Exhibit 4.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of September
5, 2003, is by and between INTEGRATED SECURITY SYSTEMS, INC., a Delaware
corporation (the "Company"), and XXXX XXXXXX and XXX XXXXXXXXXX (collectively,
"Shareholders").
WITNESSETH:
WHEREAS, the Company has issued to Shareholders ten million
(10,000,000) shares of common stock of the Company (hereinafter referred to as
the "Registrable Shares") pursuant to the Agreement and Plan of Merger dated
September 5, 2003 among the Company, ISSI Merger Sub, Inc. (the "Merger Sub"),
ARMR Services Corporation ("ARMR"), Xxxx Xxxxxx, Xxxxx Xxxxxxxxxx, and the
Shareholders (the "Merger Agreement");
WHEREAS, the Registrable Shares have not been registered under the
Securities Act of 1933, as amended (the "1933 Act") and, as an inducement to
Shareholders to enter into the Merger Agreement and to consummate the merger of
ARMR with and into the Merger Sub (the "Merger"), the Company has agreed to
grant to Shareholders certain registration rights with respect to the
Registrable Shares as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. DEMAND REGISTRATION.
(a) The Company hereby agrees to use its best efforts to register
all or any portion of the Registrable Shares on one (1) occasion upon receipt of
a written request from a holder (the "Holder" or "Holders") of record of the
Registrable Shares that the Company file a registration statement under the 1933
Act covering the registration of at least twenty-five (25%) of the Registrable
Shares then outstanding; provided, however, that the Holders hereby agree not to
exercise such demand registration rights pursuant to this Section 1 for a period
of one (1) year following the date hereof unless Renaissance Capital Growth &
Income Fund III ("Renaissance Capital") and/or Renaissance US Growth & Income
Trust PLC ("Renaissance PLC") exercise any of their respective registration
rights pursuant to that certain Registration Rights Agreement among the Company,
Renaissance Capital and Renaissance PLC, or any other agreement(s) granting to
Renaissance Capital and/or Renaissance PLC registration rights. The Company
shall, within twenty (20) days of its receipt thereof, give written notice of
such request to all holders of record of Registrable Shares. The Holders of said
Registrable Shares shall then have fifteen (15) days from the date of mailing of
such notice by the Company to request that all or a portion of their respective
Registrable Shares be included in said registration.
(b) If the Holders intend to distribute the Registrable Shares
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Agreement, and the
Company shall include such information in the written notice to the other
Holders of Registrable Shares referred to in Section 1(a) above. In such event,
the right of any Holder to include its Registrable Shares in such registration
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Shares in the underwriting (unless
otherwise mutually agreed by the Company, the underwriter, the initiating Holder
(the "Initiating Holder") and such Holder) is limited to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company as provided in Section 4(e) below)
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by mutual agreement of the Company
and the Initiating Holder, which agreement shall not be unreasonably withheld.
Notwithstanding any other provision of this Section 1, if the underwriter
advises the Initiating Holder and the Company in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holder shall so advise all Holders of Registrable Shares which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Shares that may be included in the underwriting shall be allocated
on a pro rata basis among all Holders that have requested to participate in such
registration.
(c) Each such registration shall remain effective for a period of
one hundred eighty (180) days, unless the Initiating Holder requests that such
registration be terminated prior to the expiration of such period.
Notwithstanding the foregoing, if the Holders elect not to sell all or any
portion of the Registrable Shares pursuant to a demand registration which has
become effective, such demand registration right shall nonetheless be deemed
satisfied.
(d) If, after a registration statement becomes effective, the
Company advises the Holders that the registration statement is required to be
amended under applicable federal securities laws, the Holders shall suspend any
further sales of their Registrable Shares, until the Company advises them that
the registration statement has been amended, but not more than thirty (30) days.
The one hundred eighty (180)-day time period referred to in subsection (c)
during which the registration statement must be kept current after its effective
date shall be extended for an additional number of business days equal to the
number of business days during which the right to sell the Registrable Shares
was suspended pursuant to the preceding sentence.
(e) The Company shall have the right to exclude an underwriter not
reasonably acceptable to it.
