Exhibit 4.4
BORROWER SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement"), dated as of March 11, 2003,
is entered into among Integrated Security Systems, Inc., a Delaware corporation
("Borrower" or "Pledgor"), BFS US Special Opportunities Trust PLC a public
limited company registered in England and Wales ("BFS US") (the "Lender" or
"Secured Party"), and Renaissance Capital Group, Inc., a Texas corporation, as
agent for the Lender (the "Agent").
RECITALS
A. Secured Party has lent to Pledgor the aggregate principal amount
of Two Hundred Fifty Thousand Dollars ($250,000), evidenced by the Pledgor's
promissory note of even date herewith (the "Note").
B. As a condition for the loan, Lender required that Borrower grant
a security interest in all of its assets as collateral for the loan and any
other indebtedness of Borrower to Lender (the "Obligation").
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth herein, the parties agree as follows:
1. Grant of Security Interest.
(a) In order to secure payment when due of the Obligations
now existing or hereafter incurred, Borrower hereby irrevocably grants
to the Lender a first and prior security interest in the following
property of the Borrower (the "Collateral"), whether now owned or
existing, or hereafter acquired, owned, existing or arising (whether by
contract or operation of law), and wherever located, which shall be
retained by Lender, until the Obligations have been paid in full and the
Loan Agreement has been terminated, subject to the security interests
granted to Renaissance Capital Growth & Income Fund III, Inc.
("Renaissance III") and Renaissance US Growth Investment Trust PLC
("Renaissance US").
(b) Collateral shall include all personal property of the
Borrower, including the following, all whether now owned or hereafter
acquired or arising and wherever located: (i) accounts (including
health-care-insurance receivables and credit card receivables); (ii)
securities entitlements, securities accounts, commodity accounts,
commodity contracts and investment property; (iii) deposit accounts
[i-iii collectively referred to as "Accounts"]; (iv) instruments
(including promissory notes); (v) documents (including warehouse
receipts); (vi) chattel paper (including electronic chattel paper and
tangible chattel paper); (vii) inventory, including raw materials, work
in process, or materials used or consumed in Borrower's business, items
held for sale or lease or furnished or to be furnished under contracts
of service, sale or lease, goods that are returned, reclaimed or
repossessed; (viii) goods of every nature, including stock-in-trade,
goods on consignment, standing timber that is to be cut and removed
under a conveyance or contract for sale, the unborn young of animals,
crops grown, growing, or to be grown, manufactured homes, computer
programs embedded in such goods and farm products; (ix) equipment,
including machinery, vehicles and furniture; (x) fixtures; (xi)
agricultural liens; (xii) as-extracted collateral; (xiii) commercial
tort claims, if any; (xiv) letter of credit rights; (xv) general
intangibles, of every kind and description, including payment
intangibles, software, computer information, source codes, object codes,
records and data, all existing and future customer lists, choses in
action, claims (including claims for indemnification or breach of
warranty), books, records, patents and patent applications, copyrights,
trademarks, tradenames, tradestyles, trademark applications, goodwill,
blueprints, drawings, designs and plans, trade secrets, contracts,
licenses, license agreements, formulae, tax and any other types of
refunds, returned and unearned insurance premiums, rights and claims
under insurance policies; (xvi) all supporting obligations of all of the
foregoing property; (xvii) all property of the Borrower now or hereafter
in the Lender's possession or in transit to or from, or under the
custody or control of, the Lender or any affiliate thereof; (xviii) all
cash and cash equivalents thereof; and (xix) all cash and noncash
proceeds (including insurance proceeds) of all of the foregoing
property, all products thereof and all additions and accessions thereto,
substitutions therefor and replacements thereof. The Collateral shall
also include any and all other tangible or intangible property that is
described as being part of the Collateral pursuant to one or more Riders
to Security Agreement that may be attached hereto or delivered in
connection herewith, including the Rider to Security Agreement -
Copyrights, the Rider to Security Agreement - Patents, the Rider to
Security Agreement - Trademarks and the Rider to Security Agreement -
Cash Collateral Account.
