PLEDGE AGREEMENT
THIS
PLEDGE AGREEMENT (this "Agreement"),
dated
November 16, 2004, is made and entered into by and between INTEGRATED
ALARM SERVICES GROUP, INC.,
a
Delaware corporation ("Parent"),
MADISON
PROTECTION, INC.,
a
Delaware corporation ("Madison
Protection",
together with Parent, the "Pledgors"),
and
XXXXX
FARGO BANK, N.A.,
in its
capacity as collateral trustee for the Secured Parties (as defined below)
(in
such capacity, the "Collateral
Trustee").
WHEREAS,
the Pledgors have entered into an Indenture dated as of November 16,
2004
(as it may be amended, amended and restated, supplemented or otherwise modified
from time to time, the "Indenture")
with
Xxxxx Fargo Bank, N.A., as trustee (in such capacity, the "Trustee"),
pursuant to which Parent has authorized the issuance of its 12% Senior Secured
Notes due 2011 (as such notes may hereafter be amended, amended and restated,
supplemented or otherwise modified from time to time, the "Notes");
WHEREAS,
pursuant to the Indenture, each Pledgor is entering into this Agreement in
order
to grant to the Collateral Trustee for the ratable benefit of the Holders,
the
Collateral Trustee and the Trustee (collectively, the "Secured
Parties")
a
second priority security interest in the Pledged Collateral (as defined below);
WHEREAS,
the Notes will be issued in reliance on each Pledgor's execution and delivery
of
this Agreement to the Collateral Trustee; and
WHEREAS,
each Pledgor owns the outstanding membership interests, partnership interests
and shares of capital stock in each of the entities set forth on Schedule
A
hereto.
NOW,
THEREFORE, intending to be legally bound hereby, the parties hereto agree
as
follows:
1. |
Defined
Terms.
|
(a) Except
as
otherwise expressly provided herein, capitalized terms used in this Agreement
shall have the respective meanings assigned to them in the Indenture. Where
applicable, and except as otherwise expressly provided herein, terms used
herein
(whether or not capitalized) shall have the respective meanings assigned
to them
in the Uniform Commercial Code as from in effect from time to time in the
State
of New York.
(b) "Capital
Stock" means, with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated, whether voting or
non-voting) in equity of such Person, including, without limitation, all
common
stock and preferred stock.
(c) "Foreign
Subsidiary Voting Stock" means the Voting Stock of any Foreign Subsidiary.
(d) "Foreign
Subsidiary" means any Subsidiary of Parent organized under the laws of any
jurisdiction outside the United States of America.
(e) "Voting
Stock" means, with respect to any Person, Capital Stock of any class or kind
ordinarily having the power to vote for the election of directors, managers
or
other voting members of the governing body of such Person.
(f) "Pledged
Collateral" shall mean and include the following: (i) the membership interests
and shares of capital stock listed on Schedule A
attached
hereto and made a part hereof, together with all rights and privileges
pertaining thereto, including, without limitation, all securities and additional
securities receivable in respect of or in exchange for such securities, all
rights to subscribe for securities incident to or arising from ownership
of such
securities, all cash, interest, membership interests, stock and other dividends
or distributions paid or payable on such securities, and all books and records
owned by and in the possession of each Pledgor pertaining to the foregoing,
including, without limitation, all membership interest and stock record and
transfer books; (ii) any and all other securities hereafter pledged
by each
Pledgor to the Collateral Trustee to secure the Note Obligations, and all
rights
and privileges pertaining thereto, including, without limitation, all securities
and additional securities receivable in respect of or in exchange for such
securities, all rights to subscribe for securities incident to or arising
from
ownership of such securities, all cash, interest, membership interests, stock
and other dividends or distributions paid or payable on such securities,
and all
books and records owned by and in the possession of each Pledgor pertaining
to
the foregoing and (iii) whatever is received when any of the foregoing
is
sold, exchanged or otherwise disposed of, including any proceeds as such
term is
defined in the Code, provided that, to the extent that and for so long as
adverse tax consequences for Parent and its Subsidiaries organized under
the
laws of any jurisdiction within the United States of America would otherwise
result from a pledge of all of the shares of capital stock of any Foreign
Subsidiary, not more than 65% of the total outstanding Foreign Subsidiary
Voting
Stock of such Foreign Subsidiary shall be deemed pledged under the Collateral
Documents.
