on Schedule 1 attached
hereto.
(d) This Agreement creates a valid
security interest in the Collateral of Grantor, to the extent a
security interest therein can be created under the Code, securing
the payment of the Secured Obligations. Except to the extent a
security interest in the Collateral cannot be perfected by the
filing of a financing statement under the Code, all filings and
other actions necessary or desirable to perfect and protect such
security interest have been duly taken or will have been taken upon
the filing of a financing statement listing Grantor, as debtor, and
Agent, as secured party, in the jurisdiction listed next to
Grantor’s name on Schedule 5 attached hereto. Upon the
making of such filing, Agent shall have a first priority perfected
security interest (subject to Permitted Liens) in the Collateral of
Grantor to the extent such security interest can be perfected by
the filing of a financing statement. All action by Grantor
necessary to protect and perfect such security interest on each
item of Collateral has been duly taken.
(e) (i) Except for the Security
Interest created hereby, Grantor is and will at all times be the
sole holder of record and the legal and beneficial owner, free and
clear of all Liens other than Permitted Liens, of the Pledged
Interests of Grantor (including the Pledged Interests indicated on
Schedule 2); (ii) all of the Pledged Interests are duly
authorized, validly issued, fully paid and nonassessable and the
Pledged Interests constitute the percentage of the issued and
outstanding Capital Stock of the Pledged Companies identified as
held by Grantor on Schedule 2 hereto as supplemented or modified by
any Pledged Interests Addendum or any Supplement to this Agreement;
(iii) subject to compliance with applicable mandatory Gaming
Laws, Grantor has the right and requisite authority to pledge, the
Investment Related Property pledged by Grantor to Agent as provided
herein; (iv) all actions necessary or desirable to perfect,
establish the first priority of, or otherwise protect,
Agent’s Liens in the Collateral consisting of Investment
Related Property, and the proceeds thereof, will have been duly
taken, under the laws of the United States or any state thereof
(A) upon the execution and delivery of this Agreement;
(B) upon the taking of possession by Agent or any custodian of
Agent of any certificates constituting the Pledged Interests, to
the extent such Pledged Interests are represented by certificates,
together with undated powers endorsed in blank by Grantor;
(C) upon the filing of a financing statement in the
jurisdiction set forth on Schedule 5 attached hereto, with respect
to the Pledged Interests of Grantor that are not represented by
certificates; (D) with respect to any Deposit Accounts and
Securities Accounts, upon the execution and delivery of Control
Agreements with respect thereto; and (E) with respect to the
pledge of the stock of PGIC NV and the restrictions on transfer and
agreement not to encumber the equity securities issued by PGIC NV,
upon the receipt of required approvals from Nevada Gaming
Authorities, and (v) Grantor has delivered to Agent or a
custodian of Agent all certificates representing the Pledged
Interests owned by Grantor to the extent such Pledged Interests are
represented by certificates, and undated powers endorsed in blank
with respect to such certificates. None of the Pledged Interests
owned or held by Grantor has been issued or transferred in
violation of any securities registration, securities disclosure or
similar laws of any jurisdiction to which such issuance or transfer
may be subject.
11
(f) No consent, approval,
authorization, or other order or other action by, and no notice to
or filing with, any Governmental Authority or any other Person is
required (i) for the grant of a Security Interest by Grantor
in and to the Collateral pursuant to this Agreement or for the
execution, delivery, or performance of this Agreement by Grantor,
or (ii) for the exercise by Agent of the voting or other
rights provided for in this Agreement with respect to the
Investment Related Property or the remedies in respect of the
Collateral pursuant to this Agreement, except as may be required in
connection with such disposition of Investment Related Property by
laws affecting the offering and sale of securities generally and
except for approvals required under applicable mandatory Gaming
Laws. No Intellectual Property License material to the conduct of
Grantor’s business to which Grantor is a party requires any
consent for Grantor to grant the security interest granted
hereunder, to the extent permitted under Section 9-408 of the
Code, in Grantor’s right, title or interest in or to any
Copyrights, Patents, Trademarks or material Intellectual Property
Licenses.
