Document:

Exhibit 10.12

 

PROMISSORY NOTE

 

	
   

  	
  Atlanta,
  Georgia

  
	
   

  	
  February 24,
  2004

  

 

ARTICLE I

PAYMENTS OF PRINCIPAL AND INTEREST

 

1.01                           For value received, Diversified Security Corporation, a
corporation organized under the laws of the State of Georgia, (hereinafter referred
to as “Maker”), hereby promises to pay to the order of John Wilson (“Payee”), at any location
Payee shall reasonably determine, the principal sum of FIVE HUNDRED TWENTY-SIX THOUSAND NINE  HUNDRED AND NO HUNDREDTHS DOLLARS ($526,900.00)
except as may be adjusted in accordance with the terms hereof, plus simple
interest on the unpaid principal amount hereof at the rate of seven (7.0%)
percent per annum, all according to the terms hereof, and with all such
payments being payable in cash, check, wire transfer or other form reasonably
acceptable to Payee in lawful money of the United States of America.

 

1.02                           Maker shall pay the obligation hereunder by
tendering a single payment on May 31, 2004 of the full amount of the principal
due hereunder, and all accrued interest and payment.

 

1.03                           Maker may prepay any or all of the
outstanding balance hereof without penalty prior to the due date of any
payment, and Payee shall apply such prepayments first to principal, then to any
interest or other amount hereunder.

 

1.04                           Notwithstanding the stated principal amount
hereof, Maker may offset against and reduce the principal amount of this Note
by an amount equal to the amount of any indemnification obligation as allowed
in Article 6 of the Stock Purchase Agreement by and between Maker and the
Selling Shareholders, as amended (the “Stock Purchase Agreement”). Such items
are referred to herein as Indemnification Obligations.

 

1.05                           Upon Maker’s receipt of any claim or bill for
any cost or expense that would give rise to an Indemnification Obligation,
Maker shall inform the Payee by the method(s) provided in the Stock Purchase
Agreement for providing notices.

 

1.06                           Maker may deduct from the principal amount of
this Note an amount equal to the amount stated in Maker’s notice, subject to
the amount deducted being added back to the principal amount of the Note if the
amount that Maker actually incurs that is subject to the Indemnification
Obligation is less than the amount previously deducted from the principal
amount of this Note. If an amount is deducted from the principal amount of this
Note and is later added back to the principal amount of the Note, Maker shall
be liable also for interest at the rate of seven percent (7%) per annum on the
amount of such deducted and re-added amount, as if such amount had never been
deducted.

 

 

1.07                           Repayment of this Note shal1 be subject to
any Subordination Agreement agreed upon by Maker and Payee.

 

ARTICLE II

SECURITY

 

2.01                               As security for payment of all of the
obligations hereunder, Maker hereby pledges to Payee, pursuant to the Security
Agreement of even date herewith, 40% of the Shares of common stock of no par
value of Paragon Systems, Inc. (the “Shares”) sold by Payee to Maker pursuant
to the Stock Purchase Agreement.

 

2.02                               RESERVED

 

2.03                               Neither Payee nor any of the Selling
Shareholders shall sell, assign, give, pledge, encumber, hypothecate or
transfer any of the Shares securing payment of the Note.

 

2.04                               The number of Shares subject to this Security
Agreement, and the number of Shares subject to release from this Security
Agreement shall be adjusted for any stock split, reverse stock split, or stock
dividend of Paragon Systems, Inc.

 

ARTICLE III

MISCELLANEOUS

 

3.01                              Upon the failure of Maker to tender any
payment hereunder when due, Payee may, at its option, deliver written notice to
Maker of the failure to tender such payment. If Maker has not tendered payment
of the full amount of such late payment within ten business (10) days of the
date of such notice, Payee may accelerate the full amount of principal and
interest due hereunder, and upon such acceleration, the full principal amount
hereof shall be immediately due and payable.

 

3.02                              The failure of Payee to exercise any option
hereunder, or to make demand, or to proceed to collect after making demand
hereon, shall not constitute a waiver of the right to exercise such option,
make such demand or to proceed to collect.

 

3.03                              Maker waives presentment for payment, notice
of dishonor, protest, notice of protest and diligence in bringing suit against
any party hereto.

 

2

 

3.04                              The obligations evidenced or created by this
Note, as well as all waivers of rights by Maker contained herein shall
effectively bind and be the obligations and waivers of any and all others who
may at any time become liable for the payment of all or any part of this Note.

 

3.05                              No party other than the Maker shall be liable
for the payment of all or any part of this Note unless such party has executed
a written document agreeing to be liable for payment of any or all of this
Note.

 

3.06                              If any provision (or any part of any
provision) contained in this Note shall for any reason be held or deemed to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision (or remaining part of
the affected provision) of this Note, and this Note shall be construed as if
such invalid, illegal or unenforceable provision (or part thereof) had never
been contained herein and the remaining provisions of this Note shall remain in
full force and effect.

