EXHIBIT 10.1


               SERIES A SENIOR PREFERRED EQUITY SECURITY AGREEMENT

      THIS SERIES A SENIOR PREFERRED SECURITY AGREEMENT (this "Agreement") is
made and entered into as of the 23rd day of April, 2004, by and among POWERHOUSE
TECHNOLOGIES GROUP, INC., a Delaware corporation and First Person Software,
Inc., a California corporation (together, the "Company"), and MIDDLEBURY
CAPITAL, LLC, a Delaware limited liability company ("MC" or "Agent") and each
other person or entity listed as a Secured Party on Schedule 1 attached to this
Agreement (the "Purchasers" and together with MC the "Secured Party").
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in those Series A Senior Units Purchase Agreements dated April 23,
2004, between the Company and the parties identified as Purchasers on Schedule 1
hereto (together, the "Purchase Agreement").

                                    Recitals
                                    --------

            WHEREAS, Secured Party has agreed to purchase the Series A Senior
Preferred Stock from the Company pursuant to the terms of the Purchase Agreement
and the Certificate of Designations for the Series A Senior Preferred Stock.

            WHEREAS, Secured Party has required, as a condition to purchasing
the Series A Senior Preferred Stock, that Company grant Secured Party a first
priority security interest in all of Company's patents listed in Exhibit A
hereto, the proceeds attributable to such patents and the employment agreements
of Company senior management, and to that end has required the execution and
delivery of this Agreement by Company.

            NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in the Purchase Agreement, and the Certificate of
Designations for Series A Senior Preferred Stock, the parties hereto, intending
to be legally bound, agree as follows:

      1.    Incorporation of Recitals, Purchase Agreement, and Series A Senior
Preferred Stock. The foregoing Recitals, the Purchase Agreement, the Certificate
of Designations for the Series A Senior Preferred Stock are hereby incorporated
herein in their entirety by this reference.

      2.    Definitions. The following terms shall have the meanings set forth
below:

                  "Agreements" means all employment agreements with senior
      management of the Company.

                  "Collateral" shall mean all General Intangibles, Agreements
      and Proceeds. Notwithstanding the foregoing, the security interest granted
      herein shall not extend to and the term "Collateral" shall not include any
      property, rights or licenses to

<PAGE>

      the extent the granting of a security interest therein would be contrary
      to applicable law.

                  "Copyrights" shall mean, collectively, all of Company's
      copyrights, copyright registrations and applications for copyright
      registration, whether under the laws of the United States or any other
      country or jurisdiction, including all recordings, supplemental
      registrations and derivative or collective work registrations, and all
      renewals and extensions thereof, in each case whether published or
      unpublished, now owned or existing or created or hereafter acquired or
      arising.

                  "Copyright Collateral" shall mean, collectively, all
      Copyrights and Copyright Licenses to which Company is or hereafter becomes
      a party and all other General Intangibles embodying, incorporating,
      evidencing or otherwise relating or pertaining to any Copyright or
      Copyright License, in each case whether now owned or existing or hereafter
      acquired or arising.

                  "Copyright License" shall mean any agreement now or hereafter
      in effect granting any right to any third party under any Copyright now or
      hereafter owned by Company or which Company otherwise has the right to
      license, or granting any right to Company under any property of the type
      described in the definition of Copyright herein now or hereafter owned by
      any third party, and all rights of Company under any such agreement.

                  "General Intangibles" shall mean all of the Company's present
      and future general intangibles of every kind and description, including
      (without limitation) all Copyright Collateral, all Patent Collateral and
      all Trademark Collateral and the goodwill of the business symbolized
      thereby, Federal, State and local tax refund claims of all kinds.

                  "Obligations" means each and every debt, liability, and
      obligation of every kind and description arising under or in connection
      with the Purchase Agreement or the Series A Senior Certificate of
      Designations which Company may now or at any time hereafter owe to Secured
      Party.

                  "Patent Collateral" shall mean, collectively, all Patents and
      all Patent Licenses to which Company is or hereafter becomes a party and
      all other General Intangibles embodying, incorporating, evidencing or
      otherwise relating or pertaining to any Patent or Patent License, in each
      case whether now owned or existing or hereafter acquired or arising.