(g) To the extent necessary or
desirable in the operation of Grantor’s business and subject
to the Required Library obligations set forth in the Purchase
Documents, Grantor has made in accordance with the procedures and
regulations of the United States Copyright Office and the United
States Patent and Trademark Office, as applicable, all payments,
filings and recordations to protect and maintain its interest in
the Intellectual Property identified on Schedule 1 in a manner
sufficient to claim in the public record Grantor’s ownership
thereof, including (i) making all necessary registration,
maintenance, and renewal fee payments; and (ii) filing all
necessary documents, including all applications for registration of
Copyrights comprising the Required Library, Patents and
Trademarks.
(h) Grantor has and uses
commercially reasonable efforts to enforce a policy requiring its
employees, consultants and contractors to execute appropriate
assignment agreements, pursuant to which each such employee,
consultant or contractor has assigned to Grantor all of such
individual’s rights (including with respect to Intellectual
Property) in and to all ideas, inventions, processes, works of
authorship and other work products that relate to Grantor’s
business and that were conceived, created, authored or developed
during the term of such employee’s, consultant’s or
contractor’s employment or engagement by Grantor. No past or
present employee or contractor of Grantor has any ownership
interest, license, permission or other right in or to any
Intellectual Property that is necessary to, or economically
desirable in connection with, the conduct of Grantor’s
business, except that solely to the extent necessary for the
conduct of their work for or on behalf of Grantor,
(i) employees of Grantor may have permission to use
Intellectual Property Rights and (ii) contractors may have
permission to use or license rights in the Intellectual
Property.
(i) Except as set forth in Schedule
1, no claim has been made in writing and is continuing or, to
Grantor’s knowledge, threatened that the use by Grantor of
any Intellectual Property that is necessary to, or economically
desirable in connection with, the conduct of its business does or
may violate the Intellectual Property rights of any Person. To
Grantor’s knowledge, there is currently no infringement or
unauthorized use of any item of Intellectual Property contained on
Schedule 1 .
(j) Schedule 6 attached
hereto sets forth all motor vehicles owned by Grantor as of the
Closing Date, by model, model year and vehicle identification
number.
12
6. Covenants . Grantor
covenants and agrees with Agent and the Purchaser Group that from
and after the date of this Agreement and until the date of
termination of this Agreement in accordance with
Section 23 hereof:
(a) Possession of Collateral
. In the event that any Collateral, including proceeds, is
evidenced by or consists of Negotiable Collateral, Investment
Related Property, or Chattel Paper, and if and to the extent that
perfection or priority of Agent’s Security Interest is
dependent on or enhanced by possession, Grantor, immediately upon
the request of Agent and in accordance with Section 8
hereof, shall, subject to all applicable mandatory Gaming Laws,
execute such other documents and instruments as shall be requested
by Agent or, if applicable, endorse and deliver physical possession
of such Negotiable Collateral, Investment Related Property, or
Chattel Paper to Agent or a custodian of Agent, together with such
undated powers endorsed in blank as shall be requested by
Agent;
(b) Chattel Paper
.
(i) Grantor shall take all steps
necessary or desirable to grant Agent control of all electronic
Chattel Paper in accordance with the Code and all
“transferable records” as that term is defined in
Section 16 of the Uniform Electronic Transaction Act and
Section 201 of the federal Electronic Signatures in Global and
National Commerce Act as in effect in any relevant
jurisdiction;
(ii) If Grantor retains possession
of any Chattel Paper or instruments (which retention of possession
shall be subject to the extent permitted hereby and by the Note
Purchase Agreement), promptly upon the request of Agent, such
Chattel Paper and instruments shall be marked with the following
legend: “This writing and the obligations evidenced or
secured hereby are subject to the Security Interest of
International Game Technology, a Nevada corporation, as Agent for
the benefit of the Purchaser Group”;
(c) Control Agreements
.
