<PAGE>
 
                                                                 EXHIBIT 10.32

This LOAN AND SECURITY AGREEMENT is entered into as of  November 25, 1997, by
and between SILICON VALLEY BANK ("Bank") and SILICON GAMING, INC., a California
corporation ("Borrower").


                                 RECITALS


  Borrower wishes to obtain credit from time to time from Bank, and Bank desires
to extend credit to Borrower.  This Agreement sets forth the terms on which Bank
will advance credit to Borrower, and Borrower will repay the amounts owing to
Bank.



                                 AGREEMENT


  The parties agree as follows:

1       DEFINITIONS AND CONSTRUCTION
        ----------------------------
 

  1.1   Definitions. As used in this Agreement, the following terms shall have
        -----------
the following definitions:

  "Accounts" means all presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods (including, without limitation, the licensing
of software and other technology) or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower's Books relating to any of the foregoing.

  "Adjusted Net Income" means for any fiscal period of the Borrower on a
consolidated basis net income for such period plus, to the extent deducted in
                                              ----                           
determining such net income, all amortized expenses associated with the discount
notes referenced in Section 3.1(h).  A reference to a minimum Adjusted Net
Income amount in parenthesis means that negative Adjusted Net Income (i.e., a
                                                                      ----   
loss) shall not exceed that amount.

  "Advance" means a loan advance under the Committed Line.

  "Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.

  "Bank Expenses" means all reasonable costs or expenses (including reasonable
attorneys' fees and expenses) incurred in connection with the preparation,
negotiation, administration, and enforcement of the Loan Documents; and Bank's
reasonable attorneys' fees and expenses incurred in amending, enforcing or
defending the Loan Documents, (including fees and expenses of appeal or review,
or those incurred in any Insolvency Proceeding) whether or not suit is brought.

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<PAGE>
 
  "Borrower's Books" means all of Borrower's books and records including,
without limitation:  ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or financial condition; and all
computer programs, or tape files, and the equipment, containing such
information.

  "Borrowing Base" means an amount equal to 75% of Eligible Accounts, as
determined by Bank with reference to the most recent Borrowing Base Certificate
delivered by Borrower.

  "Business Day" means any day that is not a Saturday, Sunday, or other day on
which banks in the State of California are authorized or required to close.

  "Closing Date" means the date of this Agreement.

  "Code" means the California Uniform Commercial Code.

  "Collateral" means the property described on Exhibit A attached hereto.
                                               ---------                 

  "Committed Line" means a credit extension of up to $10,000,000.00.

  "Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided that the term "Contingent
                                    --------                          
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business.  The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided that such amount
                                                    --------                 
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.

  "Contract Limit" has the meaning set forth in Section 2.1.3.

  "Copyrights" means any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held.
 
"Credit Extension" means each Advance or any other extension of credit by Bank
for the benefit of Borrower hereunder.

  "Current Assets" means, as of any applicable date, all amounts that should, in

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<PAGE>
 
accordance with GAAP, be included as current assets on the consolidated balance
sheet of Borrower and its Subsidiaries as at such date.

  "Current Liabilities" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Credit
Extensions made under this Agreement, including all Indebtedness that is payable
upon demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt and deferred software license revenue.

  "Eligible Accounts" means those Accounts that arise in the ordinary course of
Borrower's business that comply with all of Borrower's representations and
warranties to Bank set forth in Section 5.4.  Unless otherwise agreed to by Bank
in writing, Eligible Accounts shall not include the following:

  (a)  Accounts that the account debtor has failed to pay within 90 days of
invoice date;

  (b)  Accounts with respect to an account debtor, 50% of whose Accounts the
account debtor has failed to pay within 90 days of invoice date;

  (c)  Accounts with respect to an account debtor, including Affiliates, whose
total obligations to Borrower exceed 25% of all Accounts, to the extent
such obligations exceed the aforementioned percentage, except as approved
in writing by Bank;

  (d)  Accounts with respect to which the account debtor does not have its
principal place of business in the United States, except as approved in
writing by Bank;

  (e)  Accounts with respect to which the account debtor is a federal, state, or
local governmental entity or any department, agency, or instrumentality
thereof, except as approved in writing by Bank;

  (f)  Accounts with respect to which Borrower is liable to the account debtor
but only to the extent of any amounts owing to the account debtor (sometimes
referred to as "contra" accounts, e.g. accounts payable, customer deposits,
credit accounts etc.);

  (g)  Accounts generated by demonstration or promotional equipment, or with
respect to which goods are placed on consignment, guaranteed sale, sale or
return, sale on approval, bill and hold, or other terms by reason of which
the payment by the account debtor may be conditional;

  (h)  Accounts with respect to which the account debtor is an Affiliate,
officer, employee, or agent of Borrower;

  (i)  Accounts with respect to which the account debtor disputes liability or
makes any claim with respect thereto as to which Bank believes, in its sole
discretion, that there may be a basis for dispute (but only to the extent
of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and

                                      -3-
<PAGE>
 
  (j) Accounts the collection of which Bank reasonably determines to be
doubtful;

  "Eligible Balances" means the amount of net, unrestricted, collected, deposits
of Borrower maintained in operating and money market accounts with Bank as
determined after Bank deducts float and balances it requires under its normal
practices as compensation for maintaining such accounts.

  "Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.

  "ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.

  "Exchange Contract" has the meaning set forth in Section 2.1.3.

  "Foreign Exchange Reserve" has the meaning set forth in Section 2.1.3.

  "GAAP" means generally accepted accounting principles as in effect in the
United States from time to time.

  "Gaming Authorities" means, collectively, the Mississippi Gaming Commission,
the Nevada Gaming Commission, the Nevada State Gaming Control Board, and any
other Governmental Body that holds regulatory, licensing or permit authority
over gaming activities conducted by the Borrower or its Gaming Subsidiaries
within its jurisdiction.

  "Gaming Laws" means, collectively, (a) the Nevada Gaming Control Act, as
codified in Chapter 463 of the Nevada Revised Statutes, as amended from time to
time, together with the regulations of the Nevada Gaming Commission promulgated
thereunder, as amended from time to time, (b) the Mississippi Gaming Control
Act, as codified in Chapter 76 of the Mississippi Code Annotated, as amended
from time to time, together with the regulations of the Mississippi Gaming
Commission promulgated thereunder, as amended from time to time, and (c) all
other laws and regulations pursuant to which any Gaming Authority possesses
regulatory, licensing or permit authority over gaming activities conducted by
the Borrower or its Gaming Subsidiaries within its jurisdiction.

  "Gaming Subsidiaries" means Silicon Gaming-Nevada, Inc. Silicon Gaming-
Mississippi, Inc. and any other Subsidiary that is subject to the regulatory,
licensing or permit authority and jurisdiction of any Gaming Authority.

  "Gaming Subsidiaries (Restricted)" means Silicon Gaming-Missouri, Inc. and any
other Subsidiary that Borrower, with the consent of Bank, shall designate to be
such a Subsidiary.

  "Gaming Subsidiaries Stock Restrictions" means the negative pledge (e.g., the
agreement not to encumber pursuant to Section 7.5), and the restrictions on
transfers (e.g., pursuant to Section 7.1), of the capital stock of the
Borrower's Gaming Subsidiaries, but each case only to the extent such negative
pledge or restrictions require the approval of any Gaming

                                      -4-
<PAGE>
 
Authority pursuant to the Gaming Laws.

  "Gaming Subsidiaries Stock Restrictions Requisite Gaming Approvals" has the
meaning set forth in Section 13 hereof.

  "Guarantor" means any present or future guarantor of the Obligations.

  "Guaranty" means a guaranty of the Obligations in form and substance
satisfactory to Bank in its sole and absolute discretion.

  "Indebtedness" means (a) all indebtedness for borrowed money or the deferred
purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

  "Insolvency Proceeding" means any proceeding commenced by or against any
person or entity under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including assignments
for the benefit of creditors, formal or informal moratoria, compositions,
extension generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

  "Intellectual Property Collateral" means

  (a)  Copyrights, Trademarks, Patents, and Mask Works;

  (b)  Any and all trade secrets, and any and all intellectual property rights
in computer software and computer software products now or hereafter existing,
created, acquired or held;

  (c)  Any and all design rights which may be available to Borrower now or
hereafter existing, created, acquired or held;

  (d)  Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;

  (e)  All licenses or other rights to use any of the Copyrights, Patents,
Trademarks, or Mask Works, and all license fees and royalties arising from such
use to the extent permitted by such license or rights;

  (f)  All amendments, renewals and extensions of any of the Copyrights,
Trademarks, Patents, or Mask Works; and

  (g)  All proceeds and products of the foregoing, including without limitation
all payments under insurance or any indemnity or warranty payable in respect of
any of the foregoing.

  "Intercreditor Agreement" means an written agreement between the holders of
the 

                                      -5-
<PAGE>
 
Senior Discount Notes and Bank, and acknowledged by Borrower, which agreement
shall be in form and substance satisfactory to Bank in Bank's sole and
absolute discretion and which shall contain, among other things, an absolute
subordination by the such holders of any Lien now or hereafter held by them as
such holders in the property of Borrower to the liens now or hereafter held by
the Bank, without regard to the order of perfection of such Liens.

