Exhibit 10.19

 

OMNIBUS SECOND AMENDMENT

TO NOTE AND WARRANT PURCHASE AGREEMENT

AND WARRANT

 

THIS OMNIBUS SECOND AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT AND WARRANT
(this “Amendment”) dated as of                           , 2007, by and among
ISI Detention Contracting Group, Inc., a Delaware corporation (the “Original
Company”), ISI Security Group, Inc., a Delaware corporation (“Acquisition
Corp.”), and 1Sf Detention Contracting Group, Inc. (successor-by-merger to
Acquisition Corp.), a Delaware corporation (the “Surviving Company” and,
together with the Original Company and Acquisition Corp., collectively, the
“Company”), Argyle Security Acquisition Corporation, a Delaware corporation (to
be known as Argyle Security, Inc.) (“Parent”), the other Guarantors (as defined
in the Purchase Agreement) from time to time party to the Purchase Agreement (as
defined below) (the “Original Guarantors” and, together with Parent,
collectively, the “Guarantors”), and William Blair Mezzanine Capital Fund III,
L.P., a Delaware limited partnership (the “Purchaser”).

 

RECITALS:

 

WHEREAS, the Original Company, the Purchaser and the Original Guarantors
previously entered into that certain Note and Warrant Purchase Agreement dated
as of October 22, 2004, as amended by that certain Omnibus First Amendment to
Note and Warrant Purchase Agreement and Warrant dated as of November 1, 2005 (as
further amended, restated, supplemented or otherwise modified from time to time,
the “Purchase Agreement”)

 

WHEREAS, pursuant to the Purchase Agreement, the Original Company and the
Purchaser also executed and delivered, among other documents, the Warrant (as
defined in the Purchase Agreement);

 

WHEREAS, (a) the number of shares which the Purchaser was granted the right to
purchase under the Purchase Agreement and the Warrant was incorrectly calculated
based on the intent of the parties hereto at the time the Purchase Agreement and
the Warrant were originally executed and (b) pursuant to that certain Merger
Agreement, dated as of December 8, 2006 (as amended, the “Merger Agreement”), by
and among Parent, Acquisition Corp. and the Original Company, the Original
Company will merge with and into Acquisition Corp. with the Original Company
being the surviving corporation (the “Merger”);

 

WHEREAS, in connection with the consummation of the Merger, the Original
Company, the Purchaser and the Original Guarantors now desire to amend the
Purchase Agreement and the Warrant to, among other things, (a) correct the
number of shares which the Purchaser has the right to purchase under the
Purchase Agreement and the Warrant upon the terms and conditions set forth
herein, (b) add Acquisition Corp. as a Company with respect to the obligations
under the Purchase Agreement and (c) add Parent as a Guarantor with respect to
the obligations under the Purchase Agreement; and

 

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WHEREAS, capitalized terms used but not otherwise defined herein shall have the
respective meanings given to them in the Purchase Agreement.

 

NOW, THEREFORE, in consideration of the above premises, the agreements contained
herein and other good and valuable consideration, the adequacy, sufficiency and
receipt of which are hereby acknowledged, the parties hereto agree as follows:

 

Section 1.    Joinder of Company and Guarantor.  Acquisition Corp., following
the consummation of the Merger, hereby agrees to become a party to the Purchase
Agreement and agrees to be bound by all of the terms, conditions, obligations
and covenants contained therein that apply to “Company” there under. Parent,
following the consummation of the Merger, hereby agrees to become a party to the
Purchase Agreement and agrees to be bound by all of the terms, conditions,
obligations and covenants contained therein that apply to “Guarantors” there
under, including, without limitation, the provisions of Section 8 of the
Purchase Agreement.

 

Section 2.    Amendments to the Purchase Agreement.

 

(a)   The definition of “Company” contained in the preamble to the Purchase
Agreement is hereby amended to also refer to, following the consummation of the
Merger, ISI Security Group, Inc., a Delaware corporation. For the avoidance of
doubt, following the consummation of the Merger, the definition of “Company”
contained in the preamble to the Purchase Agreement will also refer to ISI
Detention Contracting Group, Inc. (successor-by-merger to Acquisition Corp.), a
Delaware corporation.