(i) Except to the extent otherwise
permitted by the Note Purchase Agreement, Grantor shall obtain an
authenticated Control Agreement, from each bank holding a Deposit
Account for Grantor;
(ii) Except to the extent otherwise
permitted by the Note Purchase Agreement, Grantor shall obtain
authenticated Control Agreements, from each issuer of
uncertificated securities, securities intermediary, or commodities
intermediary issuing or holding any financial assets or commodities
to or for Grantor;
(d) Letter of Credit Rights .
Grantor shall promptly (and in any event within 5 Business Days
after becoming a beneficiary thereof) upon becoming a beneficiary
of a letter of credit notify Agent thereof and, upon the request by
Agent, enter into, and use commercially reasonable efforts to cause
such issuer or confirming bank to enter into, a tri-party agreement
with Agent and the issuer or confirming bank with respect to
letter-of-credit rights (as that term is defined in the Code)
assigning such letter-of-credit rights to Agent and directing all
payments thereunder to a deposit account designated by Agent, all
in form and substance satisfactory to Agent;
13
(e) Commercial Tort Claims .
Grantor shall promptly (and in any event within 5 Business Days of
receipt thereof), notify Agent in writing upon incurring or
otherwise obtaining a Commercial Tort Claim after the date hereof
against any third party and, upon request of Agent, promptly amend
Schedule 3 to this Agreement, authorize the filing of additional
financing statements or amendments to existing financing statements
and do such other acts or things deemed necessary or desirable by
Agent to give Agent a first priority, perfected security interest
in any such Commercial Tort Claim, subject to Permitted
Liens;
(f) Government Contracts . If
any Account or Chattel Paper arises out of a contract or contracts
with the United States of America or Canada or any department,
agency, or instrumentality thereof, Grantor shall promptly (and in
any event within 5 Business Days of the creation thereof) notify
Agent thereof in writing and execute any instruments or take any
steps reasonably required by Agent in order that all moneys due or
to become due under such contract or contracts shall be assigned to
Agent, for the benefit of the Purchaser Group, and notice thereof
given under the Assignment of Claims Act or other applicable
law;
(g) Intellectual Property
.
(i) Upon request of Agent, in order
to facilitate filings with the United States Patent and Trademark
Office, the United States Copyright Office, Grantor shall execute
and deliver to Agent one or more Copyright Security Agreements,
Trademark Security Agreements, or Patent Security Agreements to
evidence Agent’s Lien on Grantor’s Patents, Trademarks,
or Copyrights (limited, with respect to Copyrights only, to
registered Copyrights and all Copyrights for which an application
for registration has been filed with the United States Copyright
Office), and the General Intangibles of Grantor relating thereto or
represented thereby;
(ii) Grantor shall have the duty, to
the extent necessary or economically desirable in the operation of
Grantor’s business, (A) to promptly sue for
infringement, misappropriation, or dilution and to recover any and
all damages for such infringement, misappropriation, or dilution,
(B) to prosecute diligently any trademark application or
service mark application that is part of the Trademarks pending as
of the date hereof or hereafter until the termination of this
Agreement, (C) to prosecute diligently any patent application
that is part of the Patents pending as of the date hereof or
hereafter until the termination of this Agreement, and (D) to
take all necessary or desirable action to preserve and maintain all
of Grantor’s Patents, Trademarks, Copyrights, Intellectual
Property Licenses, and its rights therein, including the filing of
applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation
proceedings. Any expenses incurred in connection with the foregoing
shall be borne by Grantor. Grantor further agrees (x) not to
abandon any Patent, Trademark, Copyright, or Intellectual Property
License that is necessary or economically desirable in the
operation of Grantor’s business without the prior written
consent of Agent, and (y) to use commercially reasonable
efforts to ensure that any Intellectual Property License entered
into after the Closing Date by Grantor under which Grantor is the
licensor and that generates or, by its terms, will generate revenue
for Grantor, permits the assignment of such agreement (and all
rights of Grantor thereunder) to the Agent (and any successors or
permitted assigns of the Agent);