  "Inventory" means all present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service (including, without
limitation, pursuant to any revenue sharing agreement), of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above.

  "Inventory on Trial" means Inventory delivered to and maintained at a customer
location for a trial approval period not exceeding 60 days after the date of
such delivery; provided that such customer location is in one of the following
               --------                                                       
states: California, Nevada, New Jersey, Mississippi, Missouri, and Colorado.

  "Investment" means any beneficial ownership of (including stock, partnership
interest or other securities) of all or a portion of any Person, or any loan,
advance or capital contribution to any Person.

  "IRC" means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
 
  "Letter of Credit" means a letter of credit or similar undertaking issued by
Bank pursuant to Section 2.1.2.

  "Letter of Credit Reserve" has the meaning set forth in Section 2.1.2.

  "Lien" means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

  "Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower, and any other present or future agreement entered into
between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated from time to time.

  "Mask Works" means all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired.

  "Material Adverse Effect" means a material adverse effect on (i) the business
operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.

  "Maturity Date" means December  31, 1999.

                                      -6-
<PAGE>
 
  "Monthly Liquidity Coverage Ratio" has the meaning set forth in Section 6.11.

  "Negotiable Collateral" means all of Borrower's present and future letters of
credit of which it is a beneficiary, notes, drafts, instruments, securities,
documents of title, and chattel paper.

  "Nevada Gaming Authorities" means, collectively, the Nevada Gaming Commission,
the Nevada State Gaming Control Board, the Clark County Liquor and Gaming
Licensing Board, and any other Governmental Body that holds regulatory,
licensing or permit authority over gaming activities conducted by the Borrower
or its Gaming Subsidiaries within the State of Nevada.

  "Obligations" means all debt, principal, interest, Bank Expenses and other
amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
 
  "Patents" means all patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same.

  "Payment Date" means the last calendar day of each month commencing on the
first such date after the Closing Date and ending on the Maturity Date.

  "Permitted Indebtedness" means:

  (a) Indebtedness of Borrower in favor of Bank arising under this Agreement or
any other Loan Document;

  (b) Indebtedness existing on the Closing Date and disclosed in the Schedule;

  (c) Subordinated Debt;

  (d) Indebtedness to trade creditors incurred in the ordinary course of
business; and

  (e) Indebtedness secured by Permitted Liens.

  "Permitted Investment" means:

  (a) Investments existing on the Closing Date disclosed in the Schedule; and

  (b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States of America or any agency or any State thereof maturing
within one (1) year from the date of acquisition thereof, (ii) commercial
paper maturing no more than one (1) year from the date of creation thereof and
currently having the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc., (iii) certificates of deposit

                                      -7-
<PAGE>
 
maturing no more than one (1) year from the date of investment therein issued
by Bank, and (iv) any other Investments permitted under the written investment
policy of the Borrower as approved by its board of directors.

  "Permitted Liens" means the following:

   (a)  Any Liens existing on the Closing Date and disclosed in the Schedule or
arising under this Agreement or the other Loan Documents;

   (b) Liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by appropriate
proceedings and as to which adequate reserves are maintained on Borrower's
Books in accordance with GAAP, provided the same have no priority over any of
                               --------
Bank's security interests;

   (c) Liens (i) upon or in any Equipment acquired or held by Borrower or any
of its Subsidiaries to secure the purchase price of (or lease rental
obligation respecting) such Equipment or indebtedness 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 Lien is confined
                                               --------
solely to the property so acquired and improvements thereon, and the proceeds
of such equipment;

   (d) Liens securing the Senior Discount Notes provided that such Liens shall
                                                --------
be subject to the provisions of the Intercreditor Agreement;

   (e)  Liens incidental to the conduct of its business or the ownership of its
property which (i) arise in the ordinary course of business, (ii) do not
secure indebtedness, and (iii) do not in the aggregate materially detract
from the value of its property or materially impair the use thereof in the
operation of its business; and

   (f) Liens incurred in connection with the extension, renewal or refinancing
of the indebtedness secured by Liens of the type described in clauses (a)
through (d) above, provided that any extension, renewal or replacement Lien
                   --------
shall be limited to the property encumbered by the existing Lien and the
principal amount of the indebtedness being extended, renewed or refinanced
does not increase.

  "Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

  "Pledged Securities Requisite Gaming Approvals" has the meaning set forth in
Section 13.

  "Prime Rate" means the variable rate of interest, per annum, most recently
announced by Bank, as its "prime rate," whether or not such announced rate is
the lowest rate available from Bank.

  "Quick Assets" means, as of any applicable date, the consolidated cash, cash
equivalents, accounts receivable and investments of Borrower with maturities of
not more than one year determined in accordance with GAAP.

                                      -8-
<PAGE>
 
  "Responsible Officer" means each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.

  "Schedule" means the schedule of exceptions attached hereto, if any.

  "SGI-Nevada Pledged Shares" has the meaning set forth in Section 13 hereof.

  "Security Agreement" means a security agreement securing the Obligations or a
Guaranty, which security agreement shall be in form and substance satisfactory
to Bank in its sole and absolute discretion.

  "Senior Discount Notes" means the Senior Discount Notes of Borrower, due
September 30, 2002.

  "Subordinated Debt" means (a) the Senior Discount Notes and (b) any debt
incurred by Borrower that is subordinated to the debt owing by Borrower to Bank
on terms acceptable to Bank (and identified as being such by Borrower and Bank).

  "Subsidiary" means with respect to any Person, corporation, partnership,
company association, joint venture, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by such Person or one or more Affiliates of such Person.

  "Trademarks" means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Assignor connected with
and symbolized by such trademarks.

   1.2 Accounting and Other Terms. All accounting terms not specifically
      --------------------------
defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in
any other Loan Document.

2  LOAN AND TERMS OF PAYMENT
   -------------------------
 
   2.1  Credit Extensions. Borrower promises to pay to the order of Bank, in
        -----------------
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder. Borrower
shall also pay interest on the unpaid principal amount of such advances at
rates in accordance with the terms hereof.


        2.1.1  Advances.
               -------- 

        (a) Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make Advances to Borrower in an aggregate outstanding amount
not to exceed the Committed Line or the Borrowing Base, whichever is less.
Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1 may be repaid and reborrowed at any time during
the term of this Agreement.

        (b)  Whenever Borrower desires an Advance, Borrower will notify Bank by

                                      -9-
<PAGE>
 
facsimile transmission or telephone no later than 3:00 p.m. Pacific time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
---------
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages
or loss suffered by Bank as a result of such reliance. Bank will credit the
amount of Advances made under this Section 2.1 to Borrower's deposit account.

        (c) The Advances shall bear interest, on the average daily balance
thereof, at a per annum rate equal to 1.00 percentage point above the Prime
Rate.

        (d) The Committed Line shall terminate on the Maturity Date, at which
time all Advances under this Section 2.1 and other amounts due under this
Agreement (except as otherwise expressly specified herein) shall be
immediately due and payable.

   2.1.2  Letters of Credit.
          ----------------- 

        (a) Subject to the terms and conditions of this Agreement, Bank will
issue or cause to be issued Letters of Credit for the account of Borrower in
an aggregate outstanding face amount not to exceed the lesser of the Committed
Line or the Borrowing Base. Each Letter of Credit shall have an expiry date no
later than the Maturity Date. All Letters of Credit shall be, in form and
substance, acceptable to Bank in its sole discretion and shall be subject to
the terms and conditions of Bank's form of standard Application and Letter of
Credit Agreement.

        (b) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any
loss, cost, expense or liability, including, without limitation, reasonable
attorneys' fees, arising out of or in connection with any Letters of Credit.

        (c) Borrower may request that Bank issue a Letter of Credit payable in
a currency other than United States Dollars. If a demand for payment is made
under any such Letter of Credit, Bank shall treat such demand as an Advance to
Borrower of the equivalent of the amount thereof (plus cable charges) in
United States currency at the then prevailing rate of exchange in San
Francisco, California, for sales of that other currency for cable transfer to
the country of which it is the currency.

        (d) Upon the issuance of any letter of credit payable in a currency
other than United States Dollars, Bank shall create a reserve under the
Committed Line for letters of credit against fluctuations in currency exchange
rates, in an amount equal to 10% of the face amount of such letter of credit.
The amount of such reserve may be amended by Bank from time to time to account
for fluctuations in the exchange rate. The availability of funds under the
Committed Line shall be reduced by the amount of such reserve for so long as
such letter of credit remains outstanding].