 

(b)   Section 1.1 of the Purchase Agreement is hereby amended by inserting the
following definitions in their proper alphabetical order to read as follows:

 

“Acquisition Corp.” means 1ST Security Group, Inc., a Delaware corporation,
prior to the consummation of the Merger.

 

“Merger” means that certain merger whereby the separate existence of Acquisition
Corp. will cease and Acquisition Corp. will be merged with and into ISI
Detention Contracting Group, Inc., a Delaware corporation (the “Original
Company”), with the Original Company being the surviving corporation.

 

“Parent” means Argyle Security Acquisition Corporation, a Delaware corporation
(to be known as Argyle Security, Inc. effective upon the Merger).

 

“Second Restatement Closing Date” means July 31, 2007.

 

(c)   Section 1.1 of the Purchase Agreement is hereby amended by amending and
restating the following definitions in their entirety:

 

“Change In Control” means (a) any event whereby Parent ceases to own and control
100%, directly or indirectly, of the economic and voting rights associated with
all of the outstanding Capital Stock of the Company; (b) any event whereby the
Company

 

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ceases to own and control 100%, directly or indirectly, of the economic and
voting rights associated with all of the outstanding Capital Stock of any of its
Subsidiaries; (c) a sale, transfer or other disposition of all or substantially
all of the assets of the Company or any of its Subsidiaries in any transaction
or series of transactions; or (d) any recapitalization, reorganization,
reclassification, merger, consolidation or exchange to which the Company or any
of its Subsidiaries is a party and as a result of which any other Person or
Persons or its or their Affiliates (other than the owners of the Capital Stock
of the Company, and holders of rights to acquire Capital Stock of the Company,
as of the date hereof) owns a majority of the Capital Stock of the Company
possessing the voting power (under ordinary circumstances) to elect a majority
of the members of the Board of the Company.

 

“Guarantors” means ISI Detention Contracting Group, Ltd., a Texas limited
partnership, ISI Detention Contracting Group, Inc., a Texas corporation, 151
Detention Contracting Group, Inc., a California corporation, ISI Detention
Contracting Group, Inc., a New Mexico corporation, ISI Detention Systems, Inc.,
a Texas corporation, 1Sf Detention 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, MCFSA, Ltd., a Texas limited partnership (each of the
foregoing a Subsidiary of the Company) and, following the consummation of the
Merger, Parent.

 

“Note” means that certain Second Amended and Restated Senior Subordinated
Promissory Note, dated July 31, 2007, in the aggregate original principal amount
of Five Million Nine Hundred Fifty-One Thousand Six Hundred Nine and No/100
Dollars ($5,951,609.00), made payable by the Company in favor of Purchaser, in
substantially the form as set forth in Exhibit A attached hereto, with
appropriate insertions, as may be further amended, restated, substituted,
replaced or otherwise modified from time to time.

 

(d)    A new Section 4.9 is hereby inserted immediately following Section 4.8 of
the Purchase Agreement:

 

4.9   Assumption of Responsibilities. As of the Second Restatement Closing Date,
each of Acquisition Corp. and Parent shall become parties to this Agreement as a
Company and a Guarantor, respectively.

 

(e)    The first sentence of Section 5.5(a) of the Purchase Agreement is hereby
amended and restated in its entirety to read as follows:

 

Immediately following the consummation of the Merger on the Second Restatement
Closing Date, the authorized Capital Stock of the Company consists of (i) 550
shares of Common Stock, 119.0064 shares of which are validly issued and
outstanding, fully paid and non assessable and (ii) 50 shares of Preferred A
Stock, 50 shares of which are validly issued and outstanding, fully paid and non
assessable.

 

(f)    Section 9.11 is hereby amended by amending and restating the Company’s
address for notice purposes to read as follows:

 

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If to the Company:

 

ISI Detention Contracting Group, Inc.

