Devcon Amends Stock Purchase Agreement

Company continues to settle up with institutional investors


Devcon International is settling up with investors. The firm, which is based in Boca Raton and which owns the Devcon Security division that provides full security services, has entered into purchase and rights agreement with some of its institutional investors. As part of the agreement, the investors, who owned, in total, a majority of the company's series A convertible preferred stock were held to an agreement that was made back in April.

The company made a forbearance agreement at that time with institutional investors. In a statement to its investment community release in early April 2007, Devcon wrote:

"Under the terms of these Forbearance Agreements, the Required Holders have agreed that for a period of time ending no later than January 2, 2008, they shall each refrain from taking any remedial action with respect to the Company's failure (the "Effectiveness Failure") to have declared effective by the United States Securities and Exchange Commission a registration statement registering the resale of the shares of Devcon's common stock underlying the Series A Preferred Shares and warrants as required by a Registration Rights Agreement, dated February 20, 2005, by and between the Company, the Required Holders and the remaining holder of the Series A Preferred Shares (the "Registration Rights Agreement"). The parties also agreed to refrain from declaring the occurrence of any "Triggering Event" with respect to the Effectiveness Failure and from delivering any Notice of Redemption at Option of Holder with respect thereto or demanding any amounts due and payable with respect to the Effectiveness Failure, including without limitation, any Registration Delay Payments. The Forbearance Agreements also contain agreements to amend the governing Certificate of Designations to revise certain terms of the Series A Preferred Shares, including, without limitation, a reduction in the conversion price of the Series A Preferred Shares to $6.75, allowance for the accrual of dividends on the Series A Preferred Shares at a rate equal to 10% per annum, which dividends may be payable in kind, and a revision of the definition of the Leverage Ratio. The revised definition shall provide for the Leverage Ratio to be calculated as a multiple of recurring monthly revenue ("RMR") as opposed to EBITDA and a revision of the Maximum Leverage Ratio covenant to require the Maximum Leverage Ratio to equal 38x RMR, commencing on June 30, 2008. "

As part of the securities purchase agreement, Devcon bought back investor warrants to purchase almost 1.3 million shares of the company's common stock; that cost the company $.13 per warrant share.

In April, the company also reorganized its management; placing Robert Schiler as CFO, former interim CFO Robert Farenhem as president, and shuffling former president Ron Lakey out of the business.