Unassociated Document


    AMENDMENT
      TO 

     

    MERGER
      AGREEMENT 

     

     

    This
      Amendment to Merger Agreement (this “Amendment”), dated June 29, 2007, is made
      by and among Argyle Security Acquisition Corp., a Delaware corporation
      (“Parent”), ISI Security Group, Inc., a Delaware corporation (“Acquisition
      Corp.”), ISI Detention Contracting Group, Inc., a Delaware corporation, d/b/a
“ISI Security Group” (the “Company”). Any capitalized term not defined herein
      shall have the meaning for such term specified in the Merger Agreement (as
      defined below). 

     

     

    WHEREAS,
      Parent,
      Acquisition Corp. and the Company entered into a Merger Agreement dated December
      8, 2006 (the “Merger Agreement”); 

     

     

    WHEREAS,
      Section
      13.1 of the Merger Agreement provides that the parties to the Merger Agreement
      may, individually, terminate the Merger Agreement if the Closing has not
      occurred by July 1, 1007 (the “Outside Closing Date”); 

     

     

    WHEREAS,
      the
      Company is willing to extend the Outside Closing Date on the terms and
      conditions contained in this Amendment; and 

     

     

    WHEREAS,
      Parent,
      Acquisition Corp. and the Company wish to amend the terms of the Merger
      Agreement on the terms contained herein. 

     

     

    NOWTHEREFORE,
      in
      consideration of the foregoing and the representations, warranties, covenants
      and agreements herein contained and other good and valuable consideration,
      the
      receipt and sufficiency of which is hereby acknowledged, the parties hereto
      hereby agree as follows: 

     

     

    1.
      Section 1.1 of the Merger Agreement is hereby amended by adding the following
      after the definition of the term “Proceeding”: 

     

     

    ““Promissory
      Notes” means unsecured subordinated promissory notes issued to the holders of
      Company Common Stock in partial consideration for the merger of the Company
      with
      Acquisition Corp. The Promissory Notes will (i) be in form mutually acceptable
      to the Company and Parent, (ii) bear interest at the rate of 5% per annum,
      paid
      semi-annually, (iii) mature five years from the date of issuance, (iv) be
      convertible (in whole or in part) into shares of Parent Common Stock at the
      election of the holders of the Promissory Notes at any time after January 1,
      2008 at a price per share of $10.00, (v) be unsecured and subordinated to
      institutional debt other than trade debt (with which it will be in pari passu)
      outstanding at and after the Closing and similar debt arrangements with any
      institution. In addition, the Promissory will be redeemable at Parent’s election
      after January 1, 2009, at a price per share of $10.00.” 

     

     

    2.
      Section 2.6(b)(i) of the Merger Agreement is hereby amended by deleting the
      phrase “$18,200,000” and replacing it with “$18,600,000”. 

     

     

     

    
      
        
        

      

      
        D-1

        
          

        

      

      
        
        

      

    

     

     

    3.
      Section 2.6(b) of the Merger Agreement is hereby amended by adding the following
      after subparagraph (ii): 

     

     

    “(iii)
      Promissory Notes in the aggregate principal amount of $1,925,000, convertible
      into 192,500 shares of Parent Common Stock.” 

     

     

    4.
      Section 2.9(b) of the Merger Agreement is hereby amended by deleting the text
      of
      Section 2.9(b) (and all of the subparagraphs of Section 2.9(b)) and replacing
      it
      with the following: 

     

     

    “If
      at
      the time of the Closing the Adjusted EBITDA of the Company is $4,500,000.00
      or
      more, and the amount of the 2/28 Backlog is $80,000,000.00 or more, then the
      Enhanced Cash Consideration and the other consideration shall be distributed
      pursuant to Schedule 2.9. The Parties hereby stipulate that for all purposes
      in
      this Agreement (including but not limited to Section 2.6(b) hereof and this
      2.9(b)), the Closing Adjusted EBITDA of the Company is $4,500,000 or more,
      and
      the amount of the 2/28 Backlog of the Company is more than $80,000,000.”


