EXHIBIT 4.6
GUARANTOR SECURITY AGREEMENT
THIS GUARANTOR SECURITY AGREEMENT (this "Security Agreement") is made
as of the date set forth on the signature page hereof by and between INTEGRATED
SECURITY SYSTEMS, INC., a Delaware corporation, whose chief executive office,
chief place of business and mailing address is 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxx, Xxxxx 00000 (the "Company"), and BRIAR CAPITAL, L.P., a Texas limited
partnership, whose address is 0000 Xxxx Xxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxx Xxxxxx, Xxxxx 00000 (the "Lender").
W I T N E S S E T H:
WHEREAS, B&B ARMR Corporation, a Delaware corporation ("Borrower") has
executed a Revolving Promissory Note dated of even date herewith in the original
principal amount of up to $3,000,000 (the "Revolving Promissory Note" and
sometimes referred to herein as the "Note") in favor of the Lender;
WHEREAS, the Company has executed a Guaranty Agreement on even date
herewith (the "Guaranty Agreement"), pursuant to which the Company promised to
guaranty payment of certain obligations, which obligations are more particularly
set forth in the Guaranty Agreement;
WHEREAS, it is a condition precedent to the obligation of the Lender to
fund under the Note that the Company shall have entered into this Security
Agreement for the purpose of securing the payment and performance by the Company
of its obligations under the Guaranty Agreement;
WHEREAS, the Company expects to receive a material benefit from the
Borrower receiving the Loan;
NOW, THEREFORE, to induce the Lender to accept the Note from the
Borrower, and in consideration thereof and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, it
is hereby agreed as follows:
1. Defined Terms.
(a) Unless otherwise defined in this Security Agreement,
terms defined in Chapter 9 of the UCC are used in this Security
Agreement as defined in Chapter 9 of the UCC.
(b) As used in this Security Agreement, the following terms
shall have the following meanings:
"Borrower Security Agreement" means that certain security
agreement dated of even date herewith by and between Borrower and
Lender.
"Collateral" has the meaning specified in Section 2.
"Equipment" means all "equipment" (as defined in the UCC)
wherever located, now or hereafter existing and all parts thereof and
all accessions thereto.
"Event of Default" has the meaning specified in Section 10.
"Financing Documents" means the Borrower Security Agreement, the
Guarantor Security Agreements, the Loan Agreement, the Note, the
Guaranty Agreements and any other documents entered into in connection
with the Lender loaning monies to the Borrower under the Note.
"Guarantor Security Agreements" means the respective Guarantor
Security Agreements dated of even date herewith between Lender and: (i)
Integrated Security Systems, Inc. and (ii) Intelli-Site, Inc.; all as
amended from time to time, pursuant to which certain assets of such
companies are pledged to Lender to secure the Secured Liabilities as
defined in the respective Guarantor Security Agreements.
"Guarantors" means Integrated Security Systems, Inc. and
Intelli-Site, Inc.
"Guaranty Agreements" means those certain Guaranty Agreements
dated of even date herewith executed by each of the Guarantors, as each
may be amended or supplemented from time to time.
"Inventory" means all "inventory" (as defined in the UCC) in all
of its forms, wherever located, now or hereafter existing and whether
acquired by purchase, merger or otherwise, including (a) all goods held
for sale or lease or to be furnished under contracts of service or so
leased or furnished and (b) all raw materials, work in process, all
finished goods and all materials and supplies used, consumed or to be
used or consumed in the manufacture, packing, shipping, advertising,
selling, leasing or production of such inventory, including (whether or
not included in such UCC definition) goods in which the Company has an
interest in mass or joint or other interest or right of any kind and
goods that are returned to or repossessed by the Company and all
accessions thereto and products thereof and all documents of title
therefor.
"Loan Agreement" means that certain Loan Agreement dated as of
even date herewith between Borrower and Lender, as amended or
supplemented from time to time.
"Note" means that certain Revolving Credit Note dated of even
date herewith in the original principal amount of up to $3,000,000
executed by the Borrower in favor of the Lender.
"Perfection Certificate" means a certificate substantially in
the form of Exhibit A to this Security Agreement, completed and
supplemented with the schedules and attachments contemplated by such
form of certificate to the satisfaction of the Lender, and duly
executed by an officer or other authorized representative of the
Company.
