Contract
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Execution
Copy
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The
security represented by this instrument was originally issued on January 2,
2008 (“Original Date
of Issuance”), and has not been registered under the Securities Act of
1933, as amended (the “Act”), or under any
applicable state securities laws, and may not be offered, sold or otherwise
transferred, assigned, pledged or hypothecated unless and until registered under
the Act and applicable state securities laws, or unless the Borrower (as defined
below) has received an opinion of counsel satisfactory to the Borrower and its
counsel that such registration is not required. The transfer of such
security is subject to the conditions specified in that certain Note and Warrant
Purchase Agreement, dated as of October 22, 2004 (as amended, restated or
otherwise modified from time to time), by and among the Borrower, Xxxxxxx Xxxxx
Xxxxxxxxx Capital Fund III, L.P., a Delaware limited partnership, and the
Guarantors party thereto from time to time.
The
obligations evidenced hereby are subordinate in the manner and to the extent set
forth in that certain Subordination Agreement, dated as of October 22,
2004, as amended by that certain First Amendment to Subordination Agreement,
dated as of November 1, 2005, and that certain Reaffirmation and Second
Amendment to Subordination Agreement, dated as of July 31, 2007 (as further
amended, restated, supplemented of otherwise modified from time to time, the
“Subordination
Agreement”), among, without limitation, Xxxxxxx Xxxxx Xxxxxxxxx Capital
Fund III, L.P., a Delaware limited partnership, ISI Security Group, Inc., a
Delaware corporation formerly known as ISI Detention Contracting Group, Inc.
(the “Borrower”), and The
PrivateBank and Trust Company (successor-in-interest to LaSalle Bank National
Association) (the “Senior Lender”), to
the obligations (including interest) owed by Xxxxxxxx to the holders of all of
the notes issued pursuant to that certain Loan and Security Agreement, dated as
of October 3, 2008, between Xxxxxxxx and Senior Lender, as such Agreement
has been and may hereafter be supplemented, modified, restated or amended from
time to time; and each holder hereof, by its acceptance hereof, shall be bound
by the provisions of the Subordination Agreement.
AMENDED AND RESTATED SENIOR
SUBORDINATED PROMISSORY NOTE A
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January 8,
2009
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$5,000,000.00
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ISI
Security Group, Inc., a Delaware corporation formerly known as ISI Detention
Contracting Group, Inc. and d/b/a “Argyle Security USA” (successor-by-merger to
ISI Security Group, Inc., an unrelated entity) (the “Borrower”), hereby
promises to pay to the order of Xxxxxxx Xxxxx Xxxxxxxxx Capital Fund III, L.P.,
a Delaware limited partnership, or its assignee (the “Holder”), the
principal amount of Five Million and No/100 Dollars ($5,000,000.00) (the “Original Principal
Amount”), together with interest thereon calculated from the date hereof
(the “Date of
Issuance”), in accordance with the provisions of this instrument (this
“Note
A”). For purposes of this Note A, the term “Principal Balance”
shall mean an amount equal to (a) the Original Principal Amount plus (b) the
aggregate amount of the Deferred Interest (as defined below) capitalized and
added to principal under this Note A from time to time after the Date of
Issuance minus
(c) all payments of principal made by the Borrower from time to time
pursuant to the terms of this Note A plus (d) all amounts
added to the Original Principal Amount pursuant to the terms of this Note A or
the Note Purchase Agreement (as defined below).
This Note
A was issued pursuant to the terms of that certain Note and Warrant Purchase
Agreement, dated as of October 22, 2004 (as amended, restated or otherwise
modified from time to time, including, without limitation, pursuant to that
certain Sixth Amendment to Note and Warrant Purchase Agreement, dated as of
January 8, 2009, the “Note Purchase
Agreement”), by and among the Borrower, the Holder and the Guarantors (as
defined therein) party thereto from time to time. This Note A is the
“Note A” referred to in the Note Purchase Agreement. The Note
Purchase Agreement contains terms governing the rights and obligations of the
Holder of this Note A and all provisions of the Note Purchase Agreement are
hereby incorporated herein in full by reference. Except as otherwise
indicated herein, capitalized terms used in this Note A have the same meanings
set forth in the Note Purchase Agreement.