     

     

    5.
      Section 13.1(a) of the Merger Agreement is hereby amended by deleting the phrase
      “by July 1, 2007” and replacing it with “on or before July 16, 2007”.


     

     

    6.
      Schedule 2.9 to the Merger Agreement is hereby deleted in its entirety and
      replaced by Schedule 2.9 attached hereto. 

     

     

    7.
      Parent
      and Acquisition Corp. hereby knowingly, voluntarily, and irrevocably, release,
      give up and forever discharge ISI and its officers, directors, agents,
      representatives, employees and attorneys, of and from any and all rights, duties
      and obligations, and any and all claims, actions, suits, debts, causes of
      actions and demands of any and every kind, both known and unknown, foreseen
      and
      unforeseen, which they may have against ISI or any of its officers, directors,
      agents, representatives, employees and attorneys, arising from any cause
      whatsoever, from the beginning of time to the date hereof, except for claims
      relating to intentional fraud or theft. Without limiting the foregoing in any
      manner, and by way of illustration only, this Section 7 is intended by the
      Parent and Acquisition Corp. to release and forever discharge ISI and all of
      its
      officers, directors, agents, representatives, employees and attorneys from
      any
      and all claims, of any and every nature, relating in any way, whether directly
      or indirectly to the closing, failure to close, or any delay in the closing,
      of
      the transactions contemplated by the Merger Agreement through the date of this
      Amendment. 

     

     

    8.
      This
      Amendment shall be construed in accordance with and governed by the laws of
      the
      State of Texas, without giving effect to the conflict of laws principles
      thereof. 

     

     

    9.
      From
      and after the date of this Amendment, Argyle will reimburse Sam Youngblood
      for
      any and all expenses incurred by Mr. Youngblood after the date hereof in
      connection with the transactions contemplated by the Merger Agreement.


     

     

    
      
        
        

      

      
        D-2

        
          

        

      

      
        
        

      

    

     

    
    

    10.
      This
      Amendment may be signed in any number of counterparts, each of which shall
      be an
      original and all of which shall be deemed to be one and the same instrument,
      with the same effect as if the signatures thereto and hereto were upon the
      same
      instrument. A facsimile signature shall be deemed to be an original signature
      for purposes of this Amendment. 

     

     

    11.
      This
      Amendment is intended to be in full compliance with the requirements for an
      Amendment to the Merger Agreement as required by Section 14.2(a) of the Merger
      Agreement, and every defect in fulfilling such requirements for an effective
      amendment to the Merger Agreement is hereby ratified, intentionally waived
      and
      relinquished by all Parties hereto. 

     

     

    [Remainder
      of page intentionally left blank] 

     

     

     

    
      
        
        

      

      
        D-3

        
          

        

      

      
        
        

      

    

     

     

    


     

     

    IN
      WITNESS WHEREOF,
      the
      parties hereto have duly executed this Amendment as of the day and year first
      above written. 

     

    
      	 	
               

              ARGYLE
                SECURITY ACQUISITION 

              CORP.

               

            
	 	 	 


    

    
      	 	
               

              By:

            	
               

              /s/
                Bob Marbut

            
	 	 	
              Name:
                Bob Marbut

            
	 	 	
              Title:
                Chairman and Co-Chief Executive
                Officer

            


    

     

    
      	 	
               

              ISI
                SECURITY GROUP, INC.

               

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Bob Marbut

            
	 	 	
              Name:
                Bob Marbut

            
	 	 	
              Title:
                Chairman and Co-Chief Executive Officer

            
	 	 	 
	 	 	 


    

     

    
      	 	
              ISI
                DETENTION CONTRACTING

              GROUP,
                INC.

               

            
	 	
              By:

            	
              /s/
                Samuel Youngblood

            
	 	 	
              Name:
                Samuel Youngblood

            
	 	 	
              Title:
                CEO

            


    

     

     

    
      
        
        

      

      
        D-4