Document:

Exhibit
10.11

 

GUARANTY OF LEASE

 

FOR VALUE RECEIVED, and
in consideration for, and as an inducement to Investment Properties, Ltd., a
Texas limited partnership, to enter into a lease (the “Lease”), as “Landlord”, with
ISI Detention Contracting Group, Inc., a Delaware corporation, as “Tenant”,
the undersigned unconditionally guarantees to Landlord the full and timely
payment and performance of all of Tenant’s covenants, conditions, and
agreements in the Lease. In addition, the undersigned expressly agrees that the
validity of this Guaranty of Lease and the obligations of the undersigned shall
not be terminated, affected, or impaired by reason of (i) any forbearance,
settlement or compromise between Landlord and Tenant, (ii) the invalidity
of the Lease for any reason whatsoever, or (iii) the release of Tenant
from any of Tenant’s obligations under the Lease by operation of law or
otherwise, including, without limitation, the rejection or assignment of the Lease
in connection with any bankruptcy proceeding.

 

The undersigned further
covenants and agrees as follows: This Guaranty of Lease shall remain in full
force and effect as to any renewal, modification or extension of the Lease,
whether or not known to, or approved by, the undersigned. No subletting of the
Demised Premises or assignment or other transfer of the Lease (or any interest
therein) shall operate to extinguish or reduce the liability of the
undersigned. In the event of any termination of the Lease by Landlord, the
undersigned’s liability shall not be terminated, but the undersigned shall be
and remain liable for all damages, costs, expenses and other claims which may
arise under the Lease. If the undersigned shall, directly or indirectly, loan
money to the Tenant, the repayment of such money shall be subordinate in all
respects to Tenant’s payment of the amounts then and thereafter due under the
Lease.

 

Wherever reference is
made to the liability of Tenant in the Lease, such reference shall he deemed to
include the liability of the undersigned, jointly and severally, with Tenant.
The liability of the undersigned for the obligations of the Lease shall be
primary. In any cause of action that accrues to Landlord under the Lease,
Landlord may, at Landlord’s option, proceed against the undersigned and/or Tenant,
jointly and severally, or proceed against the undersigned without having
demanded performance of, commenced any action against, or obtained any judgment
against Tenant. The undersigned hereby waives any obligation on the part of
Landlord to enforce the terms of the Lease against Tenant as a condition to
Landlord’s right to proceed against the undersigned. The undersigned hereby
expressly waives: (i) notice of acceptance of this Guaranty of Lease, and
of presentment, demand and protest; (ii) notice of any default hereunder
or under the Lease, and notice of any indulgence afforded Tenant; (iii) demand
for observance or performance of, or enforcement of, any terms or provisions of
this Guaranty of Lease or the Lease; and (iv) all other notices and
demands otherwise required by law which the undersigned may lawfully waive. The
undersigned agrees that in the event this Guaranty of Lease is enforced by suit
or otherwise, the undersigned will reimburse the Landlord, upon demand, for all
expenses incurred in connection therewith, including, without limitation, reasonable
attorney’s fees.

 

The undersigned hereby
waives, to the maximum extent permitted by law, all defenses available to a
surety, whether the waiver is specified herein or not.

 

It is further agreed that
all of the terms and provisions hereof shall inure to the benefit of the
successors, personal representatives and assigns of the Landlord, and shall be
binding upon the heirs, executors, personal representatives, successors and
assigns of the undersigned.

 

In the event that more
than one person or entity executes this Guaranty of Lease, the liability of
such signatories shall be joint and several.

 

This Guaranty of Lease
shall be governed by the laws of the State of Texas, and shall be performed in
all respects in Bexar County, Texas.

 

 

EXECUTED as of the 6th day of February, 2008.

 

	
   

  	
  Argyle Security Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Don NevilleExhibit 10.17

 

NOTE AND WARRANT PURCHASE AGREEMENT

 

BY AND AMONG

 

ISI DETENTION CONTRACTING GROUP, INC.,

 

WILLIAM BLAIR MEZZANINE CAPITAL FUND III, L.P.

 

AND

 

THE GUARANTORS FROM TIME TO TIME PARTIES HERETO

 

DATED AS OF OCTOBER 22, 2004

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
   

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
   

  	
  Accounting Principles

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.3

  	
   

  	
  Rules of Construction

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  AUTHORIZATION AND CLOSING

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
   

  	
  Authorization of the Securities

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
   

  	
  Purchase and Sale of the Securities

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
   

  	
  The Closing

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS OF THE PURCHASER’S
  OBLIGATIONS AT THE CLOSING

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
   

  	
  Representations and Warranties; Covenants; No Event
  of Default

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
   

  	
  Stockholders’ Agreement

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
   

  	
  Securities Law Compliance

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
   

  	
  Senior Loan Agreement

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
   

  	
  Senior Subordination Agreement

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.6

  	
   

  	
  Reorganization

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.7

  	
   

  	
  Bonding Transaction

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.8

  	
   

  	
  No Material Adverse Change

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.9

  	
   

  	
  Opinion of the Company’s Counsel; Other Opinions and
  Documents

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.10

  	
   

  	
  Closing Documents

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.11

  	
   

  	
  Proceedings

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.12

  	
   

  	
  Expenses

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.13

  	
   

  	
  Due Diligence

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.14

  	
   

  	
  Investment Fee

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.15

  	
   

  	
  Compliance with Applicable Laws

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.16

  	
   

  	
  Waiver

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.17

  	
   

  	
  Use of Proceeds

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  COVENANTS

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
   

  	
  Financial Statements and Other Information

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
   

  	
  Inspection of Property

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
   

  	
  Board Meetings

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
   

  	
  Investor Protection; Investment Opportunities

  	
  25

  

 

i

 

	
   

  	
  4.5

  	
   

  	
  Restrictive Covenants

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.6

  	
   

  	
  Affirmative Covenants

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.7

  	
   

  	
  Financial Covenants

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.8

  	
   

  	
  Covenants Related to ISI*MCS and Green Wing

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND WARRANTIES
  OF THE COMPANY

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
   

  	
  Organization, Qualifications, Authority and
  Corporate Power

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
   

  	
  Subsidiaries

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
   

  	
  Authorization of Agreements, Etc

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
   

  	
  Validity

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
   

  	
  Authorized Capital Stock

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.6

  	
   

  	
  Solvency

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.7

  	
   

  	
  Assets

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.8

  	
   

  	
  Tax Matters

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.9

  	
   

  	
  Contracts and Commitments

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.10

  	
   

  	
  Litigation, Etc

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.11

  	
   

  	
  Brokerage

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.12

  	
   

  	
  Insurance

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.13

  	
   

  	
  Employees

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.14

  	
   

  	
  Environmental and Safety Matters

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.15

  	
   

  	
  Plans

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.16

  	
   

  	
  Affiliated Transactions

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.17

  	
   

  	
  Other Agreement Representations

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  REPRESENTATIONS AND WARRANTIES
  OF THE PURCHASER

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
   

  	
  Organization and Good Standing

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
   

  	
  Authorization; Power

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
   

  	
  Validity

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
   

  	
  Accredited Investor

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
   

  	
  Purchase for Own Account; Acknowledgment of Risk

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.6

  	
   

  	
  No Violation

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  EVENTS OF DEFAULT

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
   

  	
  Definition

  	
  44

  

 

ii

 

	
   

  	
  7.2

  	
   

  	
  Consequences of Events of Default

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  THE GUARANTIES

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
   

  	
  Guaranty Unconditional

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
   

  	
  Discharge Only upon Payment in Full; Reinstatement
  in Certain Circumstances

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
   

  	
  Waivers

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
   

  	
  Limit on Recovery

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.5

  	
   

  	
  Stay of Acceleration

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.6

  	
   

  	
  Benefit to Guarantors

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.7

  	
   

  	
  Guarantor Covenants

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  MISCELLANEOUS

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
   

  	
  Expenses

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
   

  	
  Remedies

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3

  	
   

  	
  Amendments and Waivers

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.4

  	
   

  	
  Survival of Agreement; Indemnities

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.5

  	
   

  	
  No Setoffs, Etc

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.6

  	
   

  	
  Successors and Assigns

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.7

  	
   

  	
  Severability

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.8

  	
   

  	
  Counterparts

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.9

  	
   

  	
  Descriptive Headings

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.10

  	
   

  	
  Governing Law

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.11

  	
   

  	
  Notices

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.12

  	
   

  	
  Consideration for Securities; Treatment of Fees

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.13

  	
   

  	
  No Strict Construction

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.14

  	
   

  	
  Complete Agreement

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.15

  	
   

  	
  Indemnification

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.16

  	
   

  	
  Payment Set Aside

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.17

  	
   

  	
  Jurisdiction and Venue

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.18

  	
   

  	
  WAIVER OF RIGHT TO JURY TRIAL

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.19

  	
   

  	
  Certain Waivers

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.20

  	
   

  	
  Transfer Restrictions

  	
  58

  

 

iii

 

LIST OF EXHIBITS

 

Exhibit A
– Form Note

Exhibit B
– Form of Warrant

Exhibit C
– Stockholders’ Agreement

 

LIST OF SCHEDULES

 

Affiliated
Transactions Schedule

Assets
Schedule

Brokerage
Schedule

Capitalization
Schedule

Contracts
Schedule 

Construction
Contracts Schedule

Employees
Schedule

Environmental
Schedule

Fees
and Expenses Schedule

Indebtedness
Schedule 

Insurance
Schedule

ISI
MCS Schedule

Litigation
Schedule

Permitted
Encumbrances Schedule

Reorganization
Schedule

Restricted
Business Schedule

Taxes
Schedule

Use
of Proceeds Schedule

 

iv

 

NOTE AND WARRANT PURCHASE AGREEMENT

 

THIS NOTE AND WARRANT PURCHASE AGREEMENT is entered
into as of October 22, 2004 (this “Agreement”), by and among ISI
Detention Contracting Group, Inc., a Delaware corporation (the “Company”),
the Guarantors from time to time parties hereto for purposes of Section 8
hereof, and William Blair Mezzanine Capital Fund III, L.P., a Delaware
limited partnership (the “Purchaser”).

 

The parties hereto agree as follows:

 

1.                                       Definitions.

 

1.1                                 Definitions. 
For purposes of this Agreement, the following terms have the meanings
set forth below:

 

“Accounting Changes” means:  (a) changes in accounting principles
required by GAAP and implemented by the Company or any of its Subsidiaries; (b) changes
in accounting principles recommended by the Company’s certified public
accountants and implemented by the Company; and (c) changes in the
carrying value of the Company’ or any of its Subsidiaries’ assets, liabilities
or equity accounts resulting from (i) the application of purchase accounting
principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) to the Related
Transactions.

 

“Affiliate” shall mean any Person (a) that directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, the Company, (b) that beneficially owns or
holds five percent (5%) or more of the voting control or Capital Stock of the
Company, or (c) five percent (5%) or more of the voting control or Capital
Stock of which is beneficially owned or held by the Company; provided, however,
that the term “Affiliate” shall specifically exclude the Purchaser and any
Affiliate of the Purchaser and the ISI Affiliates.

 

“Board” means the board of directors (or
comparable governing body) of a Person.

 

“Business Day” means any day other than a
Saturday, Sunday or public holiday under the laws of the State of Illinois or
other day on which banking institutions are authorized or obligated to close in
Chicago, Illinois.

 

“Bonus Plan” means the ISI Detention
Contracting Group, Inc. Executive Bonus Plan approved and effective as of October 22,
2004.

 

“Capital Expenditures” means, with respect to
any period, the aggregate of all expenditures (whether paid in cash or accrued
as liabilities and including expenditures for Capital Lease Obligations) by the
Company and its Subsidiaries during such period that are required by GAAP,
consistently applied, to be included in or reflected by the property, plant and
equipment or similar fixed asset accounts (or intangible accounts subject to
amortization) on the balance sheet of the Company and its Subsidiaries.

 

 

“Capital Lease” means, with respect to any
Person, any lease of any property (whether real, personal or mixed) by such
Person as lessee that, in accordance with GAAP, would be required to be
classified and accounted for as a capital lease on a balance sheet of such
Person.

 

“Capital Lease Obligation” means, with respect
to any Capital Lease of any Person, the amount of the obligation of the lessee
thereunder that, in accordance with GAAP, would appear on a balance sheet of
such lessee in respect of such Capital Lease.

 

“Capital Stock” shall mean (a) in the case
of a corporation, voting capital stock; (b) in the case of a partnership,
voting partnership interests (whether general or limited); (c) in the case
of a limited liability company, voting membership or similar interests; or (d) voting
equity interests, in the case of any other Person.

 

“Cash Equivalents” means:  (a) marketable securities (i) issued
or directly and unconditionally guaranteed as to interest and principal by the
United States government, or (ii) issued by any agency of the United
States government the obligations of which are backed by the full faith and
credit of the United States, in each case maturing within one (1) year
after acquisition thereof; (b) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof, in each case maturing within one (1) year
after acquisition thereof and having, at the time of acquisition, a rating of
at least A-1 from S&P or at least P-1 from Moody’s; (c) commercial
paper maturing no more than one (1) year from the date of acquisition and,
at the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody’s; (d) certificates of deposit or bankers’
acceptances issued or accepted by any financial institution or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that is at least (i) “adequately
capitalized” (as defined in the regulations of its primary Federal banking
regulator) and (ii) has Tier 1 capital (as defined in such regulations) of
not less than $250,000,000, in each case maturing within one (1) year
after issuance or acceptance thereof; and (e) shares of any money market
mutual or similar funds that (i) has substantially all of its assets
invested continuously in the types of investments referred to in clauses (a) through
(d) above, (ii) has net assets of not less than $500,000,000, and (iii) has
the highest rating obtainable from either S&P or Moody’s.

 

“CERCLA” shall mean the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq.

 

“Change In Control” means (a) any event
whereby the Company ceases to own and control 100%, directly or indirectly
through one or more Subsidiaries, of the economic and voting rights associated
with all of the outstanding Capital Stock of any of its Subsidiaries; (b) 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 (c) any recapitalization, reorganization,
reclassification, merger, consolidation or exchange to which the Company 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 

 

2

 

the voting power (under
ordinary circumstances) to elect a majority of the members of the Board of the
Company.

 

“Charges” means all federal, state, county,
city, municipal, local, foreign or other governmental premiums and other
amounts (including premiums and other amounts owed to the PBGC at the time due
and payable), levies, assessments, charges, liens, claims or encumbrances upon
or relating to (a) the Collateral (as defined in the Senior Loan
Documents); (b) the Senior Debt; (c) the employees, payroll, income
or gross receipts of the Company; (d) the Company’s ownership or use of
any properties or other assets; or (e) any other aspect of the Company’s
business.

 

“Charter Documents” shall mean Articles of
Incorporation, Certificate of Incorporation, certificate of limited
partnership, certificate of limited liability company, charter or analogous
organic instrument filed with the appropriate Governmental Authority, including
all amendments and supplements thereto.

 

“Closing Date” means October 22, 2004.

 

“Code” means the Internal Revenue Code of 1986,
as amended, and any reference to any particular Code section shall be interpreted
to include any revision of or successor to that section regardless of how
numbered or classified.

 

“Common Stock” means the common stock of the
Company, $1.00 par value per share.

 

“Compliance Certificate” shall mean the
Compliance Certificate or similar report required to be provided by the Company
to the Senior Lender pursuant to the Loan and Security Agreement.

 

“Consolidated Entity” means, collectively, the
Company and its Subsidiaries that are consolidated for financial reporting
purposes.

 

“Consolidated Net Income” means, for any
Person, the consolidated net income of such Person during the measuring period,
determined in accordance with GAAP, excluding the following:  (a) the income (or deficit) of any
Person accrued prior to the date it became a Subsidiary of, or was merged or
consolidated into, such Person; (b) the income (or deficit) of any Person
(other than a Subsidiary) in which such Person has an ownership interest except
to the extent any such income has actually been received by such Person or any
of its Subsidiaries in the form of cash dividends or distributions; (c) the
undistributed earnings of any Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any contractual obligation or
requirement of law applicable to such Subsidiary; (d) any restoration to
income of any contingency reserve, except to the extent that provision for such
reserve was made out of income accrued during such period; (e) any net
gain attributable to the write-up of any asset; (f) any net gain from the
collection of the proceeds of life insurance policies; (g) any net gain
arising from the acquisition of any securities, or the extinguishment of any
Indebtedness, of such Person or any of its Subsidiaries; (h) in the case
of a successor to such Person or any of its Subsidiaries by consolidation or
merger or as a transferee of its assets, any earnings of such successor prior
to 

 

3

 

such consolidation,
merger or transfer of assets; and (i) any deferred credit representing the
excess of equity in any Subsidiary of such Person at the date of acquisition of
such Subsidiary over the cost to such Person of the investment in such
Subsidiary.

 

“Contingent Obligation” means, as applied to
any Person, any direct or indirect liability of that Person:  (a) with respect to Indebtedness
guaranteed by any Person and with respect to any Indebtedness, lease, dividend or
other obligation of another Person if the purpose or intent of the Person
incurring such liability, or the effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the holders
of such liability will be protected (in whole or in part) against loss with
respect thereto; (b) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings; (c) under any foreign exchange contract,
currency swap agreement, interest rate swap agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising
from fluctuations in currency values or interest rates; (d) any agreement,
contract or transaction involving commodity options or future contracts; (e) to
make take-or-pay or similar payments if required regardless of nonperformance
by any other party or parties to an agreement; or (f) pursuant to any
agreement to purchase, repurchase or otherwise acquire any obligation or any
property constituting security therefor, to provide funds for the payment or
discharge of such obligation or to maintain the solvency, financial condition
or any balance sheet item or level of income of another.  The amount of any Contingent Obligation shall
be equal to the amount of the obligation so guaranteed or otherwise supported
or, if not a fixed and determined amount, the maximum amount so guaranteed.

 

“Contractual Obligations” means, as applied to
any Person, any indenture, mortgage, deed of trust, contract, undertaking,
agreement or other instrument to which that Person is a party or by which it or
any of its properties is bound or to which it or any of its properties is
subject.

