Document:

EXHIBIT 10.14

 

PLEDGE AND ASSIGNMENT OF STOCK

AND SECURITY AGREEMENT

 

THIS
PLEDGE AND ASSIGNMENT OF STOCK AND SECURITY AGREEMENT (“Agreement”)
is  made
and entered into as of the 29th day of September, 2004, by the undersigned, Tri-S Security Corporation, a Georgia
corporation (the “Borrower”), in favor of Charles Keathley (the “Lender”);

 

W  I  T  N
E  S  S  E  T  H:

 

WHEREAS,
the Borrower and the Lender have entered into that certain Promissory Note,
(the “Note,” the terms defined therein and not otherwise defined herein being
used herein as therein defined), of even date herewith;

 

WHEREAS,
pursuant to all of its obligations under the Note,
Borrower desires to execute and deliver this Agreement to satisfy such
obligations; and

 

WHEREAS,
all capitalized terms used herein but not otherwise defined herein shall have
the terms ascribed to them in that certain Agreement Regarding Notes and
Preferred Shares dated of even date herewith among the Borrower, the Lender and
others;

 

NOW,
THEREFORE, for and in consideration of the foregoing
premises, the mutual covenants and conditions herein contained, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower covenants to and agrees with the Lender as
follows:

 

1.             Pledge.  As security for the
payment or performance, as the case may be, of the Secured Obligations (as
hereinafter defined), the Borrower hereby creates, assigns, hypothecates,
pledges and grants to the Lender, its successors and assigns, a security interest
in all of the Borrower’s right, title and interest in and to the following
property or interest in property of the Borrower, whether now owned or
hereafter acquired or arising (the “Collateral”):

 

(a)           280 shares of capital stock of
Paragon Systems, Inc. (the “Corporation”) evidenced by Certificates No.
                                   ,
a copy of which is attached to and labeled as Exhibit “A” (the “Pledged Stock”)
that are obtained directly or indirectly in the future by the Borrower;

 

(b)  all other property that may be delivered to
and held by the Lender pursuant to the terms hereof;

 

(c) all
payments of principal and interest, cash, instruments and other property from
time to time received, receivable or otherwise distributed, in respect of, in exchange
for or upon the conversion of the Pledged Stock or property referred to in
clause (b) above;

 

(d) all rights
and privileges of the Borrower with respect to the Pledged Stock or property
referred to in clause (b) above; and

 

 

(e) all
proceeds of any and all of the foregoing Collateral.

 

The Borrower will instruct the Corporation to register the transfer of
the Collateral on the books of the Corporation and to give written
confirmation, in form satisfactory to the Lender, to the Lender of the registration
of the transfer of the Collateral.  The
Borrower shall immediately deliver the certificates representing the Collateral
to the Lender, accompanied by executed transfer powers in blank, if requested
by the Lender, and by such other instruments or documents as the Lender or its
counsel may reasonably request.

 

TO
HAVE AND TO HOLD the Collateral, together with all
rights, title, interests, powers, privileges and preferences pertaining or
incidental thereto, unto the Lender, its successors and assigns, forever, subject,
however, to the terms, covenants and conditions hereinafter set forth.

 

2.             Obligations
Secured.  This
Pledge Agreement is made, and the security interest created hereby is granted
to the Lender, to secure prompt payment and performance when due of (i) all
obligations, duties, and covenants of the Borrower as set forth in the Amended
and Restated Parent Note in the principal amount of $2,983,750 dated of even
date herewith and the Unamended Note in the principal amount of $813,750 dated
February 24, 2004 (herein collectively the “Note”), and this Pledge Agreement;
and (ii) any other debts or obligations of the Borrower to the Lender which
state that such debts or obligations are secured hereby (collectively, the
“Secured Obligations”).  The Borrower was
formerly named Diversified Security Corporation and has amended its Articles of
Incorporation to amend its name from Diversified Security Corporation to Tri-S
Security Corporation.