   2.1.3  Foreign Exchange Contract; Foreign Exchange Settlements.
          -------------------------------------------------------

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<PAGE>
 
        (a) Subject to the terms of this Agreement, Borrower may enter into
foreign exchange contracts (the "Exchange Contracts") not to exceed an
aggregate amount equal to the Committed Line (the "Contract Limit"), pursuant
to which Bank shall sell to or purchase from Borrower foreign currency on a
spot or future basis. Borrower shall not request any Exchange Contracts at any
time it is out of compliance with any of the provisions of this Agreement. All
Exchange Contracts must provide for delivery of settlement on or before the
Maturity Date. The amount available under the Committed Revolving Line at any
time shall be reduced by the following amounts (the "Foreign Exchange
Reserve") on any given day (the "Determination Date"): (i) on all outstanding
Exchange Contracts on which delivery is to be effected or settlement allowed
more than two business days after the Determination Date, 10% of the gross
amount of the Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed within two
business days after the Determination Date, 100% of the gross amount of the
Exchange Contracts.

        (b) Bank may, in its discretion, terminate the Exchange Contracts at
any time (a) that an Event of Default occurs or (b) that there is no
sufficient availability under the Committed Revolving Line and Borrower does
not have available funds in its bank account to satisfy the Foreign Exchange
Reserve. If Bank terminates the Exchange Contracts, and without limitation of
any applicable indemnities, Borrower agrees to reimburse Bank for any and all
fees, costs and expenses relating thereto or arising in connection therewith.

        (c) Borrower shall not permit the total gross amount of all Exchange
Contracts on which delivery is to be effected and settlement allowed in any
two business day period to be more than $10,000,000 (the "Settlement Limit")
nor shall Borrower permit the total gross amount of all Exchange Contracts to
which Borrower is a party, outstanding at any one time, to exceed the Contract
Limit. Notwithstanding the above, however, the amount which may be settled in
any two (2) business day period may be increased above the Settlement Limit up
to, but in no event to exceed, the amount of the Contract Limit under either
of the following circumstances:

(i) if there is sufficient availability under the Committed Line in the amount
of the Foreign Exchange Reserve as of each Determination Date, provided that
Bank in advance shall reserve the full amount of the Foreign Exchange Reserve
against the Committed Line; or

(ii)  if there is insufficient availability under the Committed Line, as to
settlements within any two (2) business day period, provided that Bank, in its
                                                    --------                  
sole discretion, may:  (A) verify good funds overseas prior to crediting
Borrower's deposit account with Bank (in the case of Borrower's sale of foreign
currency); or (B) debit Borrower's deposit account with Bank prior to delivering
foreign currency overseas (in the case of Borrower's purchase of foreign
currency).

        (d) In the case of Borrower's purchase of foreign currency, Borrower
in advance shall instruct Bank upon settlement either to treat the settlement
amount as an advance under the Committed Revolving Line, or to debit
Borrower's account for the amount settled.

        (e) Borrower shall execute all standard form applications and
agreements of Bank which are not inconsistent with the terms of this Agreement
in connection with the Exchange Contracts and, without limiting any of the
terms of such applications and agreements, Borrower will pay all standard fees
and charges of Bank in connection with the Exchange Contracts.

                                      -11-
<PAGE>
 
        (f) Without limiting any of the other terms of this Agreement or any
such standard form applications and agreement of Bank, Borrower agrees to
indemnify Bank and hold it harmless, from and against any and all claims,
debts, liabilities, demands, obligations, actions, costs and expenses
(including, without limitation, attorneys' fees of counsel of Bank's choice),
of every nature and description which it may sustain or incur, based upon,
arising out of, or in any way relating to any of the Exchange Contracts or any
transactions relating thereto or contemplated thereby.

    2.2 Overadvances. If, at any time or for any reason,(i) the sum of (A) the
        ------------
then outstanding principal balance of the Advances, (B) the aggregate
outstanding face amount of all outstanding Letters of Credit and (C) the
Foreign Exchange Reserve exceeds (ii) the lesser of the Committed Line or the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess.

    2.3  Default Rate, Payments, and Calculations.
         ----------------------------------------

        (a) Default Rate. All Obligations shall bear interest, from and after
            ------------
the occurrence of an Event of Default, at a rate equal to five percentage
points above the interest rate applicable immediately prior to the occurrence
of the Event of Default.

        (b) Payments. Interest hereunder shall be due and payable on each
            --------
Payment Date. Borrower hereby authorizes Bank to debit any accounts with Bank
for payments of principal and interest due on the Obligations and any other
amounts owing by Borrower to Bank. Bank will notify Borrower of all debits
which Bank has made against Borrower's accounts. Any such debits against
Borrower's accounts in no way shall be deemed a set-off. Any interest not paid
when due shall be compounded by becoming a part of the Obligations, and such
interest shall thereafter accrue interest at the rate then applicable
hereunder.

        (c) Computation. In the event the Prime Rate is changed from time to
            -----------
time hereafter, the applicable rate of interest hereunder shall be increased
or decreased effective as of 12:01 a.m. on the day the Prime Rate is changed,
by an amount equal to such change in the Prime Rate. All interest chargeable
under the Loan Documents shall be computed on the basis of a 360-day year for
the actual number of days elapsed.

    2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
        ------------------
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment, whether directed to Borrower's deposit
account with Bank or to the Obligations or otherwise, shall be immediately
applied to conditionally reduce Obligations, but shall not be considered a
payment in respect of the Obligations unless such payment is of immediately
available federal funds or unless and until such check or other item of
payment is honored when presented for payment. Notwithstanding anything to the
contrary contained herein, any wire transfer or payment received by Bank after
12:00 noon Pacific time shall be deemed to have been received by Bank as of
the opening of business on the immediately following Business Day. Whenever
any payment to Bank under the Loan Documents would otherwise be due (except by
reason of acceleration) on a date that is not a Business Day, such payment
shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of
such extension.

                                      -12-
<PAGE>
 
   2.5  Fees.  Borrower shall pay to Bank the following:
        ----

        (a) Financial Examination and Appraisal Fees. Bank's customary fees
            ----------------------------------------
and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for
each appraisal of Collateral and financial analysis and examination of
Borrower performed from time to time by Bank or its agents (provided that such
                                                            --------
audits and appraisals shall not be made (i) during any period the facilities
under this Agreement are not being and are not intended by the Borrower to be
utilized and (ii) more than once annually so long as no Event of Default has
occurred and is continuing; and

        (b) Bank Expenses. Upon demand from Bank, including, without
            -------------
limitation, upon the date hereof, all Bank Expenses incurred through the date
hereof not exceeding $5,000, including reasonable attorneys' fees and
expenses, and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.

   2.6  Term. Bank shall have the right to terminate its obligation to make
        ----
Credit Extensions under this Agreement immediately and without notice upon
the occurrence and during the continuance of an Event of Default.
Notwithstanding termination of this Agreement, Bank's lien on the Collateral
shall remain in effect for so long as any Obligations are outstanding.

   2.7  Required Deposits. Until the Maturity Date Borrower will maintain
        -----------------
Eligible Balances of at least $6,500,000. For any period in which such
Eligible Balances are not kept, Borrower, as Bank's sole and exclusive remedy
therefor, will pay a fee calculated at a rate of one percent (1%) per annum,
calculated based on the difference between the minimum Eligible Balance
requirement and the actual average daily Eligible Balances during the period.
The fee will be calculated quarterly and will be due within 15 days of each
quarter end.


3  CONDITIONS OF LOANS
   -------------------
 

   3.1  Conditions Precedent to Initial Credit Extension. The effectiveness of
        ------------------------------------------------
this Agreement and the obligation of Bank to make the initial Credit Extension
is subject to the condition precedent that Bank shall have received, in form
and substance satisfactory to Bank, the following:

        (a) this Agreement;

        (b) a certificate of the Secretary of Borrower with respect to articles,
bylaws, incumbency and resolutions authorizing the execution and delivery
of this Agreement;

        (c) an intellectual property security agreement covering intellectual
property for Borrower and each Guarantor;

        (d) (i) financing statements (Forms UCC-1) for Borrower and each
Guarantor for such jurisdictions as Bank may request, together with a UCC-1
search reports for Borrower and each Guarantor from the secretary of state for
each jurisdiction in which the Borrower or any Guarantor is formed, has an
office, or otherwise does business, and (ii) all instruments constituting part
of the Collateral other than (A) certificated securities of Gaming
Subsidiaries (Restricted) and Gaming Subsidiaries as to which Pledge
Securities Requisite Gaming Approvals 

                                      -13-
<PAGE>
 
are required by the Gaming Laws but as yet have not been obtained and (B)
items held for deposit in the ordinary course of business;

        (e) insurance certificate in form and substance satisfactory to Bank
(including a loss payable endorsement in favor of Bank);

        (f) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;

        (g) Certificate of Foreign Qualification (if applicable);

        (h) a Guaranty and a Security Agreement by each Subsidiary of the
Borrower on Closing Date;

        (i) the Intercreditor Agreement; and

        (j) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.

