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 


 

















 


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.


 


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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