2. "PIGGY-BACK" REGISTRATION. If the Company proposes to register any of
its capital stock under the 1933 Act in connection with the public offering of
such securities for its own account or for the account of its security Holders,
other than Holders of Registrable Shares pursuant hereto (a "Piggy-Back
Registration Statement"), except for (i) a registration relating solely to the
sale of securities to participants in the Company's stock plans or employee
benefit plans or (ii) a registration relating solely to a transaction for which
Form S-4 may be used, then:
(a) The Company shall give written notice of such determination to
each Holder of Registrable Shares, and each such Holder shall have the right to
request, by written notice given to the Company within fifteen (15) days of the
date that such written notice was mailed by the Company to such Holder, that a
specific number of Registrable Shares held by such Holder be included in the
Piggy-Back Registration Statement (and related underwritten offering, if any);
(b) If the Piggy-Back Registration Statement relates to an
underwritten offering, the notice given to each Holder shall specify the name or
names of the managing underwriter or underwriters for such offering. In
addition, such notice shall also specify the number of securities to be
registered for the account of the Company and for the account of its
stockholders (other than the Holders of Registrable Shares), if any;
(c) If the Piggy-Back Registration Statement relates to an
underwritten offering, each Holder of Registrable Shares to be included therein
must agree (i) to sell such Holder's Registrable Shares on the same basis as
provided in the underwriting arrangement approved by the Company, and (ii) to
timely complete and execute all questionnaires, powers of attorney, indemnities,
hold-back agreements, underwriting agreements and other documents required under
the terms of such underwriting arrangements or by the United States Securities
and Exchange Commission (the "SEC") or by any state securities regulatory body;
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(d) If the managing underwriter or underwriters for the underwritten
offering under the Piggy-Back Registration Statement determines that inclusion
of all or any portion of the Registrable Shares in such offering would
materially adversely affect the ability of the underwriters for such offering to
sell all of the securities requested to be included for sale in such offering at
the best price obtainable therefor, the aggregate number of Registrable Shares
that may be sold by the Holders shall be limited to such number of Registrable
Shares, if any, that the managing underwriter or underwriters determine may be
included therein without such adverse effect as provided below. If the number of
securities proposed to be sold in such underwritten offering exceeds the number
of securities that may be sold in such offering, there shall be included in the
offering, first, up to the maximum number of securities to be sold by the
Company for its own account, and second, as to the balance, if any, Registrable
Shares requested to be included therein by the Holders thereof (pro rata as
between such Holders and all other holders of common stock of the Company
exercising Registration Rights based upon the number of shares proposed to be
registered by each), or in such other proportions as the managing underwriter or
underwriters for the offering may require.
(e) Holders of Registrable Shares shall have the right to withdraw
their Registrable Shares from the Piggy-Back Registration Statement, but if the
same relates to an underwritten offering, they may only do so during the time
period and on the terms agreed upon among the underwriters for such underwritten
offering and the Holders of Registrable Shares;
(f) The Holders will advise the Company at the time a registration
becomes effective whether the Registrable Shares included in the registration
will be underwritten or sold directly by the Holders;
(g) All demand and piggy-back registration rights of the Holders
shall terminate when all of the Registrable Shares then outstanding may be sold
pursuant to Rule 144(k) promulgated under the 1933 Act ("Rule 144(k)").
3. OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Shares pursuant to this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Shares and use all reasonable efforts to cause such
registration statement to become effective, and keep such registration statement
effective until the sooner of all such Registrable Shares having been
distributed, or until one hundred twenty (120) days have elapsed since such
registration statement became effective (subject to extension of this period as
provided below);
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement, or one hundred twenty (120) days have elapsed since such
registration statement became effective (subject to the extension of this period
as provided below);
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(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Shares owned by them;
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify as a broker-dealer in any states or
jurisdictions or to do business or to file a general consent to service of
process in any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with the managing
underwriter of such offering, in usual and customary form reasonably
satisfactory to the Company and the Holders of a majority of the Registrable
Shares to be included in such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement;
(f) Notify each Holder of Registrable Shares covered by such
registration statement, at any time when a prospectus relating thereto and
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; and
(g) In the event of the notification provided for in Section 4(f)
above, the Company shall use its best efforts to prepare and file with the SEC
(and to provide copies thereof to the Holders) as soon as reasonably possible an
amended prospectus complying with the 1933 Act, and the period during which the
prospectus referred to in the notice provided for in Section 4(f) above cannot
be used and the time period prior to the use of the amended prospectus referred
to in this Section 4(g) shall not be counted in the one hundred twenty (120) day
period of this Section 4.
4. FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the
Company that the selling Holders shall furnish to the Company any and all
information reasonably requested by the Company, its officers, directors,
employees, counsel, agents or representatives, the underwriter or underwriters,
if any, and the SEC or any other Governmental Authority, including, but not
limited to: (i) such information regarding themselves, the Registrable Shares
held by them, and the intended method of disposition of such securities, as
shall be required to effect the registration of their Registrable Shares; and
(ii) the identity of and compensation to be paid to any proposed underwriter or
broker-dealer to be employed in connection therewith.