2. |
Grant
of Security Interests.
|
Each
Pledgor, to secure on a second priority basis the full and prompt payment
and
performance of all Note Obligations, hereby grants to the Collateral Trustee
for
the ratable benefit of the Secured Parties a security interest in all of
such
Pledgor's now existing and hereafter acquired and/or arising right, title
and
interest in, to and under the Pledged Collateral owned by such Pledgor, whether
now or hereafter existing and wherever located.
3. |
Further
Assurances.
|
Prior
to
or concurrently with the execution of this Agreement, and thereafter at any
time
and from time to time upon reasonable request of the Collateral Trustee,
each
Pledgor shall deliver to the Collateral Trustee all financing statements,
continuation statements and termination statements reasonably requested by
the
Collateral Trustee, and shall execute and deliver
all assignments, certificates and documents of title, affidavits, reports,
notices, schedules of account, letters of authority, further pledges and
all
other documents (collectively, the "Transfer
Documents")
which
the Collateral Trustee may reasonably request, in form reasonably
satisfactory to the Collateral Trustee, and take such other action
2
which
the
Collateral Trustee may reasonably request, to perfect and continue perfected
and
to create and maintain the second priority status (or, after the Discharge
of
First Priority Claims (as defined in the Intercreditor Agreement), the
first
priority status) of the Collateral Trustee's security interest in the Pledged
Collateral and to fully consummate the transactions contemplated under
this
Agreement, the other Collateral Documents, the Intercreditor Agreement,
the
Indenture and the Notes. Upon the occurrence of an Event of Default, subject
to
the provisions set forth in the Intercreditor Agreement, each Pledgor
irrevocably makes, constitutes and appoints the Collateral Trustee (and
any of
Collateral Trustee's officers or employees or agents designated by Collateral
Trustee) as such Pledgor's true and lawful attorney with power to sign
the name
of Pledgor on all or any of the Transfer Documents which the Collateral
Trustee
determines must be executed, filed, recorded or sent in order to perfect
or
continue perfected the Collateral Trustee's security interest in the Pledged
Collateral, in accordance with the Intercreditor Agreement. Such power,
being
coupled with an interest, is irrevocable until the security interest of
the
Collateral Trustee in the Pledged Collateral is released pursuant to this
Agreement and the other Collateral Documents.
4. |
Representations
and Warranties.
|
Each
Pledgor hereby represents and warrants to the Collateral Trustee as
follows:
(a) Such
Pledgor has, and will continue to have (or, in the case of after-acquired
Pledged Collateral, at the time it acquires rights in such Pledged Collateral,
will have), title to the Pledged Collateral, free and clear of all Liens
except
Liens created under this Agreement and First Priority Liens (as defined in
the
Intercreditor Agreement);
(b) The
membership interests, partnership interests and capital stock constituting
the
Pledged Collateral have been duly authorized and validly issued to such Pledgor
(as set forth on Schedule
A
hereto);
(c) The
security interests in the Pledged Collateral granted hereunder and the delivery
to and possession by the Collateral Trustee thereof (or a bailee therefor)
will
create security interests that are valid, perfected and of second
priority;
(d) Subject
to the provisions of the Intercreditor Agreement, there are no restrictions
upon
the pledge of the Pledged Collateral and each Pledgor has the power and
authority and right to pledge the Pledged Collateral free of any
encumbrances;
(e) There
are
no actions, suits, or proceedings pending or, to its best knowledge, threatened
against or affecting any Pledgor with respect to the Pledged Collateral,
at law
or in equity or before or by any governmental authority, and no Pledgor is
in
default with respect to any judgment, writ, injunction, decree, rule or
regulation which could adversely affect its performance hereunder;
and
(f) The
address of each Pledgor's principal place of business is as set forth in
the
Security Agreement.