(c) Borrower represents that the grant of security interest
to Lender herein is a security interest.
2. Insurance on Collateral. Borrower further warrants and agrees
that it will pay for and maintain insurance on the Collateral.
3. Covenant For Accounts.
(a) The Borrower will, on the Lender's demand, make notations
on its books and records showing the Lender's security interest and make
available to the Lender shipping and delivery receipts evidencing the
shipment of the goods that gave rise to an account, completion
certificates or other proof of the satisfactory performance of services
that gave rise to an account, a copy of the invoice for each account and
copies of any written contract or order from which an account arose. The
Borrower shall promptly notify the Lender if an account becomes
evidenced or secured by an instrument or chattel paper and upon the
Lender's request, will promptly deliver any such instrument or chattel
paper to the Lender, including any letter of credit delivered to the
Borrower to support a shipment of inventory by the Borrower.
(b) The Borrower will promptly advise the Lender whenever an
account debtor refuses to retain or returns any goods from the sale of
which an account arose and will comply with any instructions that the
Lender may give regarding the sale or other disposition of such returns.
From time to time with such frequency as the Lender may request, the
Borrower will report to the Lender all credits given to account debtors
on all accounts.
(c) The Borrower will immediately notify the Lender if any
account arises out of contracts with the United States or any
department, agency or instrumentality thereof, and will execute any
instruments and take any steps required by the Lender so that all monies
due and to become due under such contract shall be assigned to the
Lender and notice of the assignment given to and acknowledged by the
appropriate government agency or authority under the Federal Assignment
of Claims Act.
(d) At any time after the occurrence of a Default, and
without notice to the Borrower, the Lender may direct any persons who
are indebted to the Borrower on any Collateral consisting of accounts or
general intangibles to make payment directly to the Lender of the
amounts due. The Lender is authorized to collect, compromise, endorse
and sell any such Collateral in its own name or in the Borrower's name
and to give receipts to such account debtors for any such payments and
the account debtors will be protected in making such payments to the
Lender. Upon the Lender's written request, the Borrower will establish
with the Lender and maintain a lockbox account ("Lockbox") with the
Lender and a depository account(s) ("Cash Collateral Account") with the
Lender subject to the provisions of this subparagraph and such other
related agreements as the Lender may require, and the Borrower shall
notify its account debtors to remit payments directly to the Lockbox.
Thereafter, funds collected in the Lockbox shall be transferred to the
Cash Collateral Account, and funds in the Cash Collateral Account shall
be applied by the Lender, daily, to reduce the outstanding Obligations.
(e) Upon Agent's request, upon the occurrence and during the
continuance of a Default, Borrower will, at any reasonable time and at
Borrower's own expense, physically deliver to Agent, all Accounts
(including inter-company receivables) assigned to Agent at any
reasonable place or places designated by Agent. Failure to deliver any
Account, or failure to deliver physical possession of any instruments,
documents or writings in respect of any Account shall not invalidate
Agent's Lien and security interest therein, except to the extent that
possession may be required by applicable law for the perfection of said
Lien or security interest, in which latter case, the Account shall be
deemed to be held by the Borrower as the custodian agent of Agent, for
the benefit of Lender. Failure of Agent to demand or require Borrower to
include any Account in any schedule, to execute any schedule, to assign
and deliver any schedule or to deliver physical possession of any
instruments, documents or writings related to any Account shall not
relieve Borrower of its duty so to do.
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(f) Borrower hereby agrees that it shall use commercially
reasonable efforts, at its sole cost and expense and in its own name, to
promptly and diligently collect and enforce payment of all Accounts and
Borrower will defend and hold Lender and Agent harmless from any and all
loss, damage, penalty, fine or expense arising from such collection or
enforcement.
