Exhibit 10.1

 

FIFTH AMENDMENT AND WAIVER

TO NOTE AND WARRANT PURCHASE AGREEMENT

 

THIS FIFTH AMENDMENT AND WAIVER TO NOTE AND WARRANT PURCHASE AGREEMENT (this
“Amendment”) is dated as of November 13, 2008 by and among ISI Security
Group, Inc., a Delaware corporation formerly known as ISI Detention Contracting
Group, Inc. and d/b/a “Argyle Security USA” (successor-by-merger to ISI Security
Group, Inc., an unrelated entity) (the “Company”), and William Blair Mezzanine
Capital Fund III, L.P., a Delaware limited partnership (the “Purchaser”).

 

RECITALS:

 

WHEREAS, the Company, the Purchaser and the Guarantors (as such term is defined
in the Purchase Agreement (as defined below)) (such Guarantors are parties to
the Purchase Agreement solely for the purposes of Section 8 thereof) 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, by that
certain Omnibus Second Amendment to Note and Warrant Purchase Agreement and
Warrant, dated as of July 31, 2007, by that certain Third Amendment to Note and
Warrant Purchase Agreement, dated as of January 2, 2008, and by that certain
Fourth Amendment to Note and Warrant Purchase Agreement, dated as of June 25,
2008 (as further amended, restated, supplemented or otherwise modified from time
to time, the “Purchase Agreement”);

 

WHEREAS, the Company acknowledges that a certain event of default has occurred
and is continuing under the Purchase Agreement, and the Purchaser is willing to
provide a limited waiver in respect of such event of default, subject to the
terms and conditions of this Amendment;

 

WHEREAS, in connection with the event of default, the Company wishes, and the
Purchaser is willing to, amend the Purchase Agreement, subject to the terms and
conditions of this Amendment;

 

WHEREAS, this Amendment shall constitute a Transaction Document, and these
Recitals shall be construed as part of this Amendment; and

 

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.               Amendment to the Purchase Agreement.  Section 4.7(a) of
the Purchase Agreement is hereby deleted in its entirety and restated to read as
follows:

 

(a)                                  Capital Expenditure Limits.  The Company
and its Subsidiaries, on a consolidated bases, shall not make Capital
Expenditures in

 

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excess of (i) $2,300,000, in the aggregate, for the 2007 Fiscal Year,
(ii) $3,000,000, in the aggregate, for the 2008 Fiscal Year and (iii) $600,000,
in the aggregate, during each Fiscal Year thereafter.

 

Section 2.               Waiver.

 

(a)           The Company has informed the Purchaser that as of November 12,
2008, the Company has exceeded the Capital Expenditure limitation as set forth
in Section 4.7(a) of the Purchase Agreement prior to the effectiveness of this
Amendment (the “Existing Default”).  The Purchaser hereby waives compliance by
the Company of Section 4.7(a) of the Purchase Agreement solely as it relates to
the Existing Default.  The Purchaser’s waiver of non-compliance with
Section 4.7(a) of the Purchase Agreement is limited to the specific instance of
the Existing Default and shall not be deemed a waiver of or consent to any other
failure to comply with the terms of Section 4.7(a) of the Purchase Agreement or
any other provisions of the Purchase Agreement.  Such waiver shall not prejudice
or constitute a waiver of any right or remedies which the Purchaser may have or
be entitled to with respect to any other breach of Section 4.7(a) or any other
provision of the Purchase Agreement.  The waiver is for this particular instance
and shall not be construed as a waiver of any other presently existing or future
Event of Default.  Subsequent to the date hereof, the provisions of
Section 4.7(a) of the Purchase Agreement will apply as amended hereby, without
any further action on the part of the Purchaser.

 

(b)           Other than as specifically set forth herein, the Purchaser
reserves all of its interests, rights and remedies under and pursuant to the
Transaction Documents.

 

Section 3.               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 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.  No Event of Default (other than the
Existing Default) or Potential Event of Default has occurred and is continuing
under the Purchase Agreement.

 

(b)           Organizational Authority.  (i) The execution, delivery and
performance by the Company 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 enforceable in
accordance with its terms and (iii) neither the execution and delivery nor the
performance by the Company 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 (as defined in the Senior
Loan Documents) 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

 

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authorization of, or declaration or filing with, any other Person, except for
those already duly obtained.

 

Section 4.               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
(other than the Existing Default) under the Purchase Agreement shall have
occurred and be continuing.

 

(b)           Warranties and Representations.  The warranties and
representations of the Company 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.

 

(c)           Execution and Delivery.  The Company and the Purchaser shall have
executed and delivered this Amendment.

 

(d)           Initial Amendment Fee.  The Company shall have paid to the
Purchaser an initial amendment fee in the amount of $25,000.

 

Section 5.               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 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)           References.  Upon the effectiveness of this Amendment, each
reference in (i) the Purchase Agreement to “this Agreement,” “hereunder,”
“hereof,” or words of similar import, and (ii) any other Transaction Document to
“the Agreement” or “the Purchase Agreement” shall, in each case and except as
otherwise specifically stated therein, mean and be a reference to the Purchase
Agreement or such other Transaction Documents, as applicable, as amended hereby.

 

Section 6.               Miscellaneous.

 

(a)           Additional Fee and Expenses.  In connection with this Amendment,
the Company shall pay to the Purchaser an additional amendment fee in the amount
of $25,000 on December 31, 2008.  Pursuant to Section 9.1 of the Purchase
Agreement, the Company further 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.  The failure
of the Company to comply with the foregoing requirements shall constitute an
immediate Event of Default under the Purchase Agreement.

 

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

 

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(c)           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.

 

(d)           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 Fifth Amendment and Waiver to Note and Warrant Purchase
Agreement

 

COMPANY:

 

PURCHASER:

 

 

 

ISI SECURITY GROUP, INC., a Delaware
corporation formerly known as ISI Detention
Contracting Group, Inc. and d/b/a “Argyle
Security USA”

 

WILLIAM BLAIR MEZZANINE
CAPITAL FUND III, L.P.

 

 

By:

William Blair Mezzanine Capital

By:

/s/ Tim Moxon

 

 

Partners III, L.L.C.,

Name:

Tim Moxon

 

 

its General Partner

Title:

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Marc J. Walfish

 

 

 

Name:

Marc J. Walfish

 

 

 

Title:

Managing Director

 

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