(b) In connection with the preparation and filing of each
registration statement registering Registrable Shares under the 1933 Act, the
Company shall give the Holders of Registrable Shares on whose behalf such
Registrable Shares are to be registered and their underwriters, if any, and
their respective counsel and accountants, at such Holders' sole cost and expense
(except as otherwise set forth herein), such access to copies of the Company's
records and documents and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be reasonably necessary in the
opinion of such Holders and such underwriters or their respective counsel, to
conduct a reasonable investigation within the meaning of the 1933 Act.
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5. EXPENSES OF REGISTRATION. All expenses, other than underwriting
discounts and commissions applicable to the Registrable Shares sold by selling
Holders, incurred in connection with the registration of the Registrable Shares
pursuant to this Agreement, including, without limitation, all registration,
filing and qualification fees, printer's expenses, accounting and legal fees and
expenses of the Company and the reasonable legal fees of one (1) legal counsel
for all Holders, shall be borne by the Company.
6. INDEMNIFICATION REGARDING REGISTRATION RIGHTS. If any Registrable
Shares are included in a registration statement pursuant to this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the officers and directors of each Holder, any
underwriter (as defined in the 0000 Xxx) for such Holder and each person, if
any, who controls such Holder or underwriter within the meaning of the 1933 Act
or the Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, liabilities (joint or several) or any legal or other
costs and expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action to which they may
become subject under the 1933 Act, the 1934 Act or state law, insofar as such
losses, claims, damages, costs, expenses or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (each a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact with respect to the Company or its
securities contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements therein; (ii) the omission or alleged omission to state therein a
material fact with respect to the Company or its securities required to be
stated therein or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any state securities law or any rule or regulation promulgated under
the 1933 Act, the 1934 Act or any state securities law. Notwithstanding the
foregoing, the indemnity agreement contained in this Section 7(a) shall not
apply and the Company shall not be liable (i) in any such case for any such
loss, claim, damage, costs, expenses, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person,
(ii) for amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld, or (iii) if the
statement or omission was corrected in a subsequent preliminary or final
prospectus or amendment or supplement thereto, and the Holder failed to deliver
such document to the purchaser of its securities.
(b) To the extent permitted by law, each Holder who participates in
a registration pursuant to the terms and conditions of this Agreement shall
indemnify and hold harmless the Company, each of its directors and officers who
have signed the registration statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act, the 1934 Act, any state securities
law or any rule or regulation promulgated under the 1933 Act, the 1934 Act or
any state securities law, each of the Company's employees, agents, counsel and
representatives, any underwriter and any other Holder selling securities in such
registration statement, or any of its directors or officers, or any person who
controls such Holder, against any losses, claims, damages, costs, expenses,
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, employee, agent, representative, underwriter, or
other such Holder, or director, officer or controlling person thereof, may
become subject, under the 1933 Act, the 1934 Act or other federal or state law,
only insofar as such losses, claims, damages, costs, expenses or liabilities or
actions in respect thereto arise out of or are based upon any Violation, in each
case to the extent and only to the extent that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such. Each such Holder will indemnify any
legal or other expenses reasonably incurred by the Company or any such director,
officer, employee, agent representative, controlling person, underwriter or
other Holder, or officer, director or of any controlling person thereof, in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 7(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, costs, expenses, liability or action if such settlement is
effected without the prior written consent of the Holder, which consent shall
not be unreasonably withheld.
