EIGHTH AMENDMENT AND WAIVER TO NOTE AND WARRANT PURCHASE AGREEMENT

EXHIBIT 10.1

EIGHTH AMENDMENT AND WAIVER
TO NOTE AND WARRANT PURCHASE AGREEMENT

THIS EIGHTH AMENDMENT AND WAIVER TO NOTE AND WARRANT PURCHASE AGREEMENT (this “ Amendment ”) is dated as of August 3, 2009 (the “ Eighth Amendment Effective Date ”) by and among ISI Security Group, Inc., a Delaware corporation formerly known as ISI Detention Contracting Group, Inc. (the “ Company ”), and William Blair Mezzanine Capital Fund III, L.P., a Delaware limited partnership (the “ Purchaser ”).

RECITALS:

WHEREAS , the Company, the Purchaser and the Guarantors (as such term is defined in the Purchase Agreement (as defined below)) (such Guarantors are parties to the Purchase Agreement solely for the purposes of Section 8 thereof) previously entered into that certain Note and Warrant Purchase Agreement, dated as of October 22, 2004, as amended by that certain Omnibus First Amendment to Note and Warrant Purchase Agreement and Warrant dated as of November 1, 2005, by that certain Omnibus Second Amendment to Note and Warrant Purchase Agreement and Warrant, dated as of July 31, 2007, by that certain Third Amendment to Note and Warrant Purchase Agreement, dated as of January 2, 2008, by that certain Fourth Amendment to Note and Warrant Purchase Agreement, dated as of June 25, 2008, by that certain Fifth Amendment and Waiver to Note and Warrant Purchase Agreement, dated as of November 13, 2008, by that certain Sixth Amendment to Note and Warrant Purchase Agreement, dated as of January 8, 2009 and by that certain Seventh Amendment to Note and Warrant Purchase Agreement, dated as of March 30, 2009 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Purchase Agreement ”);

WHEREAS , the Company acknowledges that a certain default has occurred and is continuing relating to a negative covenant under the Purchase Agreement, and the Purchaser is willing to provide a limited waiver in respect of such default, subject to the terms and conditions of this Amendment;

WHEREAS , in connection with the default, the Company wishes, and the Purchaser is willing to, amend the Purchase Agreement, subject to the terms and conditions of this Amendment;

WHEREAS , this Amendment shall constitute a Transaction Document, and these Recitals shall be construed as part of this Amendment; and

WHEREAS , capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Purchase Agreement.

NOW, THEREFORE , in consideration of the above premises, the agreements contained herein and other good and valuable consideration, the adequacy, sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:

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Section 1. Amendment to the Purchase Agreement. Section 1.1 of the Purchase Agreement is hereby amended by amending and restating the following definition in its entirety:

““ Permitted Indebtedness ” means:

(a) the Obligations;

(b) the Senior Debt;

(c) Indebtedness (other than with regard to the Green Wing Lease as described in subpart (k) below) 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, excluding real property leases, requiring payments not to exceed $500,000 in the aggregate for the Company and its Subsidiaries during any Fiscal Year of the Company;

(h) operating lease obligations solely with respect to real property leases (excluding the real property leases described in subpart (i) below) (1) requiring payments not to exceed $850,000 in the aggregate for the Company and its Subsidiaries during the Fiscal Year ending December 31, 2009; (2) requiring payments not to exceed $1,000,000 in the aggregate for the Company and its Subsidiaries during the Fiscal Year ending December 31, 2010; (3) requiring payments not to exceed $1,100,000 in the aggregate for the Company and its Subsidiaries during the Fiscal Year ending December 31, 2011; and (4) requiring payments not to exceed $1,200,000 in the aggregate for the Company and its Subsidiaries during the Fiscal Year ending December 31, 2012 and during each Fiscal Year of the Company and its Subsidiaries thereafter;

(i) operating lease obligations solely with respect to real property leases entered into by the Company and its Subsidiaries, solely with respect to residential property utilized by their employees in connection with the completion of work pursuant to contracts entered into in the course of ordinary course of business (for which the cost of the lease payments has been or will be included in the cost to complete for such work required by such contract), during any Fiscal Year of the Company;

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