**Exhibit10.19**

 

OMNIBUS SECONDAMENDMENT

TO NOTE ANDWARRANT PURCHASE AGREEMENT

AND WARRANT

 

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

 

RECITALS:

 

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

 

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

 

WHEREAS, (a) thenumber of shares which the Purchaser was granted the right to purchase underthe Purchase Agreement and the Warrant was incorrectly calculated based on the intentof the parties hereto at the time the Purchase Agreement and the Warrant wereoriginally executed and (b) pursuant to that certain Merger Agreement,dated as of December 8, 2006 (as amended, the “Merger Agreement”), by andamong Parent, Acquisition Corp. and the Original Company, the Original Companywill merge with and into Acquisition Corp. with the Original Company being thesurviving corporation (the “Merger”);

 

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

 

----

 

WHEREAS, capitalizedterms used but not otherwise defined herein shall have the respective meaningsgiven to them in the Purchase Agreement. 

 

NOW, THEREFORE, inconsideration of the above premises, the agreements contained herein and othergood and valuable consideration, the adequacy, sufficiency and receipt of whichare hereby acknowledged, the parties hereto agree as follows:

 

Section 1.    Joinder of Company and Guarantor.  Acquisition Corp., following the consummationof the Merger, hereby agrees to become a party to the Purchase Agreement and agreesto be bound by all of the terms, conditions, obligations and covenantscontained therein that apply to “Company” there under. Parent, following theconsummation of the Merger, hereby agrees to become a party to the PurchaseAgreement and agrees to be bound by all of the terms, conditions, obligationsand 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 thepreamble to the Purchase Agreement is hereby amended to also refer to,following the consummation of the Merger, ISI Security Group, Inc., aDelaware corporation. For the avoidance of doubt, following the consummation ofthe Merger, the definition of “Company” contained in the preamble to the PurchaseAgreement 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 ishereby amended by inserting the following definitions in their properalphabetical order to read as follows:

 

“Acquisition Corp.” means1ST Security Group, Inc., a Delaware corporation, prior to the consummationof the Merger.

 

“Merger” means thatcertain merger whereby the separate existence of Acquisition Corp. will ceaseand Acquisition Corp. will be merged with and into ISI Detention ContractingGroup, Inc., a Delaware corporation (the “Original Company”), with theOriginal Company being the surviving corporation.

 

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

 

“Second RestatementClosing Date” means July 31, 2007.

 

(c)   Section 1.1 of the Purchase Agreement ishereby amended by amending and restating the following definitions in theirentirety:

 

“ChangeIn Control” means (a) any event whereby Parent ceases to own and control100%, directly or indirectly, of the economic and voting rights associated withall of the outstanding Capital Stock of the Company; (b) any event wherebythe Company

 

----

 

ceases to own and control100%, directly or indirectly, of the economic and voting rights associated withall of the outstanding Capital Stock of any of its Subsidiaries; (c) asale, transfer or other disposition of all or substantially all of the assetsof the Company or any of its Subsidiaries in any transaction or series oftransactions; or (d) any recapitalization, reorganization,reclassification, merger, consolidation or exchange to which the Company or anyof its Subsidiaries is a party and as a result of which any other Person orPersons or its or their Affiliates (other than the owners of the Capital Stockof 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 Companypossessing the voting power (under ordinary circumstances) to elect a majorityof the members of the Board of the Company.

 

“Guarantors”means ISI Detention Contracting Group, Ltd., a Texas limited partnership, ISIDetention Contracting Group, Inc., a Texas corporation, 151 DetentionContracting Group, Inc., a California corporation, ISI DetentionContracting 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 theforegoing a Subsidiary of the Company) and, following the consummation of theMerger, Parent. 

 

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

 

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

 

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

 

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

 

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

 

(f)    Section 9.11 is hereby amended byamending and restating the Company’s address for notice purposes to read asfollows:

 

----

 

If to the Company:

 

ISI Detention ContractingGroup, 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 & LuceLLP

111 Congress Avenue, Suite 900

Austin, Texas 78701

Telephone: 512-482-6870

FAX: 512-482-6859

Attention D. HullYoungblood, Esq.

 

(g)    The updated Capitalization Schedule attachedhereto as Exhibit B is incorporated by reference into the PurchaseAgreement and hereby replaces in its entirety the Capitalization Scheduleoriginally attached thereto (which shall indicate the capitalization of theParent and its Subsidiaries immediately following the consummation of theMerger on the Second Restatement 

Closing Date).

 

Section 3.    Warrant.