 

3.07                              Payee shall not sell, assign, give, pledge,
encumber, hypothecate or transfer any of its rights pursuant to this Note.

 

3.08                              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.

 

3.09                              RESERVED.

 

3.10                              Capitalized terms such as “Selling
Shareholders” used herein and not otherwise defined herein shall have the same
definition as that term has in the Stock Purchase Agreement.

 

3.11                              Any party who is required to bring an action
to enforce the terms of this Note shall be entitled to reasonable attorneys’
fees, in addition to all other amounts otherwise due hereunder.

 

3

 

Executed
this 24 day of February, 2004

 

	
   

  	
  MAKER:

  
	
   

  	
   

  
	
   

  	
  DIVERSIFIED
  SECURITY CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronald G. Farrell

  	
   

  
	
   

  	
  Name:

  	
  Ronald
  G. Farrell

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  

 

4EXHIBIT 10.13

 

AMENDED AND RESTATED PROMISSORY NOTE

 

	
   

  	
  Atlanta,
  Georgia

  
	
   

  	
  September
  29, 2004

  

 

ARTICLE I

 

PAYMENTS OF PRINCIPAL AND INTEREST

 

1.01         For value received, the undersigned Paragon Systems, Inc., a corporation organized under the
laws of the State of Alabama (hereinafter referred to as “Maker”), hereby
promises to pay to the order of Charles Keathley , both individually and as
agent for Robert Luther, Harold Bright and John Wilson (“Payee”), at any
location Payee shall reasonably determine, the principal sum of SEVEN HUNDRED
SIX THOUSAND, FIVE HUNDRED AND SEVEN DOLLARS ($706,507.00), plus simple
interest on the unpaid principal amount hereof at the rate of seven (7.0%)
percent per annum, all according to the terms hereof, and with all such payments
being payable in cash, check, wire transfer or other form reasonably acceptable
to Payee in lawful money of the United States of America.  This Amended and Restated Promissory Note
(the “Note”) amends and restates in its entirety all of Payee’s interest, right
and title in, to and under that certain Promissory Note in principal amount of
SEVEN HUNDRED SIX THOUSAND, FIVE HUNDRED AND SEVEN DOLLARS ($706,507.00) dated
March 11, 2004 made by Maker in favor of Charles Keathley, both individually
and as agent for Robert Luther, Harold Bright and John Wilson.

 

1.02         Maker shall pay the obligation
hereunder by tendering a single payment on December 31, 2004 of the full amount
of the principal due hereunder and all interest at the rate set forth above
accrued thereon since March 11, 2004.

 

1.03         Maker shall prepay such amounts due
hereunder, as provided in Section 2.02 hereof.  In addition to the foregoing, Maker may
prepay any or all of the outstanding balance hereof without penalty prior to
the due date of any payment, and Payee shall apply such prepayments first to
principal, then to any interest or other amount hereunder.

 

ARTICLE II

 

SECURITY

 

2.01         As security for payment of all of the
obligations hereunder, Maker hereby pledges to Payee, those Accounts Receivable
and all proceeds thereof of Maker that are listed on Exhibit A .

 

2.02         Notwithstanding
anything to the contrary, upon payment of any Accounts Receivable listed on Exhibit
“A”, Maker shall pay the amount of proceeds from the payment of such
Account Receivable to the Payee, as a mandatory prepayment of the amount due
hereunder.  As further security for
payment of all obligations hereunder, Maker hereby grants to Payee, to the
extent permitted by the factoring and other agreements Maker has entered into
with LSQ

 

 

Funding Group, LLC and BRE LLC, a continuing security
interest in all of Payee’s accounts, accounts receivable, receivables, existing
or hereafter arising, all cash and non-cash proceeds resulting therefrom and
all rights relating thereto; provided, however, that such
security interest shall be subject and subordinate to the security interests
granted as of the date hereof to LSQ Funding Group, LLC and BRE LLC by
Maker.  Maker authorizes Payee
to file financing statements without notice to Maker, with all appropriate
jurisdictions, in order to perfect the security interest granted hereby.  Maker shall execute and deliver to Payee all documents that Payee may
reasonably request to perfect the security
interest granted hereby. The security interest granted hereby shall
terminate upon the indefeasible payment in full of this Note.

 

2.03         RESERVED.

 

ARTICLE III

 

MISCELLANEOUS

 

3.01         Upon the failure of Maker to tender any
payment hereunder when due, Payee may, at its option, deliver written notice to
Maker of the failure to tender such payment. 
If Maker has not tendered payment of the full amount of such late
payment within ten business (10) days of the date of such notice, Payee may
accelerate the full amount of principal and interest due hereunder, and upon
such acceleration, the full principal amount hereof shall be immediately due
and payable.

