EXHIBIT 4.3
AMENDED AND RESTATED SECURITY AGREEMENT
This AMENDED AND RESTATED SECURITY AGREEMENT (this "Agreement"), dated
as of August 5, 2004, is entered into among Integrated Security Systems, Inc., a
Delaware corporation (individually referred to as "Borrower"), B&B ARMR
Corporation, a Delaware corporation (individually referred to as "B&B"),
Intelli-Site, Inc., a Texas corporation (individually referred to as
"Intelli-Site") (B&B and Intelli-Site collectively referred to as the
"Subsidiaries") (Borrower, Intelli-Site and B&B collectively referred to as the
"Pledgor"), Renaissance US Growth Investment Trust PLC (individually referred to
as "RUSGIT"), Renaissance Capital Growth & Income Fund III, Inc., a Texas
corporation (individually referred to as "Renaissance III"), BFS US Special
Opportunities Trust PLC, a public limited company registered in England and
Wales (individually referred to as "BFS") (RUSGIT, Renaissance III and BFS
collectively referred to as the "Lender"), and Renaissance Capital Group, Inc.,
a Texas corporation, as agent for the Lender (the "Agent").
RECITALS
A. Lender has lent to Borrower the aggregate principal amount of
three million six hundred thousand dollars ($3,600,000), including but not
limited to the $1,000,000 loaned to Borrower by BFS of even date, evidenced by
the Lender's promissory notes and convertible promissory notes as listed in
Exhibit A attached hereto (the "Notes").
B. Borrower has used and intends to use a portion of the proceeds
of the Notes to finance operations of the Subsidiaries.
C. As a condition for the loans to Borrower, Lender required that
the Pledgor grant a security interest in all its assets as collateral for the
loan and any other indebtedness of Borrower to Lender (the "Obligations").
D. The Notes are secured by, among other things, those certain
Security Agreements dated as of September 27, 2001 and March 11, 2003,
respectively (the "Original Security Agreements").
E. This Agreement is being executed to restate the Original
Security Agreements to consolidate the Original Security Agreements and secure
payment of all the Obligations of Borrower to Lender.
F. It is the intention of the parties hereto that this Agreement
create a first priority security interest in the Collateral (herein defined)
securing the payment of the Notes.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth herein, the parties agree as follows:
1. Grant of Security Interest.
(a) In order to secure payment when due of the Obligations now
existing or hereafter incurred, Pledgor hereby irrevocably grants to the Lender
a first and prior security interest in the following property of the Pledgor
(the "Collateral"), whether now owned or existing, or hereafter acquired, owned,
existing or arising (whether by contract or operation of law), and wherever
located, which shall be retained by Lender, until the Obligations have been paid
in full and all Notes have been terminated.
(b) Collateral shall include all personal property of the
Pledgor, including the following, all whether now owned or hereafter acquired or
arising and wherever located: (i) accounts (including health-care-insurance
receivables and credit card receivables); (ii) securities entitlements,
securities accounts, commodity accounts, commodity contracts and investment
property; (iii) deposit accounts [i-iii collectively referred to as "Accounts"];
(iv) instruments (including promissory notes); (v) documents (including
warehouse receipts); (vi) chattel paper (including electronic chattel paper and
tangible chattel paper); (vii) inventory, including raw materials, work in
process, or materials used or consumed in Pledgor's business, items held for
sale or lease or furnished or to be furnished under contracts of service, sale
or lease, goods that are returned, reclaimed or repossessed; (viii) goods of
every nature, including stock-in-trade, goods on consignment, standing timber
that is to be cut and removed under a conveyance or contract for sale, the
unborn young of animals, crops grown, growing, or to be grown, manufactured
homes, computer programs embedded in such goods and farm products; (ix)
equipment, including machinery, vehicles and furniture; (x) fixtures; (xi)
agricultural liens; (xii) as-extracted collateral; (xiii) commercial tort
claims, if any; (xiv) letter of credit rights; (xv) general intangibles, of
every kind and description, including payment intangibles, software, computer
information, source codes, object codes, records and data, all existing and
future customer lists, choses in action, claims (including claims for
indemnification or breach of warranty), books, records, patents and patent
applications, copyrights, trademarks, tradenames, tradestyles, trademark
applications, goodwill, blueprints, drawings, designs and plans, trade secrets,
contracts, licenses, license agreements, formulae, tax and any other types of
refunds, returned and unearned insurance premiums, rights and claims under
insurance policies; (xvi) all supporting obligations of all of the foregoing
property; (xvii) all property of the Pledgor now or hereafter in the Lender's
possession or in transit to or from, or under the custody or control of, the
Lender or any affiliate thereof; (xviii) all cash and cash equivalents thereof;
and (xix) all cash and noncash proceeds (including insurance proceeds) of all of
the foregoing property, all products thereof and all additions and accessions
thereto, substitutions therefor and replacements thereof. The Collateral shall
also include any and all other tangible or intangible property that is described
as being part of the Collateral pursuant to one or more Riders to Security
Agreement that may be attached hereto or delivered in connection herewith,
including the Rider to Security Agreement - Copyrights, the Rider to Security
Agreement - Patents, the Rider to Security Agreement - Trademarks and the Rider
to Security Agreement - Cash Collateral Account.