                  "Patent License" shall mean any agreement, whether written or
      oral, now or hereafter in effect granting to any third party any right to
      make, use or sell any invention on which a Patent, now or hereafter owned
      by Company or which Company otherwise has the right to license, is in
      existence, or granting to Company any right to make, use or sell any
      invention on which property of the type described in the

<PAGE>

      definition of Patent herein, now or hereafter owned by any third party, is
      in existence, and all rights of Company under any such agreement.

                  "Patents" shall mean, collectively, all of Company's letters
      patent under the laws of the United States listed on Exhibit A hereto, all
      recordings and registrations thereof and applications therefor, including,
      without limitation, the inventions described therein, all reissues,
      continuations, divisions, renewals, extensions, continuations-in-part
      thereof, in each case whether now owned or existing or hereafter acquired
      or arising.

                  "Permitted Liens" shall mean, collectively, the following: (i)
      liens for current taxes or other governmental or regulatory assessments
      which are not delinquent, or which are being contested in good faith by
      the appropriate procedures and for which appropriate reserves are
      maintained; (ii) liens in favor of Agent and/or the Secured Party; and
      (iii) licenses or sublicenses of Patents, in each instance granted to
      others not interfering in any material respect with the business of the
      Company.

                  "Proceeds" shall mean any consideration received from the
      sale, exchange, lease or other disposition of any asset or property which
      constitutes Collateral, any other value received as a consequence of the
      possession of any Collateral and any payment received from any insurer or
      other person or entity as a result of the destruction, loss, theft or
      other involuntary conversion of whatever nature of any asset or property
      that constitutes Collateral.

                  "Security Interest" has the meaning given in Section 3(b).

                  "Trademarks" shall mean, collectively, all of Company's
      trademarks, service marks, trade names, corporate and company names,
      business names, fictitious business names, service marks, logos, trade
      dress, trade styles, other source or business identifiers, designs and
      general intangibles of a similar nature, whether under the laws of the
      United States or any other country or jurisdiction, all recordings and
      registrations thereof and applications therefor, all renewals and
      extensions thereof, all rights corresponding thereto, and all goodwill
      associated therewith or symbolized thereby, in each case whether now owned
      or existing or hereafter acquired or arising.

                  "Trademark Collateral" shall mean, collectively, all
      Trademarks and Trademark Licenses to which Company is or hereafter becomes
      a party and all other General Intangibles embodying, incorporating,
      evidencing or otherwise relating or pertaining to any Trademark or
      Trademark License, in each case whether now owned or existing or hereafter
      acquired or arising.

                  "Trademark License" shall mean any agreement, whether written
      or oral, now or hereafter in effect granting any right to any third party
      under any Trademark now or hereafter owned by Company or which Company
      otherwise has the right to license, or granting any right to Company under
      any property of the type

<PAGE>

      described in the definition of Trademark herein now or hereafter owned by
      any third party, and all rights of Company under any such agreement.

      3.    Security for Obligations.

            a. This Agreement secures, and the Collateral is collateral security
for, the prompt payment or performance in full when due, whether at stated
maturity, by required prepayment, declaration, acceleration, conversion, demand
or otherwise (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 363(a) of the Bankruptcy Code, 11
U.S.C. ss.362(a)) of all obligations and liabilities of every nature of Company
now or hereafter existing under or arising out of or in connection with the
Series A Senior Preferred Stock and this Agreement and all extensions or
renewals thereof, whether for principal, interest, (including, without
limitation, interest that, but for the filing of a petition in bankruptcy with
respect to Company, would accrue on such obligations), fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Agent or any Secured Party as a
preference, fraudulent transfer or otherwise (all such obligations of Company,
together with the Obligations, being the "Secured Obligations").

            b. Security Interest. As security for the payment or performance, as
the case may be, of the Secured Obligations, the Company hereby creates and
grants to the Agent, its successors and its assigns, for its own benefit and for
the pro rata benefit of the Purchasers, their successors and their assigns, a
security interest in the Collateral (the "Security Interest"). Without limiting
the foregoing, the Agent is hereby authorized to file one or more financing
statements, continuation statements or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest, naming the Company as debtors and the Agent as secured party.

      The Company agrees at all times to keep in all material respects accurate
and complete accounting records with respect to the Collateral, including, but
not limited to, a record of all payments and Proceeds received.

      4.    Representations and Warranties. Company represents and warrants as
follows:

            a.    Financing Statements. Except for the financing statements in
      favor of Secured Party, at the time of granting the security interest
      described herein, no financing statement covering the Collateral or any
      portion thereof will be on file in any public office and Company agrees
      not to execute or authorize the filing of any such additional financing
      statement in favor of any person, entity or governmental agency (whether
      federal, state or local) other than Secured Party as long as any portion
      of the Obligations evidenced by the Series A Senior Preferred Stock remain
      unpaid.