 

“Controlled Group” means all members of a
controlled group of corporations and all members of a controlled group of
trades or businesses (whether or not incorporated) under common control which,
together with the Company, are treated as a single employer under Section 414
of the Code or Section 4001 of ERISA.

 

“Current Interest” shall have the meaning
assigned to such term in the Note.

 

“Domestic Subsidiary” means, with respect to
any Person, a Subsidiary of such Person, which Subsidiary is incorporated or
otherwise organized under the laws of a State of the United States of America.

 

“EBITDA” means, for any period of
determination, the Consolidated Net Income of the Company and its Subsidiaries
before deductions for Taxes, Interest Expense, depreciation, amortization and
other mutually agreed upon non-cash items, calculated prior to (a) any
gains or losses on the sale of assets (other than the sale of Inventory in the
ordinary course of business), (b) extraordinary gains and losses, and (c) non-recurring
items approved by the Purchaser.

 

4

 

“Employee Benefit Plans” means, as to any
Person, any pension, retirement, Capital Stock option, Capital Stock purchase,
Capital Stock award, Capital Stock appreciation rights, savings or profit
sharing plan, program, arrangement or agreement (including trust agreements and
insurance contracts implementing such plans, programs, arrangements or
agreements), or any deferred compensation, consulting, bonus incentive
compensation, group insurance, severance or termination pay, welfare or
employee benefit plan, program, arrangement or agreement, relating to employees
or former employees of such Person or any of its Subsidiaries.

 

“Employment Agreements” means those certain
Employment Agreements between Detention Contracting Group, Ltd., a Texas
limited partnership and Subsidiary of the Company, and each of Samuel C.
Youngblood, Donald J. Carr, Michael R. Sweet, Mark S. McDonald
and Timothy N. Moxon, each dated as of the date hereof.

 

“Environmental Laws” means all applicable
federal, state, local and foreign laws, statutes, ordinances, codes, rules,
standards and regulations, now or hereafter in effect, and any applicable
judicial or administrative interpretation thereof, including any applicable
judicial or administrative order, consent decree, order or judgment, imposing
liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation).  Environmental Laws include CERCLA; the
Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101
et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§
136 et seq.); the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.); the
Toxic Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean Air Act (42
U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. §§
1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. §§ 651 et
seq.); and the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and
any and all regulations promulgated thereunder, and all analogous state, local
and foreign counterparts or equivalents and any transfer of ownership
notification or approval statutes.

 

“Environmental Liabilities” means, with respect
to any Person, all liabilities, obligations, responsibilities, response,
remedial and removal costs, investigation and feasibility study costs, capital
costs, operation and maintenance costs, losses, damages, punitive damages,
property damages, natural resource damages, consequential damages, treble damages,
costs and expenses (including all reasonable fees, disbursements and expenses
of counsel, experts and consultants), fines, penalties, sanctions and interest
incurred as a result of or related to any claim, suit, action, investigation,
proceeding or demand by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law
relating to Hazardous Materials, including any arising under or related to any
Environmental Laws, Environmental Permits, or in connection with any Release or
threatened Release or presence of a Hazardous Material whether on, at, in,
under, from or about or in the vicinity of any real or personal property.

 

“Environmental Permits” means all permits,
licenses, authorizations, certificates, approvals or registrations required by
any Governmental Authority under any Environmental Laws.

 

5

 

“Equipment” means all “equipment,” as such term
is defined in the UCC, now owned or hereafter acquired by the Company, wherever
located and, in any event, including all of the Company’s machinery and
equipment, and all products and proceeds thereof and insurance proceeds with
respect thereto.

 

“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and regulations promulgated
thereunder.

 

“ERISA Affiliate” means any trade or business
(whether or not incorporated) that, together with the Company, are treated as a
single employer within the meaning of §§ 414(b), (c), (m) or (o) of
the Code.

 

“ERISA Event” means, with respect to the
Company or any ERISA Affiliate, (a) any event described in Section 4043(c) of
ERISA with respect to a Title IV Plan; (b) the withdrawal of the Company
or ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (c) the complete or partial withdrawal of the Company or any ERISA
Affiliate from any Multiemployer Plan; (d) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of
proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the
failure by the Company or ERISA Affiliate to make when due required
contributions to a Multiemployer Plan or Title IV Plan unless such failure is
cured within 30 days; (g) any other event or condition that might
reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069
or 4212(c) of ERISA; (h) the termination of a Multiemployer Plan
under Section 4041A of ERISA or the reorganization or insolvency of a
Multiemployer Plan under Section 4241 or 4245 of ERISA; or (i) the
loss of a Qualified Plan’s qualification or Tax exempt status; or (j) the
termination of a Plan described in Section 4064 of ERISA.

 

“Fees” means any and all fees payable to the
Senior Lender pursuant to the Senior Loan Documents or to the Purchaser
pursuant to this Agreement and the other Transaction Documents.

 

“Financial Statements” means the consolidated
and consolidating income statements, statements of cash flows and balance
sheets of the Company and its Subsidiaries delivered in accordance with Section 4.1.

 

“Fiscal Year” means each annual accounting
period of the Company ending on December 31.

 

“Fixed Charge Coverage Ratio” means the ratio
of the Company’s (i) EBITDA minus non-financed Capital Expenditures
to (ii) Fixed Charges.

 

“Fixed Charges” shall mean for any period,
without duplication, scheduled payments of principal during the applicable
period with respect to all Indebtedness of the Company and its Subsidiaries, on
a consolidated basis, for borrowed money, plus scheduled payments of
principal during the applicable period with respect to all Capital Lease
Obligations 

 

6

 

of the Company and its
Subsidiaries, on a consolidated basis, plus actual payments of cash
interest during the applicable period with respect to all Indebtedness of the
Company and its Subsidiaries, on a consolidated basis, for borrowed money including
Capital Lease Obligations, plus payments during the applicable period in
respect of cash income or franchise taxes of the Company and its Subsidiaries,
on a consolidated basis.

 

“Fixtures” means all “fixtures” as such term is
defined in the UCC, now owned or hereafter acquired by the Company.

 

“Foreign Subsidiary” means, with respect to any
Person, a Subsidiary of such Person, which Subsidiary is not a Domestic
Subsidiary.

 

“Funded Debt” means, with respect to any
Person, without duplication, all Indebtedness for borrowed money evidenced by
notes, bonds, debentures, or similar evidences of Indebtedness and that by its
terms matures more than one (1) year from, or is directly or indirectly
renewable or extendible at such Person’s option under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of more than one (1) year from the date of creation thereof, and
specifically including Capital Lease Obligations, current maturities of long
term debt, revolving credit and short term debt extendible beyond one (1) year
at the option of the debtor, and also including the Senior Debt and the
Obligations.

 

“GAAP” means generally accepted accounting
principles as promulgated by the Financial Accounting Standards Board, as in
effect from time to time (subject to the provisions of Section 1.2
hereof).

 

“Governing Documents” shall mean the Charter
Documents and Organizational Documents of a Person.

 

“Governmental Authority” means any nation or
government, any state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through Capital Stock or capital ownership or otherwise, by any of
the foregoing.

 

“Green Wing  Lease”
means that certain First Fully Restated Commercial Lease Agreement, executed as
of October 22, 2004, to be effective February 1, 2004, by and between
the Company and Green Wing Management, Ltd., as amended, restated, supplemented
or otherwise modified from time to time, pursuant to which the Company leases
the premises located at 12903 Delivery Drive and 12918 Delivery Drive, San
Antonio, Texas.  “Green Wing Documents”
means the Green Wing Lease and any and all other documents pursuant to the
Green Wing Lease.

 

“Guarantors” means ISI Detention Contracting
Group, Ltd., a Texas limited partnership, ISI Detention Contracting Group, Inc.,
a Texas corporation, ISI Detention  Contracting
Group, Inc., a California corporation, ISI Detention Contracting Group, Inc.,
a New Mexico corporation, ISI Detention Systems, Inc., a Texas
corporation, ISI 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, 

 

7

 

Inc., a Texas
corporation, and MCFSA, Ltd., a Texas limited partnership, each a Subsidiary of
the Company.

 

“Hazardous Material” means all or any of the
following:  (a) substances that are
defined or listed in, or otherwise classified pursuant to, any Environmental
Laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous
wastes,” “toxic substances” or any other formulation intended to define, list
or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, or toxicity; (b) oil,
petroleum or petroleum derived substances, natural gas, natural gas liquids or
synthetic gas and drilling fluids, produced waters and other wastes associated
with the exploration, development or production of crude oil, natural gas or
geothermal resources; (c) any flammable substances or explosives or any
radioactive materials; and (d) asbestos in any form or electrical
equipment which contains any oil or dielectric fluid containing polychlorinated
biphenyls.

 

“Indebtedness” means, with respect to any
Person, without duplication (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property payment for which
is deferred six (6) months or more, but excluding obligations to trade
creditors incurred in the ordinary course of business that are unsecured and
not overdue by more than six (6) months unless being contested in good
faith; (b) all reimbursement and other obligations with respect to letters
of credit, bankers’ acceptances and surety bonds, whether or not matured; (c) all
obligations evidenced by notes, bonds, debentures or similar instruments; (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property); (e) all
Capital Lease Obligations and the present value of future rental payments under
all synthetic leases; (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price hedging arrangements, in
each case whether contingent or matured; (g) all obligations of such
Person under any foreign exchange contract, currency swap agreement, interest
rate swap, cap or collar agreement or other similar agreement or arrangement
designed to alter the risks of that Person arising from fluctuations in
currency values or interest rates, in each case whether contingent or matured; (h) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; and (i) “earnouts” and
similar payment obligations.

 

“Intangible Assets” means all intangible assets
(determined in conformity with GAAP) including, without limitation, goodwill,
Intellectual Property Rights, licenses, organizational costs, deferred amounts,
covenants not to compete, unearned income and restricted funds.

 

“Intellectual Property Rights” means all (a) patents,
patent applications, patent disclosures and inventions; (b) trademarks,
service marks, trade dress, trade names, logos and corporate names and
registrations and applications for registration thereof together with all of
the goodwill associated therewith; (c) copyrights (registered or
unregistered) and copyrightable works and registrations and applications for
registration thereof; (d) mask works and 

 

8

 

registrations and
applications for registration thereof; (e) computer software, data,
databases and documentation thereof; (f) trade secrets and other
confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, technical data, copyrightable works and customer and supplier lists
and information); (g) other intellectual property rights; and (h) copies
and tangible embodiments thereof (in whatever form or medium).

 

“Interest Expense” means interest expense
(whether cash or non-cash) deducted in the determination of consolidated net
income in accordance with GAAP, including interest expense with respect to any
Funded Debt and interest expense that has been capitalized, less, in each case
only to the extent included in the determination of interest expense the
amortization of capitalized fees and expenses incurred with respect to the Related
Transactions, amortization of any original discount attributable to any Funded
Debt or warrants, and interest paid in kind.

 

“Inventory” means any “inventory,” as such term
is defined in the UCC, now owned or hereafter acquired by the Company, wherever
located, including inventory, merchandise, goods and other personal property
that are held by or on behalf of the Company for sale or lease or are furnished
or are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods, returned goods, supplies or
materials of any kind, nature or description used or consumed or to be used or
consumed in the Company’s business or in the processing, production, packaging,
promotion, delivery or shipping of the same, including all supplies and
embedded software.

 

“Investment” as applied to any Person means (a) any
direct or indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, Capital Stock, securities, assets or ownership interest
(including partnership interests and joint venture interests) of any other
Person or (b) any capital contribution by such Person to any other Person.

 

“IPO” means a firm commitment underwritten
initial public offering and sale of Common Stock pursuant to an effective
registration statement under the Securities Act.

 

“IRS” means the United States Internal Revenue
Service.

 

“ISI Affiliates” means ISI Ltd. and ISI GP.

 

“ISI GP” means ISI*MCS GP, Inc. a Texas
corporation and the general partner of ISI Ltd.

 

“ISI Ltd.” means ISI*MCS, Ltd., a Texas limited
partnership.

 

“ISI MCS Documents” means those documents
identified on the ISI MCS Schedule attached hereto.

 

“ISI MCS Transaction” means (a) the
formation of each of the ISI Affiliates, (b) the assignment, transfer,
contribution, sale or other disposition by Samuel C. Youngblood and
Donald J. Carr of certain assets of the Company distributed to them
pursuant to the Reorganization Documents and (c) the grant to the Company
by Messrs. Carr and Youngblood 

 

9

 

of an option to acquire,
in the aggregate, a thirty percent (30%) interest in ISI Ltd. (the “Starco
Warrant”).

 

“Latest Balance Sheet” means the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of September 30,
2004.

 

“Lien” means any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest or encumbrance, easement or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security
interest under the UCC or comparable law of any jurisdiction).

 

“Loan and Security Agreement” means that
certain Loan and Security Agreement of even date herewith, by and among the
Company, the Senior Lender and the Guarantors, as the same may be amended,
restated or otherwise modified from time to time in accordance with its terms
and consistent with the terms of the Senior Subordination Agreement.

 

“Majority Holders” means the holders of a
majority of the outstanding principal amount of the Note and the holders of a
majority of the Warrant Stock (on an as-converted basis).

 

“Master Subcontract Agreements” means,
collectively, that certain (a) Master Subcontract, by and between ISI Ltd.
and ISI Detention Contracting Group, Inc., a Texas corporation, (b) Master
Subcontract, by and between ISI Ltd. and MCFSA, Ltd., a Texas limited
partnership, and (c) Master Subcontract, by and between ISI Ltd. and ISI
Controls, Ltd., a Texas limited partnership, each effective as of September 30,
2004.

 

“Material Adverse Effect” means a material
adverse effect on (a) the business, assets, operations, or condition,
financial or otherwise, of the Company and its Subsidiaries considered as a
whole; (b) the Company’s ability to pay any of the Obligations in
accordance with the terms of this Agreement, the Note and the Warrant; or (c) the
Purchaser’s rights and remedies under this Agreement and the other Transaction
Documents.

 

“Multiemployer Plan” means a multiemployer
plan, as defined in Section 4001(a)(3) of ERISA, to which the Company
or any member of the Controlled Group may have any liability.

 

“Note” means that certain Senior Subordinated
Promissory Note dated October 22, 2004, in the aggregate original
principal amount of Fifteen Million Three Hundred Thousand Dollars
($15,300,000), made payable by the Company in favor of the Purchaser, in
substantially the form as set forth in Exhibit A attached hereto,
with appropriate insertions, as may be amended, restated, substituted, replaced
or otherwise modified from time to time.

 

“Obligations” means all loans, advances, debts,
liabilities and obligations, for the performance of covenants, tasks or duties
or for payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or 

 

10

 

determinable), including
any and all of the obligations of the Company or any of its Subsidiaries with
respect to the repayment or the performance, when due, of any obligation
(monetary or otherwise) of such respective party arising under or in connection
with this Agreement, the Note, the Warrant or any other document delivered in
connection therewith, and all covenants and duties regarding such amounts, of
any kind or nature, present or future, whether or not evidenced by any note,
agreement or other instrument, arising under this Agreement or any of the other
Transaction Documents.  This term
includes all principal, interest (including all interest that accrues after the
commencement of any case or proceeding by or against the Company in bankruptcy,
whether or not allowed in such case or proceeding), Fees, Charges, expenses,
attorneys’ fees and any other sum chargeable to the Company under this
Agreement or any of the other Transaction Documents.

 

“Option Plan” shall mean that certain 2004
Stock Incentive Plan of ISI Detention Contracting Group, Inc. (a Delaware
corporation) dated October 22, 2004.

 

“Organizational Documents” shall mean the
by-laws, partnership agreement, operating agreement or analogous instrument
governing the respective operations of the Company and its Subsidiaries
including, without limitation, the Stockholders’ Agreement, and including all
amendments and supplements, respectively, thereto.

 

“PBGC” means the Pension Benefit Guaranty
Corporation and any entity succeeding to any or all of its functions under
ERISA.

 

“Pension Plan” means a “pension plan”, as such
term is defined in Section 3(2) of ERISA, which is subject to Title
IV of ERISA (other than a Multiemployer Plan), and to which the Company or any
member of the Controlled Group may have any liability, including any liability
by reason of having been a substantial employer within the meaning of Section 4063
of ERISA at any time during the preceding five (5) years, or by reason of
being deemed to be a contributing sponsor under Section 4069 of ERISA.

 

“Permitted Encumbrances” means the following: (a) Liens
for Taxes or assessments or other governmental Charges not yet delinquent or
being contested in good faith through appropriate proceedings; (b) pledges
or deposits of money securing statutory obligations under workmen’s
compensation, unemployment insurance, social security or public liability laws
or similar legislation (excluding Liens under ERISA); (c) pledges or
deposits of money securing bids, tenders, contracts (other than contracts for
the payment of money) or leases to which the Company is a party as lessee made
in the ordinary course of business; (d) inchoate and unperfected workers’,
mechanics’ or similar liens arising in the ordinary course of business, so long
as such Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers’,
warehousemen’s, suppliers’ or other similar possessory liens arising in the
ordinary course of business, so long as such Liens attach only to Inventory; (f) deposits
securing, or in lieu of, surety, appeal or customs bonds in proceedings to
which the Company is a party; (g) any attachment or judgment lien not
constituting an Event of Default under Section 7; (h) zoning
restrictions, building costs, easements, licenses, or other restrictions or
encumbrances on the use of any Real Estate or other minor irregularities in
title (including leasehold title) thereto, so long as the same do not
materially impair the use, value, or marketability of such Real Estate; (i) Liens
in favor of the Senior Lender; (j) Liens existing on the date hereof which
Liens are set 

 

11

 

forth on the Permitted
Encumbrances Schedule; and (k) Liens securing Indebtedness permitted
by clause (c) of the definition of Permitted Indebtedness, provided that
the Liens attach only to the assets financed by such Indebtedness.