4. Financing Statements. Borrower agrees to execute all financing
statements and amendments thereto as Agent, on behalf of the Lender, may request
from time to time to evidence the security interest granted to Agent hereunder
and will pay the cost of all filing fees and taxes, if any, necessary to effect
the filing thereof. By its signature hereon, the Borrower hereby irrevocably
authorizes the Lender to execute (on behalf of the Borrower) and file against
the Borrower one or more financing, continuation or amendment statements
pursuant to the Uniform Commercial Code in form satisfactory to the Lender, and
the Borrower will pay the cost of preparing and filing the same in all
jurisdictions in which such filing is deemed by the Lender to be necessary or
desirable in order to perfect, preserve and protect its security interests.
Without the written consent of Agent, Borrower will not allow any financing
statement or notice of assignment to be on file in any public office covering
any Collateral, proceeds thereof or other matters subject to the security
interest granted to Agent herein, unless such financing statement relates to a
Permitted Lien.
5. Software as Collateral. As part of the Collateral, Borrower has
delivered to Lender certain computer software, drivers and documentation
therefor, including all source and object code versions thereof (in electronic
and hard copies) and all enhancements and developments relating thereto (the
foregoing are collectively referred to herein as "Software"). Borrower grants to
Lender access and use to the Software. Borrower will update the Software in
possession of Lender no more than six (6) times per year, but no less often than
each major revision to the Software. Should Borrower default in the payment of
the Obligations, then Borrower hereby transfers title and ownership of the
Software to Lender. If Borrower is prohibited by law from transferring title and
ownership of the Software to Lender at the time of such default, then Borrower
shall grant Lender a perpetual, nonexclusive, royalty-free license to copy, make
derivative works, and use the Software for all of its business purposes (the
"License"). Upon satisfaction of the Obligation by Borrower, Lender shall
promptly return the Software to Borrower and shall have no further rights to
access of use thereof. Lender acknowledges that third party software may be
required to use the Software, and it is Lender's responsibility to obtain any
rights to use such third party software. Nothing herein will grant to Lender any
title or ownership interest in the Software. To the extent that Lender modifies,
updates, or enhances the Software ("Enhancements"), Lender shall own the same.
Borrower hereby represents and warrants to Lender that Borrower has full right,
title and interest in and to the Software, the Software is complete and will
function in accordance with the documentation therefor, and the use of the
Software will not infringe any third party intellectual property or other
rights.
6. Lender's Payment of Claims. Lender may, in its sole discretion,
discharge or obtain the release of any lien asserted by any person against the
Collateral, other than a permitted lien which, in the Lender's judgment, may
have a material adverse effect on the Lender's rights with respect to the
Collateral. All sums paid by Lender in respect thereof shall be payable, on
demand, by Borrower to Lender and shall be a part of the Obligation.
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7. Default and Remedies.
(a) Borrower shall be in default in the full and prompt
payment, when due, of the Obligation (a "Default").
(b) Upon the occurrence and during the continuation of any
Default (i) unless Lender or Agent shall elect otherwise, the entire
unpaid amount of the Obligations due under the Loan Agreement, as are
not then otherwise due and payable, shall become immediately due and
payable without notice to Borrower or demand by Lender or Agent and (ii)
either Lender or Agent may, at its or their option, exercise from time
to time any and all rights and remedies available to them under the
Uniform Commercial Code or otherwise, including the right to foreclose
or otherwise realize upon the Collateral and to dispose of any of the
Collateral at one or more public or private sales or other proceedings,
and Borrower agrees that any of Lender, Agent or their nominee may
become the purchaser at any such sale or sales. Borrower agrees that
twenty (20) days shall be reasonable prior notice of the date of any
public sale or other disposition of the same. All rights and remedies
granted Lender hereunder or under any other agreement between Lender and
Borrower shall be deemed concurrent and cumulative and not alternative,
and Lender, or Agent on its behalf, may proceed with any number of
remedies at the same time or at different times until all the
Obligations are fully satisfied. The exercise of any one right or remedy
shall not be deemed a waiver or release of, or an election against, any
other right or remedy. Borrower shall pay to Lender or Agent, on demand,
any and all expenses (including reasonable attorneys' fees and legal
expenses) which may have been incurred by Lender or Agent (i) in the
prosecution or defense of any action arising under this Agreement, the
Collateral or any of Lender's rights therein or thereto; or (ii) in
connection with the custody, preservation, use, operation, preparation
for sale or sale of the Collateral, the incurring of all of which are
hereby authorized to the extent Lender or Agent deem the same advisable.