"Permitted Collateral Liens" means (a) the Security Interest,
(b) liens for taxes not yet delinquent or which are being contested in
good faith by appropriate proceedings; provided that adequate reserves
with respect thereto are being maintained on the books of the Company
in conformity with GAAP, (c) liens (other than liens in favor of
landlords or taxing entities) in favor of carriers', warehouseman's,
mechanics', materialmen's, repairmen's or other like liens arising in
the ordinary course of business and not overdue for a period of more
than sixty (60) days or which are being contested in good faith by
appropriate proceedings, (d) liens in favor of landlords of the
Company, provided that all such liens must be subordinated to Lender's
Security Interest, (e) liens securing equipment acquired in the
ordinary course of business under equipment leases or vendor-financed
purchases, provided that the Company is current in the payment of all
amounts owed under such leases or purchase money financings, (f)
nonconsensual liens and rights of financial institutions in checking,
savings, money market and similar accounts opened and maintained by the
Company in the ordinary course of business, and (g) liens subordinated
to Lender pursuant to security agreements acceptable to Lender.
2
"Proceeds" means all proceeds of, and all other profits, rentals
or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing or other disposition of, or
realization upon, Collateral, including, without limitation, all claims
of the Company against third parties for loss of, damage to or
destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any Collateral,
and any condemnation or requisition payments with respect to any
Collateral, in each case whether now existing or hereafter arising.
"Receivables" means all "accounts", "chattel paper",
"instruments", "documents", "general intangibles" (including "payment
intangibles") (as each such term is defined in the UCC) and other
obligations owed to the Company of any kind, now or hereafter existing,
whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and whether or not evidenced by
a written agreement, and all rights now or hereafter existing in and to
all security agreements, leases, and other contracts including support
agreements (as such term is defined in the UCC) (all such written or
unwritten agreements, security agreements, leases and other contracts,
including all support agreements, being the "Related Contracts"),
securing or otherwise relating to any such accounts, chattel paper,
instruments, documents, general intangibles or other obligations.
"Secured Liabilities" means all present and future obligations
and liabilities (whether actual or contingent and whether now or
hereafter owed jointly or severally or as principal debtor, guarantor,
surety or otherwise or as the equivalent obligor under the laws of any
jurisdiction) of the Guarantors or the Borrower to the Lender,
including, without limitation, under any of the Financing Documents,
together with:
(i) all costs, charges and expenses incurred by the
Lender in connection with or arising out of the protection,
preservation or enforcement of the Lender's rights under the
Financing Documents;
(ii) any modification, renewal or extension of or
increase in any of those obligations or liabilities;
(iii) any claim for damages or restitution in the event
of rescission of any of those obligations or liabilities or
otherwise in connection with the Financing Documents;
(iv) any claim against the Borrower or the Company
flowing from the recovery by the Borrower or the Company of a
payment or discharge in respect of any of those obligations or
liabilities on grounds of preference or otherwise;
(v) all other amounts now or in the future owed by the
Borrower to the Lender; and
3
(vi) any amounts that would be included in any of the
foregoing but for any discharge, non-provability,
unenforceability or non-allowability of the same in any
insolvency, bankruptcy or other proceedings.
"Security Interest" means the security interest granted in
accordance with Section 2, as well as all other security interests
created or assigned as additional Collateral for the Secured
Liabilities in accordance with the provisions of this Security
Agreement or otherwise.
"UCC" means the Uniform Commercial Code in effect from time to
time in the State of Texas; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or
non-perfection of the Security Interest in any Collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of Texas, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions of
this Security Agreement relating to such perfection or effect of
perfection or non-perfection.
2. Security Interest.
(a) In order to secure the full and punctual payment of the
Secured Liabilities in accordance with the terms thereof, including,
without limitation, to secure the performance of all of the obligations
of the Company under the Guaranty and this Security Agreement, the
Company hereby grants and assigns to the Lender a continuing security
interest in and to all right, title and interest of the Company in all
of the following property, whether now owned or existing or hereafter
acquired or arising and regardless of where located (all being
collectively referred to as the "Collateral"):
(i) Equipment;
(ii) Inventory;
(iii) Receivables;
(iv) Related Contracts; and
(v) All Proceeds of or substitutions for all or
any of the Collateral described in Clauses (i), (ii), (iii) and
(iv) of this Section 2(a).