<PAGE>

            b.    Legal Name. Company's exact legal name is as set forth in the
      first paragraph of this Security Agreement. Company shall not change its
      legal name or its form of organization without 30 days' prior written
      notice to Secured Party.

            c.    Title and Authority. Company has (i) rights in and good title
      to the Collateral in which it is granting a security interest hereunder
      and (ii) the requisite corporate power and authority to grant to the Agent
      the Security Interest in such Collateral pursuant hereto and to execute,
      deliver and perform its obligations in accordance with the terms of this
      Agreement, without the consent or approval of any other person other than
      any consent or approval which has been obtained. Company has the sole,
      full and clear title to each of the Patents shown on Schedule B hereto and
      the registrations thereof are valid and subsisting and in full force and
      effect. None of the Patents has been abandoned or dedicated, and, except
      to the extent that the Agent, upon prior written notice by Company, shall
      consent, Company will not do any act, or omit to do any act, whereby the
      Patents may become abandoned or dedicated and shall notify the Agent
      immediately if it knows of any reason or has reason to know that any
      application or registration may become abandoned or dedicated. Company
      hereby represents and warrants that the Patents shown on Schedule B are
      the only issued U.S. patents owned by Company as of the date of this
      Agreement.

            d.    Filing. Fully executed Uniform Commercial Code financing
      statements containing a description of the Collateral shall have been, or
      shall be delivered to the Agent in a form such that they can be, filed of
      record in every governmental, municipal or other office in every
      jurisdiction in which any portion of the Collateral is located necessary
      to publish notice of and protect the validity of and to establish a valid,
      legal and perfected security interest in favor of the Agent in respect of
      the Collateral in which a security interest may be perfected by filing in
      the United States and its territories and possessions, and no further or
      subsequent filing, refiling, recording, rerecording, registration or
      reregistration is necessary in any such jurisdiction, except as provided
      under applicable law with respect to the filing of Uniform Commercial Code
      continuation statements.

            e.    Validity of Security Interest. The Security Interest
      constitutes a valid, legal and perfected first priority security interest
      in all of the Collateral for payment and performance of the Secured
      Obligations subject only to Permitted Liens.

<PAGE>

            f.    Locations of Collateral; Place of Business. Company hereby
      represents and warrants that all the Collateral is located at the
      locations listed on Schedule 2 hereto and that its federal employer
      identification number is as set forth on said Schedule. The Company agrees
      not to establish, or permit to be established, any other location for
      Collateral unless all filings under the Uniform Commercial Code as in
      effect in any state or otherwise which are required by this Agreement or
      the Purchase Agreement to be made with respect to the Collateral have been
      made and the Agent has a valid, legal and perfected first priority
      security interest in the Collateral. Company confirms that its chief
      executive office is located at the office indicated on Schedule 2 hereto.
      Company agrees not to change, or permit to be changed, the location of its
      chief executive office unless all filings under the Uniform Commercial
      Code or otherwise which are required by this Agreement to be made have
      been made and the Agent has a valid, legal and perfected first priority
      security interest

      5.    Covenants and Agreements. Company covenants and agrees as follows:

            a.    Restrictions. Company agrees that until the Obligations shall
      have been satisfied in full, Company shall not, without Secured Party's
      prior written consent, assign, transfer, encumber or otherwise dispose of
      the Collateral, or any interest therein, except that Company may (i)
      license (other than on an exclusive basis for all known fields of use for
      the duration of the term of the patent) or grant similar rights and
      interests on an arm's length basis consistent with good industry practice
      in all or any part of the Collateral to unrelated third parties pursuant
      to its business and (ii) sell, license on an exclusive basis for all known
      fields of use for the duration of the term of the patent or otherwise
      transfer for value all or any part of the Collateral with the prior
      written consent of the Secured Party, which consent will not be
      unreasonably withheld. Company further agrees that it will not take any
      action, or permit any action to be taken by others subject to its control,
      including licensees, or fail to take any action, which would affect the
      validity or enforcement of the rights transferred to Secured Party under
      this Agreement.

            b.    Defense. Company shall, at its own cost and expense, take any
      and all actions reasonably necessary to defend title to the Collateral
      owned by it against all persons and to defend the Security Interest of the
      Agent in such Collateral, and the priority thereof, against any adverse
      lien of any nature whatsoever (other than Permitted Liens).