14
(iii) Grantor acknowledges and
agrees that the Purchaser Group shall have no duties with respect
to the Trademarks, Patents, Copyrights, or Intellectual Property
Licenses. Without limiting the generality of this
Section 6(g) , Grantor acknowledges and agrees that no
member of the Purchaser Group shall be under any obligation to take
any steps to preserve rights in the Trademarks, Patents,
Copyrights, or Intellectual Property Licenses against any other
Person, but Agent may do so at its option from and after the
occurrence and during the continuance of an Event of Default, and
all expenses incurred in connection therewith (including,
reasonable fees and expenses of attorneys and other professionals)
shall be for the sole account of Issuer and shall be chargeable to
the Note Account;
(iv) With respect to all
Intellectual Property that is material to the conduct of
Grantor’s business, Grantor agrees, subject to the last
sentence of this subsection, to take all necessary or desirable
steps, including making all payments and filings in connection with
registration, maintenance, and renewal of Copyrights (limited, with
respect to Copyrights only, to the Required Library), Trademarks,
and Patents in the United States Copyright Office, the United
States Patent and Trademark Office, any other appropriate
government agencies in foreign jurisdictions or in any court, to
maintain all such Intellectual Property. Grantor hereby agrees to
take corresponding steps with respect to all new or acquired
Intellectual Property (limited, with respect to Copyrights only, to
the Copyrights comprising the Required Library) to which it is now
or later becomes entitled that is material to the conduct of its
business. Any expenses incurred in connection with such activities
shall be borne solely by Grantor. Notwithstanding the foregoing, in
no event shall Grantor, either itself or through any agent,
employee, licensee, or designee, file an application for the
registration of any Copyright with the United States Copyright
Office or any similar office or agency without giving Agent prior
written notice thereof or any Patent or Trademark with the United
States Patent and Trademark Office or any similar office or agency
without giving Agent written notice thereof promptly thereafter
(and in no event later than 5 Business Days after such filing).
Promptly upon any such filing, Grantor shall comply with
Section 6(g)(i) hereof;
(v) Within 30 days after the end of
each calendar quarter ending after the requirements of
Section 6(h) hereof are satisfied, Grantor and the
Guarantors shall deliver to Agent documentation satisfactory to
Agent identifying the Copyrights, whether created or acquired
before or after the Closing Date, comprising the Required Library
(including all supporting documentation relating to the
determination of the composition of the Required Library), and the
amount of revenue and the percentage of the aggregate amount of
revenue generated for (A) the preceding calendar quarter, and
(B) the preceding twelve month period ending on the last day
of such calendar quarter, in each case, by and/or arising from each
such Copyright. No more than 5 days following each such date of
delivery, Grantor shall (A) file applications and take any and
all other actions necessary to register or record a transfer of
ownership, as applicable, to Grantor on an expedited basis (if
expedited processing is available in accordance with the applicable
regulations and procedures of the United States Copyright Office
and any similar office of any other United States jurisdiction in
which Copyrights are used) each such Copyright comprising the
Required Library which on the applicable date of delivery is not
already the subject of a valid registration or an application
therefor diligently prosecuted with the United States Copyright
Office (or any similar office of any other United States
jurisdiction in which Copyrights are used) identifying Grantor as
the sole claimant thereof in a manner sufficient to claim in the
public record (or as a co-claimant thereof, if such is the case)
Grantor’s
15
ownership thereof, unless filing such a
Copyright would waive any trade secret rights and (B) cause to
be prepared, executed, and delivered to Agent, with sufficient time
to permit Agent to record no later than 5 days following the date
of registration of or recordation of transfer of ownership, as
applicable, to the Grantor of such Copyrights, (I) a Copyright
Security Agreement or supplemental schedules to the Copyright
Security Agreement reflecting the security interest of Agent in
such Copyrights, which supplemental schedules shall be in form and
content s