(b) The Security Interest is granted as security only and
shall not subject the Lender to, or transfer or in any way affect or
modify, any obligation or liability of the Company with respect to any
of the Collateral or any transaction in connection therewith.
(c) The inclusion of Proceeds in this Security Agreement does
not authorize the Company to sell, dispose of or otherwise use the
Collateral in any manner not specifically authorized by the Financing
Documents.
3. Representations and Warranties. The Company represents and
warrants as follows:
(a) The exact legal name of the Company, as the legal name
appears in the Company's articles of incorporation (or similar
organizational document filed with the State of its origin) as of the
date of this Security Agreement, is as set forth in the introductory
paragraph of this Security Agreement. The Company has no other
tradename except as listed on the Perfection Certificate.
4
(b) The place of business or, if the Company has more than
one place of business, the chief executive office is located at the
address of the Company specified in the Perfection Certificate.
(c) All of the Company's Inventory and Equipment is located
at the places specified in paragraph 2(c) of the Perfection Certificate
attached to this Security Agreement. Except as set forth on the
Perfection Certificate, the Company has exclusive possession and
control of the Inventory and Equipment.
(d) The office where the Company keeps its records concerning
the Receivables, and all originals of all chattel paper which evidence
Receivables, is located at the address of the Company specified in
paragraph 2(b) of the Perfection Certificate. None of the Receivables
is evidenced by a promissory note or other instrument.
(e) The Company owns the Collateral free and clear of any
lien, security interest, charge or encumbrance except for the Permitted
Collateral Liens. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file
in any recording office, except such as may have been filed relating to
Permitted Collateral Liens.
(f) This Security Agreement creates a valid and perfected
first priority security interest in the Collateral (except with respect
to Permitted Collateral Liens), securing the payment of the Secured
Liabilities, and all filings and other actions necessary or desirable
to perfect and protect such security interest have been duly taken.
(g) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required either (i) for the grant by the Company of the security
interest granted hereby or for the execution, delivery or performance
of this Security Agreement by the Company, or (ii) for the perfection
of or the exercise by the Lender of their rights and remedies under
this Security Agreement, including without limitation, the filing of a
UCC-1 financing statement.
(h) The Company is "located" (as such term is defined and
used in the UCC) in its jurisdiction of incorporation specified in the
Perfection Certificate.
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Company's
jurisdiction of incorporation, qualified to do business in all
jurisdictions in which the nature of the business conducted by the
Company makes such qualification necessary and where failure so to
qualify would otherwise have a material adverse effect on the Company's
financial condition, or the Company's ability to perform all the
Company's obligations under this Security Agreement and the other
Financing Documents to which the Company is a party.
(j) The Company is not in violation of any applicable law,
which violations, individually or in the aggregate, would affect the
Company's performance of any obligation under this Security Agreement
or the other Financing Documents to which the Company is a party; there
is no litigation before any court or governmental authority now pending
or (to the Company's knowledge after reasonable inquiry) threatened
against the Company which, if adversely determined, could reasonably be
expected to have a material adverse effect on the Company's financial
condition, or ability to perform all the Company's obligations under
this Security Agreement and the other Financing Documents to which the
Company is a party.
5
(k) The Company is the holder of all governmental approvals,
permits and licenses required to permit the Company to conduct its
business as currently conducted and to enter into and perform the
Company's obligations under this Security Agreement and the other
Financing Documents to which the Company is a party.
(l) None of the execution and delivery of this Security
Agreement, the consummation of the transactions contemplated in this
Security Agreement or the other Financing Documents to which the
Company is a party, or compliance with the terms and provisions of this
Security Agreement or the other Financing Documents to which the
Company is a party will conflict with or result in a breach of, or
require any consent under, the Company's charter or bylaws, or any
applicable law, or any agreement or instrument to which the Company is
a party or by which the Company is bound or to which the Company or any
of the Company's respective assets are subject, or constitute a default
under any such agreement or instrument.