 

3.             Representations and Warranties.  The Borrower hereby
represents and warrants to the Lender that: 
(a)  the Borrower is the legal and
equitable owner of, and has the complete and unconditional authority to pledge,
the Collateral in the manner hereby contemplated, and holds the same free and
clear of all liens, charges, encumbrances and security interests of every kind
and nature; that the Borrower will defend its title thereto against the claims
of all persons whomsoever; and that no consent or approval of any person or
entity or governmental body or regulatory authority, or of any securities
exchange, was or is necessary to the validity of such pledge which has not been
obtained;  (b) the execution, delivery
and performance by the Borrower of this Agreement will not violate the terms of
the Articles of Incorporation for the Corporation and any articles of amendment
to such Articles of Incorporation (collectively the “Articles”), the Bylaws for
the Corporation and any amendments to such Bylaws (collectively the “Bylaws”)
and any instrument, document or agreement to which the Borrower is a party, or
by which the Borrower or any of its property is bound, or be in conflict with,
result in a breach of or constitute (with giving of notice or lapse of time or
both) a default under either the Articles or the Bylaws or any such instrument,
document or agreement, or result in the creation or imposition of any lien upon
any of the property or assets of the Borrower, except for the lien in favor of
the Lender created hereby; (c) this Agreement constitutes the valid and legally
binding obligations of the Borrower, enforceable in accordance with its terms;
and (d) upon the possession of the Collateral by the Lender , the pledge
created hereby constitutes a first priority perfected pledge of and security
interest in the Collateral, and no other or further action is required on the
part of the Lender to perfect, continue or protect the priority of  the pledge and security interest created
hereby.

 

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4.             Dividends; Voting Rights; Etc.

 

(a)           The Lender shall be entitled to receive, and upon the
occurrence and during the continuance of any Default, retain any cash dividends
or other cash distributions declared and paid to the Borrower as a shareholder
of the Corporation.  Any and all liquidating
distributions, other distributions in property, return of capital or other
distributions made on or in respect of the Collateral, whether resulting from a
subdivision, combination or reclassification of the ownership interests of the
Corporation, or received in exchange for Collateral or any part thereof or as a
result of any merger, consolidation, acquisition or other exchange of assets to
which the Corporation may be a party or otherwise, shall be and become part of
the Collateral pledged hereunder and, if received by the Borrower, shall
forthwith be delivered to the Lender to be held subject to the terms of this
Agreement.

 

(b)           Any dividends or distributions received by the Lender with
respect to the Collateral and any and all money paid over to or received by the
Lender pursuant to the provisions of this Section 4 shall be applied towards
the Secured Obligations.  Any other
property paid over to or received by the Lender pursuant to this Section 4
shall be retained by the Lender as Collateral and shall be applied in
accordance with the provisions hereof.

 

(c)           The Lender, upon and after the occurrence of any Default
hereunder, shall be entitled to exercise all voting rights and powers
pertaining to the Collateral, and any and all proxies theretofore executed by
the Borrower in favor of any Person other than the Lender shall terminate and
thereafter be null and void.  The Lender,
upon and after the occurrence of any Default hereunder, and at its election, is
hereby irrevocably appointed to vote the Collateral as to any matter.

 

5.             Covenants
With Respect to Collateral; Default. 
The Borrower agrees with the Lender with
respect to the Collateral as follows:

 

(a)           The Borrower covenants that it will cause any additional
interests in the Corporation and any securities or property issued to or
received by it with respect to any of the Collateral, whether for value paid by
it or otherwise, to the extent certificated, to be forthwith deposited and
pledged hereunder, in each case accompanied by proper confirmation of
registration of the transfer on the books of the Corporation or by proper
instruments of assignment duly executed in blank by the Borrower.