12903 Delivery Drive

San Antonio, Texas 78247

Telephone: 210-495-5245

FAX: 210-495-5613

Attention: Samuel C. Youngblood, CEO

 

with a copy to:

 

Hughes & Luce LLP

111 Congress Avenue, Suite 900

Austin, Texas 78701

Telephone: 512-482-6870

FAX: 512-482-6859

Attention D. Hull Youngblood, Esq.

 

(g)    The updated Capitalization Schedule attached hereto as Exhibit B is
incorporated by reference into the Purchase Agreement and hereby replaces in its
entirety the Capitalization Schedule originally attached thereto (which shall
indicate the capitalization of the Parent and its Subsidiaries immediately
following the consummation of the Merger on the Second Restatement

Closing Date).

 

Section 3.    Warrant.

 

(a)    Amendment to the Warrant. The first sentence of the first paragraph of
the Warrant is hereby amended and restated in its entirety to read as follows:

 

FOR VALUE RECEIVED, ISI Detention Contacting Group, Inc., a Delaware corporation
(the “Company”), hereby grants to William Blair Mezzanine Capital Fund III,
L.P., a Delaware limited partnership (the “Holder”), or its successors and
assigns (together with the Holder, the “Registered Holders” and, individually, a
“Registered Holder”), the right to purchase from the Company Forty-Eight and
Ninety Five Hundredths (48.95) shares of the Common Stock, $1.00 par value per
share, of the Company (the “Common Stock”) at a price per share of $1.00 (the
“Exercise Price”).

 

(b) The Warrant will be returned to the Company following the consummation of
the Merger and will be of no further force or effect upon payment of the Merger
Consideration (as such term is defined in the Merger Agreement).

 

Section 4. Consent to the Merger. The Original Company has entered into the
Merger Agreement and desires to consummate the Merger contemplated therein. The
Original Company acknowledges that the Merger will constitute an Event of
Default pursuant to Section 7.1(o) of the Purchase Agreement. The Purchaser
hereby consents to the Merger and waives

 

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such Event of Default allowing the Original Company to consummate the Merger and
any other transaction contemplated by the Merger Agreement.

 

Section 5.   Representations and Warranties. To induce the Purchaser to enter
into this Amendment, the Company represents and warrants that:

 

(a)    Representations, Warranties; No Default.  The warranties and
representations of the Company and Guarantors contained in the Transaction
Documents shall be true and correct as of the effective date hereof, with the
same effect as though made on such date, except to the extent that such
warranties and representations expressly relate to an earlier date. The Company
represents and warrants that no Event of Default has occurred and is continuing
and no event has occurred and is continuing which, with the lapse of time, the
giving of notice, or both, would constitute an Event of Default under the
Purchase Agreement.

 

(b)    Organizational Authority. (i) The execution, delivery and performance by
the Company and each Guarantor of this Amendment are within its corporate powers
and have been duly authorized by all necessary corporate action, (ii) this
Amendment is the legal, valid and binding obligation of the Company and each
Guarantor enforceable in accordance with its terms and (iii) neither the
execution and delivery nor the performance by the Company and each Guarantor of
this Amendment (1) violates any law or regulation, or any other decree of any
governmental body, (2) conflicts with or results in the breach or termination
of, constitutes a default under or accelerates any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person is a party or by which such Person or any of its property is
bound, (3) results in the creation or imposition of any Lien, upon any of the
Collateral other than Liens in favor of the Senior Lender, (4) violates or
conflicts with the certificate of incorporation or bylaws of such Person, or
(5) requires the consent, approval or authorization of, or declaration or filing
with, any other Person, except for those already duly obtained.

 

Section 6.   Conditions Precedent. The effectiveness of this Amendment is
subject to the following conditions precedent:

 

(a)    No Default. No Potential Event of Default or Event of Default under the
Purchase Agreement shall have occurred and be continuing.

 

(b)    Warranties and Representations. The warranties and representations of the
Company and each Guarantor contained in the Transaction Documents shall be true
and correct as of the effective date hereof, with the same effect as though made
on such date, except to the extent that such warranties and representations
expressly relate to an earlier date.