(m) The Company has all necessary power and authority to
execute, deliver and perform the Company's respective obligations under
this Security Agreement and the other Financing Documents to which the
Company is a party; the Company's execution, delivery and performance
of this Security Agreement and the other Financing Documents to which
the Company is a party has been duly authorized by all necessary action
on the Company's part; and this Security Agreement and the other
Financing Documents to which the Company is a party have been duly and
validly executed and delivered by the Company and each constitutes the
Company's legal, valid and binding obligation, enforceable in
accordance with its and their terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or
moratorium or other similar laws relating to the enforcement of
creditors' rights generally and by general equitable principles.
4. Places of Business. The Company will notify the Lender promptly
of the addition or discontinuance of any place of business or any change in the
address of its principal or any other place of business. None of the Collateral
shall be removed from the locations specified herein or in the Perfection
Certificate, as from time to time supplemented, unless the Lender is given
thirty (30) days prior written notice of such removal, which notice shall state
the location or locations to which said Collateral will be removed. The Company
warrants that all of the Collateral is and shall continue to be located at the
locations set forth herein, in the Perfection Certificate or such other
locations of which the Lender receives notice in accordance with this Section.
5. Encumbrances. The Company will not create, incur, assume, or
suffer to exist now or at any time throughout the duration of the term of this
Security Agreement, any lien, security interest or other encumbrances against
the Collateral, whether now owned or hereafter acquired, except for liens in
favor of the Lender, any Permitted Collateral Liens, and any other liens allowed
in writing by the Lender. If such a lien, security interest or other encumbrance
is not a Permitted Collateral Lien, then the Company will notify the Lender of
any lien, security interest or other encumbrance securing an obligation against
the Collateral, and will defend the Collateral against such claim, lien,
security interest or other encumbrance adverse to the Lender.
6
6. Maintenance of Collateral. The Company shall preserve the
Collateral for the benefit of the Lender. Without limiting the generality of the
foregoing, the Company shall:
(a) make all such repairs, replacements, additions and
improvements to its Equipment as in its judgment are necessary to
permit the Company's business to be properly and advantageously
conducted at all times;
(b) preserve all beneficial contract rights to the extent
commercially reasonable and related to the Collateral;
(c) in conjunction with, and at the direction of, the Lender,
take commercially reasonable steps to collect all Receivables; and
(d) pay all taxes, assessments or other charges on the
Collateral when due, unless the amount or validity of such taxes,
assessments or charges are being contested in good faith by appropriate
proceedings and reserves have been provided on its books with respect
thereto in conformity with generally accepted accounting principles.
Nothing contained herein shall be construed to prohibit the Company
from buying and selling Inventory or Equipment in the ordinary course of
business; provided, however, any Equipment sold is replaced by new Equipment.
7. Additional Provisions Concerning the Collateral.
(a) The Company authorizes the Lender to file, without the
signature of the Company, where permitted by law, one or more financing
or continuation statements, and amendments thereto, relating to the
Collateral, all in the discretion of the Lender.
(b) The Company hereby irrevocably appoints the Lender as its
attorney-in-fact (which power of attorney is coupled with an interest)
and proxy, with full authority in the place and stead of the Company
and in its name or otherwise, from time to time in the Lender's
discretion, to take any action or execute any instrument which the
Lender may deem necessary or advisable to accomplish the purposes of
this Security Agreement, including, without limitation: (i) to obtain
and adjust insurance required to be paid to the Lender pursuant to
Section 8 hereof; (ii) to ask, demand, collect, xxx for, recover,
compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral; (iii) to
receive, endorse, and collect any checks, drafts or other instruments,
documents, and chattel paper in connection with clause (i) or clause
(ii) above; (iv) to sign the Company's name on any invoice or xxxx of
lading relating to any account, on drafts against customers, on
schedules and assignments of accounts, on notices of assignment,
financing statements and other public records, on verification of
accounts and on notices to customers (including notices directing
customers to make payment directly to the Lender); (v) during the
continuation of an Event of Default hereunder, to notify the postal
authorities to change the address for delivery of its mail to an
address designated by the Lender, to receive, open and process all mail
addressed to the Company; (vi) to send requests for verification of
accounts to customers; and (vii) to file any claims or take any action
or institute any proceedings which the Lender may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Lender with respect to any of the Collateral.
