The security
represented by this instrument was originally issued on
October 22, 2004 (“ 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 or 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.
THIS NOTE
HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT AND, AS REQUIRED BY
TREASURY REGULATION §1.1275-3(b)(1), INFORMATION REGARDING THE
ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE
AND THE YIELD TO MATURITY MAY BE OBTAINED FROM THE ISSUER HEREOF AT
ISI DETENTION CONTRACTING GROUP, INC., 12903 DELIVERY DRIVE SAN
ANTONIO, TEXAS 78247.
THIRD AMENDED AND
RESTATED
SENIOR SUBORDINATED PROMISSORY
NOTE
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January 8,
2009
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$5,951,609.00
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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 Nine Hundred Fifty-One
Thousand Six Hundred Nine and No/100 Dollars ($5,951,609.00)
(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
”). For purposes of this Note, the term “
Principal Balance ” shall mean an amount equal to
(a) the Original Principal Amount minus (b) all
payments of principal made by the Borrower from time to time
pursuant to the terms of this Note plus (c) all amounts
added to the Original Principal Amount pursuant to the terms of
this Note or the Note Purchase Agreement (as defined
below).
This Note 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 is the “Note” referred to in
the Note Purchase Agreement. The Note Purchase Agreement
contains terms governing the rights and obligations of the Holder
of this Note 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
have the same meanings set forth in the Note Purchase
Agreement.
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Payment of
Interest . Except as otherwise expressly
provided herein or as specifically provided in the Note Purchase
Agreement, the Principal Balance of this Note 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 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 shall be payable quarterly in arrears 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 is prepaid and that this Note is not accelerated prior to
the Maturity Date). In addition, all accrued and unpaid
Current Interest on this Note (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 (whether on the
Maturity Date or as a result of the acceleration of the maturity
thereof), or if a prepayment of this Note 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 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 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 at the rates set forth herein until
such time as payment therefor is actually delivered to the
Holder.
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Payment of
Principal on Note .
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Scheduled
Payments . The
Borrower shall pay the outstanding principal amount of this Note,
together with all accrued and unpaid interest on the principal
amount being repaid, on January 31, 2011 (the “
Maturity Date ”).
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Optional
Prepayments . At any time after the second
(2 nd
) anniversary of the Original Date
of Issuance (or, in the event of
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