            c.    Maintenance. Company shall at all times and at its own expense
      maintain and keep, or cause to be maintained and kept, the Collateral.
      Company shall perform all acts and execute all documents, including,
      without limitation, security agreements in form suitable for filing with
      the United States Patent and Trademark Office, substantially in the form
      of Exhibit B, hereof requested by the Agent at any time to evidence,
      perfect, maintain, record and enforce the Agent's interest in the
      Collateral or otherwise in furtherance of the provisions of this
      Agreement, and Company hereby authorizes the Agent to execute and file one
      or more financing

<PAGE>

      statements (and similar documents) or copies thereof or of this Agreement
      with respect to the Collateral signed only by the Agent. Company will take
      all necessary steps in any proceeding before the United States Patent and
      Trademark Office or any similar office or agency of the United States or
      any State thereof to maintain each application and registration of the
      Patents, including, without limitation, filing of renewals, affidavits of
      use, affidavits of incontestability and opposition, interference and
      cancellation proceedings.

            d.    Secured Party's Right to Take Action. If, after ten days
      written notice from Secured Party, Company fails to perform or observe any
      of its covenants or agreements set forth in this Section 5 or if Company
      notifies Secured Party that it intends to abandon all or any part of the
      Collateral, Secured Party may (but need not) perform or observe such
      covenant or agreement or take steps to prevent such intended abandonment
      on behalf and in the name, place, and stead of Company (or, in the case of
      intended abandonment, in Secured Party's own name) and may (but need not)
      take any and all other actions that Secured Party may reasonably deem
      necessary to cure or correct such failure or prevent such intended
      abandonment.

            e.    Costs and Expenses. Except to the extent that the effect of
      such payment would be to render any loan or forbearance of money usurious
      or otherwise illegal under any applicable law, Company shall pay Secured
      Party on demand the amount of all moneys expended and all costs and
      expenses (including reasonable attorneys' fees and disbursements) incurred
      by Secured Party in connection with or as a result of Secured Party's
      taking action under subsection 5(d), except for intended abandonment of
      the Collateral by Company, or exercising its rights under Section 7,
      together with interest thereon from the date expended or incurred by
      Secured Party.

            f.    Use and Disposition of Collateral. Company shall not make or
      permit to be made any assignment, pledge or hypothecation of the
      Collateral other than Permitted Liens, or grant any security interest in
      the Collateral except for the Security Interest and Permitted Liens.
      Company shall not make or permit to be made any transfer of any
      Collateral, except in the ordinary course of business, and Company shall
      remain at all times in possession of the Collateral owned by it other than
      transfers to the Agent pursuant to the provisions hereof and as otherwise
      provided in this Agreement. The Agent shall have the right, as the true
      and lawful agent of the Company, with power of substitution for the
      Company and in the Company's name, the Agent's name or otherwise, for the
      use and benefit of the Agent and the Purchasers and solely to effect the
      purposes of this Agreement, (i) to endorse the Company's name upon any
      notes, acceptances, checks, drafts, money orders or other evidences of
      payment with respect to the Collateral that may come into its possession;
      (ii) to sign the name of the Company on any invoice relating to any of the
      Collateral and (iii) upon the occurrence and during the continuance of an
      event of default under this Agreement or under the Series A Senior
      Preferred Stock, (A) to receive, endorse, assign and/or deliver any and
      all notes, acceptances, checks, drafts, money orders or other evidences or
      instruments of payment relating to the Collateral or any part thereof, and
      Company hereby waives notice of presentment, protest and non-payment of
      any instrument so endorsed, (B) to