 

“Permitted
Indebtedness” means:

 

(a)           the Obligations;

 

(b)           the Senior Debt;

 

(c)           Indebtedness not to exceed $600,000
in the aggregate at any time outstanding secured by purchase money Liens or
incurred with respect to Capital Leases;

 

(d)           Indebtedness identified on the
Indebtedness Schedule,

 

(e)           unsecured Indebtedness to trade creditors
incurred in the ordinary course of business;

 

(f)            Indebtedness secured by Permitted
Encumbrances;

 

(g)           operating lease obligations requiring
payments not to exceed $500,000 in the aggregate for the Company and its
Subsidiaries during any Fiscal Year of the Company; and

 

(h)           intercompany Indebtedness.

 

“Permitted Investments” means Investments by
the Company and its Subsidiaries in Cash Equivalents.

 

“Person” means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.

 

“Plan” means, at any time, an “employee benefit
plan,” as defined in Section 3(3) of ERISA, that the Company or any
ERISA Affiliate maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by the Company.

 

“Potential Event of Default” means any event or
occurrence which, with the passage of time or the giving of notice or both,
would constitute an Event of Default.

 

“Qualified Plan” means a Pension Plan that is
intended to be Tax-qualified under §401(a) of the Code.

 

“Real Estate” means real property owned,
leased, subleased, or used by the Company or any of its Subsidiaries listed in
the Real Estate Schedule.

 

“Related Transactions” means the initial
borrowing under the Loan and Security Agreement on the Closing Date, the
issuance of the Note and the Warrant, the Reorganization, 

 

12

 

the ISI MCS Transaction,
payment of all Fees, costs and expenses associated with all of the foregoing
and the execution and delivery of all of the Related Transactions Documents.

 

“Related Transaction Documents” means the
Senior Loan Documents, the Transaction
Documents, the Reorganization Documents and all other agreements or
instruments executed in connection with the Related Transactions.

 

“Release” means any release, threatened
release, spill, emission, leaking, pumping, pouring, emitting, emptying,
escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Material in the indoor or outdoor environment,
including the movement of Hazardous Material through or in the air, soil,
surface water, ground water or property.

 

“Reorganization” means the recapitalization and
reorganization of the Company pursuant to the Reorganization Documents, and the
distribution by the Company to its stockholders of an aggregate amount not to
exceed Seventeen Million Dollars ($17,000,000).

 

“Reorganization Documents” means those
documents identified on the Reorganization Schedule attached hereto

 

“Restricted Payment” means (a) the
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of Capital Stock; (b) any payment on account of the purchase,
redemption, defeasance, sinking fund or other retirement of the Company’s
Capital Stock or any other payment or distribution made in respect thereof,
either directly or indirectly; (c) any payment or prepayment of principal
of, premium, if any, or interest, fees or other charges on or with respect to,
and any redemption, purchase, retirement, defeasance, sinking fund or similar
payment and any claim for rescission with respect to, any Indebtedness other
than the Permitted Indebtedness; (d) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire Capital Stock of the Company now or
hereafter outstanding; (e) any payment of a claim for the rescission of
the purchase or sale of, or for material damages arising from the purchase or
sale of, any shares of the Company’s Capital Stock or of a claim for
reimbursement, indemnification or contribution arising out of or related to any
such claim for damages or rescission; (f) any payment, loan, contribution,
or other transfer of funds or other property to any stockholder of the Company
other than payment of compensation in the ordinary course of business to
stockholders who are employees of the Company and advances or reimbursement for
reasonable out-of-pocket expenses incurred or to be incurred by such employees
on behalf of the Company (including, without limitation, moving, entertainment
and travel expenses); and (g) any payment of management fees (or other
fees of a similar nature) or out-of-pocket expenses in connection therewith by
the Company to any stockholder of the Company or any Affiliate of the Company
or such stockholder.

 

“Securities” means, collectively, the Note and
the Warrant.

 

“Securities Act” means the Securities Act of
1933, as amended, or any similar federal law then in force.

 

13

 

“Securities and Exchange Commission” includes
any governmental body or agency succeeding to the functions thereof.

 

“Securities Exchange Act” means the Securities
Exchange Act of 1934, as amended, or any similar federal law then in force.

 

“Senior Debt” means all obligations by the
Senior Lender under the Senior Loan Documents, to the extent permitted under
the Senior Subordination Agreement.

 

“Senior Lender” means LaSalle Bank National
Association, a national banking association, and its successors and assigns.

 

“Senior Leverage Ratio” means the ratio of the
Company’s (i) aggregate Indebtedness (excluding Indebtedness subordinated
to Senior Lender in writing) to (ii) EBITDA.

 

“Senior Loan Documents” means the Loan and
Security Agreement and the related agreements, documents and instruments among
the Senior Lender, the Company and the Guarantors, as such agreements are in
effect at the Closing and as may be amended, restated, modified or waived from
time to time in accordance with the provisions of the applicable Senior Loan
Document in a manner consistent with the terms of the Senior Subordination
Agreement.

 

“Senior Subordination Agreement” means that
certain Subordination Agreement dated the date hereof by and among the Company,
the Purchaser and the Senior Lender, in form and substance acceptable to the
Purchaser, as may be amended, restated, supplemented or otherwise modified from
time to time.

 

“Shares” shall mean certificated or
uncertificated instruments or denominations that represent the ownership of the
Capital Stock of a Person.

 

“Stockholders’ Agreement” has the meaning set
forth in Section 3.2.

 

“Subsidiary”
shall mean any Person of which more than fifty percent (50%) of the outstanding
Capital Stock having ordinary voting power to elect a majority of the Board of
such Person (irrespective of whether at the time Capital Stock of any other
class of such Person shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned by
the Company, or any corporation, partnership, joint venture or limited
liability company of which more than fifty percent (50%) of the outstanding
Capital Stock having voting power to control such Person is at the time, directly
or indirectly, owned by the Company or any partnership of which the Company is
a general partner.  Unless the context
otherwise requires, each reference to a Subsidiary shall be a reference to a
Subsidiary of the Company.

 

“Tax” or “Taxes” means federal, state,
county, local, foreign or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license, payroll,
wage or other withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other taxes of any
kind whatsoever (including, without 

 

14

 

limitation, deficiencies,
penalties, additions to tax, and interest attributable thereto) whether
disputed or not.

 

“Tax Return” means any return, information
report or filing with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.

 

“Transaction Documents” means this Agreement,
the Note, the Warrant, the Stockholders’ Agreement, the Senior Subordination
Agreement, the ISI MCS Documents to which the Company is a party and all other
documents, instruments and agreements executed by or on behalf of the Company
and delivered in connection herewith or at any time hereafter to or for the
Purchaser or any transferee of the Purchaser, all as amended, restated,
supplemented or modified from time to time.

 

“UCC” means the Uniform Commercial Code, as the
same may, from time to time, be enacted and in effect in the State of Illinois.

 

“Warrant” means that certain Common Stock
Purchase Warrant, dated the date hereof, issued by the Company in favor of the
Purchaser to acquire, in the aggregate, up to thirty percent (30.00%) of the
Capital Stock of the Company, on a fully diluted basis, in substantially the
form as set forth in Exhibit B attached hereto, as amended,
modified, supplemented or restated from time to time.

 

“Warrant Stock” shall have the meaning ascribed
to such term in the Warrant.

 

“Wholly-Owned Subsidiary” means, with respect
to any Person, a Subsidiary of which all of the outstanding Capital Stock or
other ownership interests are owned by such Person or another Wholly-Owned
Subsidiary of such Person.

 

1.2                                 Accounting Principles. 
The classification, character and amount of all assets, liabilities,
capital accounts and reserves and of all items of income and expense to be
determined, and any consolidation or other accounting computation to be made,
and the interpretation of any definition containing any financial term,
pursuant to this Agreement shall be determined and made in accordance with GAAP
consistently applied.

 

1.3                                 Rules of Construction. 
The words “herein,” “hereof” and “hereunder” and other words of similar
import refer to this Agreement and not to any particular section, subsection or
clause contained in this Agreement.  The
words “including” and “include” and other words of similar import shall be
deemed to be followed by the phrase “without limitation” and shall not be
limited by any enumeration or otherwise. 
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.

 

15

 

2.                                       Authorization and Closing.

 

2.1                                 Authorization of the Securities. The Company shall authorize the
issuance and sale of the Note and the Warrant.

 

2.2                                 Purchase and Sale of the Securities.

 

(a)                                  At the Closing, the Company shall sell
and issue to the Purchaser and, subject to the terms and conditions set forth
herein, the Purchaser shall purchase from the Company, the Note at an aggregate
purchase price equal to $15,300,000.

 

(b)                                 At the Closing, the Company shall sell
and issue to the Purchaser and, subject to the terms and conditions set forth
herein, the Purchaser shall purchase from the Company, the Warrant at an aggregate
purchase price equal to $210,000.

 

2.3                                 The Closing. 
The closing of the purchase and sale of the Securities (the “Closing”)
shall take place at the offices of Vedder, Price, Kaufman & Kammholz,
P.C., at 10:00 a.m. on October 22, 2004 (the “Closing Date”),
or at such other place or on such other date as may be mutually agreeable to
the Company and the Purchaser.  At the
Closing, (a) the Company shall deliver to the Purchaser the Note, payable
to the order of the Purchaser, and (b) the Company shall deliver to the
Purchaser the Warrant registered in the Purchaser’s name; upon payment by the
Purchaser, in the aggregate, of Fifteen Million Three Hundred Thousand Dollars
($15,300,000), by wire transfer of immediately available funds to account(s) specified
in writing by the Company to the Purchaser at least two (2) Business
Days prior to the Closing.

 

3.                                       Conditions of the Purchaser’s Obligations
at the Closing.

 

The obligation of the Purchaser to purchase and pay
for the Securities at the Closing is subject to the fulfillment as of the
Closing of the following conditions to the satisfaction of the Purchaser in its
sole discretion:

 

3.1                                 Representations and Warranties;
Covenants; No Event of Default.  The
representations and warranties contained in Section 5 hereof shall
be true and correct at and as of the Closing as though then made; the Company
shall have performed all of the covenants required to be performed by it
hereunder and under the other documents, agreements and instruments executed in
connection herewith that are to be complied with or performed by the Company,
on or prior to the Closing; and there shall not exist any state of facts that
would constitute an Event of Default or Potential Event of Default under this
Agreement.

 

3.2                                 Stockholders’ Agreement. 
The Company, the Purchaser and certain other Persons shall have entered
into a Stockholders’ Agreement, in substantially the form set forth in Exhibit C
attached hereto (as may be amended, restated or 

 

16

 

otherwise modified from time to time, the “Stockholders’ Agreement”),
and the Stockholders’ Agreement shall be in full force and effect as of the
Closing.

 

3.3                                 Securities Law Compliance. 
The Company shall have made all filings under all applicable federal and
state securities laws necessary to consummate the issuance of the Securities
pursuant to this Agreement in compliance with such laws.

 

3.4                                 Senior Loan Agreement. 
The Company, the Guarantors and the Senior Lender shall have entered
into the Loan and Security Agreement providing for, among other financial
accommodations to the Company, a revolving credit facility in an aggregate
amount of (a) Four Million Five Hundred Thousand Dollars ($4,500,000)
during the period from the initial disbursement of funds until the Company
delivers to the Senior Lender audited financial statements for the year ending December 31,
2004 and documentation verifying compliance with the financial covenants
contained in the Loan and Security Agreement for the period ending December 31,
2004 and (b) Six Million Dollars ($6,000,000) thereafter.  At Closing, the Company shall have minimum
availability under the Loan and Security Agreement in the amount of Five
Hundred Thousand Dollars ($500,000).

 

3.5                                 Senior Subordination Agreement. 
The Purchaser, the Senior Lender and the Company shall have executed and
delivered the Senior Subordination Agreement.

 

3.6                                 Reorganization. 
On or prior to the Closing Date, the Company shall have consummated the
Reorganization and, pursuant to the terms of the Reorganization Documents, the
ownership of the Capital Stock of the Company shall be as set forth on the Capitalization
Schedule.

 

3.7                                 Bonding Transaction. 
The appropriate parties shall have executed and delivered the ISI MCS
Documents.

 

3.8                                 No Material Adverse Change. 
Since the date of the Latest Balance Sheet, there shall have been no
change in the financial condition, operating results, assets, operations,
business prospects, employee relations or customer or supplier relations of the
Company or its Subsidiaries or their respective Affiliates which would have a
Material Adverse Effect.

 

3.9                                 Opinion of the Company’s Counsel; Other
Opinions and Documents.  The Purchaser shall have
received from each of Akin, Gump, Strauss, Hauer & Feld, L.L.P., and
Youngblood & Associates, counsel for the Company, an opinion, which
shall be addressed to the Purchaser, dated the date of the Closing and in form
and substance satisfactory to the Purchaser. 
In addition, all certificates, opinions and letters delivered in
connection with the Loan and Security Agreement and the Reorganization shall be
addressed to the Purchaser or accompanied by or contain a written authorization
from the Person delivering such certificate, opinion or letter stating that the
Purchaser may rely on such document as though it were addressed to it.

 

17

 

3.10         Closing Documents. 
The Company shall have, or shall cause to be, delivered to the Purchaser
all of the following documents in form and substance reasonably satisfactory to
the Purchaser:

 

(a)           the Note, duly completed and executed by
the Company;

 

(b)           the Warrant, duly completed and executed
by the Company;

 

(c)           an officer’s certificate, dated the date
of the Closing, stating that the conditions specified in Sections 2
and 3 have been fully satisfied;

 

(d)           certified copies of the resolutions duly
adopted by the Board of the Company and the Guarantors authorizing the
execution, delivery and performance of the following documents and/or transactions
to which it is a party:  the Senior Loan
Documents, the Senior Subordination Agreement and each of the other agreements
contemplated, respectively, thereby; this Agreement, the other Transaction
Documents and each of the other agreements contemplated hereby and thereby; the
issuance and sale of the Securities; and the consummation of all other
transactions contemplated by this Agreement;

 

(e)           certified copies of the Governing
Documents of the Company and each of its Subsidiaries, each as in effect at the
Closing;

 

(f)            certified copies of the Reorganization
Documents, the ISI MCS Documents and the Senior Loan Documents, each as in
effect at the Closing;

 

(g)           fully executed copies of the Employment
Agreements;

 

(h)           certified copies of the Bonus Plan and
the Option Plan and any and all grant letters or similar documents issued to
any Person pursuant to the Option Plan;

 

(i)            copies of all third party and
governmental consents, approvals and filings required in connection with the
consummation of the transactions hereunder (including all blue sky law filings
and waivers of all preemptive rights and rights of first refusal); and

 

(j)            such other documents relating to the
transactions contemplated by this Agreement as the Purchaser or their counsel
may reasonably request.

 

3.11         Proceedings. 
All corporate and other proceedings taken or required to be taken by the
Company in connection with the transactions contemplated hereby to be
consummated at or prior to the Closing and all documents incident thereto shall
be satisfactory in form and substance to the Purchaser and its counsel.

 

18

 

3.12                           Expenses.  At the Closing, the Company shall have
reimbursed the Purchaser for, and shall have paid to certain other Persons, the
fees and expenses as provided in Section 9.1 hereof.

 

3.13                           Due
Diligence.  The Purchaser shall be
satisfied in its sole discretion with the results of its legal, accounting,
business and other due diligence investigation and review of the Company and
its Subsidiaries.

 

3.14                           Investment
Fee.  The Company shall have paid to
the Purchaser an investment fee in the amount of $175,000, by wire transfer of
immediately available funds to an account specified in writing by the
Purchaser, which amount represents the balance of the investment fee of
$250,000 due to the Purchaser at Closing.

 

3.15                           Compliance
with Applicable Laws.  The issuance
and sale of the Securities by the Company hereunder and the consummation of the
transactions contemplated by the Transaction Documents shall not be prohibited
by any applicable law or governmental rule or regulation and shall not
subject the Company to any penalty, liability, or other onerous condition under
or pursuant to any applicable law or governmental rule or regulation, and
the issuance and sale of the Securities hereunder shall be permitted by laws, rules and
regulations of the jurisdictions and Governmental Authorities and agencies to
which the Company is subject.

 

3.16                           Waiver.  Any condition specified in this Section 3
may be waived if consented to by the Purchaser; provided that no such waiver
shall be effective against the Purchaser unless it is set forth in a writing
executed by the Purchaser.

 

3.17                           Use
of Proceeds.  The Company shall have
provided to the Purchaser a Use of Proceeds Schedule summarizing, in
reasonable detail, the flow of funds as a result of the consummation of the
transactions contemplated by the Transaction Documents.

 

4.                                       Covenants.  Except as otherwise specifically provided in
this Section 4, the Company shall comply with the following
covenants so long as all or any portion of the Note and/or the Warrant remains
outstanding.

 

4.1                                 Financial
Statements and Other Information. 
The Company shall maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of Financial Statements in
conformity with GAAP (it being understood that monthly Financial Statements are
not required to have footnote disclosures). 
The Company will deliver each of the Financial Statements and other reports
described below to the Purchaser.

 

(a)                                  Financial
Statements.  The Company shall
deliver to the Purchaser the following financial statements, all of which shall
be prepared in accordance with GAAP consistently applied and subject to year
end adjustments (i) no later than thirty (30) days after each calendar month, copies of internally
prepared consolidated financial statements, including, 

 

19

 

without limitation, balance sheets and statements of income, retained
earnings and cash flow of the Company and its Subsidiaries, certified by the
Chief Financial Officer of the Company prepared on a consolidated and
consolidating basis; (ii) no later than thirty (30) days after the end of each of the first three quarters of
the Company’s Fiscal Year, copies of internally prepared financial statements
including, without limitation, balance sheets, statements of income, retained
earnings, cash flows and reconciliation of surplus, certified by the Chief
Financial Officer of the Company and (iii) no later than ninety (90) days after the end of each of
the Company’s Fiscal Years, audited annual financial statements prepared on a
consolidated and consolidating basis with an unqualified opinion by independent
certified public accountants selected by the Company and reasonably
satisfactory to the Purchaser, which financial statements shall be accompanied
by copies of any management letters sent to the Company by such accountants.