 

(b)           The Lender may hold any of the Collateral that is
evidenced by a certificate, endorsed or assigned in blank or in the name of any
nominee or nominees of the Lender, and the Lender may deliver any of the
Collateral to the Corporation thereof for the purpose of making denominational
exchanges or registrations or transfers or for such other purpose in furtherance
of this Agreement as the Lender may deem desirable.

 

(c)           The Borrower will pay all taxes, assessments and other
charges levied, assessed or imposed upon the Collateral when the same become
due.

 

(d)           A “Default” shall exist hereunder if any of the following
shall occur:  (i) the Borrower shall or
shall attempt to encumber, subject to any further pledge or security interest,
sell, transfer or otherwise dispose of any of the Collateral or any interest
therein; (ii) any

 

3

 

of the Collateral shall be attached or levied
upon or seized in any legal proceedings, or held by virtue of any lien or
distress; (iii) the Borrower shall fail or refuse to pay promptly all
taxes and assessments upon any of the Collateral; (iv) the Borrower shall
fail to perform any covenant or agreement set forth herein; (v) any
representation, warranty or statement made by the Borrower under or in
connection with this Agreement shall have been false or misleading in any
material respect when made; (vi) the pledge and security interest created
hereby shall cease for any reason to constitute a first priority perfected lien
in the Collateral or any part thereof; or (vii) the Borrower shall fail to
perform any of the Secured Obligations as defined in this Agreement.

 

6.             Remedies Upon Default.

 

(a)           If a Default shall have occurred, the Lender may sell the
Collateral, or any part thereof, at public or private sale or at any broker’s
board or on any securities exchange, for cash, upon credit or for future
delivery as the Lender shall deem appropriate. 
The Lender shall be authorized at any such sale (if, on the advice of
counsel, it deems it advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the Lender
shall have the right to assign, transfer and deliver to the purchaser or purchasers
thereof the Collateral so sold.  Each
such purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of the Borrower, and the Borrower hereby
waives (to the extent permitted by law) all rights of Stock Purchase, stay
and/or appraisal which the Borrower now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted.  The Borrower will execute and deliver such documents
and take such action as the Lender deems necessary or advisable in order that
any such sale may be made in compliance with the law.

 

(b)           The Lender shall give the Borrower ten (10) days’ written
notice of the Lender’s intention to make any such public or private sale or
sale at any broker’s board or on any such securities exchange.  Such notice, in case of public sale, shall
state the time and place for such sale, and, in the case of sale at a broker’s
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange.  Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Lender may fix and shall state in the notice (if any) of such sale.  At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Lender may (in its sole and absolute discretion) determine.  The Lender shall not be obligated to make any
sale of Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of Collateral may have been given.  The Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned.  In
case sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Lender until the sale
price is paid by the purchaser or purchasers thereof, but the Lender shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. 
As an alternative to exercising the power of sale herein conferred upon
it, the Lender may proceed by a suit or suits at law or in equity to foreclose
this Agreement and

 

4

 

to sell the Collateral, or any portion
thereof, pursuant to a judgment or decree of a court or courts of competent
jurisdiction.

 

(c)           In addition to the rights and remedies provided herein and
the Note, (herein collectively the “Loan Documents”) and otherwise available
under any applicable law, whenever a Default shall have occurred, the Lender
shall have all the rights and remedies of a secured party upon default under
the Uniform Commercial Code as then in effect in the State of Alabama.

 

7.             Application
of Proceeds of Sale and Cash.  The
proceeds of a sale of the Collateral sold pursuant to Section 6 hereof or
otherwise realized shall be applied by the Lender as follows:

 

First:  to the payment of all costs and expenses
incurred by the Lender in connection with such sale, including, but not limited
to, all court costs and the reasonable fees and expenses of counsel for the
Lender in connection therewith and unpaid fees owing to the Lender under the
Note;

 

Second:  to the ratable payment of accrued but
unpaid interest on the Secured Obligations in accordance with the provisions of
the Note;

 

Third:   to
the ratable payment in full of the unpaid principal of the Secured Obligations;

 

Fourth:   to the ratable payment of all other Secured
Obligations until all Secured Obligations have been paid in full; and

 

Fifth:
     to the Borrower or to any other
person then legally entitled thereto, of any remainder of such proceeds.