<PAGE>

      demand, collect, receive payment of, give receipt for, extend the time of
      payment of and give discharges and releases of all or any of the
      Collateral and/or release the obligor thereon, (C) to commence and
      prosecute any and all suits, actions or proceedings at law or in equity in
      any court of competent jurisdiction to collect or otherwise realize on all
      or any of the Collateral or to enforce any rights in respect of any
      Collateral, (D) to settle, compromise, compound, adjust or defend any
      actions, suits or proceedings relating to or pertaining to all or any of
      the Collateral, and (H) to use, sell, assign, transfer, pledge, make any
      agreement with respect to or otherwise deal with all or any of the
      Collateral, and to do all other acts and things necessary to carry out the
      purposes of this Agreement, as fully and completely as though the Agent
      were the absolute owner of the Collateral for all purposes; provided,
      however, that nothing herein contained shall be construed as requiring or
      obligating the Agent or any Purchaser to make any commitment or to make
      any inquiry as to the nature or sufficiency of any payment received by the
      Agent or such Purchaser or to present or file any claim or notice, or to
      take any action with respect to the Collateral or any part thereof or the
      moneys due or to become due in respect thereof or any property covered
      thereby, and no action taken by the Agent or any Purchaser or omitted to
      be taken with respect to the Collateral or any part thereof shall give
      rise to any defense, counterclaim or offset in favor of Company or to any
      claim or action against the Agent or any Purchaser in the absence of the
      gross negligence or willful misconduct of the Agent or such Purchaser; and
      provided further that, the Agent shall at all times act reasonably and in
      good faith. It is understood and agreed that the appointment of the Agent
      as the agent of the Company for the purposes set forth above in this
      Section 5(f) is coupled with an interest and is irrevocable. The
      provisions of this Section 5(f) shall in no event relieve Company of any
      of its obligations hereunder with respect to the Collateral or any part
      thereof (other than obligations which are impaired as a result of actions
      taken by the Agent pursuant to this Section 5(f)) or impose any obligation
      on the Agent or any Purchaser to proceed in any particular manner with
      respect to the Collateral or any part thereof, or in any way limit the
      exercise by the Agent or any Purchaser of any other or further right which
      it may have on the date of this Agreement or hereafter, whether hereunder
      or by law or otherwise. Anytime action is taken under this Section 5(f),
      prompt written notice of such action shall be provided to Company by
      Agent.

            g.    Further Assurances. Company agrees, at its expense, to
      execute, acknowledge, deliver and cause to be duly filed all such further
      instruments and documents and take all such actions as the Agent may from
      time to time reasonably request for the assuring and preserving of the
      Security Interest and the rights and remedies created hereby, including,
      without limitation, the payment of any fees and taxes required in
      connection with the execution and delivery of this Agreement, the granting
      of the Security Interest and the filing of any financing statements or
      other documents in connection herewith. If any amount payable under or in
      connection with any of the Collateral shall be or become evidenced by any
      promissory note or other instrument, such note or instrument shall be
      promptly pledged and delivered to the Agent, duly endorsed in a manner
      satisfactory to the Agent. Company agrees to notify promptly the Agent of
      any change in its corporate name or in the location of its chief executive
      office, its chief place of business or the office where it keeps its
      records.

<PAGE>

      6.    Events of Default. Each of the following occurrences shall
constitute an event of default under this Agreement (herein called "Event of
Default"):

            a.    an Event of Default, under any indebtedness owed by the
      Company shall occur; or

            b.    Company shall fail promptly to observe or perform any covenant
      or agreement herein binding on it or shall fail to satisfy any Obligations
      to the Secured Party; or

            c.    there is any levy, seizure, or attachment of all or any
      material portion of the Collateral, other than as set forth in this
      Agreement; or

            d.    any of the representations or warranties contained in Section
      4 or in the Purchase Agreement shall prove to have been incorrect in any
      material respect when made.

      7.    Remedies. Upon the occurrence of an Event of Default and at any time
thereafter, Secured Party may, at its option, take any or all of the following
actions:

            a.    exercise any or all remedies available under this Agreement
      including, without limitation, any and all rights afforded to a secured
      party under, and subject to its obligations contained in, the Uniform
      Commercial Code as in effect in any state or other applicable law; or

            b.    sell, assign, transfer, pledge, encumber, or otherwise dispose
      of the Collateral; or

            c.    enforce the patents and the Agreements comprising the
      Collateral and if Secured Party shall commence any suit for such
      enforcement, Company shall, at the request of Secured Party, do any and
      all lawful acts and execute any and all proper documents reasonably
      required by Secured Party in aid of such enforcement; or

            d.    incur expenses, including attorneys' fees at the regular
      hourly rates of Secured Party's counsel from time to time in effect, legal
      expenses and costs for the exercise of any right or power under this
      Security Agreement, which expenses are secured by this Security Agreement.