 

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Section 7.   Reference and Effect on Operative Documents.

 

(a)    Ratification. Except as specifically amended above, the Purchase
Agreement and the other Transaction Documents, as amended, shall remain in full
force and effect. Notwithstanding anything contained herein, the terms of this
Agreement are not intended to and do not effect a novation of the Purchase
Agreement or any other Transaction Document. The Company and each Guarantor
hereby ratifies and reaffirms each of the terms and conditions of the
Transaction Documents to which it is a party and all of its obligations
thereunder.

 

(b)    No Waiver. The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the Purchaser
under the Purchase Agreement or any of the other Transaction Documents.

 

(c)    References. Upon the effectiveness of this Amendment, each reference in
(a) the Purchase Agreement to “this Agreement,” “hereunder,” “hereof,” or words
of similar import, (b) the Warrant to “this Warrant,” “hereunder,” “hereof,” or
words of similar import and (c) any other Transaction Document to “the
Agreement,” “the Purchase Agreement” or “the Warrant” shall, in each case and
except as otherwise specifically stated therein, mean and be a reference to the
Purchase Agreement, the Warrant or such other Transaction Documents, as
applicable, as amended hereby.

 

Section 8.   Miscellaneous.

 

(a)    Fees and Expenses. Pursuant to Section 9.1 of the Purchase Agreement, the
Company agrees to pay on demand all reasonable legal fees and out-of-pocket
costs and expenses of or incurred by the Purchaser in connection with the
instruments and agreements contemplated hereby.

 

(b)    Effectuation. This Amendment shall be effective once the Company, the
Purchaser and the Guarantors have executed and delivered this amendment.

 

(c)    Binding Effect. This Amendment shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.

 

(d)    Counterparts.  This Amendment may be executed in one or more
counterparts,~ each of which when so executed and delivered, shall be an
original, and all of which together shall constitute one and the same
instrument.

 

(e)    Governing Law. This Amendment shall be governed by the laws of the State
of Illinois, without giving effect to its conflict of laws principles.

 

[Remainder of page intentionally left blank.]

 

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Signature Page to Omnibus Second Amendment

 

 

 

 

 

ORIGINAL COMPANY:

 

 

 

 

 

ISI DETENTION CONTRACTING

 

 

GROUT, INC a Delaware corporation

 

 

 

 

 

By:

/ Sam Youngblood/

 

 

Name: Sam Youngblood

 

 

Title: CEO

 

 

 

 

 

 

 

 

ACQUISITION CORP.:

 

 

 

 

 

ISI SECURITY GROUP, INC.

 

 

a Delaware corporation

 

 

 

 

 

 

 

 

By:

/Bob Marbut/

 

 

Name: Bob Marbut

 

 

Title: President

 

 

 

 

 

 

 

 

PURCHASER:

 

 

 

 

 

WILLIAM BLAIR MEZZANINE

 

 

CAPITAL FUND III, L.P.

 

 

 

 

 

By:

William Blair Mezzanine Capital

 

 

 

Partners III, L.L.C.

 

 

 

its General Partner

 

 

 

 

 

By:

/David M. Jones/

 

 

Name: David M. Jones

 

 

Its:

Managing Director

 

 

 

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Signature Page to Omnibus Second Amendment

 

 

 

Following the consummation of the Merger:

 

 

 

SURVIVING COMPANY:

 

 

 

ISI DETENTION CONTRACTING

 

GROUP, INC., a Delaware corporation

 

(successor-by-merger Acquisition Corp.)

 

 

 

 

 

By:

/ Sam Youngblood/

 

Name: Sam Youngblood

 

Title: CEO

 

 

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Signature Page to Omnibus Second Amendment

 

 

 

 

 

GUARANTORS:

 

 

 

 

 

ISI DETENTION CONTRACTING

 

 

GROUP, LTD., a Texas limited partnership

 

 

 

 

 

By:

ISI Detention Contracting Group, Inc.