 

(b)                                 Monthly
Reports.  As soon as available and in
any event (i) within thirty (30) days after the end of each month
(including the last month of the Company’s Fiscal Year), the Company will
deliver: (A) a detailed trial balance of the Company’s accounts and those
of its Subsidiaries, separately identifying all bonded accounts receivable and
all other accounts, aged per invoice date, in form and substance reasonably
satisfying to the Purchaser including, without limitation, the names and
addresses of all debtors of the Company and its Subsidiaries, (B) a
summary and detail of accounts payable, including a listing of any held checks
and (C) a work-in-progress report setting forth the status of all on-going
projects, including reasonable identification of all contracts pursuant to
which the Company or any of its Subsidiaries is then providing goods and
services, the percentage of completion of the project or projects which are the
subject of such contracts, the costs incurred to date and the total expected
cost of such contract, and such other information regarding the Company’s or
any of its Subsidiaries’ work-in-progress as the Purchaser may reasonably
request; and (ii) as soon as available and in any event within thirty (30)
days after the end of each month (including the last month of the Company’ and
its Subsidiaries’ Fiscal Year), the Company will deliver the general ledger
inventory account balance and a perpetual inventory report.

 

(c)                                  Accountants’
Reports.  Promptly upon receipt
thereof, the Company will deliver copies of all significant reports submitted
by the Company’s firm of certified public accountants in connection with each
annual, interim or special audit or review of any type of the Financial
Statements or related internal control systems of the Company or its
Subsidiaries made by such accountants, including any comment letter submitted
by such accountants to management in connection with their services.

 

20

 

(d)                                 Management
Report.  Together with each delivery
of Financial Statements of the Company and its Subsidiaries pursuant to Section 4.1(a),
the Company will deliver a management report (i) describing the operations
and financial condition of the Company and its Subsidiaries for the month then
ended and the portion of the current Fiscal Year then elapsed (or for the
Fiscal Year then ended in the case of year-end financials) and (ii) discussing
the reasons for any significant variations. 
The information above shall be presented in reasonable detail and shall
be certified by the chief financial officer of the Company to the effect that
such information fairly presents the results of operations and financial
condition of the Company and its Subsidiaries as at the dates and for the
periods indicated.

 

(e)                                  Projections
and Annual Budget.  As soon as
practicable and in any event no later than thirty (30) days prior to the
beginning of each of the Company’s Fiscal Years, the Company will deliver to
the Purchaser projections and an annual budget, prepared on a monthly and
annual basis, for the Company and its Subsidiaries for the succeeding Fiscal
Year.

 

(f)                                    Explanation
of Budget and Projections.  In
conjunction with the delivery of the annual presentation of projections or
budget referred to in Section 4.1(e) above, the Company shall
deliver a letter signed by the CEO or President of the Company and by the
Treasurer or Chief Financial Officer of the Company, describing, comparing and
analyzing, in detail, all changes and developments between the anticipated
financial results included in such projections or budget and the prior Fiscal
Year financial statements of the Company.

 

(g)                                 SEC
Filings and Press Releases.  After an
IPO and promptly upon their becoming available, the Company will deliver copies
of (i) all Financial Statements, reports, notices and proxy statements
sent or made available by the Company or any of its Subsidiaries to their
stockholders, (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by the Company or any of its
Subsidiaries with any securities exchange or with the Securities and Exchange
Commission, any other Governmental Authority or any private regulatory
authority, and (iii) all press releases and other statements made
available by the Company or any of its Subsidiaries to the public concerning
developments in the business of any such Person.

 

(h)                                 Events
of Default, Etc.  Promptly upon any
officer of the Company obtaining knowledge of any of the following events or
conditions, the Company shall deliver copies of all notices given or received
by the Company or any of its Subsidiaries with respect to any such event or
condition and a certificate of the Company’s chief executive officer specifying
the nature and period of existence of such event or condition and what action
Company or any of its Subsidiaries has taken, is taking and proposes to take
with respect thereto:  (i) any
condition or event that 

 

21

 

constitutes, or which could reasonably be expected to result in the
occurrence of, an Event of Default or Potential Event of Default; (ii) any
notice that any Person has given to the Company or any of its Subsidiaries or
any other action taken with respect to a claimed default, breach or violation
under the Loan and Security Agreement or any other material agreement to which
the Company or any of its Subsidiaries is a party; or (iii) any default or
event of default with respect to any Indebtedness of the Company or any of its
Subsidiaries.

 

(i)                                     Litigation.  Promptly upon any officer of the Company
obtaining knowledge of (i) the institution of any action, charge, claim,
demand, suit, proceeding, petition, governmental investigation, Tax audit or
arbitration now pending or, to the best knowledge of the Company after due
inquiry, threatened against or affecting the Company or any of its Subsidiaries
or any property of the Company or any of its Subsidiaries (“Litigation”)
not previously disclosed by the Company to the Purchaser or (ii) any
material development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or adversely affecting
the Company or any property of the Company which, in the case of each of
clauses (i) and (ii) could reasonably be expected to have a Material
Adverse Effect, the Company will promptly give notice thereof to the Purchaser
and provide such other information as may be reasonably available to the
Company to enable the Purchaser and their counsel to evaluate such matter.

 

(j)                                     Notice
of Corporate and other Changes.  The
Company shall provide prompt written notice of (i) all jurisdictions in
which the Company becomes qualified after the Closing Date to transact
business, (ii) any change after the Closing Date in the authorized and
issued Capital Stock of the Company or any of its Subsidiaries or any amendment
to their Governing Documents, (iii) any Subsidiary created or acquired by
the Company or any of its Subsidiaries after the Closing Date, such notice, in
each case, to identify the applicable jurisdictions, capital structures or
Subsidiaries, as applicable, and (iv) any other event that occurs after
the Closing Date which would cause any of the representations and warranties in
Section 5 of this Agreement or in any other Transaction Document to
be untrue or misleading in any material respect in light of the circumstances
in which they were made.  The foregoing
notice requirement shall not be construed to constitute consent by the
Purchaser to any transaction referred to above which is not expressly permitted
by the terms of this Agreement.

 

(k)                                  Compliance
Certificate.  Together with each
delivery of Financial Statements of the Company and its Subsidiaries pursuant
to Sections 4.1(a) and (b), the Company will deliver a
fully and properly completed Compliance Certificate signed by each of the
Company’s chief executive officer and chief financial officer.

 

22

 

(l)                                     Taxes.  The Company shall provide prompt written
notice of (i) the execution or filing with the IRS or any other
Governmental Authority of any agreement or other document extending, or having
the effect of extending, the period for assessment or collection of any Charges
by the Company or any of its Subsidiaries and (ii) any agreement by the
Company or any of its Subsidiaries or request directed to the Company or any of
its Subsidiaries to make any adjustment under Code §481(a), by reason of a
change in accounting method or otherwise, which could reasonably be expected to
have a Material Adverse Effect.  Nothing
in this Section 4.1(l) shall require the Company to give
written notice or to be otherwise restricted from extending the due date in the
normal course of business and in accordance with applicable laws for the filing
of any tax return.

 

(m)                               Pension
Plan.  The Company shall provide
prompt written notice of (i) the institution of any steps by any member of
the Controlled Group or any other Person to terminate any Pension Plan, (ii) the
failure of any member of the Controlled Group to make a required contribution
to any Pension Plan (if such failure is sufficient to give rise to a Lien under
Section 302(f) of ERISA) or to any Multiemployer Plan, (iii) the
taking of any action with respect to a Pension Plan which might reasonably be
expected to result in the requirement that the Company furnish a bond or other
security to the PBGC or such Pension Plan, (iv) the occurrence of any
event with respect to any Pension Plan or Multiemployer Plan which might
reasonably be expected to result in the incurrence by any member of the
Controlled Group of any material liability, fine or penalty (including any
claim or demand for withdrawal liability or partial withdrawal from any
Multiemployer Plan), (v) any material increase in the contingent liability
of the Company with respect to any post-retirement welfare plan benefit, or (vi) any
notice that any Multiemployer Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of an excise Tax, that any such plan is or has been funded at a rate
less than that required under Section 412 of the Code, that any such plan
is or may be terminated, or that any such plan is or may become insolvent.

 

(n)                                 Insurance.
The Company shall provide prompt written notice of any cancellation (unless
replaced by a materially similar policy) or material change in any insurance
maintained by the Company or any of its Subsidiaries.

 

(o)                                 Environmental
Claim.  The Company shall provide
prompt written notice of any other event (including (i) any violation of
any Environmental Law or the assertion of any Environmental Liabilities or (ii) the
enactment or effectiveness of any law, rule, or regulation) which might
reasonably be expected to have a Material Adverse Effect.

 

23

 

(p)                                 Senior
Lender Reports.  The Company shall
promptly provide copies of any month-end collateral reports, copies of any
statements, reports, certificates, disclosures and any other information
delivered to the Senior Lender under the terms of the Loan and Security Agreement,
including the Compliance Certificate, not otherwise required to be delivered to
the Purchaser hereunder.

 

(q)                                 Material
Supplier.  The Company shall provide
prompt written notice of any information received by the Company, whether
written or oral, that any material supplier intends to cease, materially and
negatively alter or decrease the rate of business done with the Company,
together with a copy of any written notice received from such supplier.

 

(r)                                    Other
Information.  With reasonable
promptness, the Company will deliver such other information and data with
respect to the Company or any of its Subsidiaries as from time to time may be
reasonably requested by the Purchaser.

 

For purposes of this Agreement, all accounting terms
not otherwise defined herein shall have the meanings assigned to such terms in
conformity with GAAP.  Financial
Statements furnished to the Purchaser pursuant to this Section 4.1
or any other section (unless specifically indicated otherwise) shall be
prepared in accordance with GAAP as in effect at the time of such preparation;
provided that no Accounting Change shall affect financial covenants, standards
or terms in this Agreement; provided further that the Company shall prepare
footnotes to the Financial Statements required to be delivered hereunder that
show the differences between the Financial Statements delivered (which reflect
such Accounting Changes) and the basis for calculating financial covenant
compliance (without reflecting such Accounting Changes).  All such adjustments described in clause (c) of
the definition of the term Accounting Changes resulting from expenditures made
subsequent to the Closing Date (including capitalization of costs and expenses
or payment of pre-Closing Date liabilities) shall be treated as expenses in the
period the expenditures are made.

 

4.2                                 Inspection
of Property.  The Company shall, at
its expense, permit any representatives designated by the Purchaser, during
normal business hours and at such other times as the Purchaser may reasonably
request, to (a) visit and inspect any of the properties of the Company
and/or its Subsidiaries; (b) examine the corporate and financial records
of the Company and/or its Subsidiaries and make copies thereof or extracts
therefrom; and (c) discuss the affairs, finances and accounts of any such
Persons with the directors, officers, key employees and independent accountants
of the Company and/or its Subsidiaries, as the case may be.  The presentation of an executed copy of this
Agreement by the Purchaser to the independent accountants of the Company or any
of its Subsidiaries, as the case may be, shall constitute such Person’s
permission to its independent accountants to participate in discussions with
the Purchaser.

 

4.3                                 Board
Meetings.  The Company shall hold
meetings of its Board no less frequently than quarterly, unless otherwise
agreed to by the Purchaser Designee 

 

24

 

(as defined below).  The
Purchaser shall be notified of the time, place and purpose of each meeting of
the Board of the Company (the “Company Board”) and the Board of the
Company’s Subsidiaries (the “Subsidiary Boards”).  Pursuant to the Stockholders’ Agreement, as
long as the Purchaser, together with its transferees, holds, or is deemed to
hold, at least ten percent (10%) of the Common Stock, on a fully-diluted basis,
the Purchaser shall have the right to designate one Person who the Company and
the holders of its Common Stock shall agree to nominate and vote to elect as a
member of the Company Board and each Subsidiary Board (the “Purchaser
Designee”) and one Person who shall have observation rights with respect to
all meetings of the Company Board and any Subsidiary Boards (the “Purchaser
Observer”).  The Purchaser Observer
shall have the right to attend each meeting of the Company Board and each
Subsidiary Board and all committees, respectively, thereof, and the Purchaser
Designee shall be appointed to each committee of the Company Board and each
Subsidiary Board.  The Company Board and
each Subsidiary Board shall give the Purchaser notice of each meeting of its
Board and the committee thereof at the same time and in the same manner as
notices given to the members of its Board (which notice shall be promptly
confirmed in writing).  The Purchaser
Designee and the Purchaser Observer shall be entitled to receive all written
materials and other information given to members of the Company Board and the
Subsidiary Boards in connection with such meetings at the same time such
materials and information are given to all other members of such Boards.  The Company shall reimburse the Purchaser
Designee and the Purchaser Observer for reasonable out-of-pocket expenses in
connection with attending such Person’s Board and committee meetings.  The Company agrees to take any and all
actions necessary to effectuate the intent of the foregoing provisions of this Section 4.3.

 

4.4                                 Investor
Protection; Investment Opportunities.

 

(a)                                  In
connection with any Change In Control or similar transaction under
circumstances where the Purchaser or any transferee thereof continues to hold
the Warrant or any portion thereof, the Company shall make, or cause to be
made, available to the Purchaser and/or such transferee all economic benefits
in a manner that treats the Purchaser and/or such transferee equitably with
respect to all other equityholders of Company. 
In this regard, the Company agrees to structure any Change In Control or
similar transaction, under circumstances where any Purchaser or any transferee
thereof continues to hold the Warrant or any portion thereof, in order to treat
all equityholders, including the Purchaser and/or such holder, in a fair and
equitable manner and such transaction structure shall not include disguised
purchase price components payable to any equityholder in the form of payments
allocated to covenants not to compete, consulting payments and the like, except
for employment agreements or similar agreements providing for reasonable “arms
length” levels of compensation to such equityholder in return for future
services to be rendered to the acquirer subsequent to a Change In Control.

 

25

 

(b)                                 As
a further material inducement to the Purchaser to enter into the transactions
contemplated by this Agreement and to purchase the Securities, the Company
agrees that, notwithstanding anything to the contrary contained in its
Certificate of Incorporation as in effect on the date hereof or as hereafter
amended, modified or restated, to the extent the Company becomes aware of any
business or investment opportunities in or related to, or with operations
related to, the business of the Company or its Subsidiaries which the Company
or any of its Subsidiaries or Affiliates is interested in pursuing other than
through the Company or its Subsidiaries, the Company shall, and shall cause its
Subsidiaries and Affiliates to, provide the Purchaser with reasonable advance
notice of, and the ability to participate in, such business or investment
opportunity on the same terms as the Company and/or its Subsidiaries and their
respective Affiliates.

 

4.5                                 Restrictive
Covenants.  Except as otherwise
specifically provided in this Section 4.5, the Company shall comply
with the following covenants so long as all or any portion of the Note and/or
the Warrant remains outstanding:

 

(a)                                  Indebtedness.  The Company shall not and shall not cause or
permit its Subsidiaries directly or indirectly to create, incur, assume, or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness (other than pursuant to a Contingent Obligation permitted under Section 4.5(d))
except for Permitted Indebtedness.

 

(b)                                 Liens
and Related Matters.

 

(i)                                     No
Liens.  The Company shall not and
shall not cause or permit its Subsidiaries to directly or indirectly create,
incur, assume or permit to exist any Lien on or with respect to any property or
asset of the Company or any such Subsidiary, whether now owned or hereafter
acquired, or any income or profits therefrom, except Permitted Encumbrances.

 

(ii)                                  No
Negative Pledges.  The Company shall
not, and shall not cause or permit its Subsidiaries to directly or indirectly
enter into or assume any agreement (other than this Agreement and the Senior
Loan Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.

 

(iii)                               Restrictions on
Distributions.  Except for
restrictions of the type referred to in clauses (A) through (D) below
or provided herein or in the Senior Loan Documents, the Company shall not and
shall not cause or permit its Subsidiaries to directly or indirectly create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of 

 

26

 

the Company or any such Subsidiary to: (A) pay dividends or make
any other distribution on any of its Capital Stock; (B) pay any
Indebtedness owed to the Company or any other Subsidiary; (C) make loans
or advances to the Company or any other Subsidiary; or (D) transfer any of
its property or assets to the Company or any other Subsidiary.

 

(c)                                  Investments.  The Company shall not and shall not cause or
permit its Subsidiaries to directly or indirectly make or own any Investment in
any Person except for Permitted Investments.

 

(d)                                 Contingent
Obligations.  The Company shall not
and shall not cause or permit its Subsidiaries to directly or indirectly create
or become or be liable with respect to any Contingent Obligation except:

 

(i)            Letter of
Credit Obligations (as defined in the Loan and Security Agreement);

 

(ii)           those
incurred by the Subsidiaries acting in their capacities as Guarantors under the
Senior Loan Documents and the Transaction Documents;

 

(iii)          those
resulting from endorsement of negotiable instruments for collection in the
ordinary course of business;

 

(iv)          those
incurred in the ordinary course of business with respect to surety and appeal
bonds, performance and return-of-money bonds and other similar obligations not
exceeding at any time outstanding $100,000 in aggregate liability;

 

(v)           those
incurred with respect to Permitted Indebtedness provided that any such
Contingent Obligation is subordinated to the Obligations to the same extent as
the Indebtedness to which it relates is subordinated to the Obligations; and

 

(vi)          payment of
the Put Price (as defined in the Warrant).

 

(e)                                  Restricted
Payments.  The Company shall not and
shall not cause or permit its Subsidiaries to directly or indirectly declare,
order, pay, make or set apart any sum for any Restricted Payment, except (i) in
connection with the Reorganization, the Company shall be permitted to
distribute up to $17,000,000 to its stockholders on the Closing Date, or during
the five (5) Business Day period thereafter, in accordance with the
terms of the Reorganization Documents, (ii) for management fees paid among
the Company and its Subsidiaries in a manner which is substantially consistent
with prior practices, (iii) for loans (up to $50,000 in the aggregate at
any time outstanding), (iv) pursuant to the terms, or in 

 

27

 

connection with the exercise of, the Warrant, and (v) as otherwise
specifically provided herein.