 

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

 

FORVALUE 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 andassigns (together with the Holder, the “Registered Holders” and, individually,a “Registered Holder”), the right to purchase from the Company Forty-Eight andNinety Five Hundredths (48.95) shares of the Common Stock, $1.00 par value pershare, of the Company (the “Common Stock”) at a price per share of $1.00 (the “ExercisePrice”).

 

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

 

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

 

----

 

such Event of Defaultallowing the Original Company to consummate the Merger and any other transactioncontemplated by the Merger Agreement.

 

Section 5.   Representations and Warranties. To inducethe Purchaser to enter into this Amendment, the Company represents and warrantsthat:

 

(a)    Representations, Warranties; No Default.  The warranties and representations of theCompany and Guarantors contained in the Transaction Documents shall be true andcorrect as of the effective date hereof, with the same effect as though made onsuch date, except to the extent that such warranties and representationsexpressly relate to an earlier date. The Company represents and warrants thatno Event of Default has occurred and is continuing and no event has occurredand 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) Theexecution, delivery and performance by the Company and each Guarantor of thisAmendment are within its corporate powers and have been duly authorized by allnecessary corporate action, (ii) this Amendment is the legal, valid andbinding obligation of the Company and each Guarantor enforceable in accordancewith its terms and (iii) neither the execution and delivery nor theperformance by the Company and each Guarantor of this Amendment (1) violatesany law or regulation, or any other decree of any governmental body, (2) conflictswith or results in the breach or termination of, constitutes a default under oraccelerates any performance required by, any indenture, mortgage, deed oftrust, lease, agreement or other instrument to which such Person is a party orby which such Person or any of its property is bound, (3) results in thecreation or imposition of any Lien, upon any of the Collateral other than Liensin favor of the Senior Lender, (4) violates or conflicts with the certificateof 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 ofthis Amendment is subject to the following conditions precedent:

 

(a)    No Default. No Potential Event of Default orEvent of Default under the Purchase Agreement shall have occurred and becontinuing.

 

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

 

----

 

Section 7.   Reference and Effect on Operative Documents.

 

(a)    Ratification. Except as specifically amendedabove, the Purchase Agreement and the other Transaction Documents, as amended,shall remain in full force and effect. Notwithstanding anything containedherein, the terms of this Agreement are not intended to and do not effect anovation of the Purchase Agreement or any other Transaction Document. TheCompany and each Guarantor hereby ratifies and reaffirms each of the terms and conditionsof the Transaction Documents to which it is a party and all of its obligationsthereunder. 

 

(b)    No Waiver. The execution, delivery andeffectiveness 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 theother Transaction Documents. 

 

(c)    References. Upon the effectiveness of thisAmendment, each reference in (a) the Purchase Agreement to “thisAgreement,” “hereunder,” “hereof,” or words of similar import, (b) theWarrant to “this Warrant,” “hereunder,” “hereof,” or words of similar importand (c) any other Transaction Document to “the Agreement,” “the PurchaseAgreement” or “the Warrant” shall, in each case and except as otherwisespecifically stated therein, mean and be a reference to the Purchase Agreement,the Warrant or such other Transaction Documents, as applicable, as amendedhereby.

 

Section 8.   Miscellaneous.

 

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

 

(b)    Effectuation. This Amendment shall beeffective once the Company, the Purchaser and the Guarantors have executed anddelivered this amendment. 

 

(c)    Binding Effect. This Amendment shall bebinding upon and shall inure to the benefit of the parties hereto and theirrespective successors and assigns. 

 

(d)    Counterparts.  This Amendment may be executed in one or morecounterparts,~ each of which when so executed and delivered, shall be anoriginal, and all of which together shall constitute one and the sameinstrument. 

 

(e)    Governing Law. This Amendment shall begoverned by the laws of the State of Illinois, without giving effect to itsconflict of laws principles. 

 

[Remainder of page intentionallyleft blank.] 

 

----

 
| 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                |   |   |
|                                                  |                                  |        |  |  |  |  |

 

----

 
| 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                                       |              |
|                                                  |                   |  |

 

----

 
| 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                                       |                                        |   |
|                                                  |                                             |        |  |  |

 

----

 
| 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                           |                                   |   |
|                                      |                                        |        |  |  |  |

 

----

 
| 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:                                           |              |                          |   |
|                                                  |                   |                               |  |  |  |  |  |  |  |

 

----

 

EXHIBIT A

 

SECOND AMENDED ANDRESTATED

SENIOR SUBORDINATEDPROMISSORY NOTE

 

----

*see tab 30 fordocument

 

----

 
|   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.                                       |       |                           |           |                                         |

 

----