   3.2  Conditions Precedent to all Credit Extensions. The obligation of Bank
        ---------------------------------------------
to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:

        (a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1;

        (b) After giving effect to such Credit Extension, (i) the sum of (A)
the then outstanding principal balance of the Advances, (B) the aggregate
outstanding face amount of all outstanding Letters of Credit and (C) the
Foreign Exchange Reserve shall not exceed (ii) the lesser of the Committed
Line or the Borrowing Base; and

        (c) the representations and warranties contained in Section 5 shall be
true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension. The
making of each Credit Extension shall be deemed to be a representation and
warranty by Borrower on the date of such Credit Extension as to the accuracy
of the facts referred to in this Section 3.2(b).

                                      -14-
<PAGE>
 
4  CREATION OF SECURITY INTEREST
   -----------------------------
 
   4.1  Grant of Security Interest. Subject to the provisions of Section 13,
        --------------------------
Borrower grants and pledges to Bank a continuing security interest in all
presently existing and hereafter acquired or arising Collateral in order to
secure prompt payment of any and all Obligations and in order to secure prompt
performance by Borrower of each of its covenants and duties under the Loan
Documents. Except as set forth in the Schedule, such security interest
constitutes a valid, first priority security interest in the presently
existing Collateral, and will constitute a valid, first priority security
interest in Collateral acquired after the date hereof. Borrower acknowledges
that Bank may place a "hold" on any Deposit Account pledged as Collateral to
secure the Obligations. Notwithstanding termination of this Agreement, Bank's
Lien on the Collateral shall remain in effect for so long as any Obligations
are outstanding.

   4.2  Delivery of Additional Documentation Required. Borrower shall from time
        ---------------------------------------------
to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.

   4.3  Right to Inspect. Bank (through any of its officers, employees, or
        ----------------
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to
make copies thereof and to check, test, and appraise the Collateral in order
to verify Borrower's financial condition or the amount, condition of, or any
other matter relating to, the Collateral.

5  REPRESENTATIONS AND WARRANTIES
   ------------------------------
 
   Borrower represents and warrants as follows:

   5.1  Due Organization and Qualification. Borrower and each Subsidiary is a
        ----------------------------------
corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership
of property requires that it be so qualified.

   5.2  Due Authorization; No Conflict. The execution, delivery, and
        ------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles/Certificate of Incorporation or
Bylaws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which Borrower is bound Borrower
is not in default under any agreement to which it is a party or by which it is
bound, which default could have a Material Adverse Effect.

   5.3  No Prior Encumbrances. Borrower has good and indefeasible title to the
        ---------------------
Collateral, free and clear of Liens, except for Permitted Liens.

   5.4  Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
        ---------------------------
existing obligations. The service or property giving rise to such Eligible
Accounts has been performed or delivered to the account debtor or to the
account debtor's agent for immediate shipment to and unconditional acceptance
by the account debtor. Borrower has not received notice of actual or 

                                      -15-
<PAGE>
 
imminent Insolvency Proceeding of any account debtor whose accounts are
included in any Borrowing Base Certificate as an Eligible Account.

   5.5   Merchantable Inventory. Except as set forth on the Schedule, all
         ----------------------
Inventory is in all material respects of good and marketable quality, free
from all material defects. Borrower will provide Bank with thirty (30) days'
prior notice before storing or otherwise locating any Inventory in any state
other than those states identified in the definition of "Inventory on Trial"
contained in Section 1.1.

   5.6   Intellectual Property. Borrower is the sole owner of the Intellectual
         ---------------------
Property Collateral, except for non-exclusive licenses granted by Borrower to
its customers in the ordinary course of business. Each of the Patents is valid
and enforceable, and no part of the Intellectual Property Collateral has been
judged invalid or unenforceable, in whole or in part, and no claim has been
made that any part of the Intellectual Property Collateral violates the rights
of any third party. Except for and upon the filing with the United States
Patent and Trademark Office with respect to the Patents and Trademarks and the
Register of Copyrights with respect to the Copyrights and Mask Works necessary
to perfect the security interests created hereunder, and except as has been
already made or obtained, no authorization, approval or other action by, and
no notice to or filing with, any United States governmental authority or
United States regulatory body is required either (i) for the grant by Borrower
of the security interest granted hereby or for the execution, delivery or
performance of Loan Documents by Borrower in the United States or (ii) for the
perfection in the United States or the exercise by Bank of its rights and
remedies hereunder.

   5.7   Name; Location of Chief Executive Office. Except as disclosed in the
         ----------------------------------------
Schedule, Borrower has not done business and will not without at least 30 days
prior written notice to Bank do business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.

   5.8   Litigation. Except as set forth in the Schedule, there are no actions
         ----------
or proceedings pending, or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary before any court or administrative agency in which
an adverse decision could have a Material Adverse Effect or a material adverse
effect on Borrower's interest or Bank's security interest in the Collateral

   5.9   No Material Adverse Change in Financial Statements. All consolidated
         --------------------------------------------------
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.

   5.10  Solvency. Borrower is able to pay its debts (including trade debts) as
         --------
they mature.

   5.11  Regulatory Compliance. Borrower and each Subsidiary has met the
         ---------------------
minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material  

                                      -16-
<PAGE>
 
Adverse Effect. Borrower is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations G, T
and U of the Board of Governors of the Federal Reserve System). Borrower has
complied with all the provisions of the Federal Fair Labor Standards Act.
Borrower has not violated any statutes, laws, ordinances or rules applicable
to it, violation of which could have a Material Adverse Effect.

   5.12  Environmental Condition. None of Borrower's or any Subsidiary's
         -----------------------
properties or assets has ever been used by Borrower or any Subsidiary or, to
the best of Borrower's knowledge, by previous owners or operators, in the
disposal of, or to produce, store, handle, treat, release, or transport, any
material quantity hazardous waste or hazardous substance other than in
accordance with applicable law; to the best of Borrower's knowledge, none of
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a hazardous waste
or hazardous substance disposal site, or a candidate for closure pursuant to
any environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the release, or other disposition of hazardous waste
or hazardous substances into the environment.

   5.13  Taxes. Borrower and each Subsidiary has filed or caused to be filed
         -----
all tax returns required to be filed on a timely basis, and has paid, or has
made adequate provision for the payment of, all taxes reflected therein.

   5.14  Subsidiaries. Borrower does not own any stock, partnership interest
         ------------
or other equity securities of any Person, except for Permitted Investments.

   5.15  Government Consents. Borrower and each Subsidiary has obtained all
         -------------------
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted.

   5.16  Full Disclosure. No representation, warranty or other statement made
         ---------------
by Borrower in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading.

6  AFFIRMATIVE COVENANTS
   ---------------------
 
   Borrower covenants and agrees that, until payment in full of all outstanding
Obligations, and for so long as Bank may have any commitment to make a Credit
Extension hereunder, Borrower shall do all of the following:

   6.1  Good Standing. Borrower shall maintain its and each of its
        -------------
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse  

                                      -17-
<PAGE>
 
Effect. Borrower shall maintain, and shall cause each of its Subsidiaries to
maintain, to the extent consistent with prudent management of Borrower's
business, in force all licenses, approvals and agreements, the loss of which
could have a Material Adverse Effect.

   6.2  Government Compliance. Borrower shall meet, and shall cause each
        ---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.

   6.3  Financial Statements, Reports, Certificates. Borrower shall deliver to
        -------------------------------------------
Bank: (a) as soon as available, but in any event within 30 days after the end
of each month during which any Advances are outstanding, a company prepared
consolidated balance sheet and income statement covering Borrower's
consolidated operations during such period, in a form and certified by an
officer of Borrower reasonably acceptable to Bank; (b) as soon as available,
but in any event within 45 days after the end of each fiscal quarter, a
company prepared consolidated balance sheet and income statement covering
Borrower's consolidated operations during such period, in a form and certified
by an officer of Borrower reasonably acceptable to Bank; (c) as soon as
available, but in any event within 90 days after the end of Borrower's fiscal
year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified
opinion on such financial statements of an independent certified public
accounting firm reasonably acceptable to Bank; (d) within five days of filing,
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated Debt and
all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission; (e) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of $100,000 or more;
(f) prompt notice of any material change in the composition of the
Intellectual Property Collateral, including, but not limited to, any
subsequent ownership right of the Borrower in or to any Copyright, Patent or
Trademark not specified in any intellectual property security agreement
between Borrower and Bank or knowledge of an event that materially adversely
effects the value of the Intellectual Property Collateral; and (g) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.

        Within 20 days after the last day of each month during any period that
Advances are outstanding, Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in substantially the form of Exhibit
                                                                         -------
C hereto, together with aged listings of accounts receivable and accounts
-                                                                        
payable.

        With each of the financial statements required to be delivered
pursuant to Section 6.3 (a), (b), and (c), Borrower shall also deliver to Bank
a Compliance Certificate signed by a Responsible Officer in substantially the
form of Exhibit D hereto.
        ---------

        Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every 12 months unless an Event of Default has occurred and is
continuing.

   6.4  Inventory; Returns. Borrower shall keep all Inventory in good and
        ------------------
marketable condition, free from all material defects. Returns and allowances,
if any, as between Borrower

                                      -18-
<PAGE>
 
and its account debtors shall be on the same basis and in accordance with the
usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement.  Borrower shall promptly notify Bank
of all returns and recoveries and of all disputes and claims, where the return,
recovery, dispute or claim involves more than $100,000.00.