 

(f)                                    Restriction
on Fundamental Changes.  Other than
Permitted Investments, the Company shall not and shall not cause or permit its
Subsidiaries to directly or indirectly:  (i) amend,
modify or waive any term or provision of its Governing Documents unless
required by law; (ii) enter into any Change In Control transaction on or
prior to October 22, 2006; (iii) liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution); or (iv) acquire by
purchase or otherwise all or any substantial part of the business or assets of
any other Person.

 

(g)                                 Disposal
of Assets.  The Company shall not and
shall not cause or permit its Subsidiaries to directly or indirectly convey,
sell, lease, sublease, transfer or otherwise dispose of, or grant any Person an
option to acquire, in one transaction or a series of related transactions, any
of its property, business or assets, whether now owned or hereafter acquired,
except for (i) sales of Inventory in good faith to customers for fair
value in the ordinary course of business, (ii) dispositions of obsolete
Equipment not used or useful in the business and (iii) Permitted
Encumbrances.

 

(h)                                 Transactions
with Affiliates.  The Company shall
not and shall not cause or permit its Subsidiaries to directly or indirectly
enter into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any management,
consulting, investment banking, advisory or other similar services) with any
Affiliate or with any director, officer, manager, representative, agent or
employee of the Company, except (i) as set forth on the Affiliated
Transactions Schedule; (ii) transactions in the ordinary course of and
pursuant to the reasonable requirements of the business of the Company or any
of its Subsidiaries and upon fair and reasonable terms which are fully
disclosed to the Purchaser, are no less favorable to the Company or any of its
Subsidiaries than would be obtained in a comparable arm’s length transaction
with a Person that is not an Affiliate and are approved by the Company (and/or
Subsidiary) Board including the affirmative vote of the Purchaser Designee; (iii) for
each of the employees party to the Employment Agreements, payment of reasonable
compensation to officers and employees for services actually rendered to the
Company or any of its Subsidiaries and reasonable out-of-pocket expenses
incurred by them on behalf of the Company or any of its Subsidiaries; (iv) payment
of the compensation and other amounts pursuant to the terms of the Employment
Agreements; (v) the Green Wing Lease, which may not be amended, restated,
substituted, replaced or otherwise modified without the consent of the
Purchaser; (vi) payments made pursuant to the Bonus Plan; and (vii) grants
made under or pursuant to the Option Plan.

 

28

 

(i)                                     Directors’
Fees.  The Company shall not, and
shall not cause any of its Subsidiaries to, pay fees to any Person to act as a
director of the Company or any Subsidiary, except fees payable to independent
directors of the Company Board, which fees shall not exceed $50,000 in the
aggregate during any Fiscal Year of the Company.

 

(j)                                     Conduct
of Business.  The Company shall not
and shall not cause or permit its Subsidiaries to directly or indirectly engage
in any business other than businesses currently conducted and those of the type
described on the Restricted Business Schedule.

 

(k)                                  Changes
Relating to Indebtedness.  The
Company shall not and shall not cause or permit its Subsidiaries to directly or
indirectly change or amend, modify or waive any provision of (i) the Loan
and Security Agreement, except as permitted under the Senior Subordination
Agreement, or (ii) any material provision of its other Indebtedness.

 

(l)                                     Fiscal
Year.  The Company shall not change
its Fiscal Year or permit any of its Subsidiaries to change their respective
fiscal years.

 

(m)                               Press
Release; Public Offering Materials. 
The Company agrees that neither it nor its Subsidiaries or Affiliates
will in the future issue any press releases or other public disclosure,
including any prospectus, proxy statement or other materials filed with any
Governmental Authority relating to a public offering of the Capital Stock of
the Company, using the name of the Purchaser or its Affiliates or referring to
this Agreement, the other Transaction Documents or the Related Transaction
Documents without the prior written consent of the Purchaser unless (and only
to the extent that) the Company or its Subsidiary or Affiliate is required to
do so under law and then, in any event, the Company or its Subsidiary or
Affiliate will notify the Purchaser before issuing such press release or other
public disclosure.  The Company consents
to the publication by the Purchaser of a tombstone or similar advertising
material relating to the financing transactions contemplated by this Agreement
following consummation of the transactions contemplated hereby.  The Purchaser shall provide a draft of any
such tombstone or similar advertising material to the Company for review and comment
prior to the publication thereof.

 

(n)                                 Subsidiaries.  The Company shall not and shall not cause or
permit its Subsidiaries to directly or indirectly establish, create or acquire
any new Subsidiary.

 

(o)                                 Hazardous
Materials.  The Company shall not and
shall not cause or permit its Subsidiaries to cause or permit a Release of any
Hazardous Material on, at, in, under, above, to, from or about any of the Real
Estate where such Release would (i) violate in any respect, or form the
basis for any Environmental Liabilities to the Company or any of its
Subsidiaries 

 

29

 

under, any Environmental Laws or Environmental Permits or (ii) otherwise
adversely impact the value or marketability of any of the Real Estate or any
other property or assets of the Company, other than such violations or
Environmental Liabilities to the Company or its Subsidiaries that could not
reasonably be expected to have a Material Adverse Effect.

 

(p)                                 ERISA.  The Company shall not and shall not cause or
permit any ERISA Affiliate to, cause or permit to occur an ERISA Event to the
extent such ERISA Event could reasonably be expected to have a Material Adverse
Effect.

 

(q)                                 Sale
Leasebacks.  The Company shall not
and shall not cause or permit any of its Subsidiaries to engage in any sale
leaseback, synthetic lease or similar transaction involving any of its or their
assets.

 

(r)                                    Changes
to Material Contracts.  The Company
shall not and shall not cause or permit any of its Subsidiaries to change or
amend the terms of any material contract in any respect, including the Master
Subcontract Agreements.

 

(s)                                  Prepayments
of Other Indebtedness.  Except as
otherwise specifically provided in this Agreement, the Company shall not,
directly or indirectly, voluntarily purchase, redeem, defease or prepay any
principal of, premium, if any, interest or other amount payable in respect of
any Indebtedness, other than (i) the Obligations or (ii) the Senior
Debt if and to the extent required by the Loan and Security Agreement and/or
permitted by the Senior Subordination Agreement.

 

(t)                                    Use
of Proceeds; Margin Securities.  The
Company shall not, nor shall the Company permit any of its Subsidiaries to, use
any proceeds from the sale of the Note and the Warrant hereunder, directly or
indirectly, for the purposes of purchasing or carrying any “margin securities”
within the meaning of Regulation T promulgated by the Board of Governors
of the Federal Reserve Board, or for the purpose of arranging for the extension
of credit secured, directly or indirectly, in whole or in part by collateral
that includes any “margin securities.”

 

(u)                                 Management;
Compensation.  The Company shall not,
nor shall the Company permit any of its Subsidiaries to, without the prior
approval of the Company Board (including the affirmative vote or consent of the
Purchaser Designee), (x) increase the compensation paid to any officer,
key employee or consultant in excess of, as applicable, (i) historical
increases in such compensation consistent with the past practices of the
Company, (ii) the amounts provided for in the Employment Agreements, or (iii) the
amounts payable under the Bonus Plan, or (y) terminate the employment of
any executive or key employee.

 

30

 

(v)                                 Office
Locations.  The Company shall not,
nor shall the Company permit any of its Subsidiaries to, collectively open more
than one (1) new office location during any Fiscal Year.

 

4.6                                 Affirmative
Covenants.  Except as otherwise
specifically provided in this Section 4.6, the Company shall comply
with the following covenants so long as all or any portion of the Note and/or
the Warrant remains outstanding:

 

(a)                                  Preservation
of Corporate Existence, Etc.  Cause
to be done all things necessary (i) to maintain, preserve and renew its
corporate existence, rights, franchises, privileges, qualifications and all
licenses, authorizations and permits necessary to the conduct of its businesses
and (ii) for its employees to maintain, preserve and review all licenses,
authorizations and permits necessary to the conduct of its businesses.

 

(b)                                 Maintenance
of Properties.  Maintain and keep its
properties in good repair, working order and condition (ordinary wear, tear and
obsolescence excepted).

 

(c)                                  Tax
Matters. Pay and discharge when payable all Taxes, assessments and Charges
imposed upon its properties or upon it or its income or profits (in each case
before the same becomes delinquent and before penalties accrue thereon) and all
claims for labor, materials or supplies which if unpaid would by law become a Lien
upon any of its property, unless and to the extent that the same are being
contested in good faith; provided, however, this Section 4.6(c) shall
not preclude the Company or its Subsidiaries from contesting any Taxes or other
payments, if they are being diligently contested in good faith in a manner
which stays enforcement thereof and if appropriate expense provisions have been
recorded in conformity with GAAP.

 

(d)                                 Compliance
with Laws and Contractual Obligations. 
The Company will, (i) comply with and shall cause each of its
Subsidiaries to comply with (A) the requirements of all applicable laws,
rules, regulations and orders of any Governmental Authority (including, without
limitation, laws, rules, regulations and orders relating to Taxes, employer and
employee contributions, securities, employee retirement and welfare benefits,
environmental protection matters and employee health and safety) as now in
effect and which may be imposed in the future in all jurisdictions in which the
Company or its Subsidiaries is now doing business or may hereafter be doing
business and (B) the obligations, covenants and conditions contained in
all Contractual Obligations of the Company or any of its Subsidiaries, other
than those laws, rules, regulations, orders and provisions of such Contractual
Obligations the noncompliance with which could not be reasonably expected to
have, either individually or in the aggregate, a Material Adverse Effect; and (ii) maintain
or obtain, and shall cause each of its Subsidiaries and each of its employees
to maintain or 

 

31

 

obtain, all licenses, qualifications and permits now held or hereafter
required to be held by the Company or any of its Subsidiaries, for which the
loss, suspension, revocation or failure to obtain or renew, could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.  This Section 4.6(d) shall
not preclude the Company or its Subsidiaries from contesting any Taxes or other
payments, if they are being diligently contested in good faith in a manner
which stays enforcement thereof and if appropriate expense provisions have been
recorded in conformity with GAAP.

 

(e)                                  Environmental
Matters.  The Company shall and shall
cause each of its Subsidiaries to: (i) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (ii) implement any and all
investigation, remediation, removal and response actions that are appropriate
or necessary to comply with Environmental Laws and Environmental Permits
pertaining to the presence, generation, treatment, storage, use, disposal,
transportation or Release of any Hazardous Material on, at, in, under, above,
to or from any of its Real Estate; (iii) notify the Purchaser promptly
after the Company or any of its Subsidiaries becomes aware of any violation of
Environmental Laws or Environmental Permits or any Release on, at, in, under,
above, to, from or about any Real Estate that is reasonably likely to result in
Environmental Liabilities to the Company or its Subsidiaries; and (iv) promptly
forward to the Purchaser a copy of any order, notice, request for information
or any communication or report received by the Company or any of its
Subsidiaries in connection with any such violation or Release or any other
matter relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental Liabilities to the Company or
any of its Subsidiaries, in each case whether or not the Environmental
Protection Agency or any Governmental Authority has taken or threatened any
action in connection with any such violation, Release or other matter.  If the Purchaser at any time has a reasonable
basis to believe that there may be a violation of any Environmental Laws or
Environmental Permits by the Company or any Person under its control or any
Environmental Liability arising thereunder, or a Release of Hazardous Materials
on, at, in, under, above, to, from or about any of its Real Estate, that, in
each case, could reasonably be expected to have a Material Adverse Effect, then
the Company and its Subsidiaries shall, upon the Purchaser’s written request (A) cause
the performance of such environmental audits including subsurface sampling of
soil and groundwater, and preparation of such environmental reports, at the
Company’s expense, as the Purchaser may from time to time reasonably request,
which shall be conducted by reputable environmental consulting firms reasonably
acceptable to the Purchaser and shall be in form and substance reasonably
acceptable to the Purchaser, and (B) permit the Purchaser or its
representatives to have 

 

32

 

access to all Real Estate for the purpose of conducting such
environmental audits and testing as the Purchaser deems appropriate, including
subsurface sampling of soil and groundwater. 
The Company shall reimburse the Purchaser for the costs of such audits
and tests and the same will constitute a part of the Obligations.

 

(f)                                    Maintenance
of Insurance.  (i) Apply for
and/or continue in force with responsible insurance companies adequate
insurance covering risks of such types and covering casualties, risks and
contingencies of such types and in such amounts as are customary for entities
of similar size engaged in similar lines of business, but in no event
materially less than such amounts that were maintained as of the Closing; and (ii) within
thirty (30) days of the Closing Date, the Company shall be named as
beneficiary under life insurance policies in the name of each of Samuel C.
Youngblood and Donald J. Carr in the amount of $2,000,000 and $1,000,000,
respectively.

 

(g)                                 Books
and Records.  Maintain proper books
of record and account which present fairly and accurately its financial
condition and results of operations and make provisions on its Financial
Statements for all such proper reserves as in each case are required in
accordance with GAAP consistently applied.

 

(h)                                 Employee
Benefit Plans.  (i) Maintain,
and cause each Subsidiary to maintain, each Pension Plan in compliance with all
applicable requirements of law and regulations, (ii) not permit, or permit
any member of the Controlled Group to permit, any condition to exist in
connection with any Pension Plan, which might constitute grounds for the PBGC
to institute proceedings to have such Pension Plan terminated or a trustee
appointed to administer such Pension Plan, and (iii) not engage in, permit
to exist or occur, and not permit any member of the Controlled Group to engage
in, permit to exist or occur, any other condition, event or transaction with
respect to any such Employee Benefit Plan which would be reasonably likely to
result in the incurrence by the Company or any of its Subsidiaries of any
material liability, fine or penalty.

 

(i)                                     Compliance
with Agreements.  The Company shall
perform and observe all of its obligations, and shall cause each of its
Subsidiaries (including in their capacities as Guarantors) to perform and
observe all of their respective obligations, to each holder of all or any
portion of the Note, and all of their respective obligations to each holder of
all or any portion of the Warrant and/or Warrant Stock, set forth in (i) its
Organizational Documents; (ii) the Warrant; (iii) the Note; and (iv) the
other Related Transaction Documents.

 

(j)                                     Capital
Stock.  The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the 

 

33

 

purpose of issuance upon any exercise of the Warrant, such number of
shares of Common Stock issuable upon the exercise of the Warrant.  All shares of Common Stock which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all Taxes and Liens.  The Company and, if applicable, the Purchaser
and any transferees, shall take all such actions as may be necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed.

 

(k)                                  Intellectual
Property Rights.  The Company shall,
and shall cause each of its Subsidiaries to, possess and maintain all
Intellectual Property Rights necessary to the conduct of their respective
businesses and own all right, title and interest in and to, or have a valid
license for, all such Intellectual Property Rights.  Neither the Company nor any of its
Subsidiaries shall take any action, or fail to take any action, which would
result in the invalidity, abandonment, misuse or unenforceability of such
Intellectual Property Rights or which would infringe upon or misappropriate any
rights of other Persons to the extent that such action or failure to act would
have a Material Adverse Effect.

 

(l)                                     D&O
Insurance.  Within thirty (30)
days of the Closing Date, the Company shall obtain and thereafter maintain
directors’ and officers’ liability insurance policies or binders related to
such policies in form and substance reasonably satisfactory to the Purchaser.

 

(m)                               Securities
Law Compliance.  The Company shall
timely make all filings under all applicable federal and state securities laws
necessary in connection with the issuance of the Securities pursuant to this
Agreement, if any.

 

(n)                                 Option
Plan Matters.  The Company shall
maintain the Option Plan and make any grants under the Option Plan in
accordance with the terms thereof.  The
Company shall not, and shall cause its Subsidiaries not to, amend, modify or
change any material term or provision of the Option Plan, including pursuant to
any grant or similar letter issued thereunder or pursuant thereto, without the
prior written approval of the Purchaser

 

(o)                                 Bonding
Facility.  The Company shall use its
best efforts, as soon as practicable following the Closing, to secure a bonding
financing line, similar to the bonding facility that the Company and its
Subsidiaries had in place prior to the Closing, that will allow the Company and
its Subsidiaries to provide bonds for bonded contracts.  The terms of such bonding financing line
shall be reasonably satisfactory to the Purchaser.

 

34

 

4.7                                 Financial
Covenants.  So long as (i) any
portion of the principal amount of the Note remains outstanding or (ii) the
Purchaser, together with any of its transferees, holds, or is deemed to hold,
at least ten percent (10%) of the Common Stock on a fully diluted basis, the
Company covenants and agrees that it shall and shall cause each of its
Subsidiaries to perform and comply with, all covenants in this Section 4.7
applicable to such Person.

 

(a)                                  Capital
Expenditure Limits.  The Company and
its Subsidiaries, on a consolidated basis, shall not make Capital Expenditures
during any Fiscal Year in excess of $600,000, in the aggregate.

 

(b)                                 Minimum
Fixed Charge Coverage Ratio.  The
Company and its Subsidiaries shall have, on a consolidated basis at the end of
each month, a Fixed Charge Coverage Ratio for the 12-month period then ended of
not less than 1.00 to 1.00; provided, however, that in the event the Fixed
Charge Coverage Ratio at the end of any month is at or between .90 to 1.00 and
..99 to 1.00, the Company shall have the option (the “Coverage Option”),
exercisable one (1) time during the term of this Agreement, to accrue
the Current Interest and default interest due and payable under the Note “in
kind” for two (2) successive quarterly periods prior to any Event of
Default being declared by the Purchaser hereunder.

 

(c)                                  Senior
Leverage Ratio.  The Company and its
Subsidiaries on a consolidated basis shall have, at the end of each month, a
Senior Leverage Ratio as of the last day of such month and for the 12-month
period then ended, of not more than 2.00 to 1.00; provided, however, that in
the event (i) the Senior Leverage Ratio at the end of any month is at or
between 2.01 to 1.00 and 2.50 to 1.00, and (ii) the Company has not
exercised the Coverage Option, the Company shall have the option, exercisable
one (1) time during the term of this Agreement, to accrue the Current
Interest and default interest due under the Note “in kind” for two (2) successive
quarterly periods prior to any Event of Default being declared by the Purchaser
hereunder.