 

 

 

a Texas corporation

 

 

 

its General Partner

 

 

 

 

 

By:

/ Sam Youngblood/

 

 

Name: Sam Youngblood

 

 

Title: CEO

 

 

 

 

 

ISI DETENTION CONTRACTING

 

 

GROUP, INC., a California corporation

 

 

 

 

 

By:

/ Sam Youngblood/

 

 

Name: Sam Youngblood

 

 

Title: CEO

 

 

 

 

 

 

 

 

ISI DETENTION SYSTEMS, INC.,

 

 

a Texas Corporation

 

 

 

 

 

By:

/ Sam Youngblood/

 

 

Name: Sam Youngblood

 

 

Title: CEO

 

 

 

 

 

METROPLEX CONTROL SYSTEMS

 

 

INC. a Texas corporation

 

 

 

 

 

 

 

 

By:

/ Mark McDonald /

 

 

Name: Mark McDonald

 

 

Title: President

 

 

 

 

 

 

 

 

ISI DETENTION CONTRACTING

 

 

GROUP, INC., a Texas corporation

 

 

 

 

 

By:

/ Sam Youngblood/

 

 

Name: Sam Youngblood

 

 

Title: CEO

 

 

 

 

 

 

 

 

ISI DETENTION CONTRACTING

 

 

GROUP, a New Mexico corporation

 

 

 

 

 

By:

/ Sam Youngblood/

 

 

Name: Sam Youngblood

 

 

Title: CEO

 

 

 

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ISI DETENTION SYSTEMS, LTD., a

 

 

Texas limited partnership

 

 

 

 

 

By:

ISI Detention Systems, Inc.,

 

 

 

a Texas corporation

 

 

 

its General Partner

 

 

 

 

 

By:

/ Sam Youngblood/

 

 

Name: Sam Youngblood

 

 

Title: CEO

 

 

 

 

 

 

 

 

ISI CONTROLS, LTD., a Texas limited

 

 

partnership

 

 

 

 

 

By:

Metroplex Control Systems, Inc.,

 

 

 

A Texas corporation

 

 

 

 Its General Partner

 

 

 

 

 

 

 

 

 

By:

/ Sam Youngblood/

 

 

Name: Sam Youngblood

 

 

Title: CEO

 

 

 

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Signature Page to Omnibus Second Amendment

 

 

 

 

 

 

 

 

METROPLEX COMMERCIAL FIRE

 

MCFSA, LTD., a Texas limited

AND SECURITY ALARMS, INC., a

 

partnership

Texas Corporation

 

 

 

 

 

By:

/ Sam Youngblood/

 

By:

/ Sam Youngblood/

Name:

 

 

Name:

 

Title:

 

 

Title:

 

 

 

 

 

 

 

ARGYLE SECURITY ACQUISITION

 

 

CORPORATION, a Delaware corporation

 

 

(to be known as Argyle Security, Inc.)

 

 

 

 

 

By:

/ Bob Marbut/

 

 

Name:

 

 

 

Title:

 

 

 

 

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EXHIBIT A

 

SECOND AMENDED AND RESTATED

SENIOR SUBORDINATED PROMISSORY NOTE

 

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*see tab 30 for document

 

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  Exhibit B

 

 

 

 

 

 

 

 

 

Capitalization Schedule

 

 

 

 

 

 

 

 

 

Equity Owner

 

Shares of Common

 

Shares of Preferred Stock

 

 

 

 

 

 

 

 

 

 

Sam Youngblood

 

 

63 shares

 

 

 

 

 

 

 

 

Youngblood Charitable Remainder Trust

 

 

4 shares

 

 

 

 

 

 

 

 

Don Carr

 

 

33 shares

 

 

 

 

 

 

 

 

Mark McDonald

 

 

11.9064 shares

 

 

 

 

 

 

 

 

Robert Roller

 

 

3.050 shares

 

 

 

 

 

 

 

 

Tim Moxon

 

 

2.000 shares

 

 

 

 

 

 

 

 

Neal Horman

 

 

2.050 shares

 

 

 

 

 

 

 

William Blair Mezzanine Capital Fund III,

 

 

 

50.00 shares

L.P.

 

 

 

 

 

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