   6.5  Taxes. Borrower shall make, and shall cause each Subsidiary to make,
        -----
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute
and deliver to Bank, on demand, appropriate certificates attesting to the
payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not
limited to, those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and will, upon request, furnish Bank
with proof satisfactory to Bank indicating that Borrower or a Subsidiary has
made such payments or deposits; provided that Borrower or a Subsidiary need
not make any payment if the amount or validity of such payment is (i)
contested in good faith by appropriate proceedings , (ii) is reserved
against (to the extent required by GAAP) by Borrower and (iii) no lien other
than a Permitted Lien results.

   6.6  Insurance.
        ---------

        (a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.

        (b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as are reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional
loss payee thereof and all liability insurance policies shall show the Bank as
an additional insured, and shall specify that the insurer must give at least
20 days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.

   6.7  Principal Depository. Borrower shall maintain, and shall cause each of
        --------------------
its Subsidiaries to maintain, its principal depository and operating accounts
with Bank.

   6.8  Quick Ratio. Borrower shall maintain, as of the last day of each
        -----------
calendar quarter (and as of the last day of each calendar month when there
shall be outstanding any Obligation with respect to the Committed Line) a
ratio of (x) Quick Assets to (y) Current Liabilities of at least 2.0 to 1.0.

   6.9  Registration of Intellectual Property Rights.
        --------------------------------------------

        6.9.1  Borrower shall register or cause to be registered (to
the extent not already registered) with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those intellectual
property rights listed on Exhibits A, B and C to the 

                                      -19-
<PAGE>
 
Intellectual Property Security Agreement delivered to Bank by Borrower in
connection with this Agreement within 30 days of the date of this Agreement.
Borrower shall register or cause to be registered with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable, those additional intellectual property rights developed or
acquired by Borrower from time to time in connection with any product prior to
the sale or licensing of such product to any third party, including without
limitation revisions or additions to the intellectual property rights listed
on such Exhibits A, B, C, and D.

        6.9.2  Borrower shall execute and deliver such additional instruments
and documents from time to time as Bank shall reasonably request to perfect
Bank's security interest in the Intellectual Property Collateral.

        6.9.3  Borrower shall (i) protect, defend and maintain the validity
and enforceability of the Trademarks, Patents, Copyrights, and Mask Works,
(ii) use its best efforts to detect infringements of the Trademarks, Patents,
Copyrights and Mask Works and promptly advise Bank in writing of material
infringements detected and (iii) not allow any Trademarks, Patents,
Copyrights, or Mask Works to be abandoned, forfeited or dedicated to the
public without the written consent of Bank, which shall not be unreasonably
withheld, unless Bank determines that reasonable business practices suggest
that abandonment is appropriate.

        6.9.4  Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section 6.9 to take but which Borrower fails to take, after 15 days' notice to
Borrower. Borrower shall reimburse and indemnify Bank for all reasonable costs
and reasonable expenses incurred in the reasonable exercise of its rights
under this Section 6.9.

   6.10  Subsidiary Guarantors. (a) With respect to any Subsidiary in
         ---------------------
existence on the Closing Date, Borrower shall (i) cause such Subsidiary to
become a Guarantor and a grantor under the Security Agreement on the Closing
Date, and (ii) (A) in the case of any Subsidiary which is not a Gaming
Subsidiary, grant to Bank on the Closing Date a security interest in 100% of
the equity interests of such Subsidiary pursuant to this Agreement and take
such steps to perfect such security interest as Bank may request and (B) in
the case of any Subsidiary which is a Gaming Subsidiary, but not a Gaming
Subsidiary (Restricted), grant to Bank within 180 days after the Closing Date
a security interest in 100% of the equity interests of such Subsidiary
pursuant to this Agreement and take such steps to perfect such security
interest as Bank may request, (b) upon any Person becoming a Subsidiary (other
than a Gaming Subsidiary (Restricted)) after the Closing Date, Borrower shall
immediately (i) cause such Subsidiary to become a Guarantor and a grantor
under the Security Agreement, and (ii) grant to Bank a security interest in
100% of the equity interests of such Subsidiary pursuant to this Agreement,
and (c) upon each Subsidiary becoming such a Guarantor and grantor, deliver or
cause such Subsidiary to deliver, to Bank such evidence of the due
authorization, execution and delivery of the Guaranty and Security Agreement
by such Subsidiary and take such steps to perfect such security interest as
Bank may request.

   6.11  Further Assurances. At any time and from time to time Borrower shall 
         ------------------
execute and deliver, and shall cause each of its Subsidiaries to execute and
deliver, such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.

7  NEGATIVE COVENANTS
   ------------------
 

                                      -20-
<PAGE>
 
   Borrower covenants and agrees that, so long as any Credit Extension hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Advances, Borrower will
not do any of the following:

   7.1  Dispositions. Convey, sell, lease, transfer or otherwise dispose of
        ------------
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than Transfers: (i) of
inventory in the ordinary course of business, (ii) of non-exclusive licenses
and similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; (iii) that constitute payment
of normal and usual operating expenses in the ordinary course of business;; or
(iii) of worn-out or obsolete Equipment.

   7.2  Changes in Business, Ownership, or Management, Business Locations.
        -----------------------------------------------------------------
Without Bank's prior written consent, which consent shall not be unreasonably
withheld, engage in any business, or permit any of its Subsidiaries to engage
in any business, other than the businesses currently engaged in by Borrower
and any business substantially similar or related thereto (or incidental
thereto), or suffer a change in Borrower's ownership or management. Borrower
will not, and will not permit any of its Subsidiaries to, without at least 10
days prior written notification to Bank, relocate its chief executive office
or add any new offices or business locations.

   7.3  Mergers or Acquisitions. Without Bank's prior written consent, which
        -----------------------
consent shall not be unreasonably withheld, merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with or into any other
business organization, or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person.

   7.4  Indebtedness. Create, incur, assume or be or remain liable with
        ------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.

   7.5  Encumbrances. Create, incur, assume or suffer to exist any Lien with
        ------------
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.

   7.6  Distributions. Pay any dividends or make any other distribution or
        -------------
payment on account of or in redemption, retirement or purchase of any capital
stock other than stock repurchases made in connection with Borrower's stock
option plans not exceeding $100,000 in the aggregate in any fiscal year.

   7.7  Investments. Directly or indirectly acquire or own, or make any
        -----------
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.

   7.8  Transactions with Affiliates. Directly or indirectly enter into or
        ----------------------------
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person.

   7.9  Intellectual Property Agreements. Borrower shall not permit the
        --------------------------------
inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way 

                                      -21-
<PAGE>
 
prevent the creation of a security interest in Borrower's rights and interests
in any property included within the definition of the Intellectual Property
Collateral acquired under such contracts, except to the extent that such
provisions are necessary in Borrower's exercise of its reasonable business
judgement.

   7.10  Subordinated Debt. Make any payment in respect of any Subordinated
         -----------------
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt and the Intercreditor
Agreement, or amend any provision contained in any documentation relating to
the Subordinated Debt without Bank's prior written consent.

  7.11   Inventory. Store the Inventory with a bailee, warehouseman, or
         ---------
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and for Inventory on Trial and except for such other locations as
Bank may approve in writing, Borrower shall keep the Inventory only at the
location set forth in Section 10 hereof and such other locations of which
Borrower gives Bank prior written notice and as to which Borrower signs and
files a financing statement where needed to perfect Bank's security interest.

   7.12  Compliance. Become an "investment company" or a company controlled by
         ----------
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose;
fail to meet the minimum funding requirements of ERISA; permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply
with the Federal Fair Labor Standards Act or violate any other law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral; or permit any of its Subsidiaries to do any of the foregoing.