(c) Pledgor represents that the grant of security interest to
Lender herein is a first and prior security interest.
2. Covenant For Accounts.
(a) The Pledgor will, on the Lender's demand, make notations
on its books and records showing the Lender's security interest and make
available to the Lender shipping and delivery receipts evidencing the shipment
of the goods that gave rise to an account, completion certificates or other
proof of the satisfactory performance of services that gave rise to an account,
a copy of the invoice for each account and copies of any written contract or
order from which an account arose. The Pledgor shall promptly notify the Lender
if an account becomes evidenced or secured by an instrument or chattel paper and
upon the Lender's request, will promptly deliver any such instrument or chattel
paper to the Lender, including any letter of credit delivered to the Pledgor to
support a shipment of inventory by the Pledgor.
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(b) The Pledgor will promptly advise the Lender whenever an
account debtor refuses to retain or returns any goods from the sale of which an
account arose and will comply with any instructions that the Lender may give
regarding the sale or other disposition of such returns. From time to time with
such frequency as the Lender may request, the Pledgor will report to the Lender
all credits given to account debtors on all accounts.
(c) The Pledgor will immediately notify the Lender if any
account arises out of contracts with the United States or any department, agency
or instrumentality thereof, and will execute any instruments and take any steps
required by the Lender so that all monies due and to become due under such
contract shall be assigned to the Lender and notice of the assignment given to
and acknowledged by the appropriate government agency or authority under the
Federal Assignment of Claims Act.
(d) At any time after the occurrence of a Default, and without
notice to the Pledgor, the Lender may direct any persons who are indebted to the
Pledgor on any Collateral consisting of accounts or general intangibles to make
payment directly to the Lender of the amounts due. The Lender is authorized to
collect, compromise, endorse and sell any such Collateral in its own name or in
the Pledgor's name and to give receipts to such account debtors for any such
payments and the account debtors will be protected in making such payments to
the Lender. Upon the Lender's written request, the Pledgor will establish with
the Lender and maintain a lockbox account ("Lockbox") with the Lender and a
depository account(s) ("Cash Collateral Account") with the Lender subject to the
provisions of this subparagraph and such other related agreements as the Lender
may require, and the Pledgor shall notify its account debtors to remit payments
directly to the Lockbox. Thereafter, funds collected in the Lockbox shall be
transferred to the Cash Collateral Account, and funds in the Cash Collateral
Account shall be applied by the Lender, daily, to reduce the outstanding
Obligations.
(e) Upon Agent's request, upon the occurrence and during the
continuance of a Default, Pledgor will, at any reasonable time and at Pledgor's
own expense, physically deliver to Agent, all Accounts (including inter-company
receivables) assigned to Agent at any reasonable place or places designated by
Agent. Failure to deliver any Account, or failure to deliver physical possession
of any instruments, documents or writings in respect of any Account shall not
invalidate Agent's Lien and security interest therein, except to the extent that
possession may be required by applicable law for the perfection of said Lien or
security interest, in which latter case, the Account shall be deemed to be held
by the Pledgor as the custodian agent of Agent, for the benefit of Lender.
Failure of Agent to demand or require Pledgor to include any Account in any
schedule, to execute any schedule, to assign and deliver any schedule or to
deliver physical possession of any instruments, documents or writings related to
any Account shall not relieve Pledgor of its duty so to do.
