Tri-S Security further extends exchange offer for 10% convertible promissory notes

By Angela McDaniels

Tacoma, Wash., Nov. 6 - Tri-S Security Corp. said it extended the offer to exchange its 10% convertible promissory notes due 2008 for 14% convertible promissory notes due 2010 and warrants to 5 p.m. ET on Nov. 13 from Nov. 5.

The company also updated the schedule TO it filed with the Securities and Exchange Commission relating to offer. The schedule TO was amended to include changes that will be made to the company's board of directors in connection with the exchange offer and to update some disclosures.

The company will increase the board to five members from four and elect one person designated by Select Contrarian Value Partners, LP, an existing noteholder and a beneficial owner of more than 5% of the company's common stock. The increase will take place after Select Contrarian tenders its notes and the exchange offer ends.

The updated TO schedule also notes that:

• If the company does not regain compliance with Nasdaq Marketplace Rules by Dec. 3, then Nasdaq will notify Tri-S that its securities will be delisted. The company could then request a hearing, and the securities would remain listed pending the outcome of the hearing.

The company no longer satisfies the minimum $2.5 million shareholders' equity requirement for continued listing;

• The company expects to record a pre-tax non-cash impairment charge of about $4 million in the quarter ended Sept. 30 in order to reduce the carrying value of the goodwill associated with wholly owned subsidiary Cornwall Group, Inc.; and

• Tri-S and chief executive officer Ronald G. Farrell have further amended his employment agreement so that 10,000 shares underlying his stock grants will vest on the last day of each month from Jan. 1 through May 31, 2010 and the remaining unvested shares will vest on June 30, 2010.

Offer details

The exchange offer was originally set to end on Sept. 18 and has been extended a number of times.

As previously reported, on Oct. 20 the company announced new terms for the exchange offer, including the elimination of the option to receive common shares plus series A warrants for the existing notes.

Instead, Tri-S amended the new convertible promissory notes on offer, raising the coupon to 14% from 10%, shortening the term to two years from three years and cutting the conversion price to $1.75 per share from $3.30 per share.

Tri-S also reduced the exercise price of the warrants that are being offered with the new notes to the volume-weighted average price of its common stock for a five-day period prior to the expiration of the exchange. Previously the exercise price was $3.30.

Warrant coverage was cut to 18.23% from 50%.

In addition, Tri-S reduced the threshold for completing the exchange. It now requires that 85% of the existing notes be tendered, down from 95%.

Based in Alpharetta, Ga., Tri-S provides contract security guard services to U.S. government agencies.

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