 

(d)                                 Notwithstanding
anything to the contrary contained in clauses (b) and (c) above, upon
an Event of Default under Section 7.1(g), the Purchaser shall have
all of the rights and remedies contained herein.

 

4.8                                 Covenants
Related to ISI*MCS and Green Wing. The Company (a) shall, and shall
cause each of its Subsidiaries to, immediately provide to the Purchaser a copy
of each notice received pursuant to the ISI MCS Documents and the Green Wing
Documents; (b) shall not, and shall not cause or permit any of its
Subsidiaries to, change or amend the terms of any of the ISI MCS Documents or
the Green Wing Documents; and (c) shall, and shall cause each of its Subsidiaries
to, immediately notify the Purchaser of any breach or termination of any of the
ISI MCS Documents or the Green Wing Documents.

 

35

 

5.                                       Representations
and Warranties of the Company.

 

As a material inducement to the Purchaser to enter
into this Agreement and purchase the Securities hereunder, the Company hereby
represents and warrants to the Purchaser as follows:

 

5.1                                 Organization,
Qualifications, Authority and Corporate Power.

 

(a)                                  The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and is duly licensed or
qualified and in good standing as a foreign corporation in each jurisdiction in
which the nature of the business conducted by it or the nature of the Real
Estate owned or leased by it requires such licensing or qualification unless
and to the extent that the failure to be so licensed or qualified or to be in
such good standing would not have a Material Adverse Effect.

 

(b)                                 The
Company has all requisite corporate power and authority and all licenses,
permits and authorizations necessary to own and hold its properties and to
carry on its business as now conducted and as proposed to be conducted, and the
Company has the corporate power and authority to execute, deliver and perform
the Transaction Documents to which it is a party.  The Company is in full compliance with all of
the terms and provisions of its Governing Documents.

 

5.2                                 Subsidiaries.  Each Subsidiary is duly organized, validly
existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is incorporated or organized, as the case may be, with
none being a Foreign Subsidiary, has full and adequate power to own or lease
its property and assets and carry on its business as now conducted, and is duly
licensed or qualified and in good standing in each jurisdiction in which the
nature of the business conducted by it or the nature of the Real Estate owned
or leased by it requires such licensing or qualification unless and to the
extent that the failure to be so licensed or qualified or to be in such good
standing would not have a Material Adverse Effect.  All of the outstanding shares of Capital
Stock or comparable equity interests of each Subsidiary are validly issued and
outstanding and fully paid and nonassessable and all such shares or other
equity interests owned by the Company or a Subsidiary are owned, beneficially
and of record, by the Company or such Subsidiary free and clear of all Liens, other
than Liens in favor of the Senior Lender that are held subject to the Senior
Subordination Agreement.  There are no
outstanding commitments or other obligations of the Company or any Subsidiary
to issue, and no options, warrants or other rights of any Person to acquire,
any shares of any class of Capital Stock or other comparable equity interests
of any Subsidiary.

 

5.3                                 Authorization
of Agreements, Etc.  The execution,
delivery and performance by each of the Company and the Subsidiaries of the
Transaction Documents to which it is a party and the issuance, sale and
delivery of the Note and the Warrant by the 

 

36

 

Company (a) have been duly authorized by all requisite corporate
or partnership action and (b) will not (i) violate any provision of
law, any order of any court or other Governmental Authority, its Governing
Documents, any material provision of any material indenture, agreement or other
instrument to which it is a party or bound, or any of its properties or assets
is bound, or (ii) result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such order, indenture, agreement or
other instrument, or (iii) result in the creation or imposition of any
Lien of any nature whatsoever upon any of its properties or assets.

 

5.4                                 Validity.  This Agreement has been duly executed and
delivered by the Company and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms (except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors’ rights generally
or by general equitable principles, regardless or whether such enforceability
is considered in a proceeding at law or in equity).  The Note, the Warrant, the Stockholders’
Agreement, the Senior Subordination Agreement and the other Transaction
Documents to be executed by the Company, when executed and delivered in
accordance with this Agreement, will constitute legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms (except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors’
rights generally or by general equitable principles, regardless or whether such
enforceability is considered in a proceeding at law or in equity).

 

5.5                                 Authorized
Capital Stock.

 

(a)                                  The
authorized Capital Stock of the Company consists of 3,000 shares of Common
Stock, 104.9064 shares of which are validly issued and outstanding, fully paid
and nonassessable.  The stockholders of
record and holders of subscriptions, warrants, options, convertible securities
and other rights (contingent or otherwise) to purchase or otherwise acquire
Capital Stock of the Company and the number of shares of Capital Stock, other
equity securities, and the number of such subscriptions, warrants, options,
convertible securities and other such rights held by each, are as set forth in
the attached Capitalization Schedule.

 

(b)                                 Except
as set forth in the attached Capitalization Schedule and pursuant
to the terms and conditions of this Agreement, (i) no Person owns of
record or is known to the Company to own beneficially any share of Capital
Stock or other equity securities of the Company, (ii) no subscription,
warrant, option, convertible security, or other right (contingent or
other) to purchase or otherwise acquire from the Company Capital Stock of
the Company is authorized or outstanding and (iii) there is no commitment
by the Company to issue shares, subscriptions, warrants, options, convertible
securities, or other such rights or to distribute to holders of any of its
Capital Stock any evidence of Indebtedness or assets.  Except as provided 

 

37

 

for in this Agreement, its Governing Documents, the Transaction
Documents, or as set forth in the attached Capitalization Schedule, the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its Capital Stock or any interest therein or to pay
any dividend or make any other distribution in respect thereof.  There are no voting trusts or agreements, stockholders’
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights or proxies relating to any securities of the Company or any
of its Subsidiaries, other than the Stockholders’ Agreement and voting
agreement contained therein, included in the Transaction Documents.  All of the outstanding securities of the
Company were issued in compliance with all applicable federal and state
securities laws.  Except as set forth in
the attached Capitalization Schedule, the Company has no direct or
indirect Subsidiaries.

 

5.6                                 Solvency.  From and after the date of this Agreement,
the Loan and Security Agreement, the transactions contemplated herein and
therein, and the Reorganization, the Company and its Subsidiaries:  (a) owns and will continue to own assets
the fair market value of which are greater than the total amount of its
liabilities (including contingent liabilities); (b) has and will continue
to have capital that is not unreasonably small in relation to its business as
presently conducted or any contemplated or undertaken transaction; and (c) does
not intend to and will not incur and does not believe that it will incur debts
beyond its ability to pay such debts as they become due.

 

5.7                                 Assets.  Except as set forth on the attached Assets
Schedule, the Company has good and marketable title to, or a valid
leasehold interest in, the properties and assets (including Real Estate) used
by it, located on its premises or shown on the Latest Balance Sheet or acquired
thereafter, free and clear of all Liens, except for properties and assets
disposed of in the ordinary course of business since the date of the Latest
Balance Sheet and except for Permitted Encumbrances.  Except as described on the Assets Schedule,
the Company’ and its Subsidiaries’ buildings, equipment and other tangible
assets are in good operating condition and are fit for use in the ordinary
course of business. The Company owns, or has a valid leasehold interest in, all
assets necessary for the conduct of its businesses as presently conducted and
as presently proposed to be conducted

 

5.8                                 Tax
Matters.

 

(a)                                  Except
as set forth on the attached Taxes Schedule: each Consolidated Entity
has filed all Tax Returns which it is required to file under applicable laws
and regulations; all such Tax Returns are complete and correct and have been
prepared in compliance with all applicable laws and regulations; each
Consolidated Entity has paid all Taxes due and owing by it (whether or not such
Taxes are required to be shown on a Tax Return) and has withheld and paid over
to the appropriate Taxing authority all Taxes which it is required to withhold
from amounts paid or owing to any 

 

38

 

employee, equityholder, creditor or other third party unless contesting
in good faith pursuant to appropriate proceedings; no Consolidated Entity has
waived any statute of limitations with respect to any Taxes or agreed to any
extension of time with respect to any Tax assessment or deficiency; the accrual
for Taxes on the Latest Balance Sheet would be adequate to pay all Tax
liabilities of each Consolidated Entity if its current Tax year were treated as
ending on the date of the Latest Balance Sheet (excluding any amount recorded
which is attributable solely to timing differences between book and Tax income);
since the date of the Latest Balance Sheet, no Consolidated Entity has incurred
any liability for Taxes other than in the ordinary course of business; the
assessment of any additional Taxes for periods for which Tax Returns have been
filed by each Consolidated Entity is not expected to exceed the recorded
liability therefor on the Latest Balance Sheet (excluding any amount recorded
which is attributable solely to timing differences between book and Tax
income); the federal income Tax Returns of each Consolidated Entity has been
audited and closed for all Tax years through 1998; no foreign, federal, state
or local Tax audits or administrative or judicial proceedings are pending or,
to the knowledge of the Company, being conducted with respect to any Consolidated
Entity, no information related to Tax matters has been requested by any
foreign, federal, state or local Taxing authority and no written notice
indicating an intent to open an audit or other review has been received by the
Company from any foreign, federal, state or local Taxing authority; and there
are no unresolved questions or claims concerning the Tax liability of any
Consolidated Entity.

 

(b)                                 No
Consolidated Entity has made an election under §341(f) of the Code.  No Consolidated Entity is liable for the
Taxes of another Person that is not a Subsidiary in an amount under (i) Treasury
Regulation §1.1502-6 (or comparable provisions of state, local or foreign law),
(ii) as a transferee or successor, (iii) by contract or indemnity, or
(iv) otherwise.  No Consolidated
Entity is a party to any Tax sharing agreement. Each Consolidated Entity has
disclosed on its federal income Tax Returns any position taken for which
substantial authority (within the meaning of Code §6662(d)(2)(B)(i)) did not
exist at the time the Tax Return was filed. 
No Consolidated Entity has made any payments, is obligated to make
payments or is a party to an agreement that could obligate it to make any
payments that would not be deductible under Code §280G.

 

5.9                                 Contracts
and Commitments.  Except as disclosed
on the Contracts Schedule, all of the Company’s and its Subsidiaries’
contracts are valid, binding and enforceable in accordance with their
respective terms, except where any failure or failures thereof would not,
considered in the aggregate, have a Material Adverse Effect.  The Company and each of its Subsidiaries has
performed all obligations required to be performed by it under such contracts
and is not in default under or in breach of nor in receipt of any claim of
default or breach under any such contract; no event has occurred which, with
the passage of time or the giving of 

 

39

 

notice or both, would result in a default, breach or event of
noncompliance by the Company or any of its Subsidiaries under any such
contract; none of the Company nor any of its Subsidiaries has any present
expectation or intention of not fully performing all such obligations; none of
the Company nor any of its Subsidiaries has knowledge of any breach or
anticipated breach by the other parties to any such contract; and none of the
Company nor any of its Subsidiaries is a party to any contract or commitment
requiring it to purchase or sell goods or services or lease property above or
below (as the case may be) prevailing market prices and rates.  The Construction Contracts Schedule
sets forth (i) a complete and accurate list of all construction contracts,
agreements or commitments, outstanding as of the date hereof, by which the
Company and its Subsidiaries are bound and (ii) identifies the percentage
of completion or performance for each such contract as of the date hereof.

 

5.10                           Litigation,
Etc.  Except as set forth on the
attached Litigation Schedule, there are no actions, suits, proceedings,
orders, investigations or claims pending or, to the best of the Company’s
knowledge, threatened against or affecting the Company or any of its
Subsidiaries (or pending, or, to the best of the Company’s knowledge,
threatened against or affecting any of the officers, directors, managers or
employees of the Company or any of its Subsidiaries with respect to their
businesses or proposed business activities on behalf of the Company or any of
its Subsidiaries), or pending or threatened by the Company or any of its Subsidiaries
against any third party, at law or in equity, or before or by any governmental
department, commission, board, bureau, agency or instrumentality (including,
without limitation, any actions, suits, proceedings or investigations with
respect to the transactions contemplated by this Agreement); neither the
Company nor any of its Subsidiaries is subject to any arbitration proceedings
under collective bargaining agreements or otherwise or, any governmental
investigations or inquiries (including, without limitation, inquiries as to the
qualification to hold or receive any license or permit); and, to the best of
the Company’s knowledge, there is no basis for any of the foregoing. Neither
the Company nor any of its Subsidiaries is subject to any judgment, order or
decree of any court or other governmental agency, and neither Company nor any
of its Subsidiaries has received any opinion or memorandum or legal advice from
legal counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage.

 

5.11                           Brokerage.  Except as set forth on the attached Brokerage
Schedule, there are no claims for brokerage commissions, finders’ fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement binding upon the Company or any
of its Subsidiaries.  The Company shall
pay, and shall hold the Purchaser harmless against, any liability, loss or
expense (including, without limitation, reasonable attorneys’ fees and
out-of-pocket expenses) arising in connection with any such claim.

 

5.12                           Insurance.  The attached Insurance Schedule contains
a description of each insurance policy maintained by the Company or any of its
Subsidiaries with respect to its properties, assets and businesses, and each
such policy is in full 

 

40

 

force and effect as of the Closing Date. Neither the Company nor any of
its Subsidiaries is in default in any material respect with respect to its
obligations under any insurance policy maintained by it, and neither Company
nor any of its Subsidiaries has been denied insurance coverage. The insurance
coverage of the Company and its Subsidiaries is customary for entities of
similar size engaged in similar lines of business. Except as set forth on the Insurance
Schedule, the Company and its Subsidiaries do not have any self-insurance
or co-insurance programs, and the reserves set forth on the Latest Balance
Sheet are adequate to cover all anticipated liabilities with respect to any
such self-insurance or co-insurance programs.

 

5.13                           Employees.  Except as set forth on the attached Employees
Schedule, the Company is not aware that any executive or key employee of
the Company or any of its Subsidiaries or any group of employees of the Company
or any of its Subsidiaries has any plans to terminate employment with the
Company or any of its Subsidiaries.  The
Company and each of its Subsidiaries has complied with all laws relating to the
employment of labor (including, without limitation, provisions thereof relating
to wages, hours, equal opportunity, collective bargaining and the payment of
social security and other Taxes), and the Company is not aware that the Company
or any of its Subsidiaries has any labor relations problems (including, without
limitation, any union organization activities, threatened or actual strikes or
work stoppages or material grievances). 
Except as set forth on the attached Employee Schedule, neither
the Company nor any of its Subsidiaries nor, to the best of the Company’s
knowledge, any of their employees is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreements relating to,
affecting or in conflict with the present or proposed business activities of
the Company or any of its Subsidiaries. Salaries and bonuses payable or to be
paid to each employee during the Company’s 2004 Fiscal Year are set forth on
the attached Employees Schedule.

 

5.14                           Environmental
and Safety Matters.

 

(a)                                  Except
as set forth on the attached Environmental Schedule, the Company and its
Subsidiaries have complied with and are currently in compliance with all
Environmental Laws, and neither the Company nor any of its Subsidiaries has
received any oral or written notice, regarding any liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental Laws which
have not been corrected and which relate to the Company or any of its
Subsidiaries or any of their properties or facilities.  Without limiting the generality of the
foregoing, the Company and its Subsidiaries have obtained and complied with,
and are currently in compliance with, all Environmental Permits that may be
required pursuant to any Environmental Law for the occupancy of their
properties or facilities or the operation of their businesses.  A list of all such Environmental Permits is
set forth on the attached Environmental Schedule.  Neither this Agreement nor the consummation
of the

 

41

 

transactions contemplated by this Agreement shall impose any
obligations on the Company or any of its Subsidiaries or otherwise for site
investigation or cleanup, or notification to or consent of any Governmental
Authorities or third parties under any Environmental Laws (including, without
limitation, any so called “transaction-triggered” or “responsible property
transfer” laws and regulations). None of the following exists in violation of
Environmental Laws at any property or facility owned, occupied or operated by
the Company or any of its Subsidiaries:

 

(i)            underground
storage tanks or surface impoundments;

 

(ii)           asbestos-containing
materials in any form or condition; or

 

(iii)          materials or equipment containing
polychlorinated biphenyls.

 

(b)           Neither
Company nor any of its Subsidiaries has treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled or Released any
substance (including, without limitation, any Hazardous Material) or owned,
occupied or operated any facility or property, so as to give rise to
liabilities of the Company or any of its Subsidiaries for response costs,
natural resource damages or attorneys fees pursuant to CERCLA, or any other
Environmental Law.

 

(c)           Without
limiting the generality of the foregoing, no facts, events or conditions
relating to the past or present properties, facilities or operations of the
Company or its Subsidiaries shall prevent, hinder or limit continued compliance
with Environmental Laws, give rise to any corrective, investigatory or remedial
obligations pursuant to Environmental Laws or any other liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental Laws (including, without limitation, those liabilities relating
to onsite or offsite Releases or threatened Releases of Hazardous Materials,
personal injury, property damage or natural resources damage).

 

(d)           Neither
the Company nor any of its Subsidiaries has, either expressly or by operation
of law, assumed or undertaken any liability or corrective, investigatory or
remedial obligation of any other Person relating to any Environmental Laws.

 

(e)           Neither
the Company nor any of its Subsidiaries has received notice of or is subject to
any Environmental Liabilities.  No Lien,
whether recorded or unrecorded, in favor of any Governmental Authority,
relating to any liability of the Company or any of its Subsidiaries arising
under any Environmental Laws has attached to any property leased or operated by
the Company or any of its Subsidiaries.

 

5.15         Plans.    No
fact, including, but not limited to, any “Reportable Event,” as that term is
defined in Section 4043 of ERISA, exists in connection with any Pension
Plan 

 

42

 

of the Company or any of its Subsidiaries which might constitute
grounds for termination of any such Pension Plan by the PBGC or for the
appointment by the appropriate United States District Court of a Trustee to
administer any such Pension Plan.  No “Prohibited
Transaction” within the meaning of Section 406 of ERISA exists or will
exist upon the execution or delivery of this Agreement or the performance by
the parties hereto of their respective duties and obligations hereunder.  The Company agrees to do all acts, including
but not limited to contributions, necessary to maintain compliance with ERISA
and agrees not to terminate any such Pension Plan in a manner or do or fail to
do any act which could result in the imposition of a Lien on any property of
the Company or its Subsidiaries pursuant to Section 406B of ERISA.  Neither the Company nor its Subsidiaries has
incurred withdrawal liability under a Multiemployer Plan.