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(f) Pledgor hereby agrees that it shall use commercially
reasonable efforts, at its sole cost and expense and in its own name, to
promptly and diligently collect and enforce payment of all Accounts and Pledgor
will defend and hold Lender and Agent harmless from any and all loss, damage,
penalty, fine or expense arising from such collection or enforcement.
3. Financing Statements. Pledgor agrees to execute all financing
statements and amendments thereto as Agent, on behalf of the Lender, may request
from time to time to evidence the security interest granted to Agent hereunder
and will pay the cost of all filing fees and taxes, if any, necessary to effect
the filing thereof. By its signature hereon, the Pledgor hereby irrevocably
authorizes the Lender to execute (on behalf of the Pledgor) and file against the
Pledgor one or more financing, continuation or amendment statements pursuant to
the Uniform Commercial Code in form satisfactory to the Lender, and the Pledgor
will pay the cost of preparing and filing the same in all jurisdictions in which
such filing is deemed by the Lender to be necessary or desirable in order to
perfect, preserve and protect its security interests. Without the written
consent of Agent, Pledgor will not allow any financing statement or notice of
assignment to be on file in any public office covering any Collateral, proceeds
thereof or other matters subject to the security interest granted to Agent
herein, unless such financing statement relates to a Permitted Lien.
4. Software as Collateral. As part of the Collateral, Pledgor has
delivered to Lender certain computer software, drivers and documentation
therefor, including all source and object code versions thereof (in electronic
and hard copies) and all enhancements and developments relating thereto (the
foregoing are collectively referred to herein as "Software"). Pledgor grants to
Lender access and use to the Software. Pledgor will update the Software in
possession of Lender no more than six (6) times per year, but no less often than
each major revision to the Software. Should Pledgor default in the payment of
the Obligations, then Pledgor hereby transfers title and ownership of the
Software to Lender. If Pledgor is prohibited by law from transferring title and
ownership of the Software to Lender at the time of such default, then Pledgor
shall grant Lender a perpetual, nonexclusive, royalty-free license to copy, make
derivative works, and use the Software for all of its business purposes (the
"License"). Upon satisfaction of the Obligation by Pledgor, Lender shall
promptly return the Software to Pledgor and shall have no further rights to
access of use thereof Lender acknowledges that third party software may be
required to use the Software, and it is Lender's responsibility to obtain any
rights to use such third party software. Nothing herein will grant to Lender any
title or ownership interest in the Software. To the extent that Lender modifies,
updates, or enhances the Software ("Enhancements"), Lender shall own the same.
Pledgor hereby represents and warrants to Lender that Pledgor has full right,
title and interest in and to the Software, the Software is complete and will
function in accordance with the documentation therefor, and the use of the
Software will not infringe any third party intellectual property or other
rights.
5. Lender's Payment of Claims. Lender may, in its sole discretion,
discharge or obtain the release of any Lien asserted by any Person against the
Collateral, other than a Permitted Lien which, in the Lender's judgment, may
have a Material Adverse Effect on the Lender's rights with respect to the
Collateral. All sums paid by Lender in respect thereof shall be payable, on
demand, by Pledgor to Lender and shall be a part of the Obligations.
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6. Default and Remedies.
(a) Pledgor shall be in default in the full and prompt
payment, when due, of the Obligations (a "Default").
(b) Upon the occurrence and during the continuation of any
Default (i) unless Lender or Agent shall elect otherwise, the entire unpaid
amount of the Obligations due under the Loan Agreement, as are not then
otherwise due and payable, shall become immediately due and payable without
notice to Pledgor or demand by Lender or Agent and (ii) either Lender or Agent
may, at its or their option, exercise from time to time any and all rights and
remedies available to them under the Uniform Commercial Code or otherwise,
including the right to foreclose or otherwise realize upon the Collateral and to
dispose of any of the Collateral at one or more public or private sales or other
proceedings, and Pledgor agrees that any of Lender, Agent or their nominee may
become the purchaser at any such sale or sales. Pledgor agrees that twenty (20)
days shall be reasonable prior notice of the date of any public sale or other
disposition of the same. All rights and remedies granted Lender hereunder or
under any other agreement between Lender and Pledgor shall be deemed concurrent
and cumulative and not alternative, and Lender, or Agent on its behalf, may
proceed with any number of remedies at the same time or at different times until
all the Obligations are fully satisfied. The exercise of any one right or remedy
shall not be deemed a waiver or release of, or an election against, any other
right or remedy. Pledgor shall pay to Lender or Agent, on demand, any and all
expenses (including reasonable attorneys' fees and legal expenses) which may
have been incurred by Lender or Agent (i) in the prosecution or defense of any
action arising under this Agreement, the Collateral or any of Lender's rights
therein or thereto; or (ii) in connection with the custody, preservation, use,
operation, preparation for sale or sale of the Collateral, the incurring of all
of which are hereby authorized to the extent Lender or Agent deem the same
advisable. Pledgor's liability to Lender or Agent for any such payment shall be
included in the Obligations. The proceeds of any Collateral received by Lender
or Agent at any time before or after a Default, whether from a sale or other
disposition of Collateral or otherwise, or the Collateral itself, may be applied
to the payment, in full or in part, of such of the Obligations and in such order
and manner as Lender or Agent may elect.