3
5.
|
General
Covenants.
|
Each
Pledgor hereby covenants and agrees as follows:
(a) Each
Pledgor shall do all acts that may be necessary and appropriate to maintain,
preserve and protect the Pledged Collateral.
(b) Each
Pledgor shall appear in and defend any action or proceeding of which it is
aware
which could reasonably be expected to affect its title to, or the Collateral
Trustee's interest in, the Pledged Collateral and the proceeds thereof;
provided,
however,
that it
may settle such actions or proceedings with respect to the Pledged Collateral
with the consent of Collateral Trustee.
(c) Each
Pledgor shall keep accurate and complete records of the Pledged
Collateral.
(d) Each
Pledgor shall pay any and all taxes, duties, fees or imposts of any nature
imposed by any state, federal or local authority on any of the Pledged
Collateral.
(e) Each
Pledgor shall permit the Collateral Trustee, its officers, employees and
agents,
during regular business hours, to inspect all books and records of such Pledgor
related to the Pledged Collateral, provided that upon and during the continuance
of an Event of Default, such inspections and visits shall not be confined
to
regular business hours.
(f) During
the term of this Agreement, each Pledgor shall not sell, assign, transfer
or
otherwise dispose of the Pledged Collateral, except as permitted by the
Indenture.
6. |
Other
Rights With Respect to Pledged
Collateral.
|
In
addition to the other rights with respect to the Pledged Collateral granted
to
the Collateral Trustee hereunder, at any time and from time to time, after
an
Event of Default, the Collateral Trustee, at its option and at the expense
of
the Pledgors, may, subject to the provisions set forth in the Intercreditor
Agreement: (a) transfer into its own name, or into the name of its
nominee,
all or any part of the Pledged Collateral, thereafter receiving all dividends,
income or other distributions upon the Pledged Collateral; (b) take
control
of and manage all or any of the Pledged Collateral; (c) apply to the
payment of any of the Note Obligations, whether any be due and payable or
not,
any moneys, including cash dividends and income from any Pledged Collateral,
now
or hereafter in the hands of the Collateral Trustee (or a bailee therefor),
on
deposit or otherwise, belonging to any Pledgor, as the Collateral Trustee,
in
its sole discretion, shall determine; and (d) take any action related
to
the protection of the Pledged Collateral which such Pledgor is required but
fails to do hereunder.
7. |
Additional
Remedies Upon Event of
Default.
|
Upon
the
occurrence of any Event of Default, subject to the provisions set forth in
the
Intercreditor Agreement, the Collateral Trustee shall have, in addition to
all
rights and remedies of the Collateral Trustee under the Code or other applicable
law, and in addition to its rights under Section 6 above and under
the
other Collateral Documents, the following rights and remedies:
4
(a) Subject
to the provisions set forth in the Intercreditor Agreement, the Collateral
Trustee may, after ten days' advance notice to each Pledgor, sell, assign,
give
an option or options to purchase or otherwise dispose of the Pledged Collateral,
or any part thereof at public or private sale in accordance with securities
laws, at any of the Collateral Trustee's offices or elsewhere, for cash,
on
credit or for future delivery, and upon such other terms as the Collateral
Trustee may deem commercially reasonable. Each Pledgor agrees that ten days'
advance notice of the time and place of any public sale or the time after
which
any private sale is to be made shall constitute reasonable notification.
The
Collateral Trustee shall not be obligated to make any sale of the Pledged
Collateral regardless of notice of sale having been given. The Collateral
Trustee 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. Each Pledgor
recognizes that the Collateral Trustee may be compelled to resort to one
or more
private sales of the Pledged Collateral to a restricted group of purchasers
who
will be obliged to agree, among other things, to acquire such securities
for
their own account for investment and not with a view to the distribution
or
resale thereof.
