| December 14, 2009 | $5,951,609.00 |
| 1. | 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
ten percent (10.00%) per annum (“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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| 2. | Payment of Principal on Note. |
| (a) | 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”). |
| (b) | Optional Prepayments. In the event of a sale of the Borrower approved
by the Holder, at any time after the Original Date of Issuance, the Borrower, at its
option, may, without premium or penalty, prepay all or any portion of this Note 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. |
| (c) | Mandatory Prepayment. In the event of an IPO or a Change in Control of
the Borrower or Parent, the Borrower shall, without premium or penalty, prepay this
Note in full at a prepayment price of one hundred percent (100%) of the Principal
Balance, plus accrued and unpaid interest to the prepayment date. |
| (d) | Notice of Prepayments. The Borrower shall give notice (which shall be
irrevocable) to the Holder of this Note 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. |
| 3. | Payment Schedule. Set forth as Exhibit A attached hereto is a schedule which
reflects the amount of Current Interest payable quarterly and the Principal Balance of this
Note at the beginning and at the end of each quarter during the term of this Note (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). Upon any voluntary
or mandatory prepayment of all or any portion of the Principal Balance, the Current 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 and the interest accruing and payable thereafter under this Note. 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. |
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| 4. | Transfer and Exchange; Replacement; Cancellation. |
| (a) | Transfer and Exchange. |
| (i) | Subject to any restrictions contained in this Note or the Note
Purchase Agreement, this Note 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 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. |
| (ii) | Upon surrender of this Note 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. |
| (b) | Replacement. Upon receipt of evidence reasonably satisfactory to the
Borrower (an affidavit of the Holder of this Note shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of this Note 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, the Borrower
shall (at its expense) execute and deliver, in lieu thereof, a new Note of the same
class and representing the same rights and obligations represented by such lost,
stolen, destroyed or mutilated Note dated so that there will be no loss of interest on
this Note. |
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| 5. | Payments. All payments to be made to the Holder of this Note 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 after 2:00 p.m. (Chicago time) on any
day will be deemed to have been received on the next following Business Day. |
| 6. | 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: |
| 7. | 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. |
| 8. | Governing Law. This Note 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. |
| 9. | Liabilities. In furtherance and not in limitation of the rights and remedies of the
Holder of this Note hereunder or at law, the Holder of this Note may, subject to the Senior
Subordination Agreement, proceed under this Note against the Borrower in its absolute and sole
discretion for any of the liabilities of the Borrower under this Note or any other liability
or obligation of the Borrower arising hereunder. |
| 10. | Events of Default. Upon the occurrence of any “Event of Default,” as described and
specified in the Note Purchase Agreement, the Holder shall, subject to the Senior
Subordination Agreement, 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. | Usury Laws. It is the intention of the Borrower and the Holder of this Note to
conform strictly to all applicable usury laws now or hereafter in force, and any interest
payable under this Note 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 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, or if this Note
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 shall under no circumstances exceed the
maximum legal rate upon the Principal Balance of this Note 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, or if this Note has been repaid, then such excess shall be rebated to the Borrower. |
| 12. | Waiver. The Borrower hereby waives diligence, presentment, protest and demand and
notice of protest and demand, dishonor and nonpayment of this Note, and expressly agrees that
this Note, or any payment hereunder, may be extended from time to time and that the Holder
hereof may accept security for this Note or release security for this Note, all without in any
way affecting the liability of the Borrower hereunder. |
| 13. | Section 163 of the Internal Revenue Code. Notwithstanding any other provisions
contained in this Note, payments under this Note shall not be deferred beyond any date if
deferral beyond such date would result in this Note 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. |
| 14. | Amended and Restated. This Note replaces in its entirety and is in substitution for
but not in payment of that certain Third Amended and Restated Senior Subordinated Promissory
Note, dated as of January 8, 2009 (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 $5,951,609.00, and does not and shall not be deemed
to constitute a novation thereof. The 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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| BORROWER: | ISI SECURITY GROUP, INC., a Delaware corporation, formerly known as ISI Detention Contracting Group, Inc. | |||||
| By: | /s/ Donald F. Neville | |||||
| Donald F. Neville | ||||||
| Chief Financial Officer | ||||||
| Quarter Ending | Days O/S | Beginning Principal | Applicable Interest Rate | Current Interest Owed | PIK Interest Owed | Total Interest Owed | Principal Paid | Interest Paid/to be Paid | Ending Principal | |||||||||||||||||||||||||||
September 30, 2009 |
92 | $ | 5,951,609.00 | 11.58 | % | $ | 176,127.95 | $ | — | $ | 176,127.95 | $ | — | $ | (176,127.95 | ) | $ | 5,951,609.00 | ||||||||||||||||||
December 14, 2009 |
75 | $ | 5,951,609.00 | 11.58 | % | 143,582.57 | 143,582.57 | — | — | 6,095,191.57 | ||||||||||||||||||||||||||
December 31, 2009 |
17 | 5,951,609.00 | 10.00 | % | 28,104.82 | — | 28,104.82 | — | (171,687.39 | ) | 5,951,609.00 | |||||||||||||||||||||||||
March 31, 2010 |
90 | 5,951,609.00 | 10.00 | % | 148,790.23 | — | 148,790.23 | — | (148,790.23 | ) | 5,951,609.00 | |||||||||||||||||||||||||
June 30, 2010 |
91 | 5,951,609.00 | 10.00 | % | 150,443.45 | — | 150,443.45 | — | (150,443.45 | ) | 5,951,609.00 | |||||||||||||||||||||||||
September 30, 2010 |
92 | 5,951,609.00 | 10.00 | % | 152,096.67 | — | 152,096.67 | — | (152,096.67 | ) | 5,951,609.00 | |||||||||||||||||||||||||
December 31, 2010 |
92 | 5,951,609.00 | 10.00 | % | 152,096.67 | — | 152,096.67 | — | (152,096.67 | ) | 5,951,609.00 | |||||||||||||||||||||||||
January 31, 2011 |
31 | 5,951,609.00 | 10.00 | % | 51,249.97 | — | 51,249.97 | — | (51,249.97 | ) | 5,951,609.00 | |||||||||||||||||||||||||