7. Representations and Covenants of Pledgor. Pledgor hereby
represents to and agrees with Lender as follows:
(a) Pledgor owns its portion of the Collateral as sole owner,
free and clear of any Liens, other than Permitted Liens.
(b) So long as any Obligations remain unpaid, Pledgor agrees
not to sell, assign or transfer the Collateral, other than sales of Collateral
in the ordinary course of business, and to maintain it free and clear of any
Liens, other than Permitted Liens.
8. Miscellaneous.
(a) This Agreement shall bind and inure to the benefit of the
parties and their respective heirs, personal representatives, successors and
assigns, except that Pledgor shall not assign any of its rights hereunder
without the prior written consent of holders of more than 50% of the principal
amount of the then outstanding Notes.
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(b) Any provision hereof which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without affecting the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of such provision in any other jurisdiction.
(c) This Agreement shall be governed by and construed and
enforced in accordance with the substantive laws of the State of Texas, without
regard to the conflicts of laws provisions thereof, and the applicable laws of
the United States. Venue and jurisdiction shall be in the state or federal
courts in Dallas County, Texas.
(d) Pledgor hereby consents to the jurisdiction of the courts
of the State of Texas in any action or proceeding which may be brought against
it under or in connection with this Agreement or any transaction contemplated
hereby or to enforce any agreement contained herein and, in the event any such
action or proceeding shall be brought against it, Pledgor agrees not to raise
any objection to such jurisdiction or to the laying of venue in Dallas County,
Texas or, if applicable, any other county in any state in which Collateral is
located.
(e) All capitalized terms, unless otherwise specified, have
the meanings assigned to them in the Notes.
(f) Any notices or other communications required or permitted
to be given by this Agreement or any other documents and instruments referred to
herein must be (i) given in writing and personally delivered, mailed by prepaid
certified or registered mail or sent by overnight service, such as FedEx, or
(ii) made by telex or facsimile transmission delivered or transmitted to the
party to whom such notice or communication is directed, with confirmation
thereupon given in writing and personally delivered or mailed by prepaid
certified or registered mail.
If to Pledgor:
Integrated Security Systems, Inc.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Secured Party:
Renaissance US Growth Investment Trust PLC
c/o Renaissance Capital Group, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000-XX00
Xxxxxx, Xxxxx 00000
Attn.: Xxxxxxx Xxxxxxxxx
President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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Renaissance Capital Growth & Income Fund III, Inc.
c/o Renaissance Capital Group, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000-XX00
Xxxxxx, Xxxxx 00000
Attn.: Xxxxxxx Xxxxxxxxx
President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
BFS US Special Opportunities Trust PLC
c/o Renaissance Capital Group, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000-XX00
Xxxxxx, Xxxxx 00000
Attn.: Xxxxxxx Xxxxxxxxx
President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Agent:
Renaissance Capital Group, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000-XX00
Xxxxxx, Xxxxx 00000
Attn.: Xxxxxxx Xxxxxxxxx
President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any notice delivered personally in the manner provided herein will be deemed
given to the party to whom it is directed upon the party's (or its agent's)
actual receipt. Any notice addressed and mailed in the manner provided herein
will be deemed given to the party to whom it is addressed at the close of
business, local time of the recipient, on the fourth business day after the day
it is placed in the mail, or, if earlier, the time of actual receipt.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date and year written above.
PLEDGOR:
INTEGRATED SECURITY SYSTEMS, INC.