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(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
of such counsel to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve the indemnifying party of its obligations under this Section 7, except
to the extent that the failure results in a failure of actual notice to the
indemnifying party and such indemnifying party is materially prejudiced in its
ability to defend such action solely as a result of the failure to give such
notice.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under this Section 7 in respect of any
losses, claims, damages, costs, expenses, liabilities or actions referred to
herein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, costs, expenses, liabilities or
actions in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand and of the Holder, on the other, in connection with
the Violation that resulted in such losses, claims, damages, costs, expenses,
liabilities or actions. The relative fault of the Company, on the one hand, and
of the Holder, on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of the material fact or
the omission to state a material fact relates to information supplied by the
Company or by the Holder, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Company, on the one hand, and the Holders, on the other,
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by a pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of losses, claims, damages, costs, expenses,
liabilities and actions referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses incurred by such indemnified party in connection with
defending any such action or claim. Notwithstanding the provisions of this
Section 7, neither the Company nor the Holders shall be required to contribute
any amount in excess of the amount by which the total price at which the
securities were offered to the public exceeds the amount of any damages which
the Company or each such Holder has otherwise been required to pay by reason of
such Violation. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
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7. REPORTS UNDER THE 1934 ACT. So long as the Company has a class of
securities registered pursuant to Section 12 of the 1934 Act, with a view to
making available to the Holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, if applicable, the Company agrees to use its reasonable efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act;
(c) Use its reasonable best efforts to include all Common Stock
covered by such registration statement on NASDAQ if the Common Stock is then
quoted on NASDAQ; or list all Common Stock covered by such registration
statement on such securities exchange on which any of the Common Stock is then
listed; or, if the Common Stock is not then quoted on NASDAQ or listed on any
national securities exchange, use its best efforts to have such Common Stock
covered by such registration statement quoted on NASDAQ or, at the option of the
Company, listed on a national securities exchange; and
(d) Furnish to any Holder, so long as the Holder owns any
Registrable Shares, (i) forthwith upon request a copy of the most recent annual
or quarterly report of the Company and such other SEC reports and documents so
filed by the Company, and (ii) such other information (but not any opinion of
counsel) as may be reasonably requested by any Holder seeking to avail himself
of any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
8. ASSIGNMENT OF REGISTRATION RIGHTS. Subject to the terms and conditions
of this Agreement, the right to cause the Company to register Registrable Shares
pursuant to this Agreement may be assigned by Holder to any transferee or
assignee of such securities; provided that said transferee or assignee is a
transferee or assignee of at least ten percent (10%) of the Registrable Shares
and provided that the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; and provided, further, that such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act; it
being the intention that so long as Holder holds any Registrable Shares
hereunder, either Holder or its transferee or assignee of at least ten percent
may exercise the registration rights hereunder. Other than as set forth above,
the parties hereto hereby agree that the registration rights hereunder shall not
be transferable or assigned and any contemplated transfer or assignment in
contravention of this Agreement shall be deemed null and void and of no effect
whatsoever.
9. OTHER MATTERS.
(a) Each Holder of Registrable Shares hereby agrees by acquisition
of such Registrable Shares that, with respect to each offering of the
Registrable Shares, whether each Holder is offering such Registrable Shares in
an underwritten or nonunderwritten offering, such Holder will comply with
Regulation M or such other or additional anti-manipulation rules then in effect
until such offering has been completed, and in respect of any nonunderwritten
offering, in writing will inform the Company, any other Holders who are selling
shareholders, and any national securities exchange upon which the securities of
the Company are listed, that the Registrable Shares have been sold and will,
upon the Company's request, furnish the distribution list of the Registrable
Shares. In addition, upon the request of the Company, each Holder will supply
the Company with such documents and information as the Company may reasonably
request with respect to the subject matter set forth and described in this
Section 10.
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(b) Each Holder of Registrable Shares hereby agrees by acquisition
of such Registrable Shares that, upon receipt of any notice from the Company of
the happening of any event which makes any statement made in the registration
statement, the prospectus or any document incorporated therein by reference,
untrue in any material respect or which requires the making of any changes in
the registration statement, the prospectus or any document incorporated therein
by reference, in order to make the statements therein not misleading in any
material respect, such Holder will forthwith discontinue disposition of
Registrable Shares under the prospectus related to the applicable registration
statement until such Holder's receipt of the copies of the supplemented or
amended prospectus, or until it is advised in writing by the Company that the
use of the prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in the prospectus.
10. WAIVERS AND MODIFICATIONS. All modifications, consents, amendments or
waivers (herein "Waivers") of any provision of this Agreement shall be effective
only if the same shall be in writing by Shareholders and then shall be effective
only in the specific instance and for the purpose for which given. No notice or
demand given in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such notice or demand. No
failure to exercise, and no delay in exercising, on the part of Shareholders,
any right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right. The rights of Shareholders hereunder shall be in
addition to all other rights provided by law.
11. GOVERNING LAW. This Agreement will be governed by the laws of the State
of Delaware without regard to conflicts of law principles.