 

8.             Exercise
of Powers.  The
Lender shall have and be entitled to exercise all such powers hereunder as are
specifically delegated to the Lender by the terms hereof, together with such
powers as are reasonably incidental thereto. 
The Lender may execute any of its duties hereunder by or through agents
or employees and shall be entitled to retain counsel and to act in reliance
upon the advice of such counsel concerning all matters pertaining to its duties
hereunder.

 

9.             Lender
Appointed Attorney-in-Fact.  The
Borrower hereby appoints the Lender as its attorney-in-fact for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any instrument which the Lender either may deem necessary or
advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest.  Without
limiting the generality of the foregoing, the Lender shall have the right and
power to receive, endorse and collect all checks and other orders for the
payment of money made payable to the Borrower representing any interest or
dividend or other distribution payable in respect of the Collateral or any part
thereof and to give full discharge for the same.

 

10.          No
Waiver.  No
failure on the part of the Lender to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy by the Lender
preclude any other or

 

5

 

further
exercise thereof or the exercise of any other right, power or remedy.  All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.

 

11.          Securities
Law, Etc.  The
Borrower recognizes that the Lender may be unable or shall determine that it is
undesirable to effect a public sale of any or all of the collateral by reason
of certain prohibitions contained in Federal and state securities laws, but may
be compelled or determine that it is desirable to resort to one or more private
sales thereof to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof.  The Borrower acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, AGREES
THAT ANY SUCH PRIVATE SALE SUBJECT TO SUCH CONDITIONS AND MADE IN ACCORDANCE
WITH APPLICABLE LAW SHALL BE DEEMED TO HAVE BEEN MADE IN A COMMERCIALLY
REASONABLE MANNER.  Without limiting the
generality of the foregoing, the provisions of this Section would apply if, for
example, the Lender were to place all or any part of the Collateral for private
placement by an investment banking or similar firm, or if such firm purchased
all or any part of the Collateral for its own account, or if the Lender placed
all or any part of the Collateral privately with a purchaser or
purchasers.  The Borrower further agrees
to do or cause to be done all such other acts and things as may be requested by
the Lender and necessary to make such private sale or sales of any portion or
all of the Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at the Borrower’s
expense.

 

12.          Termination.  This Pledge
Agreement will terminate when all of the Secured Obligations have been fully
paid and performed by Borrower and all Secured Obligations of Borrower have
terminated, at which time the Lender will, upon the Borrower’s request, execute
and deliver to the Borrower such documents as the Borrower shall reasonably
request to evidence the termination of the security interests or release of
such Collateral, as the case may be.  Any
such assignment shall be without recourse upon or warranty by the Lender.

 

13.          Binding
Agreement; Assignment.  This
Agreement, and the terms, covenants and conditions hereof, shall be binding
upon and inure to the benefit of the parties hereto and to all holders of
indebtedness secured hereby and their respective successors and assigns, except
that the Borrower shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise pledge,
encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Lender as collateral under this
Agreement.

 

14.          Governing
Law; Amendments.  This
Agreement shall in all respects be construed in accordance with and governed by
the laws of the State of Alabama.  This
Agreement may not be amended or modified, nor may any of the Collateral be
released or the pledge or security interest created hereby be extended, except
pursuant to a writing signed by the parties hereto.

 

6

 

15.          Further
Assurances.  The
Borrower agrees to do such further acts and things, and to execute and deliver
such additional conveyances, assignments, agreements and instruments, as the
Lender may at any time request in connection with the administration and
enforcement of this Agreement or relative to the Collateral or any part thereof
or in order better to assure and confirm unto the Lender its rights and
remedies hereunder.