The
proceeds of any collection, sale or other disposition of the Pledged Collateral,
or any part thereof, shall, after the Collateral Trustee has made all deductions
of expenses, including, but not limited to, reasonable attorneys' fees and
other
out-of-pocket expenses incurred in connection with repossession, collection,
sale or disposition of such Pledged Collateral or in connection with the
enforcement of the Collateral Trustee's rights with respect to the Pledged
Collateral in any insolvency, bankruptcy or reorganization proceedings, be
applied against the Note Obligations, whether or not all the same be then
due
and payable in the manner set forth in the Indenture and the Security Agreement.
8. |
Collateral
Trustee's Duties.
|
The
powers conferred on the Collateral Trustee hereunder are solely to protect
its
interest in the Pledged Collateral and shall not impose any duty upon it
to
exercise any such powers. Except for the safe custody and preservation of
any
Pledged Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Collateral Trustee shall have no duty as to
any
Pledged Collateral or as to the taking of any necessary steps to preserve
rights
against prior parties or any other rights pertaining to any Pledged
Collateral.
9. |
No
Waiver; Cumulative Remedies.
|
No
failure to exercise, and no delay in exercising, on the part of the Collateral
Trustee, any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any further exercise thereof or the exercise
of any
other right, power or privilege. The remedies herein provided are cumulative
and
not exclusive of any remedies provided under the other Collateral Documents
or
the Indenture or by applicable Law or in any other written instrument or
agreement relating to the Note Obligations or any security therefor. Each
Pledgor waives any right to require the Collateral Trustee to proceed against
any other Person or to exhaust any of the Pledged Collateral or other security
for the Note Obligations or to pursue any remedy in the Collateral Trustee's
power.
5
10. |
Assignment.
|
All
rights of Collateral Trustee under this Agreement shall inure to the benefit
of
its successors and assigns. All obligations of the Pledgors shall bind its
successors; provided, however, no Pledgor may assign or transfer any of its
rights and obligations hereunder or any interest herein.
11. |
Severability.
|
Any
provision of this Agreement which shall be held invalid or unenforceable
shall
be ineffective without invalidating the remaining provisions
hereof.
12. |
Governing
Law.
|
This
Agreement shall be construed in accordance with and governed by the internal
laws of the State of New York, except to the extent the validity or perfection
of the security interests or the remedies hereunder in respect of any Pledged
Collateral are governed by the law of a jurisdiction other than the State
of New
York.
13. |
Notices.
|
All
notices, requests, demands, directions and other communications (as used
in this
Section 13, collectively referred to as "notices") given to or made
upon
any party hereto under the provisions of this Agreement shall be in writing
(including facsimile communication), unless otherwise expressly permitted
hereunder, and shall be delivered or sent by facsimile or via
nationally-recognized overnight courier, by hand or U.S. mail to the respective
parties at the addresses and numbers set forth under their respective names
provided in the Indenture or in accordance with any subsequent unrevoked
written
direction from any party to the other parties and delivered pursuant to the
requirements of this Section 13. All notices shall, except as otherwise
expressly herein provided, be effective: (a) in the case of facsimile,
when
received, (b) in the case of hand-delivered notice, when hand-delivered,
(c) if given by mail, four days after such
communication is deposited in the mail with first-class postage prepaid,
return
receipt requested, and (d) if given by any other means (including
by air
courier), when delivered.
14. |
Specific
Performance.
|
Each
Pledgor acknowledges and agrees that, in addition to the other rights of
the
Collateral Trustee hereunder and under the other Collateral Documents and
the
Indenture, because the Collateral Trustee's remedies at law for failure of
such
Pledgor to comply with the provisions hereof relating to Collateral Trustee's
rights: (a) to inspect the books and records related to the Pledged
Collateral, (b) to receive the various notifications such Pledgor
is
required to deliver hereunder, (c) to obtain copies of agreements
and
6
documents
as provided herein with respect to the Pledged Collateral, (d) to
enforce
the provisions hereof pursuant to which such Pledgor has appointed Collateral
Trustee its attorney-in-fact, and (e) to enforce Collateral Trustee's
remedies hereunder, would be inadequate and that any such failure would
not be
adequately compensable in damages, such Pledgor agrees that each such provision
hereof may be specifically enforced, subject to the provisions set forth
in the
Intercreditor Agreement.