Any disposition of Collateral by Agent shall be subject to the mandatory
requirements of applicable law and subject to the requirement that Agent act
reasonably and in good faith. Subject to such conditions, Agent may sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale, for cash, upon credit or for future delivery as the Agent shall deem
appropriate. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Company, and Company
hereby

<PAGE>

waives (to the extent permitted by law) all rights of redemption, stay
and appraisal which Company now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted. The Agent shall
give the Company ten (10) days' written notice (which Company agrees is
reasonable notice within the meaning of Section 9-504(3) of the Uniform
Commercial Code) of the Agent's intention to make any sale of Collateral. Such
notice, in the case of a public sale, shall state the time and place for such
sale. Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Agent may fix and state in the
notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot, as an entirety or in separate
parcels, as the Agent may (in its sole and absolute discretion) determine. The
Agent shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Agent until the sale price is paid by the purchaser or purchasers thereof, but
the Agent shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. At any public
sale made pursuant to this Section 7, any Purchaser may bid for or purchase,
free (to the extent permitted by law) from any right of redemption, stay or
appraisal on the part of Company (all said rights being also hereby waived and
released to the extent permitted by law), with respect to the Collateral or any
part thereof offered for sale and any such Purchaser may make payment on account
thereof by using any claim then due and payable to any such Purchaser from
Company as a credit against the purchase price, and any such Purchaser may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to Company therefor. For purposes hereof, a
written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof; the Agent shall be free to carry out such sale and
purchase pursuant to such agreement, and Company shall not be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Agent shall have entered into such an agreement all
events of default shall have been remedied and the Secured Obligations paid in
full. Company shall remain liable for any deficiency. As an alternative to
exercising the power of sale herein conferred upon it, the Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a court
appointed receiver.

      8.    Designation of Agent; Indemnity.

            a.    The Purchasers hereby irrevocably designate MC (and its
      successors and assigns) as their agent and MC hereby accepts such
      designation, in order to execute any and all instruments or other
      documents on behalf of the Purchasers and to do any and all other acts or
      things on behalf of the Purchasers that MC (or its successors or assigns)
      in its sole discretion deems necessary or advisable or that may be
      required

<PAGE>

      pursuant to this Agreement or otherwise, to exercise Secured Party's
      rights and remedies under this Agreement. None of the Purchasers may take
      any action or exercise any rights under this Agreement except through MC
      as their agent. Company hereby appoints the Agent the attorney-in-fact of
      Company solely for the purpose of carrying out the provisions of this
      Agreement and taking any action and executing any instrument which the
      Agent may reasonably deem necessary or advisable to accomplish the
      purposes hereof, which appointment is irrevocable so long as this
      Agreement and the Security Interest have not been terminated and coupled
      with an interest.

            b.    MC, as agent, shall have no duties or responsibilities
      whatsoever with respect to the Collateral except as are specifically set
      forth herein. MC, in its capacity as agent for the Purchasers, shall
      neither be responsible for or under, nor chargeable with knowledge of the
      terms and conditions of, any other agreement, instrument or document in
      connection herewith. MC may conclusively rely upon, and shall be fully
      protected from all liability, loss, cost, damage or expense in acting or
      omitting to act pursuant to any written notice, instrument, request,
      consent, certificate, document, letter, telegram, opinion, order,
      resolution or other writing hereunder without being required to determine
      the authenticity of such document, the correctness of any fact stated
      therein, the propriety of the service thereof or the capacity, identity or
      authority of any party purporting to sign or deliver such document. MC
      shall have no responsibility for the contents of any such writing
      contemplated herein and may rely without any liability upon the contents
      thereof.

            c.    MC, in its capacity as agent for the Purchasers, shall not be
      liable for any action taken or omitted by it in good faith and reasonably
      believed by it to be authorized hereby or with the rights or powers
      conferred upon it hereunder, nor for action taken or omitted by it in good
      faith, and in accordance with advice of counsel (which counsel may be of
      MC's own choosing), and shall not be liable for any mistake of fact or
      error of judgment or for any acts or omissions of any kind except for its
      own willful misconduct or negligence.

            d.    Each of the Purchasers and the Company (each, an "Indemnifying
      Parties") agrees to indemnify MC, in its capacity as agent for the
      Purchasers, and its employees, directors, officers and agents and hold
      each harmless against any and all liabilities incurred by it hereunder as
      a consequence of such party's action, and each Indemnifying Party agrees
      to indemnify MC, in its capacity as agent for the Purchasers, and hold it
      harmless against any claims, costs, payments, and expenses (including the
      fees and expenses of counsel) and all liabilities incurred by it in
      connection with the performance of its duties hereunder, except in the
      case for claims, costs, payments, and expenses (including the fees and
      expenses of counsel) and liabilities incurred by MC resulting from its own
      willful misconduct or gross negligence.

