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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, William Blair
Mezzanine 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, William Blair Mezzanine 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 Borrower to the holders of all of the notes
issued pursuant to that certain Loan and Security Agreement, dated
as of October 3, 2008, between Borrower 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 William Blair Mezzanine
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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(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&nbs
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