Borrower's liability to Lender or Agent for any such payment shall be
included in the Obligations. The proceeds of any Collateral received by
Lender or Agent at any time before or after a Default, whether from a
sale or other disposition of Collateral or otherwise, or the Collateral
itself, may be applied to the payment, in full or in part, of such of
the Obligations and in such order and manner as Lender or Agent may
elect.
8. Representations and Covenants of Borrower. Borrower hereby
represents to and agrees with Lender as follows:
(a) Borrower owns the Collateral as sole owner, free and
clear of any liens, other than permitted liens, except for the security
interest granted to Renaissance III and Renaissance US.
(b) So long as any Obligation remains unpaid, Borrower agrees
not to sell, assign, or transfer the Collateral, other than sales of
Collateral in the ordinary course of business, and to maintain it free
and clear of any liens, other than permitted liens and the security
interest granted to Renaissance III and Renaissance US.
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9. Miscellaneous.
(a) This Agreement shall bind and inure to the benefit of the
parties and their respective heirs, personal representatives,
successors, and assigns, except that Borrower shall not assign any of
its rights hereunder without the prior written consent of Lender.
(b) Any provision hereof which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without affecting the
validity or enforceability of the remainder of this Agreement or the
validity or enforceability of such provision in any other jurisdiction.
(c) This Agreement shall be governed by and construed and
enforced in accordance with the substantive laws of the State of Texas,
without regard to the conflicts of laws provisions thereof, and the
applicable laws of the United States. Venue and jurisdiction shall be in
the state or federal courts in Dallas County, Texas.
(d) Borrower hereby consents to the jurisdiction of the
courts of the State of Texas in any action or proceeding which may be
brought against it under or in connection with this Agreement or any
transaction contemplated hereby or to enforce any agreement contained
herein and, in the event any such action or proceeding shall be brought
against it, Borrower agrees not to raise any objection to such
jurisdiction or to the laying of venue in Dallas County, Texas or, if
applicable, any other county in any state in which Collateral is
located.
(e) All capitalized terms, unless otherwise specified, have
the meanings assigned to them in the Loan Agreement and the Debentures.
(f) Any notices or other communications required or permitted
to be given by this Agreement or any other documents and instruments
referred to herein must be (i) given in writing and personally
delivered, mailed by prepaid certified or registered mail or sent by
overnight service, such as FedEx, or (ii) made by telex or facsimile
transmission delivered or transmitted to the party to whom such notice
or communication is directed, with confirmation thereupon given in
writing and personally delivered or mailed by prepaid certified or
registered mail.
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If to Borrower to:
Integrated Security Systems, Inc.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx X. Xxxx, Esq.
Xxxxxx and Xxxxx, LLP
0000 X. Xxxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Lender to:
BFS US Special Opportunities Trust PLC
c/o Renaissance Capital Group, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000-XX00
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx Xxxxxxxxx
President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Agent to:
Renaissance Capital Group, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000-XX00
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx Xxxxxxxxx
President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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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 herein will be deemed given to the party to whom it is
addressed at the close of business, local time of the recipient, on the
fourth business day after the day it is placed in the mail, or, if
earlier, the time of actual receipt.
[The remainder of this page is intentionally left blank;
signature page follows.]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
and year written above.
BORROWER:
INTEGRATED SECURITY SYSTEMS, INC.
By: /S/ C. A. XXXXXX, JR.
---------------------------
C. A. Xxxxxxx, Chairman and
Chief Executive Officer
SECURED PARTY:
BFS US SPECIAL OPPORTUNITIES TRUST PLC
By: /S/ XXXXXX XXXXXXXXX
---------------------------
Xxxxxxx Xxxxxxxxx, Director
AGENT:
RENAISSANCE CAPITAL GROUP, INC.
By: /S/ XXXXXX XXXXXXXXX
--------------------------------
Xxxxxxx Xxxxxxxxx, President and
Chief Executive Officer
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