   7.13 Profitability. Borrower shall not permit its Adjusted Net Income for
        -------------
any fiscal quarter set forth below to be less than the correlative amount set
forth below:

      Fiscal Quarter Ending              Minimum Adjusted Net Income
      ---------------------              ---------------------------

             09/30/97                            $(6,468,000)
             12/31/97                            $(5,070,000)
             03/31/98                            $(4,018,000)
             06/30/98                            $(2,971,000)
             09/30/98                            $  (908,000)
             12/31/98                            $   119,000
             03/31/99 and thereafter                  -0-

8  EVENTS OF DEFAULT
   -----------------

   Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:

   8.1  Payment Default. If Borrower fails to pay, when due, any of the
        --------------- 
Obligations.

   8.2  Covenant Default.
        ---------------- 

                                      -22-
<PAGE>
 
        8.2.1 If Borrower fails to perform any obligation under Sections 6.3,
6.6, 6.8, 6.9, or 6.10 or violates any of the covenants contained in Article 7
of this Agreement, or

        8.2.2 If Borrower fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or
future agreement between Borrower and Bank and as to any default under such
other term, provision, condition, covenant or agreement that can be cured, has
failed to cure such default within ten days after the occurrence thereof;
provided that if the default cannot by its nature be cured within the ten day
period or cannot after diligent attempts by Borrower be cured within such ten-
day period, and such default is likely to be cured within a reasonable time,
then Borrower shall have an additional reasonable period (which shall not in
any case exceed 30 days) to attempt to cure such default, and within such
reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);

   8.3  Material Adverse Change. If there (i) occurs a material adverse change
        -----------------------
in the business, operations, or condition (financial or otherwise) of the
Borrower, or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is a material impairment of the value or
priority of Bank's security interests in the Collateral;

   8.4  Attachment. If any material portion of Borrower's assets is attached,
        ----------
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has
not been removed, discharged or rescinded within ten days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing
to conduct all or any material part of its business affairs, or if a judgment
or other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the same is not paid
within ten days after Borrower receives notice thereof, provided that none of
the foregoing shall constitute an Event of Default where such action or event
is stayed or an adequate bond has been posted pending a good faith contest by
Borrower (provided that no Credit Extensions will be required to be made
during such cure period);

   8.5  Insolvency. If Borrower becomes insolvent, or if an Insolvency
        ----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is
commenced against Borrower and is not dismissed or stayed within 30 days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);

   8.6  Other Agreements. If there is a default in any agreement to which
        ----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity
of any Indebtedness in an amount in excess of $100,000.00 or that could have a
Material Adverse Effect;

   8.7  Subordinated Debt. If Borrower makes any payment on account of
        -----------------
Subordinated Debt, except to the extent such payment is allowed under the
Intercreditor Agreement or any subordination agreement entered into with Bank;

   8.8  Judgments. If a judgment or judgments for the payment of money in an
        ---------
amount, 

                                      -23-
<PAGE>
 
individually or in the aggregate, of at least $100,000.00 shall be rendered
against Borrower and shall remain unsatisfied and unstayed for a period of ten
days (provided that no Credit Extensions will be made prior to the
satisfaction or stay of such judgment); or

   8.9   Misrepresentations. If any material misrepresentation or material
         ------------------
misstatement exists now or hereafter in any warranty or representation set
forth herein or in any certificate or writing delivered to Bank by Borrower or
any Person acting on Borrower's behalf pursuant to this Agreement or to induce
Bank to enter into this Agreement or any other Loan Document.

   8.10  Gaming Approval. (a) The Pledged Securities Requisite Gaming
         ---------------
Approvals and the Gaming Subsidiaries Stock Restrictions Requisite Gaming
Approvals have not both been obtained by April 30, 1998, or, at any time prior
thereto, Borrower (or any one acting on Borrower's behalf) notifies Bank that
either of such approvals will not be granted, or (b) any Gaming Authority
purports to order the rescission of any Loan Document or takes any action
which directly or indirectly materially impairs the validity, binding effect,
or enforceability of any Loan Document.

   8.11  Guaranty. Any guaranty of all or a portion of the Obligations ceases
         --------
for any reason to be in full force and effect, or any Guarantor fails to
perform any obligation under any guaranty of all or a portion of the
Obligations, or any material misrepresentation or material misstatement exists
now or hereafter in any warranty or representation set forth in any guaranty
of all or a portion of the Obligations or in any certificate delivered to Bank
in connection with such guaranty, or any of the circumstances described in
Sections 8.4, 8.5 or 8.8 occur with respect to any Guarantor.

9  BANK'S RIGHTS AND REMEDIES
   --------------------------
 

   9.1   Rights and Remedies. Upon the occurrence and during the continuance
         -------------------
of an Event of Default, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:

        9.1.1  Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.5 all Obligations shall become immediately due and payable without any
action by Bank) ;

        9.1.2  Cease advancing money or extending credit to or for the benefit
of Borrower under this Agreement or under any other agreement between Borrower
and Bank;

        9.1.3  Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;

        9.1.4  Without notice to or demand upon Borrower, make such payments
and do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank
as Bank may designate. Borrower authorizes Bank to enter the premises where
the Collateral is located, to take and maintain possession of the Collateral,
or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank's determination appears to be prior
or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's premises,  

                                      -24-
<PAGE>
 
Borrower hereby grants Bank a license to enter such premises and to occupy the
same, without charge in order to exercise any of Bank's rights or remedies
provided herein, at law, in equity, or otherwise;

        9.1.5  Without notice to Borrower set off and apply to the Obligations
any and all (i) balances and deposits of Borrower held by Bank, or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Bank;

        9.1.6  Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section 9.1,
to use, without charge, Borrower's labels, patents, copyrights, mask works,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral or otherwise to the extent reasonably necessary to
permit Bank to exercise its rights and remedies, and, in connection with
Bank's exercise of its rights under this Section 9.1, Borrower's rights under
all licenses and all franchise agreements shall inure to Bank's benefit;

        9.1.7  Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to the
Obligations in whatever manner or order it deems appropriate;

        9.1.8  Bank may credit bid and purchase at any public sale, or at any
private sale as permitted by law; and

        9.1.9  Any deficiency that exists after disposition of the Collateral
as provided above will be paid immediately by Borrower.

   9.2  Power of Attorney. Effective only upon the occurrence and during the
        -----------------
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill
of lading relating to any Account, drafts against account debtors, schedules
and assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for
amounts and upon terms which Bank determines to be reasonable; (f) to modify,
in its sole discretion, any intellectual property security agreement entered
into between Borrower and Bank without first obtaining Borrower's approval of
or signature to such modification to be limited to amending Exhibit A, Exhibit
B, Exhibit C, and Exhibit D, thereof, as appropriate, to include reference to
any right, title or interest in any Copyrights, Patents, Trademarks, Mask
Works acquired by Borrower after the execution hereof or to delete any
reference to any right, title or interest in any Copyrights, Patents,
Trademarks, or Mask Works in which Borrower no longer has or claims any right,
title or interest; (g) to file, in its sole discretion, one or more financing
or continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Borrower where permitted by law; and (h)
to transfer the Intellectual Property Collateral into the  

                                      -25-
<PAGE>
 
name of Bank or a third party to the extent permitted under the California
Uniform Commercial Code provided Bank may exercise such power of attorney to
sign the name of Borrower on any financing statement regardless of whether an
Event of Default has occurred. The appointment of Bank as Borrower's attorney
in fact, and each and every one of Bank's rights and powers, being coupled
with an interest, is irrevocable until all of the Obligations have been fully
repaid and performed and Bank's obligation to provide advances hereunder is
terminated.

   9.3  Accounts Collection. Upon the occurrence and during the continuance of
        -------------------
an Event of Default, Bank may notify any Person owing funds to Borrower of
Bank's security interest in such funds and verify the amount of such Account.
Borrower shall collect all amounts owing to Borrower for Bank, receive in
trust all payments as Bank's trustee, and if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.

   9.4  Bank Expenses. If Borrower fails to pay any amounts or furnish any
        -------------
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may, upon notice to Borrower, do any or
all of the following: (a) make payment of the same or any part thereof; (b)
set up such reserves under the Committed Line as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 6.6 of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by
Bank to make similar payments in the future or a waiver by Bank of any Event
of Default under this Agreement.

   9.5  Bank's Liability for Collateral. So long as Bank complies with
        -------------------------------
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk
of loss, damage or destruction of the Collateral shall be borne by Borrower.

   9.6  Remedies Cumulative. Bank's rights and remedies under this Agreement,
        -------------------
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not expressly set forth herein as provided
under the Code, by law, or in equity. No exercise by Bank of one right or
remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by
Bank shall constitute a waiver, election, or acquiescence by it. No waiver by
Bank shall be effective unless made in a written document signed on behalf of
Bank and then shall be effective only in the specific instance and for the
specific purpose for which it was given.

   9.7  Demand; Protest. Borrower waives demand, protest, notice of protest,
        ---------------
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of accounts, documents, instruments, chattel paper, and guarantees
at any time held by Bank on which Borrower may in any way be liable.

10  NOTICES
    -------

                                      -26-
<PAGE>
 
        Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements
and other informational documents which may be sent by first-class mail,
postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
 
 
If to Borrower:      2800 West Bayshore Road, Palo Alto, CA  94303
                     Attn: Tom Carlson    FAX: (650) 842-9001
If to Bank:          1731 Embarcadero Road, Suite 220, Palo Alto, CA  94303
                     Attn: John China     FAX: (650) 812-0640

        The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.

11  CHOICE OF LAW AND VENUE
    -----------------------

        The Loan Documents shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to
the exclusive jurisdiction of the state and Federal courts located in the
County of Santa Clara, State of California. BORROWER AND BANK EACH HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

12  GENERAL PROVISIONS
    ------------------
 
    12.1  Successors and Assigns. This Agreement shall bind and inure to the
          ----------------------
benefit of the respective successors and permitted assigns of each of the
parties; provided that neither this Agreement nor any rights hereunder
         --------
may be assigned by Borrower without Bank's prior written consent, which
consent may be granted or withheld in Bank's sole discretion. Bank shall have
the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder; provided that so long as no
                                                   --------
Event of Default has occurred and is continuing, Bank shall not sell or
assign any interest that would result in Bank holding less than a controlling
majority of the voting right respecting the credit facilities hereunder
without Borrower's prior consent, which consent shall not be unreasonably
withheld.