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1.
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Payment of
Interest.
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(a)
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Current
Interest. Except as otherwise expressly provided herein
or as specifically provided in the Note Purchase Agreement, the Principal
Balance of this Note A shall bear interest (computed on the basis of
actual days elapsed in a 360-day year) at the rate of (i) eleven and
fifty-eight hundredths percent (11.58%) per annum from the date hereof
through and including September 30, 2010 and (ii) fifteen and
fifty-eight hundredths percent (15.58%) per annum from October 1,
2010 and at all times thereafter (“Current
Interest”). In addition, default interest shall accrue
on the unpaid Principal Balance of this Note A at the rate of two percent
(2%) per annum after the occurrence and during the continuance of an Event
of Default. Current Interest accruing on the Principal Balance
of this Note A shall be payable quarterly in arrears beginning on
March 31, 2009 in accordance with the payment schedule on Exhibit A
attached hereto and made a part hereof (assuming for purposes of Exhibit A
that no portion of the Principal Balance of this Note A is prepaid and
that this Note A is not accelerated prior to the Maturity
Date). In addition, all accrued and unpaid Current Interest on
this Note A (together with any accrued and unpaid default interest) shall
be paid upon the payment in full of the entire outstanding Principal
Balance of this Note A (whether on the Maturity Date or as a result of the
acceleration of the maturity thereof), or if a prepayment of this Note A
is made, on the Principal Balance prepaid, and, if payment in full is not
paid when due, thereafter on demand. Unless prohibited under
applicable law, any accrued interest (whether Current Interest or default
interest) which is not paid on the date on which it is due and payable
shall be capitalized and shall bear interest at the same rate at which
interest is then accruing on the Principal Balance of this Note A until
such interest is paid. Any accrued interest (whether Current
Interest or default interest) which for any reason has not theretofore
been paid shall be paid in full on the date on which the final principal
payment on this Note A is made (whether on the Maturity Date or as a
result of the acceleration of the maturity thereof). Interest
shall accrue on any payment due under this Note A at the rates set forth
herein until such time as payment therefor is actually delivered to the
Holder.
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(b)
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Deferred
Interest. In addition to Current Interest payable
pursuant to Section 1(a)
above, prior to the Maturity Date, the Principal Balance of this Note A
shall bear deferred interest (computed on the basis of actual days elapsed
in any 360-day year) at the rate of 8.42% per annum (“Deferred
Interest”). In addition, default interest shall accrue
on the unpaid Principal Balance of this Note A at the rate of two percent
(2%) per annum after the occurrence and during the continuance of an Event
of Default. Deferred Interest accruing on the Principal Balance
of this Note A shall be compounded quarterly and capitalized as principal
on the last Business Day of each calendar quarter beginning on March 31,
2008 during the term hereof and shall be payable in accordance with the
payment schedule set forth on Exhibit A
attached hereto and made a part hereof (assuming for purposes of Exhibit A
that no portion of the Principal Balance of this Note A is prepaid and
that this Note A is not accelerated prior to the Maturity
Date). In addition, all accrued and unpaid Deferred Interest on
this Note A (together with any accrued and unpaid default interest) shall
be paid upon the payment in full of the entire outstanding Principal
Balance of this Note A (whether on the Maturity Date or as a result of the
acceleration of the maturity thereof), or if a prepayment of this Note A
is made, on the Principal Balance prepaid, and, if payment in full is not
paid when due, thereafter on demand. Interest shall
accrue on any payment due under this Note A at the rates set forth herein
until such time as payment therefor is actually delivered to the
Holder.
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2.
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Payment of Principal
on Note A.
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(a)
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Scheduled
Payments. The Borrower shall pay the outstanding
principal amount of this Note A, together with all accrued and unpaid
interest on the principal amount being repaid, on January 31, 2011
(the “Maturity
Date”).