12. ARBITRATION.
(a) Upon the demand of Shareholders or the Company (collectively the
"parties"), made before the institution of any judicial proceeding or not more
than sixty (60) days after service of a complaint, third party complaint,
cross-claim or counterclaim or any answer thereto or any amendment to any of the
above, any Dispute (as defined below) shall be resolved by binding arbitration
in accordance with the terms of this arbitration clause. A "Dispute" shall
include any action, dispute, claim, or controversy of any kind, whether founded
in contract, tort, statutory or common law, equity, or otherwise, now existing
or hereafter occurring between the parties arising out of, pertaining to or in
connection with this Agreement, or any related agreements, documents, or
instruments (the "Documents"). The parties understand that by this Agreement
they have decided that the Disputes may be submitted to arbitration rather that
being decided through litigation in court before a judge or jury and that once
decided by an arbitrator the claims involved cannot later be brought, filed, or
pursued in court.
(b) Arbitrations conducted pursuant to this Agreement, including
selection of arbitrators, shall be administered by the American Arbitration
Association ("Administrator") pursuant to the Commercial Arbitration Rules of
the Administrator. Arbitrations conducted pursuant to the terms hereof shall be
governed by the provisions of the Federal Arbitration Act (Title 9 of the United
States Code), and to the extent the foregoing are inapplicable, unenforceable or
invalid, the laws of the State of Delaware. Judgment upon any award rendered
hereunder may be entered in any court having jurisdiction; provided, however,
that nothing contained herein shall be deemed to be a waiver by any party that
is a bank of the protections afforded to it under 12 U.S.C. 91 or similar
governing state law. Any party who fails to submit to binding arbitration
following a lawful demand by the opposing party shall bear all costs and
expenses, including reasonable attorneys' fees, incurred by the opposing party
in compelling arbitration of any Dispute.
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(c) No provision of, nor the exercise of any rights under, this
arbitration clause shall limit the right of any party to (i) foreclose against
any real or personal property collateral or other security, (ii) exercise
self-help remedies (including repossession and set off rights) or (iii) obtain
provisional or ancillary remedies such as injunctive relief, sequestration,
attachment, replevin, garnishment, or the appointment of a receiver from a court
having jurisdiction. Such rights can be exercised at any time except to the
extent such action is contrary to a final award or decision in any arbitration
proceeding. The institution and maintenance of an action as described above
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the Dispute to arbitration, nor render inapplicable the
compulsory arbitration provisions hereof. Any claim or Dispute related to
exercise of any self-help, auxiliary or other exercise of rights under this
Section 13 shall be a Dispute hereunder.
(d) Arbitrator(s) shall resolve all Disputes in accordance with the
applicable substantive law of the State of Delaware. Arbitrator(s) may make an
award of attorneys' fees and expenses if permitted by law or the agreement of
the parties. All statutes of limitation applicable to any Dispute shall apply to
any proceeding in accordance with this arbitration clause. Any arbitrator
selected to act as the only arbitrator in a Dispute shall be required to be a
practicing attorney with not less than five (5) years practice in commercial law
in the State of Delaware. With respect to a Dispute in which the claims or
amounts in controversy do not exceed five hundred thousand dollars ($500,000), a
single arbitrator shall be chosen and shall resolve the Dispute. In such case
the arbitrator shall have authority to render an award up to but not to exceed
five hundred thousand dollars ($500,000), including all damages of any kind
whatsoever, costs, fees and expenses. Submission to a single arbitrator shall be
a waiver of all parties' claims to recover more than five hundred thousand
dollars ($500,000). A Dispute involving claims or amounts in controversy
exceeding five hundred thousand dollars ($500,000) shall be decided by a
majority vote of a panel of three arbitrators ("Arbitration Panel"), one of whom
must possess the qualifications to sit as a single arbitrator in a Dispute
decided by one arbitrator. The arbitrator(s) shall be empowered to resolve any
dispute regarding the terms of this Agreement or any Dispute or any claim that
all or any part (including this provision) is void or voidable but shall have no
power to change or alter the terms of this Agreement. The award of the
arbitrator(s) shall be in writing and shall specify the factual and legal basis
for the award.
(e) To the maximum extent practicable, the Administrator, the
arbitrator(s) and the parties shall take any action reasonably necessary to
require that an arbitration proceeding hereunder be concluded within one hundred
eighty (180) days of the filing of the Dispute with the Administrator. The
arbitrator(s) shall be empowered to impose sanctions for any party's failure to
proceed within the times established herein. Arbitration proceedings hereunder
shall be conducted in the State of Delaware at a location determined by the
Administrator. In any such proceeding, a party shall state as a counterclaim any
claim which arises out of the transaction or occurrence or is in any way related
to this Agreement which does not require the presence of a third party which
could not be joined as a party in the proceeding. The provisions of this
arbitration clause shall survive any termination, amendment or expiration of
this Agreement unless the parties otherwise expressly agree in writing. Each
party agrees to keep all Disputes and arbitration proceedings strictly
confidential, except for disclosures of information required in the ordinary
course of business of the parties or as required by applicable law or
regulation.