    12.2  Indemnification. Borrower shall , indemnify ,defend, protect and
          ---------------
hold harmless Bank 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 the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential

                                      -27-
<PAGE>
 
to transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.

    12.3  Time of Essence. Time is of the essence for the performance of all
          ---------------
obligations set forth in this Agreement.

    12.4  Severability of Provisions . Each provision of this Agreement shall
          --------------------------
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

    12.5  Amendments in Writing, Integration. This Agreement cannot be amended
          ----------------------------------
or terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this
Agreement, if any, are merged into this Agreement and the Loan Documents.

    12.6  Counterparts. This Agreement may be executed in any number of
          ------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.

    12.7  Survival. All covenants, representations and warranties made in this
          --------
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
12.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run.

    12.8  Confidentiality. In handling any confidential information of
          ---------------
Borrower, Bank shall exercise the same degree of care that it exercises with
respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they
have entered into a comparable confidentiality agreement in favor of Borrower
and have delivered a copy to Borrower, (iii) as required by law, regulations,
rule or order, subpoena, judicial order or similar order, (iv) as may be
required in connection with the examination, audit or similar investigation of
Bank, and (v) as Bank may deem appropriate in connection with the exercise of
any remedies hereunder. Confidential information hereunder shall not include
information that either: (a) is in the public domain or in the knowledge or
possession of Bank when disclosed to Bank, or becomes part of the public
domain after disclosure to Bank through no fault of Bank; or (b) is disclosed
to Bank by a third party, provided Bank does not have actual knowledge that
such third party is prohibited from disclosing such information.

13  GAMING RESTRICTIONS
    -------------------

    13.1 Acknowledgement of Gaming Restrictions. The Bank acknowledges that
         --------------------------------------
pursuant to the Gaming Laws:

                                      -28-
<PAGE>
 
        (a) Approvals from the Gaming Authorities are required for the Bank to
acquire control (as defined in the Gaming Laws) of the Borrower.

        (b) The disposition of collateral consisting of gaming devices,
including slot machines, cashless wagering systems and associated equipment
(as those terms are defined in Nevada Revised Statutes ("NRS") Sections
463.014, 463.0138, 463.0155 and 463.0181) is subject to the requirements of
the Nevada Gaming Laws, including the approval of the Nevada State Gaming
Control Board (the "Nevada Board"), before foreclosure on, taking possession
of, or other disposition of such devices.

        (c) The pledge and disposition by the Borrower of the capital stock of
Silicon Gaming-Nevada, Inc. (the "SGI-Nevada Pledged Shares"), and any
restrictions on the transfer of and agreements not to encumber the SGI-Nevada
Pledged Shares, require the prior approval of the Nevada Gaming Commission
(the "Nevada Commission") upon the recommendation and the Nevada Board. Any
pledge or disposition of the SGI-Nevada Pledged Shares, and any restrictions
on transfer or agreements not to encumber such SGI-Nevada Pledged Shares, are
void without such prior approvals.

        (d) Any foreclosure on or transfer of a possessory security interest
in or other disposition of the SGI-Nevada Pledged Shares, except a transfer
back to the Borrower, and before any other resort to the SGI-Nevada Pledged
Shares or other enforcement of the security interests herein, will require the
prior approvals of the Nevada Gaming Authorities and the licensing of the
Bank, unless such licensing requirement is waived by the Nevada Gaming
Authorities upon application of the Bank.

        (e) The collateral agent must maintain stock certificates or other
instruments evidencing the SGI-Nevada Pledged Shares at all times physically
within the State of Nevada at a location designated to the Nevada Board, and
shall make such stock certificates or other instruments available for
inspection by agents of the Nevada Board immediately upon request during
normal business hours.

        (f) The Borrower and Silicon Gaming-Nevada, Inc. must report the Loan,
and the transactions contemplated by the Loan and Security Agreement, to the
Nevada Board after the execution thereof. In addition, the Nevada Commission
may require rescission thereof if such transactions are inimical to public
health, safety, morals, good order or general welfare of the people of the
State of Nevada or would reflect, or tend to reflect, discredit upon the State
of Nevada or the gaming industry.

        (g) The Bank is subject to being called forward by the Nevada
Authorities, in their discretion, for licensing or a finding of suitability as
a lender.

   13.2  Cooperation with Gaming Authorities. The Bank agrees to cooperate with
         -----------------------------------
the Gaming Authorities in connection with the administration of their
regulatory jurisdiction over the Borrower and its Gaming Subsidiaries,
including, without limitation, the provision of such documents or other
information as may be requested by any such Gaming Authority relating to the
Lender, or to the Borrower or its Gaming Subsidiaries, or to the Loan and
Security Agreement.

   13.3  Gaming Laws; Requisite Gaming Approvals.
         --------------------------------------- 

                                      -29-
<PAGE>
 
        (a) Notwithstanding anything to the contrary therein, the Loan and
Security Agreement and the exercise of all rights, powers and remedies
thereunder, are subject to all applicable provisions of the Gaming Laws.

        (b) Notwithstanding anything to the contrary contained above or in the
Loan and Security Agreement, the Bank understands and agrees that (i) the
pledge of Capital Stock of the Gaming Subsidiaries requires the prior approval
of the Gaming Authorities under the Gaming Laws (the "Pledged Securities
Requisite Gaming Approvals"), and (ii) to become effective, the Gaming
Subsidiaries Stock Restrictions require the approvals described in the
definition thereof (the "Gaming Subsidiaries Stock Restrictions Requisite
Gaming Approvals"). On the Closing Date, the Borrower and its Gaming
Subsidiaries in good faith believe that they will be able to obtain all
Pledged Securities Requisite Gaming Approvals and Gaming Subsidiaries Stock
Restrictions Requisite Gaming Approvals within 180 days after the Closing
Date. Notwithstanding anything to the contrary contained above or in the Loan
and Security Agreement, unless and until (x) the relevant Pledged Securities
Requisite Gaming Approvals have been obtained with respect to the pledge of
the Capital Stock of the Gaming Subsidiaries, the pledge of such Capital Stock
will not be required, and (y) the relevant Gaming Subsidiaries Stock
Restrictions shall not apply or be effective. To the extent the relevant
Pledged Securities Requisite Gaming Approvals are obtained with respect to one
or more of the Gaming Subsidiaries, the Capital Stock of such entity shall
promptly (and in any event within 10 days after obtaining such approvals) be
pledged pursuant to the relevant pledge agreement. Furthermore, the Borrower
and its Gaming Subsidiaries agree to use their best effect or to obtain all
Pledged Securities Requisite Gaming Approvals and Gaming Subsidiaries Stock
Restrictions Requisite Gaming approvals as promptly as possible after the
Closing Date.

        (c) Notwithstanding anything to the contrary contained in subparagraph
(b) above or otherwise in this Loan and Security Agreement, the Bank
understands and agrees that the provision of subparagraph (b) shall not apply
to any Gaming Subsidiary (Restricted), its stock, its license (if granted),
and the obtaining of the Gaming Subsidiaries Stock Restrictions Requisite
Gaming Approvals or the Pledged Securities Requisite Gaming Approvals
contemplated herein with respect to such Gaming Subsidiary (Restricted).


    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.


SILICON GAMING, INC., a California corporation


By: /s/ Thomas E. Carlson 
   __________________________________________

Title:  Vice President & CFO
      _______________________________________

SILICON VALLEY BANK

By: /s/ John China 
   __________________________________________

Title:  Vice President 
      _______________________________________

                                      -30-
<PAGE>
 
                           SCHEDULE OF EXCEPTIONS


Permitted Indebtedness (Indebtedness on the Closing Date)
----------------------                                   

  None, other than as disclosed in the Agreement itself

Permitted Investments  (Investments on the Closing Date)
---------------------                                   

  None, other than as disclosed in the Agreement itself

Permitted Liens (Liens on the Closing Date)
---------------                            

  13.3(c).0.1  Lighthouse Capital Partners, LP, Greenbrae, CA

  UCC Filing #s:    9534660054
                    9609260092  
                    9615060410
                    9609260093  
                    9605760386
                    9533860405  
                    9533860401
                    9605760327
  Leased equipment, computer equipment, business machinery & equipment.

  13.3(c).0.2  Copelco Capital, Park Ridge, NJ

  UCC Filing #:     9635160543

  Leased equipment (copy machine)

Section 4.1  (Priority Exceptions)
-----------                         

             None

Section 5.7  (Trade and Other Names)
-----------                           

             None

Section 5.8  (Litigation)
-----------                

             None

                                      -31-
<PAGE>
 
                                  EXHIBIT A



Debtor:     Silicon Gaming, Inc.