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(b)
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Optional
Prepayments. The Borrower may not prepay any portion of
this Note A at any time from the Original Date of Issuance through the
date which is six (6) months after the Original Date of
Issuance. Subject to the terms of Section 2(c)
below, at any time after the date which is six months after the Original
Date of Issuance (or, in the event of an IPO or a sale of the Borrower
approved by the Holder, at any time after the Original Date of Issuance),
the Borrower, at its option, may prepay all or any portion of this Note A
on any scheduled quarterly payment date at a prepayment price of one
hundred percent (100%) of the Principal Balance to be prepaid, plus
accrued and unpaid interest to the prepayment
date.
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(c)
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Prepayment
Premium. Subject to the terms of Section 2(b)
above, the Borrower, at its option, may prepay the Principal Balance of
this Note A, in minimum increments of $1,000,000 plus (i) accrued and
unpaid interest to the prepayment date and (ii) a prepayment fee
calculated as follows:
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Prepayment
Date
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Prepayment
Fee
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On
or after July 2, 2007 but prior to
January 1,
2009
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5%
multiplied by the Principal Balance prepayment amount
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On
or after January 1, 2009 but prior to
February
1, 2009
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4.6%
multiplied by the Principal Balance prepayment amount
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On
or after February 1, 2009 but prior to
March
1, 2009
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4.2%
multiplied by the Principal Balance prepayment amount
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On
or after March 1, 2009 but prior to
April
1, 2009
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3.8
% multiplied by the Principal Balance prepayment amount
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On
or after April 1, 2009 but prior to
May
1, 2009
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3.4%
multiplied by the Principal Balance prepayment amount
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On
or after May 1, 2009 but prior to
June
1, 2009
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3.0%
multiplied by the Principal Balance prepayment amount
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On
or after June 1, 2009 but prior to
July
1, 2009
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2.6%
multiplied by the Principal Balance prepayment amount
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On
or after July 1, 2009 but prior to
August
1, 2009
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2.2%
multiplied by the Principal Balance prepayment amount
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On
or after August 1, 2009 but prior to
September
1, 2009
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1.8%
multiplied by the Principal Balance prepayment amount
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On
or after September 1, 2009 but prior to
October
1, 2009
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1.4%
multiplied by the Principal Balance prepayment amount
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On
or after October 1, 2009 but prior to
November
1, 2009
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1.0%
multiplied by the Principal Balance prepayment amount
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On
or after November 1, 2009 but prior to
December
1, 2009
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0.6%
multiplied by the Principal Balance prepayment amount
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On
or after December 1, 2009 but prior to
January 1,
2010
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0.2%
multiplied by the Principal Balance prepayment amount
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On
or after January 1, 2010
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No
Fee
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(d)
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Notice of
Prepayments. The Borrower shall give notice (which shall
be irrevocable) to the Holder of this Note A of each prepayment not later
than 1:00 p.m. (Chicago time) on
the Business Day immediately preceding the date of prepayment, specifying
the aggregate Principal Balance to be prepaid and the prepayment
date. Once any such notice has been given, the Principal
Balance specified in such notice, together with all accrued and unpaid
interest on the amount of each such prepayment to the date of payment, and
any prepayment premium, shall become due and payable on such date of
payment.
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3.
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Payment
Schedule. Set forth as Exhibit A
attached hereto is a schedule which reflects the amount of Current
Interest payable quarterly, the amount of Deferred Interest which accrues
and is payable and the Principal Balance of this Note A at the beginning
and at the end of each quarter during the term of this Note A (assuming
for purposes of Exhibit A
that no portion of the Principal Balance of this Note A is prepaid and
that this Note A is not accelerated prior to the Maturity
Date). Upon any voluntary or mandatory prepayment of all or any
portion of the Principal Balance, the Current Interest and the Deferred
Interest reflected on Exhibit A
attached hereto shall be recomputed based upon the remaining Principal
Balance. The Holder shall amend Exhibit A
hereto to reflect such recomputation and deliver the same to the Borrower,
and such amended Exhibit A
shall constitute rebuttable presumptive evidence of the Principal Balance
owing and unpaid on this Note A and the interest accruing and payable
thereafter under this Note A. The failure to amend Exhibit A
hereto or to deliver the same to the Borrower shall not, however, affect
the obligations of the Borrower to pay the Principal Balance and all
accrued and unpaid interest on the Principal Balance of this Note
A.
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4.
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Transfer and Exchange;
Replacement; Cancellation.
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(a)
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Transfer and
Exchange.
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(i)
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Subject
to any restrictions contained in this Note A or the Note Purchase
Agreement, this Note A and all rights and obligations hereunder are
transferable, in whole or in part, to any Person (excluding any Person
that is a direct or indirect competitor of the Borrower), without charge
to the Holder, upon surrender of this Note A with a properly executed
assignment in form and substance reasonably acceptable to the Borrower at
the principal office of the Borrower. To facilitate any such
transfer, the Borrower hereby covenants to execute such documents and
perform such acts as may be necessary or appropriate in the Holder’s sole
judgment for the Holder to effect any such
transfer.
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(ii)
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Upon
surrender of this Note A for transfer or for exchange, the Borrower, at
its expense, will (subject to the conditions set forth herein and in the
Note Purchase Agreement) execute and deliver in exchange therefor a new
Note or Notes, as the case may be, as requested by the Holder or
transferee, which aggregates the Principal Balance of such Note, issued as
the Holder or such transferee may request, dated so that there will be no
gain or loss of interest on such surrendered Note and otherwise of like
tenor. The issuance of new Notes shall be made without charge
to the Holder(s) of the surrendered Note for any issuance tax in respect
thereof or other cost incurred by the Borrower in connection with such
issuance.
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(b)
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Replacement. Upon
receipt of evidence reasonably satisfactory to the Borrower (an affidavit
of the Holder of this Note A shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of this Note A and, in the case
of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Borrower (provided that if the Holder is a
financial institution or other institutional investor, its own agreement
of indemnity shall be satisfactory), or, in the case of any such
mutilation, upon the surrender of this Note A, the Borrower shall (at its
expense) execute and deliver, in lieu thereof, a new Note A of the same
class and representing the same rights and obligations represented by such
lost, stolen, destroyed or mutilated Note A dated so that there will be no
loss of interest on this Note A.
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5.
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Payments. All
payments to be made to the Holder of this Note A shall be made by wire
transfer to the Holder in lawful money of the United States of America in
same-day available funds. Any payment received by the Holder of
this Note A after 2:00 p.m. (Chicago time) on any day will be deemed to
have been received on the next following Business
Day.
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6.
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Place of
Payment. Payments of principal, interest, premium and
other amounts shall be made by wire transfer of immediately available
funds to the following account of the Holder
hereof:
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ABA
No.: 026 009 593
Account
No.: 5800441577
Account
Name: Xxxxxxx Xxxxx Xxxxxxxxx Capital Fund III, L.P.
Bank: Bank
of America
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or to
such other account or to the attention of such other Person as specified by the
Holder in a prior written notice to the Borrower.
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7.
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Business
Days. If any payment is due, or any time period for
giving notice or taking action expires, on a day which is not a Business
Day, the payment shall be due and payable on, and the time period shall
automatically be extended to, the next Business Day immediately following,
and interest shall continue to accrue at the required rate hereunder until
any such payment is made.
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8.
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Governing
Law. This Note A shall be governed and construed in
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (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.
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9.
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Liabilities. In
furtherance and not in limitation of the rights and remedies of the Holder
of this Note A hereunder or at law, the Holder of this Note A may proceed
under this Note A against the Borrower in its absolute and sole discretion
for any of the liabilities of the Borrower under this Note A or any other
liability or obligation of the Borrower arising
hereunder.
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10.
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Events of
Default. Upon the occurrence of any “Event of Default,” as
described and specified in the Note Purchase Agreement, the Holder shall
have all of the rights and remedies in accordance with, and as provided
by, the terms of the Note Purchase Agreement. In addition, the
Holder shall be entitled to recover from the Borrower any and all costs
and expenses, including reasonable attorneys’ fees and court costs,
incurred in enforcing its rights
hereunder.
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11.
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Usury
Laws. It is the intention of the Borrower and the Holder
of this Note A to conform strictly to all applicable usury laws now or
hereafter in force, and any interest payable under this Note A shall be
subject to reduction to an amount not in excess of the maximum legal
amount allowed under the applicable usury laws as now or hereafter
construed by the courts having jurisdiction over such
matters. If the maturity of this Note A is accelerated by
reason of an election by the Holder hereof resulting from an Event of
Default, voluntary prepayment by the Borrower or otherwise, then the
earned interest may never include more than the maximum amount permitted
by law, computed from the date hereof until payment, and any interest in
excess of the maximum amount permitted by law shall be canceled
automatically and, if theretofore paid, shall at the option of the Holder
hereof either be rebated to the Borrower or credited on the Principal
Balance of this Note A, or if this Note A has been paid, then the excess
shall be rebated to the Borrower. The aggregate of all interest
(whether designated as interest, service charges, points or otherwise)
contracted for, chargeable, or receivable under this Note A shall under no
circumstances exceed the maximum legal rate upon the Principal Balance of
this Note A remaining unpaid from time to time. If such
interest does exceed the maximum legal rate, it shall be deemed a mistake
and such excess shall be canceled automatically and, if theretofore paid,
at the option of the Holder hereof either be rebated to the Borrower or
credited on the Principal Balance of this Note A, or if this Note A has
been repaid, then such excess shall be rebated to the
Borrower.
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12.
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Waiver. The
Borrower hereby waives diligence, presentment, protest and demand and
notice of protest and demand, dishonor and nonpayment of this Note A, and
expressly agrees that this Note A, or any payment hereunder, may be
extended from time to time and that the Holder hereof may accept security
for this Note A or release security for this Note A, all without in any
way affecting the liability of the Borrower
hereunder.
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13.
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Section 163 of
the Internal Revenue Code. Notwithstanding any other
provisions contained in this Note A, payments under this Note A shall not
be deferred beyond any date if deferral beyond such date would result in
this Note A being treated as an “applicable high yield discount
obligation” under Section 163(e)(5) and Section 163(i) of the
Code. The preceding sentence shall apply only to the extent
necessary to achieve the objective herein described and shall apply only
to amounts treated as interest or original issue discount under the
Code.
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14.
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Amended and
Restated. This Note replaces in its entirety and is in
substitution for but not in payment of that certain Senior Subordinated
Promissory Note A, dated as of January 2, 2008 (as amended, restated,
supplemented or otherwise modified from time to time, the “Prior Note”),
made by the Borrower in favor of the Holder in the aggregate maximum
principal amount of $5,000,000, and does not and shall not be deemed to
constitute a novation thereof. Such Prior Note shall be of no
further force and effect upon the execution of this Note; provided,
however, that all outstanding indebtedness, including, without limitation,
principal and interest under the Prior Note as of the date of this Note,
is hereby deemed indebtedness evidenced by this Note and is incorporated
herein by this reference.
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[SIGNATURE
PAGE FOLLOWS]
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Amended
and Restated Senior Subordinated Promissory Note A Signature Page
IN
WITNESS WHEREOF, the Borrower has caused this Note A to be executed and
delivered by a duly authorized officer as of the date first written
above.
| ISI SECURITY GROUP, INC., a Delaware corporation formerly known as ISI Detention Contracting Group, Inc. and d/b/a “Argyle Security USA” | |||
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By:
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/s/ Xxx Xxxxxxxxxx | |
| Name: | Xxx Xxxxxxxxxx | ||
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Title:
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Chief Executive Officer | ||
EXHIBIT A
See
attached.