9
13. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws during the term
of this Agreement, such provision shall be fully severable; this Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of this Agreement; and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of each such illegal, invalid or unenforceable
provision shall be added as part of this Agreement a provision mutually
agreeable to the Company and Shareholders as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable. In the event the Company and Shareholders are unable to agree upon
a provision to be added to this Agreement within a period of ten (10) business
days after a provision of this Agreement is held to be illegal, invalid or
unenforceable, then a provision acceptable to independent arbitrators, such to
be selected in accordance with the provisions of the American Arbitration
Association, as similar in terms to the illegal, invalid or unenforceable
provision as is possible and be legal, valid and enforceable shall be added
automatically to this Agreement. In either case, the effective date of the added
provision shall be the date upon which the prior provision was held to be
illegal, invalid or unenforceable.
14. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Company and Shareholders and their respective successors, assigns
and legal representatives; provided, however, that the Company may not, without
the prior written consent of Shareholders, assign any rights, powers, duties or
obligations thereunder.
15. NO THIRD PARTY BENEFICIARY. The parties do not intend the benefits of
this Agreement to inure to any third party, nor shall this Agreement be
construed to make or render Shareholders liable to any materialman, supplier,
contractor, subcontractor, purchaser or lessee of any property owned by the
Company, or for debts or claims accruing to any such persons against the
Company. Notwithstanding anything contained herein, no conduct by any or all of
the parties hereto, before or after signing this Agreement, shall be construed
as creating any right, claim or cause of action against Shareholders, or any of
its officers, directors, agents or employees, in favor of any materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property owned
by the Company, nor to any other person or entity other than the Company.
16. ENTIRETY. This Agreement and any other documents or instruments issued
or entered into pursuant hereto and thereto contain the entire agreement between
the parties and supersede all prior agreements and understandings, written or
oral (if any), relating to the subject matter hereof and thereof.
17. HEADINGS. Section headings are for convenience of reference only and,
except as a means of identification of reference, shall in no way affect the
interpretation of this Agreement.
18. SURVIVAL. All representations and warranties made by the Company herein
shall survive the Merger.
19. MULTIPLE COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
20. NOTICES.
(a) 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.
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(b) Any notice to be mailed, sent or personally delivered shall be
mailed or delivered to the principal offices of the party to whom such notice is
addressed, as that address is specified herein below. Any such notice or other
communication shall be deemed to have been given (whether actually received or
not) on the day it is mailed, postage prepaid, or sent by overnight service or
personally delivered or, if transmitted by telex or facsimile transmission, on
the day that such notice is transmitted; provided, however, that any notice by
telex or facsimile transmission, received by any the Company or Shareholders
after 4:00 p.m., Dallas, Texas time, at the recipient's address, on any day,
shall be deemed to have been given on the next succeeding business day. Any
party may change its address for purposes of this Agreement by giving notice of
such change to the other parties.
If to the Company to:
Integrated Security Systems, Inc.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
(000) 000-0000 (telephone)
(000) 000-0000 (fax)
with a copy to:
Xxxxx X. Xxxx, Esq.
Xxxxx and Xxxxx, LLP
0000 X. Xxxxx Xxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxx 00000
(000) 000-0000 (telephone)
(000) 000-0000 (fax)
If to Shareholders to:
Xxxx Xxxxxx
0000 Xxxxxxx Xxxxx
Xxxxx Xxxxxx, XX 00000-0000
and
Xxx Xxxxxxxxxx
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
with a copy to:
Xxxxxx X. Xxxx, Esq.
Xxxxx & Xxxxxxx L.L.P.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 0000
XxXxxx, XX 00000
(000) 000-0000 (telephone)
(000) 000-0000 (fax)
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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
here 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.
12
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
executed and delivered, as of the date and year first above written.
COMPANY:
INTEGRATED SECURITY SYSTEMS, INC.
By: /S/ C. A. Xxxxxxx, Jr.
------------------------------------
C. A. Xxxxxxx, Jr.
Chairman and Chief Executive Officer
SHAREHOLDERS:
/S/ Xxxx Xxxxxx
-----------------------------------------
Xxxx Xxxxxx
/S/ Xxx Xxxxxxxxxx
-----------------------------------------
Xxx Xxxxxxxxxx
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