The Company hereby ratifies and approves in advance all acts of said
attorney; and so long as the attorney acts in good faith and without
gross negligence it shall have no liability to the Company for any act
or omission as to such attorney.
7
(c) If the Company fails to perform any agreement contained
herein, the Lender may perform, or cause performance of, such agreement
or obligation, and the costs and expenses of the Lender incurred in
connection therewith shall be payable by the Company immediately upon
demand by Lender, and shall bear interest at the rate set forth in
Section 2.02(b) of the Loan Agreement.
(d) The powers conferred on the Lender hereunder are solely
to protect its interest in the Collateral and shall not impose any duty
upon the Lender to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Lender shall have no duty
as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to
any Collateral.
(e) Anything herein to the contrary notwithstanding, (i) the
Company shall remain liable under any contracts and agreements relating
to the Collateral, to the extent set forth therein, to perform all of
its obligations thereunder, to the same extent as if this Security
Agreement had not been executed; (ii) the exercise by the Lender of any
of its rights hereunder shall not release the Company from any of its
obligations under the contracts and agreements relating to the
Collateral; and (iii) the Lender shall not have any obligation or
liability by reason of this Security Agreement under any contracts and
agreements relating to the Collateral, nor shall the Lender be
obligated to perform any of the obligations or duties of the Company
thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
(f) The Company will maintain (A) the location of its place
of business and its chief executive office (if it has more than one
place of business) and (B) the location where the Company keeps or
holds any Collateral or records relating thereto at (1) the applicable
locations described in the Perfection Certificate, or (2) at locations
within other States if, prior to such relocation, the Company shall
have given the Lender not less than thirty (30) days' notice thereof.
(g) Until the Secured Liabilities are paid in full, the
Company agrees that the Company will (i) preserve the Company's
corporate existence and not, in one transaction or a series of related
transactions, convert to a different type of entity, merge into or
consolidate with any other entity, or sell all or substantially all of
its assets; (ii) not change the state of the Company's incorporation;
and (iii) not change the Company's name or identity in any manner,
unless in the case of this clause (iii) only, the Company shall have
given the Lender not less than forty-five (45) days prior notice
thereof.
8. Insurance. The Company shall maintain insurance covering the
Collateral with financially sound and reputable insurers satisfactory to the
Lender against such risks as are customarily insured by a business in the same
or a similar industry and similarly situated for an amount not less than the
full replacement value of such Collateral. In addition, the Company shall
maintain errors and omissions insurance with financially sound and reputable
insurers satisfactory to the Lender. All such insurance policies covering
property on and after the date such property becomes subject to the Security
Interest shall be written so as to be payable in the event of loss to the
Lender, and shall provide for at least thirty (30) days prior written notice to
the Lender prior to the cancellation or modification of each such policy. At the
request of the Lender, all insurance policies covering property subject to the
Security Interest shall be furnished to and held by the Lender. If, while any
Secured Liabilities are outstanding, any proceeds with respect to any casualty
loss are paid to the Lender under such policies on account of such casualty
loss, and no default has occurred and is continuing, the Lender will pay over
such proceeds in whole or in part to the Company, for the purpose of repairing
or replacing the Collateral destroyed or damaged, with any such repaired or
replaced Collateral to be secured by this Security Agreement. If an Event of
Default has occurred and is continuing, the Lender may apply the proceeds as
Lender deems fit, subject to applicable law and the terms of the Financing
Documents, and may cancel, assign or surrender any such insurance policies.
8
9. Fixtures. It is the intention of the parties hereto that none of
the Equipment, machinery or other property securing the Secured Liabilities
hereunder shall become fixtures.