Secured Party:  Silicon Valley Bank

The Collateral shall consist of all right, title and interest of Borrower in and
to the following:

(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor
vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;

(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above;

(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, design rights,
income tax refunds, payments of insurance and rights to payment of any kind;

(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and
any and all credit insurance, guaranties, and other security therefor, as well
as all merchandise returned to or reclaimed by Borrower;

(e) All documents, cash, deposit accounts, securities, investment property,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;

(f) All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any
of the foregoing; and

(g) All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.

                                SILICON GAMING, INC.



                                By: /s/ Thomas E. Carlson
                                  ________________________________________

                                Title:  Vice President & CFO
                                     _____________________________________

<PAGE>
 
                                  EXHIBIT B


     LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
     DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.

TO:  CENTRAL CLIENT SERVICE DIVISION            DATE: ________________________

FAX#:  (408) _____________________              TIME: _____________________

FROM:  SILICON GAMING, INC.
       _______________________________________________________________________
       BORROWER'S NAME

FROM:  _______________________________________________________________________
       AUTHORIZED SIGNER'S NAME

       _______________________________________________________________________
       AUTHORIZED SIGNATURE

PHONE: _______________________________________________________________________

FROM ACCOUNT #________________________  TO ACCOUNT#___________________________

REQUESTED TRANSACTION TYPE            REQUEST DOLLAR AMOUNT
--------------------------            ---------------------

PRINCIPAL INCREASE (ADVANCE)          $ ______
PRINCIPAL PAYMENT (ONLY)              $ ______
INTEREST PAYMENT (ONLY)               $ ______
PRINCIPAL AND INTEREST (PAYMENT)      $ ______

OTHER INSTRUCTIONS: _____

   All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Advance
Request; provided that those representations and warranties expressly referring
         --------                                                              
to another date shall be true, correct and complete in all material respects as
of such date.

BANK USE ONLY:
TELEPHONE REQUEST:
----------------- 

The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.

__________________________             _______________________ 
Authorized Requester

   _____________________________________________ 
   Authorized Signature (Bank)

   Phone # _____________________________________

<PAGE>
 
                                  EXHIBIT C
                         BORROWING BASE CERTIFICATE
 
 
Borrower: Silicon Gaming, Inc.    Bank:  Silicon Valley Bank
Commitment Amount:  $10,000,000.00
 
ACCOUNTS RECEIVABLE

1.  Accounts Receivable Book Value as of     $_________
2.  Additions (please explain on reverse)    $_________
3.  TOTAL ACCOUNTS RECEIVABLE                $_________
 
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4.  Amounts over 90 days due                 $_________
5.  Balance of 50% over 90 day accounts      $_________
6.  Concentration Limits                     $_________
7.  Foreign Accounts                         $_________
8.  Governmental Accounts                    $_________
9.  Contra Accounts                          $_________
10. Promotion or Demo Accounts               $_________
11. Intercompany/Employee Accounts           $_________
12. Other (please explain on reverse)        $_________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS     $_________
14. Eligible Accounts (#3 minus #13)         $_________
15. LOAN VALUE OF ACCOUNTS (75% of #14)      $_________
 
 
BALANCES
16. Maximum Loan Amount                      $_________
17. Total Funds Available                    $_________
18. Present balance owing on Line of Credit  $_________
19. RESERVE POSITION (#17 minus #18)         $_________

The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.

COMMENTS:
BANK USE ONLY
Received By:____________________
Date:________________
Reviewed By:____________________
Compliance Status:  Yes / No___________________________


By: _______________________
   Authorized Signer

<PAGE>
 
                                  EXHIBIT D

                           COMPLIANCE CERTIFICATE


TO:    SILICON VALLEY BANK
FROM:  SILICON GAMING, INC.

   The undersigned authorized officer of Silicon Gaming, Inc. hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in
complete compliance for the period ending ______________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof.  Attached herewith are the required documents supporting
the above certification.  The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.  The Officer expressly acknowledges that no
borrowings may be requested by  the Borrower at any time or  date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that  such compliance is determined not just  at the date this
certificate is delivered.

   Please indicate compliance status by circling Yes/No under "Complies" column.
 
 
Reporting Covenant                Required                         Complies
------------------                --------                         --------

Monthly financial statements      Monthly within 30 days/1/        Yes   No
Quarterly financial statements    FQE within 45 days               Yes   No
Annual (CPA Audited)              FYE within 90 days               Yes   No
10Q and 10K                       Within 5 days after filing with 
                                   the SEC                         Yes   No
Borrowing Base Certificate and
A/R & A/P Agings (if an
Advance is outstanding)           Monthly within 20 days/2/        Yes   No
 
Financial Covenant                Required          Actual         Complies
------------------                --------          ------         --------

Minimum Quick Ratio (FQE or       2.00:1.00         ___:1.00       Yes   No
month-end if an
Advance is outstanding)
 
Minimum Adjusted Net Income
    FQE - 09/30/97                $(6,468,000)      $___________   Yes   No
    FQE - 12/31/97                $(5,070,000)      $___________   Yes   No 
    FQE - 03/31/98                $(4,018,000)      $___________   Yes   No 
    FQE - 06/30/97                $(2,971,000)      $___________   Yes   No 
    FQE - 09/30/98                $(  908,000)      $___________   Yes   No 
    FQE - 12/31/98                $   119,000       $___________   Yes   No 
    FQE - 03/31/99 and after      $     - 0 -       $___________   Yes   No 

_________________
  /1/  Only required if any Advances are outstanding during such period.

  /2/  Only required if any Advances are outstanding during such period.

<PAGE>
 
Sincerely,
_______________________  Date:_______________
SIGNATURE

________________________ 
TITLE

     BANK USE ONLY
Received By:____________________
Date:________________
Reviewed By:____________________
Compliance Status:  Yes / No
Comments Regarding Exceptions:

<PAGE>
 
                   DISBURSEMENT REQUEST AND AUTHORIZATION


Borrower:  Silicon Gaming, Inc.  Bank:  Silicon Valley Bank

LOAN TYPE.  This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $10,000,000.00.

PRIMARY PURPOSE OF LOAN.  The primary purpose of this loan is for business.

SPECIFIC PURPOSE.  The specific purpose of this loan is:  _______________.

DISBURSEMENT INSTRUCTIONS.  Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied.  Please disburse the loan proceeds as follows:

                                                               Revolving Line
                                                               --------------
     Amount paid to Borrower directly:    $________
     Undisbursed Funds                    $________
     Principal                            $________

CHARGES PAID IN CASH.  Borrower has paid or will pay in cash as agreed the
following charges:

     Prepaid  Finance Charges Paid in Cash:  $________
          $________ Loan Fee
          $________ Accounts Receivables Audit

     Other Charges Paid in Cash:          $________
          $________ UCC Search Fees
          $________ UCC Filing Fees
          $________ Patent Filing Fees
          $________ Trademark Filing Fees
          $________ Copyright Filing Fees
          $________ Outside Counsel Fees and Expenses
                          [ESTIMATE, DO NOT LEAVE BLANK]

     Total Charges Paid in Cash           $________

AUTOMATIC PAYMENTS.  Borrower hereby authorizes Bank automatically to deduct
from Borrower's account numbered ______________ the amount of any loan payment.
If the funds in the account are insufficient to cover any payment, Bank shall
not be obligated to advance funds to cover the payment.

FINANCIAL CONDITION.  BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK.  THIS
AUTHORIZATION IS DATED AS OF ____________________, 19___.

BORROWER:  SILICON GAMING, INC.

____________________________________ 
Authorized Officer


<PAGE>
 
                       AGREEMENT TO PROVIDE INSURANCE

Grantor:  Silicon Gaming, Inc.         Bank:  Silicon Valley Bank

     INSURANCE REQUIREMENTS.  __________________________________________
("Grantor") understands that insurance coverage is required in connection with
the extending of a loan or the providing of other financial accommodations to
Grantor by Bank.  These requirements are set forth in the Loan Documents.  The
following minimum insurance coverages must be provided on the following
described collateral (the "Collateral"):

          Collateral:   All Inventory, Equipment and Fixtures.
          Type:         All risks, including fire, theft and liability.
          Amount:       Full insurable value.
          Basis:        Replacement value.
          Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished without a minimum of 10 days prior
written notice to Bank.

     INSURANCE COMPANY.  Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Bank.  Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.

     FAILURE TO PROVIDE INSURANCE.  Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of ____________________________, 19___, or earlier.  Grantor
acknowledges and agrees that if Grantor fails to provide any required insurance
or fails to continue such insurance in force, Bank may do so at Grantor's
expense as provided in the Loan and Security Agreement.  The cost of such
insurance, at the option of Bank, shall be payable on demand or shall be added
to the indebtedness as provided in the security document.  GRANTOR ACKNOWLEDGES
THAT IF BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED
PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE
LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED.  IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.

     AUTHORIZATION.  For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.


<PAGE>
 
     GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS.  THIS AGREEMENT IS DATED
____________________________, 19___.


GRANTOR:  SILICON GAMING, INC.

x______________________________
 Authorized Officer


     FOR BANK USE ONLY
     INSURANCE VERIFICATION

DATE:                                              PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS: