PLEDGE AGREEMENT
This
PLEDGE
AGREEMENT dated
as
of October 3, 2008 (the “Pledge
Agreement”)
is
executed by
ISI SECURITY GROUP, INC.,
a
Delaware corporation,
DETENTION CONTRACTING GROUP, LTD.,
a Texas
limited partnership,
ISI DETENTION CONTRACTING GROUP, INC.,
a Texas
corporation,
ISI DETENTION CONTRACTING GROUP, INC.,
a
California corporation,
ISI DETENTION CONTRACTING GROUP, INC.,
a New
Mexico corporation,
ISI DETENTION SYSTEMS, INC.,
a Texas
corporation,
ISI SYSTEMS, LTD.,
a Texas
limited partnership,
METROPLEX CONTROL SYSTEMS, INC.,
a Texas
corporation,
ISI CONTROLS, LTD.
, a
Texas limited partnership,
METROPLEX COMMERCIAL FIRE AND SECURITY ALARMS, INC.,
a Texas
corporation and
MCFSA, LTD.,
a Texas
limited partnership COM-TEC
SECURITY, LLC,
a
Wisconsin limited liability company, and COM-TEC
CALIFORNIA LIMITED PARTNERSHIP,
a
Wisconsin limited partnership (collectively, the “Pledgor”),
which
have their chief executive located at 00000 Xxxxxxxx Xxxxx, Xxx Xxxxxxx,
Xxxxx 00000, and THE
PRIVATEBANK AND TRUST COMPANY,
an
Illinois banking corporation (the “Bank”),
whose
address is 00 X. Xxxxxxx, 0xx Xxxxx,
Xxxxxxx, Xxxxxxxx 00000 (the Borrower and the Guarantors are collectively
referred to herein as the “Debtor”).
R
E C
I T A L S:
A. ISI
Security Group, Inc., a Delaware corporation (“Borrower”)
and
Bank have entered into that certain Loan and Security Agreement of even date
herewith (as amended, supplemented or modified from time to time, the
“Loan
Agreement”),
and
of even date herewith, that certain (i) Facility Loan A Note in the principal
amount of ten million dollars ($10,000,000.00), (ii) Facility B Note in the
principal amount of five million dollars ($5,000,000.00) and (iii) Facility
C Note in the principal amount of ten million dollars ($10,000,000.00) (together
with any and all notes issued in extension, renewal or modification thereof
or
substitution or replacement therefor, collectively the “Notes”).
B. As
a
condition to the Bank’s entering into the Loan Agreement and acceptance of the
Notes and making the Loans evidenced by the Notes, the Bank requires that the
Pledgor enter into this Pledge Agreement for the benefit of the Bank and the
affiliates of the Bank (collectively, the “Affiliates”)
in
order to secure the obligations and performance of the Pledgor hereunder and
of
the Borrower under the Loan Agreement and the Notes.
NOW
THEREFORE, for and in consideration of the foregoing premises, which are hereby
incorporated herein as true, and the mutual promises and agreements contained
herein, the Pledgor and the Bank hereby agree as follows:
Section
1. DEFINITIONS.
Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
ascribed to such terms in the Loan Agreement. The term “UCC”
means
the Uniform Commercial Code as in effect in the State of Illinois. The terms
“Adverse
Claim,”
“Control,”
“Entitlement
Order,”
“Financial
Asset,”
“Securities
Account,”
“Securities
Entitlement,”
“Securities
Intermediary”
and
“Security”
have
the meanings given them in Article 8 of the UCC.
Section
2. PLEDGE
AND GRANT OF SECURITY INTEREST.
To
secure
the prompt payment and performance in full when due of the Secured Obligations
(as defined in Section 3
hereof),
each Pledgor hereby pledges and assigns and grants to the Bank, a continuing
security interest in any and all right, title and interest of such Pledgor
in
and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the “Pledged
Collateral”):
(a) Pledged
Collateral.
100%
(or, if less than 100% is owned by such Pledgor, the full amount owned by such
Pledgor) of the issued and outstanding shares, partnership interests, membership
interests, securities, and all other equity interests of each Subsidiary of
each
Pledgor, including, without limitation, those set forth on Exhibit A
attached
hereto;
(b) Additional
Interests.
100%
(or, if less than 100% is owned by such Pledgor, the full amount owned by such
Pledgor) of each class of the issued and outstanding shares, partnership
interests, membership interests, securities and other equity interests of any
other Person which hereafter becomes a Subsidiary of any Pledgor;
(c) Distributions.
All
shares, securities, membership interests or other equity interests representing
a dividend on any of the Pledged Collateral, or representing a distribution
or
return of capital upon or in respect of the Pledged Collateral, or resulting
from a stock split, revision, reclassification or other exchange therefor,
and
any subscriptions, warrants, rights or options issued to the holder of, or
otherwise in respect of, the Pledged Collateral; and in the event of any
consolidation or merger involving the issuer of any Pledged Collateral and
in
which such issuer is not the surviving entity, all shares of each class of
the
capital stock of the successor entity formed by or resulting from such
consolidation or merger; and
(d) Proceeds.
All
Proceeds and Products of the foregoing, however and whenever acquired and in
whatever form.
Without
limiting the generality of the foregoing, it is hereby specifically understood
and agreed that a Pledgor may from time to time hereafter pledge and deliver
additional shares of stock or other interests to the Bank as collateral security
for the Secured Obligations. Upon such pledge and delivery to the Bank, such
additional shares of stock or other interests shall be deemed to be part of
the
Pledged Collateral of such Pledgor and shall be subject to the terms of this
Pledge Agreement whether or not Exhibit A
is
amended to refer to such additional shares.
Section
3. SECURITY
FOR SECURED OBLIGATIONS.
The
security interest created hereby in the Pledged Collateral of each Pledgor
constitutes continuing collateral security for all of the following, whether
now
existing or hereafter incurred (the “Secured
Obligation”):
(a) all of the Obligations, howsoever evidenced, created, incurred or
acquired, whether primary, secondary, direct, contingent, or joint and several;
(b) the obligations of the Pledgor contained in this Pledge Agreement; and
(c) all expenses and charges, legal and otherwise, reasonably incurred by
the Bank in collecting or enforcing any Obligations or Secured Obligations
or in
realizing on or protecting any security therefor, including without limitation
the security granted hereunder.
2
Section
4. DELIVERY
OF THE PLEDGED COLLATERAL; PERFECTION OF SECURITY INTEREST.
Each
Pledgor hereby agrees that:
(a) Delivery
of Certificates.
Each
Pledgor shall deliver to the Bank (i) simultaneously with or prior to the
execution and delivery of this Pledge Agreement, all certificates representing
the Pledged Collateral of such Pledgor and (ii) promptly upon the receipt
thereof by or on behalf of a Pledgor, all other certificates and instruments
constituting Pledged Collateral of a Pledgor. Prior to delivery to the Bank,
all
such certificates and instruments constituting Pledged Collateral of a Pledgor
shall be held in trust by such Pledgor for the benefit of the Bank pursuant
hereto. All such certificates shall be delivered in suitable form for transfer
by delivery or shall be accompanied by duly executed instruments of transfer
or
assignment in blank, substantially in the form provided in Exhibit B
attached
hereto.
(b) Additional
Securities.
If such
Pledgor shall receive by virtue of its being or having been the owner of any
Pledged Collateral, any (i) certificate, including without limitation, any
certificate representing a dividend or distribution in connection with any
increase or reduction of capital, reclassification, merger, consolidation,
sale
of assets, combination of shares or membership or equity interests, stock
splits, spin-off or split-off, promissory notes or other instrument;
(ii) option or right, whether as an addition to, substitution for, or an
exchange for, any Pledged Collateral or otherwise; (iii) dividends payable
in securities; or (iv) distributions of securities or other equity
interests in connection with a partial or total liquidation, dissolution or
reduction of capital, capital surplus or paid-in surplus, then such Pledgor
shall receive such certificate, instrument, option, right or distribution in
trust for the benefit of the Bank, shall segregate it from such Pledgor’s other
property and shall deliver it forthwith to the Bank in the exact form received
together with any necessary endorsement and/or appropriate stock power duly
executed in blank, substantially in the form provided in Exhibit B,
to be
held by the Bank as Pledged Collateral and as further collateral security for
the Secured Obligations.
(c) Financing
Statements.
Each
Pledgor authorizes the Bank to prepare and file such UCC or other applicable
financing statements as may be reasonably deemed necessary or desirable by
the
Bank in order to perfect and protect the security interest created hereby in
the
Pledged Collateral of such Pledgor.
(d) Provisions
Relating to Securities Entitlements and Securities Accounts.
With
respect to any Pledged Collateral consisting of a Securities Entitlement or
held
in a Securities Account, (a) the applicable Pledgor and the applicable
Securities Intermediary shall enter into an agreement with the Bank granting
Control to the Bank over such Pledged Collateral, such agreement to be in form
and substance reasonably satisfactory to the Bank and (b) the Bank shall be
entitled, upon the occurrence and during the continuance of a Default or an
Event of Default, to notify the applicable Securities Intermediary that it
should follow the Entitlement Orders of the Bank and no longer follow the
Entitlement Orders of the applicable Pledgor. Upon receipt by a Pledgor of
notice from a Securities Intermediary of its intent to terminate the Securities
Account of such Pledgor held by such Securities Intermediary, prior to the
termination of such Securities Account the Pledged Collateral in such Securities
Account shall be (i) transferred to a new Securities Account which is
subject to a control agreement as provided above or (ii) transferred to an
account held by the Bank (in which it will be held until a new Securities
Account is established).
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Section
5. REPRESENTATIONS
AND WARRANTIES.
Each
Pledgor hereby represents and warrants to the Bank, for the benefit of the
Bank,
that until all of the Secured Obligations have been satisfied in
full:
(a) Authorization
of Pledged Collateral.
The
Pledged Collateral is duly authorized and validly issued, is fully paid and
nonassessable and is not subject to the preemptive rights of any Person. All
other shares of capital stock constituting Pledged Collateral will be duly
authorized and validly issued, fully paid and nonassessable and not subject
to
the preemptive rights of any Person.
(b) Title.
Each
Pledgor has good and indefeasible title to the Pledged Collateral of such
Pledgor and will at all times be the legal and beneficial owner of such Pledged
Collateral free and clear of any Lien, other than Permitted Liens. There exists
no Adverse Claim with respect to the Pledged Collateral of such
Pledgor.
(c) Exercising
of Rights.
The
exercise by the Bank of its rights and remedies hereunder will not violate
any
law or governmental regulation or any material contractual restriction binding
on or affecting a Pledgor or any of its property, provided that the Bank obtains
all necessary Governmental Approvals pursuant to Section 10(e)
hereof.
(d) Pledgor’s
Authority.
No
authorization, approval or action by, and no notice or filing with any
Governmental Authority, the issuer of any Pledged Collateral or third party
is
required either (i) for the pledge made by a Pledgor or for the granting of
the security interest by a Pledgor pursuant to this Pledge Agreement or
(ii) for the exercise by the Bank of its rights and remedies hereunder
(except as may be required by laws affecting the offering and sale of
securities).
(e) Security
Interest/Priority.
This
Pledge Agreement creates a valid security interest in favor of the Bank for
the
benefit of the Bank in the Pledged Collateral. The taking possession by the
Bank
of the certificates (if any) representing the Pledged Collateral and all other
certificates and instruments constituting Pledged Collateral will perfect and
establish the first priority (subject to Permitted Liens) of the Bank’s security
interest in all certificated Pledged Collateral and such certificates and
instruments. Each Pledgor is a “registered
organization,”
as
that term is defined in Article 9 of the UCC, and its name on its signature
line hereto is its exact legal name as registered in the state of its
organization. Upon the filing of UCC financing statements in the appropriate
filing office in the location of each Pledgor’s State of organization, the Bank
shall have a perfected first priority (subject to Permitted Liens) security
interest in all uncertificated Pledged Collateral consisting of partnership
or
limited liability company interests that do not constitute a Security pursuant
to Section 8-103(c) of the UCC. With respect to any Pledged Collateral
consisting of a Securities Entitlement or held in a Securities Account, upon
execution and delivery by the applicable Pledgor, the applicable Securities
Intermediary and the Bank of an agreement granting Control to the Bank over
such
Pledged Collateral, the Bank shall have a perfected first priority (subject
to
Permitted Liens) security interest in such Pledged Collateral. Except as set
forth in this Section, no action is necessary to perfect or otherwise protect
such security interest.
4
(f) No
Other Capital Securities.
Except
as set forth on Exhibit A
attached
hereto, as revised or updated from time to time after the date hereof by the
Pledgor, no Pledgor owns any Capital Securities of any Person. Exhibit A,
hereto,
as revised or updated from time to time after the date hereof by the Pledgor,
as
it pertains to each Pledgor, includes all Foreign Subsidiaries directly owned
by
such Pledgor, and does not include any Person not directly owned by such
Pledgor. The Pledgor shall send to the Bank such revised or updated Exhibit A’s
from
time to time as is necessary to reflect the current ownership of the Capital
Securities of the Pledgor in Subsidiaries..
(g) Partnership
and Limited Liability Company Interests.
Except
as previously disclosed in writing to the Bank, none of the Pledged Collateral
consisting of partnership or limited liability company interests (i) is
dealt in or traded on a securities exchange or in a securities market,
(ii) by its terms expressly provides that it is a security governed by
Article 8 of the UCC, (iii) is an investment company security,
(iv) is held in a securities account or (v) constitutes a Security or
a Financial Asset.
Section
6. COVENANTS.
Each
Pledgor hereby covenants that until all of the Credit and Collateral Termination
Events have occurred, such Pledgor shall:
(a) Defense
of Title.
Use
commercially reasonable efforts to warrant and defend title to and ownership
of
the Pledged Collateral of such Pledgor at its own expense against the claims
and
demands of all other parties claiming an interest therein, keep the Pledged
Collateral free from all Liens, except for Permitted Liens, and not sell,
exchange, transfer, assign, lease or otherwise dispose of Pledged Collateral
of
such Pledgor or any interest therein, except as permitted under the Loan
Agreement and the other Loan Documents.
(b) Further
Assurances.
Promptly execute and deliver at its expense all further instruments and
documents and take all further action that may be necessary or reasonably
desirable or that the Bank may reasonably request in order to (i) perfect
and protect the security interest created hereby in the Pledged Collateral
of
such Pledgor (including, without limitation, the authentication and filing
of
UCC financing statements and any and all action reasonably necessary to satisfy
the Bank that the Bank has obtained a first priority perfected security interest
in all Pledged Collateral); (ii) enable the Bank to exercise and enforce
its rights and remedies hereunder in respect of the Pledged Collateral of such
Pledgor; and (iii) otherwise effect the purposes of this Pledge Agreement,
including, without limitation and if requested by the Bank, delivering to the
Bank irrevocable proxies in respect of the Pledged Collateral of such
Pledgor.
5
(c) Amendments.
Not
make or consent to any amendment or other modification or waiver with respect
to
any of the Pledged Collateral of such Pledgor or enter into any agreement or
allow to exist any restriction with respect to any of the Pledged Collateral
of
such Pledgor other than pursuant hereto or as may be permitted under the Loan
Agreement.
(d) Compliance
with Securities Laws.
File
all reports and other information now or hereafter required to be filed by
such
Pledgor with the United States Securities and Exchange Commission and any other
state, federal or foreign agency in connection with the ownership of the Pledged
Collateral of such Pledgor.
(e) Issuance
or Acquisition of Capital Securities.
Not
without executing and delivering, or causing to be executed and delivered,
to
the Bank such agreements, documents and instruments as the Bank may reasonably
require, issue or acquire any capital stock consisting of an interest in a
partnership or a limited liability company that (i) is dealt in or traded
on a securities exchange or in a securities market, (ii) by its terms
expressly provides that it is a security governed by Article 8 of the UCC,
(iii) is an investment company security, (iv) is held in a Securities
Account or (v) constitutes a Security or a Financial Asset.
Section
7. PERFORMANCE
OF OBLIGATIONS; ADVANCES BY BANK.
Upon
the
occurrence and during the continuance of an Event of Default, on failure of
any
Pledgor to perform any of the covenants and agreements contained herein, the
Bank may, at its sole option and in its reasonable discretion, perform or cause
to be performed the same and in so doing may expend such sums as the Bank may
reasonably deem advisable in the performance thereof, including, without
limitation, the payment of any insurance premiums, the payment of any taxes,
a
payment to obtain a release of a Lien or potential Lien, expenditures made
in
defending against any adverse claim and all other expenditures which the Bank
may make for the protection of the security hereof or which may be compelled
to
make by operation of law. All such sums and amounts so expended shall be
repayable by the Pledgor on a joint and several basis promptly upon timely
notice thereof and demand therefor, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended
at
the Default Rate. No such performance of any covenant or agreement by the Bank
on behalf of any Pledgor, and no such advance or expenditure therefor, shall
relieve the Pledgor of any default under the terms of this Pledge Agreement,
the
other Loan Documents or any Hedging Agreement between any Obligor and the Bank
or affiliate of the Bank. The Bank may make any payment hereby authorized in
accordance with any xxxx, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into
the
accuracy of such xxxx, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent
such
payment is being contested in good faith by a Pledgor in appropriate proceedings
and against which adequate reserves are being maintained in accordance with
GAAP.
6
Section
8. EVENTS
OF DEFAULT.
The
occurrence of an event which under the Loan Agreement would constitute an Event
of Default shall be an event of default hereunder (an “Event
of Default”).
Section
9. REMEDIES.
(a) General
Remedies.
Upon
the occurrence of an Event of Default and during the continuation thereof,
the
Bank shall have, in respect of the Pledged Collateral of any Pledgor, in
addition to the rights and remedies provided herein, in the Loan Documents,
in
any Hedging Agreement between any Obligor and the Bank or by law, the rights
and
remedies of a secured party under the UCC or any other applicable
law.
(b) Sale
of Pledged Collateral.
Upon
the occurrence of an Event of Default and during the continuation thereof,
without limiting the generality of this Section and without notice, the Bank
may, in its reasonable discretion, sell or otherwise dispose of or realize
upon
the Pledged Collateral, or any part thereof, in one or more parcels, at public
or private sale, at any exchange or broker’s board or elsewhere, at such price
or prices and on such other terms as the Bank may deem commercially reasonable,
for cash, credit or for future delivery or otherwise in accordance with
applicable law. To the extent permitted by law, the Bank may in such event,
bid
for the purchase of such securities. Each Pledgor agrees that, to the extent
notice of sale shall be required by law and has not been waived by such Pledgor,
any requirement of reasonable notice shall be met if notice, specifying the
place of any public sale or the time after which any private sale is to be
made,
is personally served on or mailed, postage prepaid, to such Pledgor, in
accordance with the notice provisions of the Loan Agreement at least ten (10)
days before the time of such sale. The Bank shall not be obligated to make
any
sale of Pledged Collateral of such Pledgor regardless of notice of sale having
been given. The Bank may adjourn any public or private sale from time to time
by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so
adjourned.
(c) Private
Sale.
Upon
the occurrence of an Event of Default and during the continuation thereof,
the
Pledgor recognizes that the Bank may deem it impracticable to effect a public
sale of all or any part of the Pledged Collateral and that the Bank may,
therefore, determine to make one or more private sales of any such Pledged
Collateral to a restricted group of purchasers that have agreed, among other
things, to acquire such Pledged Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. Each Pledgor
acknowledges that any such private sale may be at prices and on terms less
favorable to the seller than the prices and other terms which might have been
obtained at a public sale and, notwithstanding the foregoing, agrees that such
private sale shall be deemed to have been made in a commercially reasonable
manner and that the Bank shall have no obligation to delay sale of any such
Pledged Collateral for the period of time necessary to permit the issuer of
such
Pledged Collateral to register such Pledged Collateral for public sale under
the
Securities Act of 1933. Each Pledgor further acknowledges and agrees that any
offer to sell such Pledged Collateral which has been (i) publicly
advertised on a bona fide basis in a newspaper or other publication of general
circulation in the financial community of New York, New York (to the extent
that
such offer may be advertised without prior registration under the Securities
Act
of 1933), or (ii) made privately in the manner described above shall be
deemed to involve a “public
sale”
under
the UCC, notwithstanding that such sale may not constitute a “public offering”
under the Securities Act of 1933, and the Bank may, in such event, bid for
the
purchase of such Pledged Collateral.
7
(d) Retention
of Pledged Collateral.
In
addition to the rights and remedies hereunder, upon the occurrence of an Event
of Default and during the continuation thereof, the Bank may, after providing
the notices required by Section 9-621 of the UCC (or any successor sections
of the UCC) or otherwise complying with the requirements of applicable law
of
the relevant jurisdiction, accept or retain all or any portion of the Pledged
Collateral in full or partial satisfaction of the Secured Obligations. Unless
and until the Bank shall have provided such notices, however, the Bank shall
not
be deemed to have retained any Pledged Collateral in satisfaction of any Secured
Obligations for any reason.
(e) Deficiency.
In the
event that the proceeds of any sale, collection or realization are insufficient
to pay all amounts to which the Bank is legally entitled, the Pledgor shall
be
jointly and severally liable for the deficiency, together with interest thereon
at the Default Rate, together with the costs of collection and the reasonable
fees of any attorneys employed by the Bank to collect such deficiency. Any
surplus remaining after the full payment and satisfaction of the Secured
Obligations shall be returned to the Pledgor or to whomsoever a court of
competent jurisdiction shall determine to be entitled thereto.
(f) Other
Security.
To the
extent that any of the Secured Obligations are now or hereafter secured by
property other than the Pledged Collateral (including, without limitation,
real
and other personal property owned by a Pledgor), or by a guarantee, endorsement
or property of any other Person, then the Bank shall have the right to proceed
against such other property, guarantee or endorsement upon the occurrence of
any
Event of Default, and the Bank has the right, in its sole discretion, to
determine which rights, security, liens, security interests or remedies the
Bank
shall at any time pursue, relinquish, subordinate, modify or take with respect
thereto, without in any way modifying or affecting any of them or any of the
Bank’s rights or the Secured Obligations under this Pledge Agreement, under any
other of the Loan Documents or under any Hedging Agreement between any Obligor
and the Bank or an affiliate of the Bank.
Section
10. RIGHTS
OF THE BANK.
(a) Power
of Attorney.
In
addition to other powers of attorney contained herein, each Pledgor hereby
designates and appoints the Bank and each of its designees or agents as
attorney-in-fact of such Pledgor, irrevocably and with power of substitution,
with authority to take any or all of the following actions upon the occurrence
and during the continuation of an Event of Default:
8
(i) to
demand, collect, settle, compromise, adjust and give discharges and releases
concerning the Pledged Collateral of such Pledgor, all as the Bank may
reasonably determine;
(ii) to
commence and prosecute any actions at any court for the purposes of collecting
any of the Pledged Collateral of such Pledgor and enforcing any other right
in
respect thereof;
(iii) to
defend, settle, adjust or compromise any action, suit or proceeding brought
and,
in connection therewith, give such discharge or release as the Bank may deem
reasonably appropriate;
(iv) to
pay or
discharge taxes, liens, security interests, or other encumbrances levied or
placed on or threatened against the Pledged Collateral of such
Pledgor;
(v) to
direct
any parties liable for any payment under any of the Pledged Collateral to make
payment of any and all monies due and to become due thereunder directly to
the
Bank or as the Bank shall direct;
(vi) to
receive payment of and receipt for any and all monies, claims, and other amounts
due and to become due at any time in respect of or arising out of any Pledged
Collateral of such Pledgor;
(vii) to
sign
and endorse any drafts, assignments, proxies, stock powers, verifications,
notices and other documents relating to the Pledged Collateral of such
Pledgor;
(viii) to
execute and deliver all assignments, conveyances, statements, financing
statements, renewal financing statements, pledge agreements, affidavits, notices
and other agreements, instruments and documents that the Bank may determine
necessary in order to perfect and maintain the security interests and liens
granted in this Pledge Agreement and in order to fully consummate all of the
transactions contemplated herein;
(ix) to
exchange any of the Pledged Collateral of such Pledgor or other property upon
any merger, consolidation, reorganization, recapitalization or other
readjustment of the issuer thereof and, in connection therewith, deposit any
of
the Pledged Collateral of such Pledgor with any committee, depository, transfer
agent, registrar or other designated agency upon such terms as the Bank may
determine;
(x) to
vote
for a shareholder, partner or member resolution, or to sign an instrument in
writing, sanctioning the transfer of any or all of the Pledged Collateral of
such Pledgor into the name of the Bank or into the name of any transferee to
whom the Pledged Collateral of such Pledgor or any part thereof may be sold
pursuant to Section 9
hereof;
and
9
(xi) to
do and
perform all such other acts and things as the Bank may reasonably deem to be
necessary, proper or convenient in connection with the Pledged Collateral of
such Pledgor.
This
power of attorney is a power coupled with an interest and shall be irrevocable
until all of the Secured Obligations have been satisfied in full. The Bank
shall
be under no duty to exercise or withhold the exercise of any of the rights,
powers, privileges and options expressly or implicitly granted to the Bank
in
this Pledge Agreement, and shall not be liable for any failure to do so or
any
delay in doing so. The Bank shall not be liable for any act or omission or
for
any error of judgment or any mistake of fact or law in its individual capacity
or its capacity as attorney-in-fact except acts or omissions resulting from
its
gross negligence or willful misconduct. This power of attorney is conferred
on
the Bank solely to protect, preserve and realize upon its security interest
in
the Pledged Collateral.
(b) Assignment
by the Bank.
The
Bank may from time to time assign the Secured Obligations or any portion thereof
and/or its Lien on the Pledged Collateral or any portion thereof, and the
assignee shall be entitled to all of the rights and remedies of the Bank under
this Pledge Agreement in relation thereto.
(c) The
Bank’s Duty of Care.
Other
than the exercise of reasonable care to ensure the safe custody of the Pledged
Collateral while being held by the Bank hereunder, the Bank shall have no duty
or liability to preserve rights pertaining thereto, it being understood and
agreed that Pledgor shall be responsible for preservation of all rights in
the
Pledged Collateral of such Pledgor, and the Bank shall be relieved of all
responsibility for Pledged Collateral upon surrendering it or tendering the
surrender of it to the Pledgor. The Bank shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in
its
possession if such Pledged Collateral is accorded treatment substantially equal
to that which the Bank accords its own property, which shall be no less than
the
treatment employed by a reasonable and prudent agent in the industry, it being
understood that the Bank shall not have responsibility for (i) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relating to any Pledged Collateral, whether or not
the
Bank has or is deemed to have knowledge of such matters; or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Pledged Collateral.
(d) Voting
Rights in Respect of the Pledged Collateral.
(i) Until
such time as an Event of Default shall have occurred and be continuing and
the
Bank shall have given Borrower notice thereof, to the extent permitted by law,
each Pledgor may exercise any and all voting and other consensual rights
pertaining to the Pledged Collateral of such Pledgor or any part thereof for
any
purpose not inconsistent with the terms of this Pledge Agreement or the Loan
Agreement; and
10
(ii) Subject
to Subsection (e)
of this
Section, upon the occurrence and during the continuance of an Event of Default
and notice from Bank to Borrower, all rights of a Pledgor to exercise the voting
and other consensual rights which it would otherwise be entitled to exercise
pursuant to paragraph (i) of this Subsection (d)
shall
cease and all such rights shall thereupon become vested in the Bank which shall
then have the sole right to exercise such voting and other consensual
rights.
(e) Dividend
and Distribution Rights in Respect of the Pledged Collateral.
(i) So
long
as no Event of Default shall have occurred and be continuing and subject to
Section 4(b)
hereof,
each Pledgor may receive and retain any and all dividends (other than stock
or
ownership interest dividends and other dividends constituting Pledged Collateral
which are addressed hereinabove), distributions or interest paid in respect
of
the Pledged Collateral to the extent they are allowed under the Loan
Agreement.
(ii) Upon
the
occurrence and during the continuation of an Event of Default:
(A) all
rights of a Pledgor to receive the dividends, distributions and interest
payments which it would otherwise be authorized to receive and retain pursuant
to paragraph (i) of this Subsection (e)
shall
cease and all such rights shall thereupon be vested in the Bank which shall
then
have the sole right to receive and hold as Pledged Collateral such dividends,
distributions and interest payments; and
(B) all
dividends, distributions and interest payments which are received by a Pledgor
contrary to the provisions of clause (A) of this paragraph (ii) shall be
received in trust for the benefit of the Bank, shall be segregated from other
property or funds of such Pledgor, and shall be forthwith paid over to the
Bank
as Pledged Collateral in the exact form received, to be held by the Bank as
Pledged Collateral and as further collateral security for the Secured
Obligations.
(f) Release
of Pledged Collateral.
The
Bank may release any of the Pledged Collateral from this Pledge Agreement or
may
substitute any of the Pledged Collateral for other Pledged Collateral without
altering, varying or diminishing in any way the force, effect, lien, pledge
or
security interest of this Pledge Agreement as to any Pledged Collateral not
expressly released or substituted, and this Pledge Agreement shall continue
as a
first priority lien on all Pledged Collateral not expressly released or
substituted.
Section
11. APPLICATION
OF PROCEEDS.
Upon
the
occurrence and during the continuation of an Event of Default, any payments
in
respect of the Secured Obligations and any proceeds of any Pledged Collateral,
when received by the Bank in cash or its equivalent, will be applied in
reduction of the Secured Obligations in the order set forth in the Loan
Agreement, and each Pledgor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that
the
Bank shall have the continuing and exclusive right to apply and reapply any
and
all such payments and proceeds in the Bank’s sole discretion, notwithstanding
any entry to the contrary upon any of its books and records.
11
Section
12. COSTS
OF COUNSEL.
If
at any
time hereafter, whether upon the occurrence of an Event of Default or not,
the
Bank employs counsel to prepare or consider amendments, waivers or consents
with
respect to this Pledge Agreement, or to take action or make a response in or
with respect to any legal or arbitral proceeding relating to this Pledge
Agreement or relating to the Pledged Collateral, or to protect the Pledged
Collateral or exercise any rights or remedies under this Pledge Agreement or
with respect to the Pledged Collateral, then the Pledgor agrees to promptly
pay
in accordance with the Loan Agreement any and all such reasonable documented
costs and expenses of the Bank, all of which costs and expenses shall constitute
Secured Obligations hereunder.
Section
13. CONTINUING
AGREEMENT.
(a) This
Pledge Agreement shall be a continuing agreement in every respect and shall
remain in full force and effect until all of the Secured Obligations have been
satisfied in full. Upon the occurrence of all of the Secured Obligations being
satisfied in full, this Pledge Agreement shall be automatically terminated
and
the Bank shall, upon the request and at the expense of the Pledgor, forthwith
release all of its liens and security interests hereunder and shall execute
and
deliver all UCC termination statements and/or other documents reasonably
requested by the Pledgor evidencing such termination. Notwithstanding the
foregoing all releases and indemnities provided hereunder shall survive
termination of this Pledge Agreement.
(b) This
Pledge Agreement shall continue to be effective or be automatically reinstated,
as the case may be, if at any time payment, in whole or in part, of any of
the
Secured Obligations is rescinded or must otherwise be restored or returned
by
the Bank as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable costs
and expenses (including without limitation any reasonable legal fees and
disbursements) incurred by the Bank in defending and enforcing such
reinstatement shall be deemed to be included as a part of the Secured
Obligations.
Section
14. AMENDMENTS;
WAIVERS; MODIFICATIONS.
This
Pledge Agreement and the provisions hereof may not be amended, waived, modified,
changed, discharged or terminated except as set forth in the Loan
Agreement.
Section
15. SUCCESSORS
IN INTEREST.
This
Pledge Agreement shall create a continuing security interest in the Pledged
Collateral and shall be binding upon each Pledgor, its successors and assigns
and shall inure, together with the rights and remedies of the Bank hereunder,
to
the benefit of the Bank and its successors and permitted assigns; provided
,
however , that the Pledgor may not assign its rights or delegate its duties
hereunder without the prior written consent of the Bank, as required by the
Loan
Agreement.
12
Section
16. NOTICES.
All
notices required or permitted to be given under this Pledge Agreement shall
be
in conformance with the Loan Agreement or the Guaranty, as
applicable.
Section
17. COUNTERPARTS.
This
Pledge Agreement may be executed in any number of counterparts, each of which
where so executed and delivered shall be an original, but all of which shall
constitute one and the same instrument. It shall not be necessary in making
proof of this Pledge Agreement to produce or account for more than one such
counterpart.
Section
18. HEADINGS.
The
headings of the sections and subsections hereof are provided for convenience
only and shall not in any way affect the meaning, construction or interpretation
of any provision of this Pledge Agreement.
Section
19. WAIVER
OF DEFENSES.
EACH
PLEDGOR WAIVES EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF ACTION, COUNTERCLAIM
OR SETOFF WHICH ANY PLEDGOR MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION
BY
THE BANK IN ENFORCING THIS PLEDGE AGREEMENT. PROVIDED THE BANK ACTS IN GOOD
FAITH, EACH PLEDGOR RATIFIES AND CONFIRMS WHATEVER THE BANK MAY DO PURSUANT
TO
THE TERMS OF THIS PLEDGE AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR
THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE DEBTOR.
Section
20. FORUM
SELECTION AND CONSENT TO JURISDICTION.
ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED THAT NOTHING
IN
THIS PLEDGE AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE BANK FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. EACH
PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR
THE
NORTHERN DISTRICT OF ILLINOIS
FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE PLEDGOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE
PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
13
Section
21. WAIVER
OF JURY TRIAL.
THE
BANK
AND EACH PLEDGOR, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT
WITH
COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS PLEDGE AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT, ANY
OF
THE OTHER OBLIGATIONS, THE COLLATERAL, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT
OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN
CONNECTION WITH ANY OF THE FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF
DEALING IN WHICH THE BANK AND ANY PLEDGOR ARE ADVERSE PARTIES, AND EACH AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY
FINANCIAL ACCOMMODATION TO THE PLEDGOR.
Section
22. SEVERABILITY.
If
any
provision of this Pledge Agreement is determined to be illegal, invalid or
unenforceable, such provision shall be fully severable and the remaining
provisions shall remain in full force and effect and shall be construed without
giving effect to the illegal, invalid or unenforceable provisions.
Section
23. ENTIRETY.
This
Pledge Agreement, the other Loan Documents and any Hedging Agreement between
any
Obligor and the Bank or any affiliate of the Bank represent the entire agreement
of the parties hereto and thereto, and supersede all prior agreements and
understandings, oral or written, if any, including any commitment letters or
correspondence relating to this Pledge Agreement, the other Loan Documents,
any
such Hedging Agreement or the transactions contemplated herein and
therein.
Section
24. SURVIVAL.
All
representations and warranties of the Pledgor hereunder shall survive the
execution and delivery of this Pledge Agreement, the other Loan Documents and
any Hedging Agreement between any Obligor and the Bank or any affiliate of
the
Bank, the delivery of the Notes and the making of the Loans and the issuance
of
the Letters of Credit under the Loan Agreement.
14
Section
25. MARSHALLING.
The
Bank
shall not be under any obligation to marshal any assets in favor of any Pledgor
or any other Person or against or in payment of any or all of the Secured
Obligations.
Section
26. SUBORDINATION
AND POSTPONEMENT OF SUBROGATION RIGHTS.
Each
Pledgor hereby subordinates any right of subrogation, indemnity, reimbursement
or contribution against the issuer of any Pledged Collateral or any other
Obligor arising on account of any disposition of or other realization on the
Pledged Collateral by the Bank pursuant to Section 9
to the
rights and interests of the Bank in the Pledged Collateral and agrees that
it
shall not attempt to exercise or realize on any such rights until all of the
Secured Obligations have been satisfied in full.
Section
27. CONFLICTS.
To
the
extent that any provision of this Pledge Agreement is inconsistent with or
conflicts with any provision of the Loan Agreement, the provision of the Loan
Agreement will control.
[Signature
pages follow]
15
Each
of
the parties hereto has caused a counterpart of this Pledge Agreement to be
duly
executed and delivered as of the date first above written.
|
PLEDGOR:
|
|
|
ISI
SECURITY GROUP, INC.,
|
|
|
a
Delaware corporation
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
President
|
|
DETENTION
CONTRACTING GROUP, LTD.,
|
|
|
a
Texas limited partnership
|
|
|
By:
|
ISI
DETENTION CONTRACTING GROUP, INC.,
|
|
a
Texas corporation, its general partner
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
|
ISI
DETENTION CONTRACTING GROUP, INC.,
|
|
|
a
Texas corporation
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
|
ISI
DETENTION CONTRACTING GROUP, INC.,
|
|
|
a
California corporation
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
|
ISI
DETENTION CONTRACTING GROUP, INC.,
|
|
|
a
New Mexico corporation
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
16
|
ISI
DETENTION SYSTEMS, INC.,
|
|
|
a
Texas corporation
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
|
ISI
SYSTEMS, LTD.,
|
|
|
a
Texas limited partnership
|
|
|
By:
|
ISI
DETENTION SYSTEMS, INC.,
|
|
a
Texas corporation, its general partner
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
|
METROPLEX
CONTROL SYSTEMS, INC.,
|
|
|
a
Texas corporation, (f/k/a ISI Metroplex Controls, Inc.)