By: /S/ C. A. Xxxxxxx, Jr.
--------------------------------
C. A. Xxxxxxx, Jr., Chairman and
Chief Executive Officer
B&B ARMR CORPORATION
By: /S/ C. A. Xxxxxxx, Jr.
---------------------------------
C. A. Xxxxxxx, Jr., Sole Director
INTELLI-SITE, INC.
By: /S/ C. A. Xxxxxxx, Jr.
----------------------------
C. A. Xxxxxxx, Jr., Chairman
LENDER:
RENAISSANCE US GROWTH INVESTMENT
TRUST PLC
By: /S/ Xxxxxxx Xxxxxxxxx
---------------------------
Xxxxxxx Xxxxxxxxx, Director
RENAISSANCE CAPITAL GROWTH &
INCOME FUND III, INC.
By: Renaissance Capital Group, Inc.,
Investment Adviser
By: /S/ Xxxxxxx Xxxxxxxxx
--------------------------------
Xxxxxxx Xxxxxxxxx, President and
Chief Executive Officer
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BFS US SPECIAL OPPORTUNITIES TRUST PLC
By: /S/ Xxxxxxx Xxxxxxxxx
---------------------------
Xxxxxxx Xxxxxxxxx, Director
AGENT:
RENAISSANCE CAPITAL GROUP, INC.
By: /S/ Xxxxxxx Xxxxxxxxx
--------------------------------
Xxxxxxx Xxxxxxxxx, President and
Chief Executive Officer
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EXHIBIT A
NOTES
--------------------------------- --------------------- -------------------
LENDER DATE AMOUNT
--------------------------------- --------------------- -------------------
Renaissance Capital Growth 9/27/2001 $ 75,000
& Income Fund III, Inc.
("Renaissance III")
--------------------------------- --------------------- -------------------
Renaissance III 10/12/2001 $ 25,000
--------------------------------- --------------------- -------------------
Renaissance III 10/26/2001 $ 25,000
--------------------------------- --------------------- -------------------
Renaissance III 11/9/2001 $ 25,000
--------------------------------- --------------------- -------------------
Renaissance III 11/16/2001 $ 25,000
--------------------------------- --------------------- -------------------
Renaissance III 12/28/2001 $ 25,000
--------------------------------- --------------------- -------------------
Renaissance III 1/14/2002 $ 50,000
--------------------------------- --------------------- -------------------
Renaissance III 9/5/2002 $ 75,000
--------------------------------- --------------------- -------------------
Renaissance III 4/23/2003 $ 100,000
--------------------------------- --------------------- -------------------
Renaissance III 6/18/2003 $ 100,000
--------------------------------- --------------------- -------------------
Renaissance III 10/1/2003 $ 200,000
--------------------------------- --------------------- -------------------
Renaissance US Growth 9/27/2001 $ 75,000
Investment Trust PLC
("RUSGIT")
--------------------------------- --------------------- -------------------
RUSGIT 10/12/2001 $ 25,000
--------------------------------- --------------------- -------------------
RUSGIT 10/26/2001 $ 25,000
--------------------------------- --------------------- -------------------
RUSGIT 11/9/2001 $ 25,000
--------------------------------- --------------------- -------------------
RUSGIT 11/16/2001 $ 25,000
--------------------------------- --------------------- -------------------
RUSGIT 12/28/2001 $ 25,000
--------------------------------- --------------------- -------------------
RUSGIT 1/14/2002 $ 50,000
--------------------------------- --------------------- -------------------
RUSGIT 9/5/2002 $ 75,000
--------------------------------- --------------------- -------------------
RUSGIT 4/23/2003 $ 100,000
--------------------------------- --------------------- -------------------
RUSGIT 5/30/2003 $ 200,000
--------------------------------- --------------------- -------------------
RUSGIT 10/1/2003 $ 200,000
--------------------------------- --------------------- -------------------
BFS US Special Opportunities 3/11/2003 $ 250,000
Trust PLC ("BFS")
--------------------------------- --------------------- -------------------
BFS 4/23/2003 $ 100,000
--------------------------------- --------------------- -------------------
BFS 5/30/2003 $ 200,000
--------------------------------- --------------------- -------------------
BFS 9/5/2003 $ 500,000
--------------------------------- --------------------- -------------------
BFS 8/5/2004 $1,000,000
--------------------------------- --------------------- -------------------
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