 

5.16         Affiliated
Transactions.  Except as set forth on
the attached Affiliated Transactions Schedule, no officer, director,
employee, manager, holder of Capital Stock or Affiliate of the Company or any
of its Subsidiaries, or any individual related by blood, marriage or adoption
to any such individual, or any entity in which any such Person or individual
owns any beneficial interest, is a party to any agreement, contract,
commitment, side letter or transaction with the Company or any of its
Subsidiaries or has any interest in any property used by the Company or any of
its Subsidiaries.

 

5.17         Other
Agreement Representations.  The
representations and warranties (and the disclosure schedules thereto) made by
the Company and the Guarantors in the Loan and Security Agreement, the
Reorganization Documents and the ISI MCS Documents are true and correct in all
material respects as of the date hereof, and are hereby incorporated in full by
this reference and shall be deemed to have been made to (and for the benefit
of) the Purchaser in this Agreement. 
True and correct copies of the final disclosure schedules referenced in
and/or attached to the Loan and Security Agreement, the Reorganization
Documents and the ISI MCS Documents have been delivered to the Purchaser.

 

6.             Representations
and Warranties of the Purchaser.

 

As a material inducement to the Company to enter into
this Agreement and sell the Securities hereunder, the Purchaser hereby
represents and warrants to the Company as follows:

 

6.1           Organization
and Good Standing.  It is a limited
partnership, duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite power and authority to
carry on its business as now conducted.

 

6.2           Authorization;
Power.  The execution and delivery by
it of, and the performance by it under, the Transaction Documents to which it
is a party and the purchase of the Note and the Warrant issued in favor of it
have been duly authorized by all requisite action, and it has the full right,
power and authority to enter into, and perform its obligations under, the
Transaction Documents to which it is a party.

 

43

 

6.3           Validity.  This Agreement has been duly executed and
delivered by it and constitutes its valid and binding obligation, enforceable
against it in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors’ rights generally or by general equitable
principles, regardless of whether such enforceability is considered in a
proceeding in equity or at law.

 

6.4           Accredited
Investor.  It is an “accredited
investor” as such term is defined in Rule 501 of Regulation D under
the Securities Act.

 

6.5           Purchase
for Own Account; Acknowledgment of Risk. 
It is acquiring the Securities for its own account without the present
intention of resale or distribution.  It
acknowledges that it may not resell or otherwise transfer such Securities
without an effective registration statement or exemption therefrom under federal
and applicable state securities laws, and that it may have to hold its
investment for an indefinite amount of time. 
It further acknowledges that the purchase of the Securities is a risky
investment and that it may lose its entire investment hereby.

 

6.6           No
Violation. The execution, delivery and performance by the Purchaser of this
Agreement and the other Transaction Documents to which it is a party, and the
consummation of the transactions contemplated hereby and thereby, do not and
shall not (a) conflict with or result in any breach of any of the
provisions of, (b) constitute a default under or result in a violation of,
or (c) require any authorization, consent, approval, exemption or other
action by or notice to any Governmental Authority under the provisions of, the
Purchaser’s Governing Documents or any law to which the Purchaser is subject.

 

7.             Events of Default.

 

7.1           Definition.  An “Event of Default” shall be deemed to have
occurred for purposes of this Agreement if:

 

(a)           the
Company fails to pay when due and payable (whether at maturity or otherwise) (i) the
full amount of interest then accrued on the Note within three (3) Business
Days of the date such interest is due, or (ii) the full amount of any
principal payment (together with any applicable premium) on the Note;

 

(b)           the Company or any of
its Subsidiaries:

 

(i)            breaches
or fails to perform or observe any of the covenants and obligations described
in Section 4.1 of this Agreement and such breach or failure
continues for at least forty-five (45) days; or

 

(ii)           breaches
or fails to perform or observe any of the covenants and obligations described
in Section 4.2 or 4.6 of this Agreement and such breach or
failure continues for at least thirty (30) days; or

 

44

 

(iii)          breaches or fails to perform or observe any
of the covenants, obligations or other provisions contained in the Note and
such breach or failure continues for at least thirty (30) days; or

 

(iv)          breaches
or fails to perform or observe any of the covenants, obligations or other provisions
contained in the Warrant or in Sections 4.4, 4.5  4.7
or 4.8 of this Agreement; or

 

(v)           breaches
or fails to perform or observe any of the covenants, obligations or other
provisions contained herein (other than as described above), or contained in
any other instrument delivered pursuant hereto or thereto and such breach or
failure continues for at least thirty (30) days after notice thereof from the
Purchaser;

 

(c)           any
representation, warranty or information contained herein or required to be furnished
to the holder of the Note or the Warrant pursuant to this Agreement, or any
writing furnished by or on behalf of the Company to the holder of the Note
and/or the Warrant, is false or misleading on the date made or furnished;

 

(d)           the
Company or any of its Subsidiaries makes an assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally as they
become due; or an order, judgment, decree or injunction is entered adjudicating
the Company or any of its Subsidiaries bankrupt or insolvent or an order,
judgment, decree or injunction is entered against the Company or any of its
Subsidiaries, requiring the dissolution or split up of the Company or any of
its Subsidiaries or preventing the Company or any of its Subsidiaries from
conducting all or any material part of its business; or any order for relief
with respect to the Company or any of its Subsidiaries is entered under the
Federal Bankruptcy Code; the Company or any of its Subsidiaries petitions or
applies to any tribunal for the appointment of a custodian, trustee, assignee,
receiver, liquidator or sequestrator (or similar official) of the Company or
any of its Subsidiaries, of any substantial part of the assets of the Company
or any of its Subsidiaries, or for the winding up or liquidation of the Company
or any of its Subsidiaries’ affairs, or commences any proceeding (other than a
proceeding for the voluntary liquidation and dissolution of any of its
Subsidiaries) relating to the Company or any of its Subsidiaries under any
bankruptcy reorganization, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or similar law of any jurisdiction now or hereafter in
effect; or any such petition or application is filed, or any such proceeding is
commenced, against the Company or any of its Subsidiaries and either (i) the
Company or any Subsidiary by any act approves thereof, consents thereto or
acquiescence therein or (ii) such petition, application or proceeding is
not dismissed within sixty (60) days;

 

45

 

(e)           any
money judgment, writ or warrant of attachment, or similar process involving an
amount in the aggregate at any time in excess of $110,000 (in any case not
adequately covered by insurance as to which the insurance company has
acknowledged coverage) is entered or filed against the Company or any of its
Subsidiaries or any of their respective assets and remains undischarged,
unvacated, unbonded or unstayed for a period of thirty (30) days, but in
any event not later than ten (10) days
prior to the date of any proposed sale thereunder;

 

(f)            the
Company or any of its Subsidiaries defaults (i) in payment of any amounts
under any indenture, loan agreement or other instrument under which any
evidence of Indebtedness of the Company or any of its Subsidiaries has been or
hereafter may be issued (other than the Senior Debt) and such default could, in
the Purchaser’s sole judgment, have a Material Adverse Effect, or (ii) in
compliance with the terms, covenants or other provisions of any such indenture,
loan agreement or other instrument, and the effect of such default in
compliance is to permit the acceleration of the stated maturity of such
Indebtedness (whether or not actually accelerated) or (in the case of demand obligations)
results in demand for payment of such Indebtedness and such acceleration or
demand could, in the Purchaser’s sole judgment, have a Material Adverse Effect;

 

(g)           the
payment of any portion of the Senior Debt is accelerated by the holders thereof;

 

(h)           the
Company shall breach or fail to perform or observe any of the covenants,
obligations or provisions contained in Section 4.3 hereof or in the
Stockholders’ Agreement;

 

(i)            (i) there
shall have been any amendment to or termination of the Green Wing Lease, or (ii) any
party to the Green Wing Lease shall have breached  or otherwise failed to perform or observe any of the
covenants, obligations or provisions contained therein;

 

(j)            (i) there
shall have been any amendment to or termination of (A) any of the Master
Subcontractor Agreements or (B) any of the ISI MCS Documents or (ii) a
party to any of the ISI MCS Documents (other than Purchaser) or any of the
Master Subcontractor Agreements shall have breached  or otherwise failed to perform or observe any of the
covenants, obligations or provisions contained, respectively, therein;

 

(k)           the Company
or any other party to any Affiliate transaction shall have breached  or otherwise failed to perform or observe
any of the covenants, obligations or provisions related thereto;

 

46

 

(l)            the
dissolution of the Company or any Guarantor which is a partnership, limited
liability company, corporation or other entity without reconstitution within
sixty (60) days of such dissolution;

 

(m)          the
institution in any court of a criminal proceeding against the Company or any
Guarantor, or the indictment of the Company or any Guarantor for any felony
which, if adversely determined, could have a Material Adverse Effect;

 

(n)           there shall
occur any event which, in the Purchaser’s reasonable judgment, could have a
Material Adverse Effect;

 

(o)           there
shall occur a Change In Control or IPO; or

 

(p)           any
provision of this Agreement, the Note or the Warrant affecting the ability of
the Company or any Guarantor to pay or perform its obligations hereunder or
thereunder shall cease to be in full force and effect or shall be declared to
be null and void by a court of competent jurisdiction.

 

The foregoing shall constitute Events of Default
whatever the reason or cause for any such Event of Default and whether it is
voluntary or involuntary or is effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or Governmental Authority.

 

7.2           Consequences of
Events of Default.

 

(a)           If
any Event of Default has occurred, the Current Interest on the Note shall
increase immediately by two (2) percentage points to thirteen and
fifty-eight hundreths percent (13.58%). 
Any increase of the Current Interest resulting from the operation of
this subparagraph shall terminate as of the close of business on the date on
which no Event of Default exists (subject to subsequent increases pursuant to
this subparagraph).

 

(b)           If
an Event of Default of the type described in Section 7.1(d) has
occurred, then the aggregate principal amount of the Note (together with all
accrued and unpaid interest thereon and all other amounts due and payable with
respect thereto) shall become immediately due and payable without any action on
the part of the holders of the Note, and the Company shall immediately pay to
the holders of the Note all amounts due and payable with respect to the Note.

 

(c)           If
any Event of Default has occurred and is continuing, then each holder of the
Note may declare all or any portion of the outstanding principal amount of its
Note (together with all accrued and unpaid interest thereon and all other
amounts due and payable with respect thereto) to be immediately due and payable
and may demand immediate payment of all or any portion of the outstanding
principal amount of such Note (together with all such other amounts then due
and payable) owned by such holder.

 

47

 

(d)           Each
holder of the Note shall also have any other rights which such holder may be
afforded under any Related Transaction Document from time to time and any other
rights which such holder may have pursuant to applicable law.

 

8.             The
Guaranties.  To induce the Purchaser
to purchase the Securities described herein and in consideration of benefits
expected to accrue to each Guarantor and for other good and valuable
consideration, each Guarantor hereby unconditionally and irrevocably
guarantees, jointly and severally, to the Purchaser and each other holder of
the Securities, the due and punctual payment of all present and future
Obligations, including the due and punctual payment of principal of and
interest on the Note and Obligations with respect to the Warrant and/or Warrant
Stock, as and when the same shall become due and payable, whether at stated
maturity, by acceleration or otherwise, according to the terms hereof and
thereof.  In case of failure by the
Company punctually to pay any Obligations, each Guarantor hereby
unconditionally and jointly and severally agrees to make such payment or to
cause such payment to be made punctually as and when the same shall become due
and payable, whether at stated maturity, by acceleration or otherwise, and as
if such payment were made by the Company.

 

8.1           Guaranty
Unconditional.  The obligations of
each Guarantor as a guarantor under this Section 8 and with respect
to the Transaction Documents shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:

 

(a)           any
extension, renewal, settlement, compromise, waiver or release in respect of any
obligation of the Company or of any other Guarantor under this Agreement or any
other Transaction Document or by operation of law or otherwise;

 

(b)           any
modification or amendment of or supplement to this Agreement or any other
Transaction Document;

 

(c)           any
change in the corporate existence, structure or ownership of, or any
insolvency, bankruptcy, reorganization or other similar proceeding affecting,
the Company, any other Guarantor, or any of their respective assets, or any
resulting release or discharge of any obligation of the Company or of any other
Guarantor contained in any Transaction Document;

 

(d)           the
existence of any claim, set-off or other rights which the Guarantor may have at
any time against the Purchaser, any holder of the Note, any holder of the
Warrant or any other Person, whether or not arising in connection herewith;

 

(e)           any
failure to assert, or any assertion of, any claim or demand or any exercise of,
or failure to exercise, any rights or remedies against the Company, any other
Guarantor or any other Person;

 

48

 

(f)            any
application of any sums by whomsoever paid or howsoever realized to any
obligation of the Company, regardless of what obligations of the Company remain
unpaid;

 

(g)           any
invalidity or unenforceability, relating to or against the Company or any other
Guarantor for any reason, of this Agreement or of any other Transaction
Document or any provision of applicable law or regulation purporting to
prohibit the payment by the Company or any other Guarantor of the principal of
or interest on the Note or the sale of Warrant Stock upon the exercise of the Warrant
or any other amount payable by them under the Transaction Documents; or

 

(h)           any
other act or omission to act or delay of any kind by the Purchaser, any holder
of the Note, any holder of the Warrant or any other Person or any other
circumstance whatsoever that might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the obligations of the Guarantors
under the Transaction Documents.

 

8.2           Discharge
Only upon Payment in Full; Reinstatement in Certain Circumstances.  Each Guarantor’s obligations under this Section 8
shall remain in full force and effect until the principal of and interest on
the Note has been paid and satisfied in full in cash, the Warrant has been “put”
or exercised and all other Obligations shall have been paid and satisfied in
full in cash.  If at any time any payment
of the principal of or interest on the Note or any other amount payable by the
Company under any of the Transaction Documents is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or of any Guarantor, or otherwise, each Guarantor’s
obligations under this Section 8 with respect to such payment shall
be reinstated at such time as though such payment had become due but had not
been made at such time.

 

8.3           Waivers.

 

(a)           General.  Each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by the Purchaser,
any holder of the Note, any holder of the Warrant or any other Person against
the Company, another Guarantor or any other Person.

 

(b)           Subrogation
and Contribution.  Each Guarantor
hereby agrees not to exercise or enforce any right of exoneration, contribution,
reimbursement, recourse or subrogation available to such Guarantor against any
Person liable for payment of the Obligations, or as to any security therefor,
unless and until the full amount owing on the Obligations has been paid; and
the payment by such Guarantor of any amount pursuant to any of the Transaction
Documents on account of credit extended to the Company shall not in any way
entitle such Guarantor to any right, title or interest (whether by way of
subrogation or otherwise) in and to any of the 

 

49

 

Obligations or any proceeds thereof or any security therefor unless and
until the full amount owing on the Obligations has been paid.

 

8.4           Limit
on Recovery.  Notwithstanding any
other provision hereof, the right of recovery against each Guarantor under this
Section 8 shall not (to the extent required by or as may be
necessary or desirable to ensure the enforceability against such Guarantor of
its obligations hereunder or thereunder in accordance with the laws of the
jurisdiction of its incorporation or where it carries on business) exceed (x) the
amount which would render such Guarantor’s obligations under this Section 8
void or voidable under applicable law, including without limitation fraudulent
conveyance law minus (y)  $1.00.

 

8.5           Stay
of Acceleration.  If acceleration of
the time for payment of any amount payable by the Company under this Agreement
or any other Transaction Document is stayed upon the insolvency, bankruptcy or
reorganization of the Company, all such amounts otherwise subject to
acceleration under the terms of this Agreement or the other Transaction
Documents shall nonetheless be payable jointly and severally by the Guarantors
hereunder forthwith on demand by the Purchaser.

 

8.6           Benefit
to Guarantors.  All of the Guarantors
that are engaged in business are engaged in related businesses and integrated
to such an extent that the financial strength and flexibility of each such
Guarantor has a direct impact on the success of each other such Guarantor.  Each Guarantor will derive substantial direct
and indirect benefit from the extension of credit hereunder.

 

8.7           Guarantor
Covenants.  Each Guarantor shall take
such action as the Company is required by this Agreement to cause such Guarantor
to take, and shall refrain from taking such action as the Company is required
by this Agreement to prohibit such Guarantor from taking.

 

9.             Miscellaneous.

 

9.1           Expenses.  The Company shall pay, indemnify, defend and
hold the Purchaser harmless from and against liability for the payment of, and
reimburse the Purchaser on demand as and when incurred from and against, (a) all
reasonable out-of-pocket costs and expenses incurred by it in connection with
the due diligence review of the Company, the preparation, negotiation and
execution of the Transaction Documents and the consummation of all of the
transactions contemplated hereby and thereby (including, without limitation,
all reasonable fees and expenses of legal counsel, environmental consultants
and accountants), which costs and expenses shall be payable at the Closing (or
immediately upon demand by the Purchaser if not paid at the Closing for any
reason), all of the foregoing to be capped at Two Hundred Thousand Dollars
($200,000); (b) all reasonable fees and expenses incurred with respect to
any amendments or waivers (whether or not the same become effective) under or
in respect of each of the Transaction Documents, the Governing Documents of the
Company and/or its 

 

50

 

Subsidiaries and the other agreements and instruments contemplated
hereby and thereby (including, without limitation, in connection with any
proposed merger, sale or recapitalization of or involving the Company and/or
its Subsidiaries); (c) all recording and filing fees and stamp and other
Taxes which may be payable in respect of the execution and delivery of this
Agreement or the issuance, delivery or acquisition of any of the Securities; (d) the
fees and expenses incurred with respect to the interpretation and enforcement
of the rights granted under each of the Transaction Documents, the Governing
Documents of the Company and the agreements or instruments contemplated hereby
and thereby (including, but not limited to, costs of collection); and (e) all
reasonable costs and expenses, due diligence expenses, travel expenses and
legal fees incurred by the Purchaser, in connection with their continuing
relationship with the Company and its Subsidiaries after the date hereof
including, without limitation, reimbursement of costs and expenses pursuant to Sections 4.2
and 4.3 hereof.  If the Company
fails to pay when due any amounts due the Purchaser or fails to comply with any
of its obligations pursuant to this Agreement or any other agreement, document
or instrument executed or delivered in connection herewith, the Company shall
upon demand by the Purchaser, pay to the Purchaser such further amounts as
shall be sufficient to cover the reasonable cost and expense (including, but
not limited to, reasonable attorneys’ fees) incurred by or on behalf of the
Purchaser in collecting all such amounts due or in otherwise enforcing the
Purchaser’s rights and remedies hereunder. 
The Company also agrees to pay to the Purchaser all reasonable costs and
expenses incurred by them, including reasonable compensation to their attorneys
for all services rendered, in connection with the investigation of any Event of
Default and enforcement of their rights hereunder. The Company shall also pay
those fees and expenses set forth on the Fees and Expenses Schedule.