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
|
ISI
CONTROLS, LTD.,
|
|
|
a
Texas limited partnership
|
|
|
By:
|
METROPLEX
CONTROL SYSTEMS, INC.,
|
|
a
Texas corporation, its general partner
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
17
|
METROPLEX
COMMERCIAL FIRE AND
|
|
|
SECURITY
ALARMS, INC.,
|
|
|
a
Texas corporation
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
|
MCFSA,
LTD.,
|
|
|
a
Texas limited partnership
|
|
|
By:
|
METROPLEX
COMMERCIAL FIRE AND
|
|
SECURITY
ALARMS, INC.,
|
|
|
a
Texas corporation, its general partner
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
|
COM-TEC
SECURITY, LLC
|
|
|
a
Wisconsin limited liability company
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
|
COM-TEC
CALIFORNIA LIMITED
|
|
|
PARTNERSHIP
|
|
|
a
Wisconsin limited partnership
|
|
|
By:
|
METROPLEX
CONTROL SYSTEMS, INC.,
|
|
a
Texas corporation, its general partner
|
|
|
By:
|
/s/
Xxx Xxxxxxxxxx
|
|
Name:
|
Xxx
Xxxxxxxxxx
|
|
Title:
|
CEO
|
18
Agreed
and accepted:
BANK:
|
THE
PRIVATEBANK AND TRUST COMPANY,
|
|
|
an
Illinois banking corporation
|
|
|
By:
|
/s/
Xxxx Xxxxxx
|
|
Name:
|
Xxxx
Xxxxxx
|
|
Title:
|
Associate
Managing Director
|
19
EXHIBIT
A
|
Pledgor
|
|
Issuer
|
Issued and
Outstanding
Interests
|
Certificate
Numbers
|
Percentage of
Issued and
Outstanding
Interests
|
Percentage of
Voting Interests
|
||||||||||
|
ISI
Security Group, Inc. (DE)
|
ISI Detention Contracting Group, Inc. (a TX corp.) |
|
10 Shares |
9
|
100
|
%
|
100
|
%
|
||||||||
|
|
Metroplex Control Systems, Inc. | 1000 Shares |
1
|
100
|
%
|
100
|
%
|
|||||||||
|
|
Metroplex Commercial Fire and Security Alarms, Inc. | 1000 Shares |
5
|
100
|
%
|
100
|
%
|
|||||||||
|
|
ISI Detention Systems, Inc. | 1000 Shares |
1
|
100
|
%
|
100
|
%
|
|||||||||
|
|
ISI Controls, Ltd. | 990 LP Units |
3
|
99
|
%
|
0
|
%
|
|||||||||
|
|
MCFSA, Ltd. | 990 LP Units |
8
|
99
|
%
|
0
|
%
|
|||||||||
|
|
ISI Systems, Ltd. | 990 LP Units |
4
|
99
|
%
|
0
|
%
|
|||||||||
|
|
Detention Contracting Group, Ltd. | 990 LP Units |
3
|
99
|
%
|
0
|
%
|
|||||||||
|
ISI
Detention Contracting Group, Inc. (a TX corp.)
|
Detention Contracting Group, Ltd. | 10 GP Units |
4
|
1
|
%
|
100
|
%
|
|||||||||
|
|
ISI Detention Contracting Group, Inc. (a CA corp.) | 100 Shares |
1
|
100
|
%
|
100
|
%
|
|||||||||
| ISI Detention Contracting Group, Inc. (a NM corp.) | 1,000 Shares | 1 | 100 | % | 100 | % | ||||||||||
|
Pledgor
|
|
Issuer
|
|
Issued and
Outstanding
Interests
|
|
Certificate
Numbers
|
|
Percentage of
Issued and
Outstanding
Interests
|
|
Percentage of
Voting Interests
|
||||||
|
Metroplex
Control Systems, Inc.
|
ISI Controls, Ltd. | 10 GP Units |
4
|
1
|
%
|
100
|
%
|
|||||||||
|
|
Com-Tec
California Limited Partnership
|
1 GP Unit |
3
|
50
|
%
|
100
|
%
|
|||||||||
|
Metroplex
Commercial Fire and Security Alarms, Inc.
|
MCFSA, Ltd. | 10 GP Units |
9
|
1
|
%
|
100
|
%
|
|||||||||
|
ISI
Detention Systems, Inc.
|
ISI Systems, Ltd. | 10 GP Units |
3
|
1
|
%
|
100
|
%
|
|||||||||
|
ISI
Controls, Ltd.
|
Com-Tec Security, LLC | 100 Units |
3
|
100
|
%
|
100
|
%
|
|||||||||
|
Com-Tec
Security, LLC
|
Com-Tec California Limited Partnership | 1 LP Unit |
2
|
50
|
%
|
0
|
%
|
|||||||||
EXHIBIT
B
STOCK
POWER
FOR
VALUE RECEIVED,
_______________________________________
does
hereby sell, assign and transfer unto ________________________________________________________,
_______________________________________________________________________________
(______________________) Shares of the Capital Stock, par value $0.____ per
share, of _______________________________________________________,
a
______________________ corporation, represented by Certificate number
__________________, standing in the name of the undersigned on the books of
said
Company.
The
undersigned does hereby irrevocably constitute and appoint
______________________ as attorney to transfer the said stock on the books
of
said Company, with full power of substitution in the premises.
Dated:
__________________, 200__
|
___________________________
|
|
By:_____________________________
|
|
Name:
________________________
|
|
Title:
_____________________________
|
IMPORTANT:
The
signature to this Power must correspond with the name as written upon the face
of the certificate in every particular without alteration or any change
whatever.