10. Default. Any one or more of the following events shall
constitute an event of default (an "Event of Default"):
(a) any representation or warranty made or deemed made by the
Company in this Security Agreement or any other Financing Documents
shall prove to have been incorrect, false, incomplete or misleading; or
(b) any representation or warranty made or deemed made by the
Borrower in any of the Financing Documents shall prove to have been
incorrect, false, incomplete or misleading; or
(c) the Company shall breach or fail to perform or observe
any term, covenant or agreement contained in this Security Agreement or
any other Financing Document and such failure shall continue beyond any
grace period contained in this Security Agreement or any other
Financing Document, as may be applicable; or
(d) the Borrower shall breach or fail to perform or observe
any term, covenant or agreement contained in any Financing Document and
such failure shall continue beyond any grace period contained in any
such applicable Financing Document; or
(e) the occurrence and continuance of an "Event of Default"
under the Loan Agreement.
11. Remedies.
(a) Upon the occurrence of an Event of Default and at any
time or times during the continuance thereof, unless such Event of
Default shall have been cured within the applicable time period, if
any, or waived in writing by the Lender, and subject to the provisions
of applicable law, the Lender may exercise any one or more of the
following remedies:
(i) The Lender shall have full power and authority to
sell or otherwise dispose of the Collateral or any part thereof.
Any such sale or other disposition, subject to the provisions of
applicable law, may be by public or private proceedings and may
be made by one or more contracts, as a unit or in parcels, at
such time and place, by such method, in such manner and on such
terms as the Lender may determine. Except as required by law,
such sale or other disposition and such notice will be deemed to
have been sufficiently given if such notice is hand-delivered or
mailed postage prepaid, at least ten (10) days before the time
of such sale or other disposition, to the Company at its address
as specified in the Security Agreement. To the extent permitted
by law, the Lender may buy any or all of the Collateral upon any
sale thereof. To the extent permitted by law, upon any such sale
or sales, the Collateral so purchased shall be held by the
purchaser absolutely free from any claims or rights of
whatsoever kind or nature, including any claim of redemption and
any similar rights being hereby expressly waived and released by
the Company. In connection with any such sale, the Lender shall
be permitted to limit its warranties to the maximum extent
provided in the UCC. After deducting all reasonable costs and
expenses of collection, custody, sale or other disposition or
delivery (including legal costs and reasonable attorneys' fees)
and all other charges due against the Collateral, the residue of
the proceeds of any such sale or other disposition shall be
applied to the payment of the Secured Liabilities, except as
otherwise provided by law or directed by any court of competent
jurisdiction, and any surplus after the payment in full of the
Secured Liabilities shall be returned to the Company, except as
otherwise provided by law or any such court. The Company shall
be liable for any deficiency in payment of the Secured
Liabilities, including all reasonable costs and expenses of
collection, custody, sale or other disposition or delivery and
all other charges due against the Collateral, as herein
enumerated.
9
(ii) The Lender may notify an account debtor of the
Company to make payment to the Lender whether the Company or the
Lender were previously making collections on any of the accounts
receivable; and the Lender may also take control of any proceeds
from any Collateral.
(iii) At any time whether or not an Event of Default has
occurred, with or without notice, the Lender is authorized to
offset and charge against any other credits and obligations ever
owed by the Lender to the Company, any amount for which the
Company may become obligated to the Lender at any time, whether
under the Financing Documents or otherwise. The obligations
secured by the Security Interest granted and by the Lender's
right of offset includes all obligations of any kind or type now
or hereafter arising, owed by the Company to the Lender, whether
liquidated or unliquidated, direct or indirect, contingent or
not.
(iv) The Lender may commence proceedings in any court of
competent jurisdiction for the appointment of a receiver (which
term shall include a receiver-manager) of the Collateral or of
any part thereof or may by instrument in writing appoint any
person to be a receiver of the Collateral or any part thereof
and may remove any receiver so appointed by the Lender and
appoint another in his stead; and any such receiver appointed by
instrument in writing shall have power (a) to take possession of
the Collateral or any part thereof, (b) to carry on the business
of the Company, (c) to borrow money on the security of the
Collateral in priority to this Security Agreement to the extent
required for the maintenance, preservation or protection of the
Collateral or any part thereof or for the carrying on of the
business of the Company, and (d) to sell lease or otherwise
dispose of the whole or any part of the Collateral at public
auction, by public tender or by private sale, either for cash or
upon credit, at such time and upon such terms and conditions as
the receiver may determine; provided that any such receiver
shall be deemed the agent of the Company and the Lender shall
not be in any way responsible for any misconduct or negligence
of any such receiver.