 

3.02         The failure of Payee to exercise any
option hereunder, or to make demand, or to proceed to collect after making
demand hereon, shall not constitute a waiver of the right to exercise such
option, make such demand or to proceed to collect.

 

3.03         Maker waives presentment for payment,
notice of dishonor, protest, notice of protest and diligence in bringing suit
against any party hereto.

 

3.04         The obligations evidenced or created by
this Note, as well as all waivers of rights by Maker contained herein shall
effectively bind and be the obligations and waivers of any and all others who
may at any time become liable for the payment of all or any part of this Note.

 

3.05         No party other than the Maker shall be
liable for the payment of all or any part of this Note unless such party has
executed a written document agreeing to be liable for payment of any or all of
this Note.

 

3.06         If any provision (or any part of any
provision) contained in this Note shall for any reason be held or deemed to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision (or remaining part of
the affected provision) of this Note, and this Note shall be construed as if
such invalid, illegal or unenforceable provision (or part thereof) had never
been contained herein and the remaining provisions of this Note shall remain in
full force and effect.

 

3.07         Payee shall not sell, assign, give,
pledge, encumber, hypothecate or transfer any of its rights pursuant to this
Note.

 

2

 

3.08         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) for providing
notice as set forth in the Stock Purchase Agreement dated February 23, 2004 by
and among Tri-S Security Corporation, Charles Keathley, Robert Luther, Harold
Bright and John Wilson.

 

3.09         Maker and Payee hereby consent and
agree to the exclusive jurisdiction and venue of the courts of Madison County,
Alabama as proper and convenient for any action to enforce any of the
provisions of this Note.

 

3.10         Any party who is required to bring an
action to enforce the terms of this Note shall be entitled to reasonable
attorneys’ fees, in addition to all other amounts otherwise due hereunder.

 

IN WITNESS WHEREOF, Maker and Payee have
executed this Note or caused this Note to be executed as of September 29, 2004.

 

	
   

  	
  MAKER:

  
	
   

  	
   

  
	
   

  	
  PARAGON
  SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronald
  G. Farrell

  	
   

  
	
   

  	
  Name:

  	
  Ronald G.
  Farrell

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PAYEE:

  
	
   

  	
   

  
	
   

  	
  /s/ Charles Keathley

  	
   

  
	
   

  	
  CHARLES
  KEATHLEY

  

 

3

 

EXHIBIT A

 

Not on LSQ
aging

 

	
  30-60

  	
   

  	
  Invoice #

  	
   

  	
  60-90

  	
   

  	
  Invoice #

  	
   

  	
  91 Up

  	
   

  	
  Invoice #

  	
   

  
	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  3,932.50

  	
   

  	
  4129

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  3,245.74

  	
   

  	
  4130AS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  561.00

  	
   

  	
  4131

  	
   

  
	
  $

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  3,477.46

  	
   

  	
  4131 AS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  2,816.66

  	
   

  	
  4134AS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  2,948.82

  	
   

  	
  4136AS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  3,031.42

  	
   

  	
  4138AS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  3,179.00

  	
   

  	
  4143

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  3,379.76

  	
   

  	
  4145

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  1,760.00

  	
   

  	
  4159

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  3,872.00

  	
   

  	
  4162

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  (62.50

  	
  )

  	
  4163AS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  10,169.50

  	
   

  	
  4169

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  1,387.68

  	
   

  	
  4175AS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  239.54

  	
   

  	
  4177AS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  49.56

  	
   

  	
  4190AS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  21.32

  	
   

  	
  4204

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  39.98

  	
   

  	
  4215

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  7,867.20

  	
   

  	
  1127

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  2,969.44

  	
   

  	
  CG96-1020

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  371.18

  	
   

  	
  CG96-1021

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  670.80

  	
   

  	
  CG96-1079

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  4,162.93

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  80.00

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  13,153.90

  	
   

  	
  Soo18-8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  (1,268.26

  	
  )

  	
  121-6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  580.23

  	
   

  	
  S0092-16

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  1,202.18

  	
   

  	
  S0092-17

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  13,040.43

  	
   

  	
  57-35

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  202.10

  	
   

  	
  046-11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  202.10

  	
   

  	
  046-13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  201.73

  	
   

  	
  BR48613

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  403.15

  	
   

  	
  BR486

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  135.16

  	
   

  	
  BR486

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  255.17

  	
   

  	
  486

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  762.96

  	
   

  	
  13101

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  4,111.36

  	
   

  	
  HPP-1602

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  5,566.55

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  8,710.88

  	
   

  	
  STPAA-275

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  77,730.24

  	
   

  	
  56

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  781.70

  	
   

  	
   

  	
   

  
	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
  185,942.57

  	
   

  	
   

  	
   

  
															

 

4

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