Exhibit 10.22


 


SECURITY AGREEMENT


 


This
Security Agreement (“Security Agreement”) is made as of the 24 day of February,
2004 by Diversified Security Corporation, a
Georgia corporation (the “Purchaser”) and in favor of Robert Luther, a resident of the State of
Alabama (the “Secured Party”) to secure the payments required under certain
Promissory Notes of even date herewith and certain payments required by the
terms of Class C Redeemable Preferred Stock held by the Secured Party.  The security is provided upon the following
terms and conditions:


 


ARTICLE I


 


THE
OBLIGATION SECURED


 


1.01                           The Secured Party has contemporaneously
herewith agreed to accept two promissory notes of even date herewith (the
“Notes”) and certain shares of Class C Redeemable Preferred Stock (the “Class C
Stock”) from Purchaser.  This Security
Agreement provides security solely for the payment of the Notes and Class C
Stock and for no other obligation.


 


1.02                           This Security Agreement and the Notes and
Class C Stock have been executed and delivered by the Purchaser in reliance on
the Secured Party’s full and complete performance of all of the terms and
conditions of the Stock Purchase Agreement, including but not limited to the
accuracy of all representations and warranties of the Selling Shareholders
pursuant to the Stock Purchase Agreement.


 


ARTICLE II


 


SECURITY INTEREST


 


2.01                           Purchaser hereby grants to Secured Party a
security interest in 137 shares of no par value common stock of Paragon
Systems, Inc.  (the “Shares”), and such
security interest shall include any and all replacements and any Shares issued
by way of any stock split, reverse stock split or stock dividend.


 


2.02                           This Security Agreement and the rights hereby
granted shall secure the prompt payment of all amounts due under the Note, as
such amount may be adjusted pursuant to the terms of the Notes, and all
dividend payments and redemption payments due the Secured Party as provided for
the Class C Stock.


 

















 


2.03                           The Secured Party may, at its option, perfect
its interest in the Shares by appointing an agent or other designee as its
agent to take possession of and hold the Shares during the term of the Notes or
while any of the Class C Stock owned by the Secured Party remains
outstanding.  The agent appointed by the
Secured Party may not be any person currently or previously employed by Paragon
Systems, Inc., but Aubrey Lammons may serve as agent for both the Secured Party
and Purchaser for purposes of holding possession of the Shares during the term
of this Agreement, and releasing such Shares pursuant to the terms of this
Agreement.


 


2.04                           The Secured Party shall release its security
interest in the Shares upon the payment of the full amount of the principal of
the Notes and redemption in full of all of the Class C Stock owned by the Secured
Party.  Within five (5) days of such
full payment, the Secured Party shall deliver the Shares to the Purchaser.


 


The
Secured Party shall release 37 of the Shares originally subject to this
Security Agreement, upon payment of the Promissory Note issued to the Secured
Party pursuant to Article 1.2 (b) of the Stock Purchase Agreement of February
23, 2004, which is part of the series of Notes totaling $5,500,000 issued to
the Selling Shareholders.


 


ARTICLE III


 


COVENANT OF PURCHASER


 


3.01                           The Purchaser hereby covenants to operate
Paragon Systems, Inc. in such a way as to maximize long-term shareholder value,
and to enhance the value of the Shares. 
Such provision shall not be interpreted as imposing on Purchaser, or any
officer, director or controlling shareholder thereof, any fiduciary or other
duty to the Secured Party that exceeds the duties imposed by law on the
officers, directors or controlling shareholders of a corporation to the other
shareholders of such corporation.


 


ARTICLE IV


 


SECURED PARTY’S REMEDIES FOR NON-PAYMENT


 


4.01                           Secured Party shall be entitled to exercise
the remedies listed below upon the failure of the Purchaser to pay in full the
amount due on any payment required under the Notes (as such payment amount may
be adjusted pursuant to the Note) or pursuant to the terms of the Class C
Stock, at the time such amount is due, plus any applicable cure period.


 


2

















 


4.02                           Upon any non-payment as described in Section
4.01 hereof, and upon giving notice as provided herein, Secured Party shall
have the following rights and remedies:


 


a.                                       Secured Party may, at his option, declare all
sums due under the Notes due to the Secured Party, as may be adjusted
thereunder, immediately due and payable; and


 


b.                                      Pursue any legal remedy available to collect
all sums secured hereby and to enforce its title in and right to possession of
the Shares, and to enforce any and all other rights or remedies available to
it.


 


ARTICLE V


 


MISCELLANEOUS PROVISIONS


 


5.01                           This Security Agreement shall remain in full
force and effect until all of the payments due under the Notes shall be paid
and the Class C Stock owned by the Secured Party shall have been fully
redeemed.


 


5.02                           This Security Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of Georgia
without reference to choice of law principles.


 


5.03                           During the term of the Notes and until
redemption in full of the Class C Shares owned by the Secured Party, Purchaser
shall be the shareholder of the Shares. 
Specifically, during the term of the Note and until redemption in full
of the Class C Shares owned by the Secured Party, Purchaser shall have the
exclusive right to vote all of such Shares at any meeting of the shareholders
of Paragon Systems, Inc. and shall exercise all rights of a shareholder of the
Shares.


 


5.04                           This Security Agreement shall terminate on
the full payment of all obligations under the Notes and the redemption of the
Class C Stock owned by the Secured Party.


 


5.05                           Any notice required hereunder shall be deemed
given three (3) business days after such notice has been transmitted and
received by the party to receive such notice by the method(s) provided in the
Stock Purchase Agreement for providing notices.


 


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IN
WITNESS WHEREOF, this Security Agreement has been executed and delivered on
behalf of and in the name of the Purchaser on the date indicated above.


 


 


	
   

  	
  DIVERSIFIED SECURITY
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronald G. Farrell

  	
   

  
	
   

  	
  Name:

  	
  Ronald G. Farrell

  	
   

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SECURED PARTY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert
  Luther

  	
   

  
	
   

  	
  Robert Luther

  
					



 


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