(v) The Lender shall have all other rights and remedies
of a secured party provided under the UCC.
(vi) The Lender shall have all other rights and remedies
allowed at law and/or in equity.
10
(b) It is provided, however, that in the Lender's efforts in
collection on the Collateral, the Company shall be liable and
responsible for any deficiency.
12. Limitation on Duty of the Lender in Respect of Collateral. The
powers conferred on the Lender under this Security Agreement are solely to
protect the Lender's interests in the Collateral and shall not impose any duty
upon the Lender to exercise any such powers. Except for reasonable care in the
custody of any Collateral in the Lender's possession and the accounting for
moneys actually received by the Lender under this Security Agreement, the Lender
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral. The Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in the Lender's possession if the
Collateral is accorded treatment substantially equal to that which the Lender
accords its own property, it being understood that the Lender shall not be
liable or responsible for any loss or damage to any of the Collateral, or for
any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other bailee selected by
the Lender in good faith. Except as otherwise expressly provided in this Section
12, the Company has the risk of loss of the Collateral. Further, the Lender has
no duty to collect any income accruing on the Collateral or to preserve any
rights relating to the Collateral. The Lender shall have no obligation to clean
up or otherwise prepare the Collateral for sale.
13. Concerning Lender. In furtherance and not in derogation of the
rights, privileges and immunities of the Lender set forth in the other Financing
Documents:
(a) The Lender is authorized to take all such action as is
provided to be taken by the Lender under this Security Agreement and
all other action reasonably incidental thereto. As to any matters not
expressly provided for in this Security Agreement (including the timing
and methods of realization upon the Collateral), the Lender shall act
or refrain from acting in the Lender's sole discretion.
(b) The Lender shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Security Interests in any
of the Collateral, whether impaired by operation of law or by reason of
any action or omission to act on the Lender's part under this Security
Agreement. The Lender shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Security
Agreement by the Company.
14. Payment of Taxes, Charges, Etc. The Lender, at its option, after
notice to the Company, may discharge any taxes, charges, assessments, security
interest, liens or other encumbrances upon the Collateral or otherwise protect
the value thereof. All such expenditures incurred by the Lender shall become
payable by the Company to the Lender upon demand, shall bear interest at the
highest legal rate from the date incurred to the date of payment, and shall be
secured by the Collateral.
15. Waivers. To the extent permitted by law, the Company hereby
waives demand for payment, notice of dishonor or protest and all other notices
of any kind in connection with the Secured Liabilities except notices required
hereby, by law or by any other agreement between the Company and the Lender. The
Lender may release, supersede, exchange or modify any Collateral or security
which it may from time to time hold and may release, surrender or modify the
liability of any third party without giving notice hereunder to the Company.
Such modifications, changes, renewals, releases or other actions shall in no way
affect the Company's obligations hereunder.
11
16. Transfer Expenses, Etc. The Company will pay, indemnify and hold
the Lender harmless from and against all costs and expenses (including taxes, if
any) arising out of or incurred in connection with any transfer of Collateral
into or out of the name of the Lender and all reasonable costs and expenses,
including reasonable legal fees, of the Lender arising out of or incurred in
connection with this Security Agreement.
17. Termination. This Security Interest shall terminate following
the full payment, satisfaction, or discharge of all Secured Liabilities. Upon
such termination, the Lender will deliver to the Company appropriate UCC
termination statements with respect to Collateral so released from the Security
Interest for filing with each filing officer with which UCC financing statements
have been filed by the Lender to perfect the Security Interest in such
Collateral.
18. Successors and Assigns. This Security Agreement shall be binding
upon and inure to the benefit of the Company and the Lender and their respective
successors and assigns.
19. Severability of Provisions. Any provision of any Financing
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Financing
Document or affecting the validity or enforceability of such Financing Document
or affecting the validity or enforceability of such provision in any other
jurisdiction.