      9.    Application of Proceeds. The proceeds of any collection or sale of
Collateral, as well as any Collateral consisting of cash, shall be applied by
the Agent as follows:

<PAGE>

            FIRST, to the payment of all reasonable costs and expenses incurred
      by the Agent in connection with such collection or sale or otherwise in
      connection with this Agreement or any of the Secured Obligations,
      including, but not limited to, all court costs and the reasonable fees and
      expenses of its agents and legal counsel, the repayment of all advances
      made by the Agent hereunder on behalf of the Company and any other
      reasonable costs or expenses incurred in connection with the exercise of
      any right or remedy hereunder;

            SECOND, pro rata to the payment in full of the liquidation
      preference and accrued and unpaid dividends in respect of the Series A
      Senior Preferred Stock outstanding (pro rata as among the Purchasers in
      accordance with the number of shares of Series A Senior Preferred Stock
      held by them);

            THIRD, to the Company, its successors and assigns, or as a court of
      competent jurisdiction may otherwise direct.

      10.   Security Interest Absolute. All rights of the Agent hereunder, the
Security Interest, and all obligations of the Company hereunder, shall be
absolute and unconditional irrespective of (i) any partial invalidity or
unenforceability of any Obligations, any other agreement with respect to any of
the Secured Obligations or any other agreement or instrument relating to any of
the foregoing, (ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other amendment
or waiver of or consent to any departure from the Series A Senior Preferred
Stock or any other agreement or instrument, (iii) any exchange, release or
nonperfection of any other Collateral, or any release or amendment or waiver of
or consent to or departure from any guarantee, for all or any of the Secured
Obligations, or (iv) any other circumstance which might otherwise constitute a
defense available to, or discharge of the Company in respect of the Secured
Obligations or in respect of this Agreement.

      11.   Miscellaneous. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by Secured Party. A waiver signed by Secured
Party shall be effective only in the specific instance and for the specific
purpose given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party's rights or remedies. All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party's option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. Secured Party shall not be obligated to preserve any
rights Company may have against prior parties, to realize on the Collateral at
all or in any particular manner or order, or to apply any cash proceeds of the
Collateral in any particular order of application. This Agreement shall be
binding upon and inure to the benefit of Company and Secured Party and their
respective participants, successors, and permitted assigns and shall take effect
when signed by Company and Secured Party, and Company waives notice of Secured
Party's acceptance hereof; provided, however, that the Secured Party's rights
hereunder may not be transferred or assigned to any third party without the
prior written consent of Company. This Agreement shall be governed by the
internal law of the State of New York without regard to conflicts of

<PAGE>

law provisions. If any provision or application of this Agreement is held
unlawful or unenforceable in any respect, such illegality or unenforceability
shall not affect other provisions or applications which can be given effect and
this Agreement shall be construed as if the unlawful or unenforceable provision
or application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Obligations.

      12.   Waiver of Jury Trial: COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT COMPANY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
SECURED PARTY ENTERING INTO THIS AGREEMENT.

      13.   Termination. This Agreement and the Security Interest shall
terminate when all the Secured Obligations have been fully and indefeasibly paid
in full, at which time the Agent shall execute and deliver to the Company all
Uniform Commercial Code termination statements and similar documents which the
Company shall reasonably request to evidence such termination; provided,
however, that all indemnities of the Company contained in this Agreement shall
survive, and remain operative and in full force and effect regardless of, the
termination of this Agreement for a period of six (6) months following the
termination of this Agreement

<PAGE>

            IN WITNESS WHEREOF, the parties have duly executed and delivered
this Security Agreement as of the date and year first written above.

                             SECURED PARTY AND AGENT:
                             ------------------------

                             MIDDLEBURY CAPITAL LLC

                             By:____________________________________
                             Name:_______________________________
                             Title:________________________________


                             COMPANY:

                             POWERHOUSE TECHNOLOGIES GROUP, INC.


                             By:_________________________________
                             Name:  Jay Elliot
                                    -----------------------------
                             Title: Chief Executive Officer
                                    -----------------------------

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED APRIL 23, 2004,
                   AMONG POWERHOUSE TECHNOLOGIES GROUP, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "PURCHASERS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Purchasers" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.


PURCHASER:_____________________________


By:_____________________________
Name:
Title: