UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
______________
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported): December
8, 2006
ARGYLE
SECURITY ACQUISITION CORPORATION
(Exact
Name of Registrant as Specified in Charter)
|
Delaware
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000-51639
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20-3101079
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(State
or Other Jurisdiction of Incorporation)
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|
(Commission
File Number)
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(IRS
Employer Identification No.)
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200
Concord Plaza, Suite 700 San Antonio, TX
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78216
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
(210)
828-1700
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of registrant under any of the following
provisions:
[
] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[X]
Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR
240.14a-12(b))
[
] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
[
]
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item
1.01 Entry
into a Material Definitive Agreement.
On
December 8, 2006, Argyle Security Acquisition Corporation (the “Company”), and
its newly-formed,
wholly-owned subsidiary ISI Security Group, Inc. (“Merger Sub”), entered into a
merger agreement with ISI Detention Contracting, Inc. (“ISI”) pursuant to which
Merger Sub would merger with and into ISI, resulting in ISI becoming a wholly
owned subsidiary of the Company. At the closing of the merger, the stockholders
of ISI will receive 1,180,000 shares of Argyle common stock and $16,300,000
in
cash. In addition, if ISI’s adjusted earnings before interest, taxes,
depreciation and amortization (“EBITDA”) for the year ended December 31, 2006
are greater than $4,500,000 and its backlog of orders (defined as unearned
revenue on projects that have been booked) at February 28, 2007 is equal to
or
greater than $80,000,000, Argyle will pay the stockholders of ISI an additional
$1,900,000. The calculation of ISI’s adjusted EBITDA is subject to an adjustment
of $900,000 relating to certain expenses that the Company and ISI agreed should
not reduce EBITDA. The Company will also assume approximately $6,000,000 in
long-term debt and up to $9,000,000 that may be outstanding pursuant to a
revolving credit line, exclusive of capitalized leases. As of September 30,
2006
there was approximately $4,700,000 outstanding under the credit
line.
The
merger agreement provides that the Company will, within 30 days after the
closing of the merger, file a registration statement relating to the resale
of
the shares of the Company’s common stock acquired by the stockholders of ISI,
and that the Company will use its commercially reasonable best efforts to have
the registration statement declared effective by the SEC within 150 days after
the closing of the merger. In addition, ISI’s stockholders agreed not to sell
the shares of the Company’s common stock that they received in consideration for
the merger (i) with respect to 440,288 shares to be owned by a non-management
stockholder of ISI, until the earlier of six months after the closing of the
Merger or November 1, 2007, and (ii) with respect to 739,712 shares to be owned
by the officers and directors of ISI, until January 24, 2009.
The
closing of the merger is subject to certain conditions, including the approval
of the transaction by the Company’s stockholders and fewer than 20% of the
Company’s stockholders exercising their right to redeem their shares of common
stock for cash. The stockholders of ISI will also be entitled to indemnification
from the Company if certain events occur. In the event that the merger is not
consummated by July 1, 2007, either party may terminate the merger agreement
without reason.
Giuliani
Capital Advisors served as financial advisor to Argyle Security in connection
with this transaction.
For
other
information regarding the acquisition, see the press release attached hereto
and
incorporated herein by reference.
The
Company and its directors and executive officers may be deemed to be
participants in the solicitation of proxies for the special meeting of the
Company’s stockholders to be held to approve the merger.
The
Company’s stockholders are advised to read, when available, the Company’s
definitive proxy statement in connection with the Company’s solicitation of
proxies for the special meeting because it will contain important information
not contained in this Current Report on Form 8-K. The definitive proxy statement
will be mailed to stockholders as of a record date to be established for voting
on the proposed merger. Stockholders will also be able to obtain a copy of
the
definitive proxy statement, without charge, by directing a request to: Argyle
Security Acquisition Corporation, 200
Concord Plaza, Suite 700, San Antonio, TX 78216, Attn: Bob Marbut.
The
proxy statement, once available, can also be obtained, without charge, at the
Securities and Exchange Commission’s internet site
(http://www.sec.gov).
Non-GAAP
Financial Measures
This
Current Report on Form 8-K contains disclosure of EBITDA and backlog of orders
for certain periods, which may be deemed to be non-GAAP financial measures
within the meaning of Regulation G promulgated by the Securities and Exchange
Commission. As used in this presentation, adjusted EBITDA reflects the removal
from the calculation of EBITDA of certain expenses that the Company and ISI
agreed should not reduce EBITDA. The companies do not expect these expenses
to
continue after the closing of the merger. Management believes that adjusted
EBITDA, or earnings before interest, taxes, depreciation and amortization,
is an
appropriate measure of evaluating operating performance and liquidity, because
it reflects the resources available for strategic opportunities including,
among
others, investments in the business and strategic acquisitions. Management
believes that backlog of orders, or unearned revenue on projects that have
been
booked, is an appropriate measure of evaluating operating performance, because
it reflects future potential revenues. The disclosure of adjusted EBITDA or
backlog of orders may not be comparable to similarly titled measures reported
by
other companies. Neither EBITDA nor backlog of orders is a recognized term
under
U.S. GAAP and EBITDA and backlog of orders should be considered in addition
to,
and not as substitutes for, or superior to, operating income, cash flows,
revenue, or other measures of financial performance prepared in accordance
with
generally accepted accounting principles. Neither adjusted EBITDA nor backlog
of
orders is a completely representative measure of either the historical
performance or, necessarily, the future potential of ISI.
Item
9.01 Financial
Statements and Exhibits.
| 10.1 |
Merger Agreement by and among Argyle
Security
Acquisition Corporation, ISI Security Group, Inc. and ISI Detention
Contracting, Inc. |
| 99.1 |
Press Release dated December 14,
2006 |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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| Date: December
14, 2006 |
ARGYLE
SECURITY
ACQUISITION CORPORATION |
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By: |
/s/ Bob
Marbut |
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Bob
Marbut |
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Chairman
and Co-Chief Executive
Officer
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EXHIBIT
INDEX
| 10.1 |
Merger Agreement by and among Argyle
Security
Acquisition Corporation, ISI Security Group, Inc. and ISI Detention
Contracting, Inc. |
| 99.1 |
Press Release dated December 14,
2006 |