20. Submission to Jurisdiction.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
SECURITY AGREEMENT AND THE OTHER FINANCING DOCUMENTS TO WHICH THE
COMPANY IS A PARTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS
OR OF THE UNITED STATES LOCATED IN XXXXXX COUNTY, TEXAS AND, BY
EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT, THE COMPANY HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF THE COMPANY'S
PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS
WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE COMPANY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
THE COMPANY PURSUANT TO SECTION 22, SUCH SERVICE TO BECOME EFFECTIVE
THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING IN THIS SECURITY AGREEMENT
SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
(b) THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
THE COMPANY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS SECURITY AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (a) OF THIS SECTION 20 AND HEREBY FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
12
21. Waiver of Jury Trial. THE COMPANY HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION WITH THIS SECURITY AGREEMENT OR ARISING
FROM OR RELATING TO ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS SECURITY
AGREEMENT, AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
22. Notice. Any notice or communication required or permitted
hereunder shall be deemed to be delivered, whether actually received or not,
when deposited in the United States mail, postage fully prepaid, registered or
certified mail, and addressed to the intended recipient at the address set forth
on the signature page of this Security Agreement. Any address for notice may be
changed by written notice delivered as provided herein.
23. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS, EXCEPT AS REQUIRED
BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTERESTS, OR REMEDIES UNDER THIS SECURITY AGREEMENT,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS.
24. Controlling Agreement. This Security Agreement, as a Financing
Document, is one of the "Security Instruments" referred to in the Loan
Agreement. To the extent of any conflict with the terms, provisions,
representation or warranties of this Security Agreement and the Loan Agreement,
the Loan Agreement controls.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date indicated below each signature.
COMPANY:
INTEGRATED SECURITY SYSTEMS, INC., a
Delaware corporation
By: /S/ C.A. Xxxxxxx, Jr.
-----------------------------------
C.A. Xxxxxxx, Jr., Chairman and CEO
Address: 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Date: November 10, 2004
LENDER:
BRIAR CAPITAL, L.P.,
a Texas limited partnership
By: Briar Capital General, LLC,
a Texas limited liability company,
its general partner
By: /S/ Xxxxx Xxxxxxxx
-------------------
Xxxxx Xxxxxxxx, CEO
Address: 0000 Xxxx Xxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Date: November 10, 2004
14
PERFECTION CERTIFICATE
The undersigned, the Chairman and Chief Executive Officer of INTEGRATED
SECURITY SYSTMES, INC., a Delaware corporation (the "Grantor"), hereby
certifies, in connection with the Security Agreement, dated as of November 10,
2004 (the "Security Agreement"; initial capitalized terms used but not defined
in this Perfection Certificate shall have the meanings ascribed to such terms in
the Security Agreement), executed by Grantor in favor of BRIAR CAPITAL, L.P., a
Texas limited partnership ("the Lender"), to the Lender as follows:
1. Name. (a) The exact legal name of Grantor, as the legal name
appears in Grantor's articles of incorporation as of the date of this Perfection
Certificate, is as follows: INTEGRATED SECURITY SYSTEMS, INC.
(b) The following is a list of all other names (including trade
names or similar appellations) used by Grantor or any of its divisions or other
business units at any time since its date of incorporation:
NONE.
(c) The jurisdiction of organization of Grantor is Delaware; its
organizational identification number issued by the State of Delaware is 2282300;
and its federal taxpayer identification number is 00-0000000.
2. Current Location. (a) The only place of business of Grantor, or
if Grantor has more than one, its chief executive office, is located at the
following address:
Street Address: 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Mailing Address: 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
(b) The following are all the locations where Grantor maintains any
books or records relating to any Collateral (if more than one location, please
attach additional pages including all addresses):
Street Address: 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
(c) The following are all the locations where Grantor maintains any
Inventory or Equipment (if more than two locations, please attach additional
pages including all addresses):
Street Address: 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
15
(d) The following are all the locations outside the State of Texas
where Grantor maintains or has maintained any Inventory, Equipment or other
tangible personal property or any office since its incorporation:
Street Address: None.
EXECUTED this 10th day of November, 2004.
INTEGRATED SECURITY SYSTEMS, INC.,
a Delaware corporation
By: /S/ C.A. Xxxxxxx, Jr.
-----------------------------------
C.A. Xxxxxxx, Jr., Chairman and CEO
16