15. |
Voting
Rights and Rights to Receive Dividends or Distributions in Respect
of the
Pledged Collateral.
|
This
Agreement is given as security to secure performance of the Note Obligations.
So
long as no Event of Default shall occur and be continuing under the Indenture:
(a) Each
Pledgor may exercise any and all voting and other consensual rights pertaining
to the Pledged Collateral or any part thereof for any purpose not inconsistent
with the terms of this Agreement, the other Collateral Documents, the Indenture
or the Intercreditor Agreement; provided,
however,
that
such Pledgor will not exercise or will refrain from exercising any such right,
as the case may be, if such action would have a material adverse effect on
the
grant of a security interest in the Pledged Collateral; and
(b) Each
Pledgor shall be entitled to receive cash dividends or other distributions
in
the ordinary course made in respect of the Pledged Collateral, to the extent
permitted to be paid pursuant to the Indenture and the Intercreditor Agreement,
so long as no Event of Default shall occur and be continuing.
16. |
Entire
Agreement; Amendments.
|
This
Agreement constitutes the entire agreement between the parties with respect
to
the subject matter hereof and supersedes all prior agreements relating to
a
grant of a security interest in the Pledged Collateral by each Pledgor. This
Agreement may not be amended or supplemented except by a writing signed by
the
Collateral Trustee and each Pledgor and except in accordance with the Indenture
and the Intercreditor Agreement.
17. |
Reconveyance.
|
The
Collateral Trustee's right, title and interest hereunder with respect to
the
Pledged Collateral shall terminate and be discharged upon payment in full
of the
Note Obligations and the Collateral Trustee shall, upon such termination
and
discharge and at the request and sole expense of each Pledgor, take such
action
and execute and deliver, such documents and instruments necessary to terminate,
release and discharge this Agreement and the security interest created hereby,
and to reconvey the Pledged Collateral to such Pledgor.
7
18. |
Counterparts.
|
This
Agreement may be executed in any number of counterparts, and by different
parties hereto in separate counterparts, each of which when so executed shall
be
deemed an original and all of which taken together shall constitute but one
and
the same agreement.
19. |
Descriptive
Headings.
|
The
descriptive headings which are used in this Agreement are for the convenience
of
the parties only and shall not affect the meaning of any provision of this
Agreement.
20. |
Intercreditor
Agreement.
|
Notwithstanding
anything herein to the contrary, the lien and security interest granted to
the
Collateral Trustee pursuant to this Agreement and the exercise of any right
or
remedy by the Collateral Trustee hereunder are subject to the provisions
of the
Intercreditor Agreement. In the event of any conflict between the terms of
the
Intercreditor Agreement and this Agreement, the terms of the Intercreditor
Agreement shall govern and control.
[SIGNATURE
PAGE FOLLOWS]
8
SIGNATURE
PAGE - PLEDGE AGREEMENT
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed with the intention that it constitutes a sealed instrument as
of the
date first above written.
INTEGRATED
ALARM
SERVICES GROUP, INC.,
a
Delaware
corporation
By: /s/
Xxxxxxx X. XxXxxx
Title: Chairman
of the Board & CEO
Name: Xxxxxxx
X. XxXxxx
XXXXX
FARGO BANK,
N.A., as
Collateral Trustee
By: /s/ Xxxxxx
X. X'Xxxxxxx
Title: Assistant
Vice President
Name: Xxxxxx
X. X'Xxxxxxx
MADISON
PROTECTION,
INC.
By: /s/
Xxxxxxx X. XxXxxx
Title: Authorized
Person
Name: Xxxxxxx
X. XxXxxx
S-1
SCHEDULE
A TO
PLEDGE AGREEMENT
(To
Be Completed by Pledgor)
DESCRIPTION
OF PLEDGED COLLATERAL
Pledgor
|
Issuer
|
Percentage
|
Certificate
Number
|
Units/Shares
|
INTEGRATED
ALARM
SERVICES
GROUP, INC.
|
1000
|