 

9.2           Remedies.  Each holder of Securities shall have all
rights and remedies set forth, as applicable, in this Agreement, the
Securities, the Stockholders’ Agreement and the Governing Documents (to the
extent applicable to the Securities or holders thereof) of the Company and all
rights and remedies which such holders have been granted at any time under any
other Transaction Document currently in force. 
No remedy hereunder or thereunder conferred is intended to be exclusive
of any other remedy, and each and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or thereunder or now
or hereafter existing at law or in equity or by statute or otherwise.  Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted at law or in equity.

 

9.3           Amendments
and Waivers.  The provisions of this
Agreement may not be amended or waived and the Company may not take any action
herein prohibited, or omit to perform any act herein required to be performed
by it, without the prior written consent of the Company and Majority Holders; provided,
however, that any amendment or amendments that lower the interest rate
or lengthen the 

 

51

 

amortization schedule of the Note shall require the unanimous written
consent of the holders of the outstanding principal amount of the Note.

 

9.4           Survival
of Agreement; Indemnities.  All
covenants, agreements, representations and warranties contained in this
Agreement (including the schedules hereto), the Warrant and the Note, or
concurrently with or hereafter made in writing by the Company in connection
herewith or therewith, shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, regardless
of any investigation made by the Purchaser or on their behalf.  In addition, notwithstanding the payment or
repayment of all amounts pursuant to this Agreement, the Warrant or the Note,
the obligations of the Company pursuant to Sections 9.1, 9.15,
9.16, 9.17, 9.18, 9.19 and 9.20 shall
survive indefinitely.

 

9.5           No
Setoffs, Etc.  All payments hereunder
and under the Note and the Warrant shall be made by the Company without setoff,
offset, deduction or counterclaim, free and clear of all Taxes, levies,
imports, duties, fees and charges, and without any withholding, restriction or
conditions imposed by any Governmental Authority.  If the Company shall be required by any law
to deduct, setoff or withhold any amount from or in respect of any payment to
the Purchaser hereunder or under the Note or the Warrant, then the amount so
payable to the Purchaser shall be increased as may be necessary so that, after
making all required deductions, setoffs and withholdings, the Purchaser shall
receive an amount equal to the sum it would have received had no such
deductions, setoffs or withholding been made.

 

9.6           Successors
and Assigns.  Except as otherwise
expressly provided herein, all representations, warranties, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether or not so expressed.  In addition, and whether or not any express
assignment has been made, the provisions of this Agreement which are for the
Purchaser’ benefit as purchasers or holders of the Securities or Warrant Stock
are also for the benefit of, and enforceable by, any subsequent holder of such
Securities or such Warrant Stock.

 

9.7           Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.

 

9.8           Counterparts.  This Agreement may be executed in
counterparts, either one of which need not contain the signatures of more than
one party, but both such counterparts taken together shall constitute one and
the same Agreement.

 

52

 

9.9           Descriptive
Headings.  The descriptive headings
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement.

 

9.10         Governing
Law.  The law of the State of
Illinois shall govern all issues and questions concerning the relative rights
and obligations of the parties and all issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement and
the exhibits and schedules hereto shall be construed in accordance with the
laws of the State of Illinois, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Illinois or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Illinois. 
In furtherance of the foregoing, the internal law of the State of
Illinois shall control the interpretation and construction of this Agreement
(and all schedules and exhibits hereto), even though under that jurisdiction’s
choice of law or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.

 

9.11         Notices.  All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid.  Such notices, demands and other communications
shall be sent to the parties hereto at their respective addresses indicated
below:

 

If to the Purchaser:

 

William Blair
Mezzanine Capital Fund III, L.P.

c/o Merit Capital Partners

303 West Madison Street, Suite 2100
 Chicago, IL 60606
 Attention:  Mr. David M.
Jones

 

with a copy to:

 

Vedder, Price,
Kaufman & Kammholz, P.C.

222 North LaSalle Street

Suite 2400

Chicago, Illinois 60601-1003

Attention:  Michael A. Nemeroff, Esq.

 

If to the Company:

 

ISI Detention
Contracting Group, Inc.

12903 Delivery Drive

San Antonio, TX 78247

Telephone: 210-495-5245

FAX: 210-495-5613

Attention:  Samuel C. Youngblood, CEO

 

53

 

with copies to:

 

Akin Gump Strauss Hauer & Feld LLP

300 Convent Street 

Suite 1500 

San Antonio, Texas 78205-3732

Attention: Alan Schoenbaum, Esq.

 

Youngblood &
Associates

400 West 15th Street, Suite 808

Austin, Texas 78701

Telephone: 512 474-7054

FAX: 512 474-5605

Attention: D. Hull Youngblood, Esq.

 

or to such other address or to the attention
of such other person as the recipient party has specified by prior written
notice to the sending party.

 

9.12         Consideration
for Securities; Treatment of Fees. 
The Purchaser and the Company acknowledge and agree that the fair market
value of the Warrant is $210,000.  The
Purchaser and the Company shall file their respective federal, state and local
Tax returns in a manner which is consistent with such fair market value figures
and shall not take any action or position (whether in preparation of Tax
returns, financial statements or otherwise) which is inconsistent with any of
the above.

 

9.13         No
Strict Construction.  The parties
hereto have participated jointly in the negotiation and drafting of this
Agreement.  In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.

 

9.14         Complete
Agreement.  This Agreement, the
Senior Subordination Agreement and the applicable Related Transaction Documents
embody the complete agreement and understanding among the parties and supersede
any prior agreements or representations by or among the parties, written or
oral, which may have related to the subject matter hereof in any way.

 

9.15         Indemnification.

 

(a)           In
consideration of the Purchaser’s execution and delivery of this Agreement and
acquiring the Securities hereunder and in addition to all of the Company’s
other obligations under this Agreement and in addition to all other rights and
remedies available at law or in equity, the Company shall defend, protect and
indemnify the Purchaser and each other holder the Securities and all of their
respective officers, directors, stockholders, partners, members, Affiliates,
direct or indirect owners, employees, agents, representatives, successors and
assigns (including, without 

 

54

 

limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Indemnified Parties”),
and save and hold each of them harmless against, and pay on behalf of or
reimburse such party on demand as and when incurred from and against any and
all actions, causes of action, suits, claims, losses (including diminutions in
value and consequential damages), out-of-pocket costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including, without limitation, reasonable
attorneys’ fees and disbursements, interest and penalties and all amounts paid
in investigation, defense or settlement of any of the foregoing and claims
relating to any of the foregoing (the “Indemnified Liabilities”),
incurred by the Indemnified Parties or any of them as a result of, or arising
out of, or relating to (a) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Securities; or (b) the execution, delivery, performance or enforcement
of this Agreement and any other instrument, document or agreement executed
pursuant hereto by any of the Indemnified Parties, except to the extent any
such Indemnified Liabilities are caused by the particular Indemnified Party’s
gross negligence or willful misconduct. 
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.

 

(b)           Without
limiting the generality of the indemnity set out in Section 9.15(a) above,
the Company shall defend, protect, indemnify and hold harmless the Purchaser
and all other Indemnified Parties from and against any and all actions, causes
of action, suits, losses, liabilities, damages, injuries, penalties, fees,
costs, expenses and claims of any and every kind whatsoever paid, incurred or
suffered by, or asserted against, the Purchaser or any other Indemnified Party
for, with respect to, or as a direct or indirect result of, the past, present
or future environmental condition of any property owned, operated or used by
the Company or any of its Subsidiaries, their predecessors or successors or of
any offsite treatment, storage or disposal location associated therewith,
including, without limitation, the presence on or under, or the Release, or
threatened Release into, onto or from, any such property or location of any
toxic, chemical or Hazardous Materials (including, without limitation, any
losses, liabilities, damages, injuries, penalties, fees, costs, expenses or
claims asserted or arising under CERCLA, any so-called “Superfund” or “Superlien”
law, or any other applicable federal, state, local or foreign statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards on conduct concerning, any toxic, chemical or
Hazardous Materials).

 

55

 

(c)           In
the event that any Indemnified Party is made a defendant in or party to any
action or proceeding, judicial or administrative, instituted by any third party
for any Indemnified Liabilities (any such third party action or proceeding
being referred to as a “Third Party Claim”), the Indemnified Party shall
give the Company written notice thereof as soon as practicable after becoming
aware of such Third Party Claim.  The
failure to give such notice shall not affect any Indemnified Party’s ability to
seek reimbursement for Indemnified Liabilities, unless such failure has
materially and adversely affected the Company’s ability to defend successfully
a Third Party Claim.  The Company shall
be entitled to contest and defend such Third Party Claim; provided, that it (i) has
a reasonable basis for concluding that such defense may be successful and (ii) diligently
contests and defends such Third Party Claim. 
Notice of the intention so to contest and defend shall be given by the
Company to the Indemnified Party within twenty (20) Business Days after the
Indemnified Party’s notice of such Third Party Claim (but, in all events, at
least five (5) business days prior to the date that an answer to such Third
Party Claim is due to be filed).  Such
contest and defense shall be conducted by reputable attorneys employed by the
Company.  The Indemnified Party shall be
entitled at any time, at its own cost and expense (which expense shall not
constitute an Indemnified Liability unless the Indemnified Party reasonably
determines that the Company is not adequately representing or, because of a
conflict of interest, may not adequately represent, any interests of such
Indemnified Party), to participate in such contest and defense and to be
represented by attorneys of its or their own choosing.  If the Indemnified Party elects to
participate in such defense, the Indemnified Party shall cooperate with the
Company in the conduct of such defense. 
In no event shall the Company be responsible for the expense of more
than one counsel for the Indemnified Parties. 
Neither the Indemnified Party nor the Company may concede, settle or
compromise any Third Party Claim without the consent of the other party, which
consent shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, in the event
the Company fails or is not entitled to contest and defend a claim, the
Indemnified Party shall be entitled to contest, defend and settle such Third
Party Claim at the expense of the Company.

 

(d)           In
the event any Indemnified Party should have a direct claim against the Company
that does not involve a Third Party Claim (a “Direct Claim”), the
Indemnified Party shall deliver a notice of such Direct Claim with reasonable
promptness to the Company.  If the
Company notifies the Indemnified Party that it does not dispute the Direct
Claim described in such notice or fails to notify the Indemnified Party within
forty-five (45) days after delivery of such notice by the Indemnified Party
whether the Company disputes the Direct Claim described in such notice, the
Indemnified Liabilities in the amount specified in the Indemnified Party’s
notice shall be conclusively deemed a liability of the Company, and the Company
shall pay the amount of such Indemnified Liabilities to the 

 

56

 

Indemnified Party on demand in accordance with the terms hereof.  If the Company gives notice to the
Indemnified Party that it disputes the Direct Claim, the Indemnified Party may
pursue whatever legal remedies may be available to enforce its rights under
this Agreement.

 

9.16         Payment
Set Aside.  To the extent that the
Company makes a payment or payments to the Purchaser hereunder or under the
Note or the Warrant, or the Purchaser enforce their rights or exercise their
right of setoff hereunder or thereunder, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

 

9.17         Jurisdiction
and Venue.  Each of the parties (a) submits
to the jurisdiction of any state or federal court sitting in Chicago, Illinois
in any legal suit, action or proceeding arising out of or relating to this
Agreement, the Note, the Warrant or any other Transaction Document, (b) agrees
that all claims in respect of the action or proceeding may be heard or
determined in any such court and (c) agrees not to bring any action or
proceeding arising out of or relating to this Agreement, the Note, the Warrant
or any other Transaction Document in any other court.  Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety or other security that might be required of any
other party with respect thereto.  Any
party may make service on any other party by sending or delivering a copy of
the process to the party to be served at the address and in the manner provided
for the giving of notices in Section 8.11.  Each party agrees that a final judgment in
any action or proceeding so brought shall be conclusive and may be enforced by
suit on the judgment or in any other manner provided by law.  Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of
the Purchaser to bring proceedings against the Company in the courts of any
other jurisdiction.  To the extent
provided by law, should the Company, after being so served, fail to appear or
answer to any summons, complaint, process or papers so served within the number
of days prescribed by law after the mailing thereof, the Company shall be
deemed in default and an order and/or judgment may be entered by the court
against the Company, as demanded or prayed for in such summons, complaint,
process or papers.  The exclusive choice
of forum for Company set forth in this Section 9.17 shall not be
deemed to preclude the enforcement by the Purchaser or the holders of the Note
or the Warrant of any judgment obtained in any other forum or the taking by the
Purchaser or any holders of the Note or the Warrant of any action to enforce
the same in any other appropriate jurisdiction, and Company hereby waives the
right to collaterally attack any such judgment or action.

 

57

 

9.18         WAIVER
OF RIGHT TO JURY TRIAL.  THE COMPANY,
THE PURCHASER, THE HOLDERS OF THE NOTE AND THE HOLDERS OF THE WARRANT HEREBY
WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF
THIS AGREEMENT, THE NOTE OR THE WARRANT OR THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT RESPECTIVELY, THEREOF.  THE COMPANY AGREES THAT THIS SECTION 9.18
IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGE THAT THE
PURCHASER WOULD NOT PURCHASE THE SECURITIES HEREUNDER IF THIS SECTION 9.18
WERE NOT PART OF THIS AGREEMENT.

 

9.19         Certain
Waivers.  The Company hereby waives
diligence, presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of the Note, and expressly agrees that the Note, or any
payment thereunder, may be extended from time to time and that the holders
thereof may accept security for the Note or release security for the Note, all
without in any way affecting the liability of the Company thereunder.

 

9.20         Transfer
Restrictions.  The Securities
acquired pursuant hereto are subject to the applicable transfer restrictions
contained herein, in the Note, the Warrant and the Stockholders’ Agreement, as
the case may be.

 

[SIGNATURE
PAGE FOLLOWS]

 

58

 

Note and Warrant Purchase Agreement Signature
Page

 

IN WITNESS WHEREOF, the parties hereto have executed
this Note and Warrant Purchase Agreement on the date first written above.

 

	
  COMPANY: 

  	
  PURCHASER: 

  
	
   

  	
   

  
	
  ISI
  DETENTION CONTRACTING GROUP, 

  INC. 

  	
  WILLIAM
  BLAIR MEZZANINE 

  CAPITAL FUND III, L.P. 

  
	
   

  	
   

  
	
  By :

  	
   

  	
   

  	
  By:

  	
  William
  Blair Mezzanine Capital

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Partners III,
  L.L.C.

  
	
  Title:

  	
   

  	
   

  	
   

  	
  its General
  Partner 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name: David
  M. Jones 

  
	
   

  	
  Its:
  Managing Director

  
								

 

59

 

	
  DETENTION
  CONTRACTING GROUP, 

  LTD., a Texas limited partnership 

  	
   

  	
  ISI
  DETENTION CONTRACTING 

  GROUP, INC., a Texas corporation 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: ISI
  Detention Contracting Group, Inc., 

  	
   

  	
  By:

  	
   

  
	
  a Texas
  corporation 

  	
   

  	
  Name:

  	
   

  
	
  its General
  Partner 

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  By :

  	
   

  	
   

  	
   

  
	
  Name :

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ISI
  DETENTION CONTRACTING GROUP, 

  INC., a California corporation 

  	
   

  	
  ISI
  DETENTION CONTRACTING 

  GROUP, INC., a New Mexico corporation 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By :

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name :

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  ISI
  DETENTION SYSTEMS, INC., a Texas 

  corporation 

  	
   

  	
  ISI SYSTEMS,
  LTD., a Texas limited 

  partnership 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By :

  	
   

  	
   

  	
  By: ISI Detention
  Systems, Inc., a Texas 

  
	
  Name :

  	
   

  	
   

  	
  corporation 

  
	
  Title:

  	
   

  	
   

  	
  its General
  Partner 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  METROPLEX
  CONTROL SYSTEMS, INC., 

  a Texas corporation 

  	
   

  	
  ISI
  CONTROLS, LTD., a Texas limited 

  partnership 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By :

  	
   

  	
   

  	
  By: Metroplex
  Control Systems, Inc.,  

  
	
  Name :

  	
   

  	
   

  	
  a Texas
  corporation 

  
	
  Title:

  	
   

  	
   

  	
  its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
																		

 

60

 

	
  METROPLEX
  COMMERCIAL FIRE AND 

  	
   

  	
  MCFSA, LTD.,
  a Texas limited partnership 

  
	
  SECURITY
  ALARMS, INC., a Texas 

  	
   

  	
   

  
	
  corporation 

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  Metroplex Commercial Fire and 

  
	
   

  	
   

  	
  Security
  Alarms, Inc., a Texas corporation 

  
	
  By :

  	
   

  	
   

  	
  its General
  Partner 

  
	
  Name :

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
									

 

61

 

EXHIBIT A

 

Form Note

 

(See Attached)

 

A-1

 

EXHIBIT B

 

Form of Warrant

 

(See Attached)

 

B-1

 

EXHIBIT C

 

Stockholders’ Agreement

 

(See attached)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}]]