 

16.          The
Borrower’s Obligations Absolute, Etc. 
The obligations of the Borrower under this
Agreement shall be absolute and unconditional in accordance with its terms and
shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation: (a) any
change in the time, place or manner of payment of, or in any other term of, all
or any of the Secured Obligations, any waiver, indulgence, renewal, extension,
amendment or modification of or addition, consent or supplement to or deletion
from or any other action or inaction under or in respect of the Note or any
other Loan Document, or any of the other documents, instruments or agreements
relating to the Secured Obligations or any other instrument or agreement
referred to therein or any assignment or transfer of any thereof; (b) any lack
of validity or enforceability of the Loan Documents, or any other documents,
instruments or agreements referred to therein or any assignment or transfer of
any thereof; (c) any furnishing of any additional security to the Lender, or
its assignees or any acceptance thereof or any release of any security by the
Lender or its assignees; (d) any limitation on any party’s liability or obligations
under any such instrument or agreement or any invalidity or unenforceability,
in whole or in part, of any such instrument or agreement or any term thereof;
(e) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to the Borrower, or
any action taken with respect to this Agreement by any trustee or receiver, or
by any court, in any such proceeding, whether or not the Borrower shall have
notice or knowledge of any of the foregoing; or (f) any exchange, release or
nonperfection of any other collateral, or any release, or amendment or waiver
of or consent to departure from any guaranty or security, for all or any of the
Secured Obligations.

 

17.          Headings.  Section headings
used herein are for convenience only and are not to affect the construction of
or be taken into consideration in interpreting this Agreement.

 

18.          Notices.  Except as otherwise
provided herein, all notices, requests and demands to or upon a party hereto
shall be in writing and shall be sent by certified or registered mail, return
receipt requested, personal delivery against receipt or by telecopier or other
facsimile transmission and, unless otherwise expressly provided herein, shall
be deemed to have been validly served, given or delivered when delivered
against receipt or one Business Day after deposit in the mail, postage prepaid,
or, in the case of facsimile transmission, when received at the office of the
noticed party, addressed as follows:

 

	
  (A)

  	
  If to the Lender:

  	
  Charles Keathley

  
	
   

  	
   

  	
  9017 Valley View Drive

  
	
   

  	
   

  	
  Huntsville, Alabama 35801

  
	
   

  	
   

  	
   

  
	
  (B)

  	
  If to the Borrower:

  	
  3700 Mansell Road

  
	
   

  	
   

  	
  Suite 220

  
	
   

  	
   

  	
  Alpharetta, Georgia 30022

  

 

7

 

or to such other address as each party may designate for itself by like
notice given in accordance with this Section 19.

 

19.          Acceptance.  The Borrower waives any requirement that the
Lender acknowledge its acceptance of this Agreement.

 

[The Remainder of This Page Intentionally
Left Blank]

 

8

 

IN
WITNESS WHEREOF, the Borrower has caused this Pledge
Agreement to be duly executed under seal as of the day and year first above
written.

 

	
   

  	
  Tri-S Security Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronald G. Farrell

  	
   

  
	
   

  	
  Its: Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  STATE OF
                                  

  	
  )

  	
   

  
	
   

  	
  ) ss:

  	
   

  
	
  COUNTY OF
                             

  	
  )

  	
   

  

 

I,
the undersigned Notary Public in and for said County in said State, hereby
certify that Ronald G. Farrell, who is personally known to me and whose
name is signed to the foregoing instrument as the Chief Executive Officer of
Tri-S Security Corporation, a Georgia corporation,  acknowledged before me on this day that,
being informed of the contents of said instrument, he, as such officer,
executed the same voluntarily and with full authority on behalf of Tri-S
Security Corporation on the date first therein set forth.

 

Given
under my hand and official seal this the
          day of
                            ,
2004.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  My Commission Expires:

  	
   

  	
   

  
					

 

9EXHIBIT 10.15

 

PLEDGE AND ASSIGNMENT OF STOCK

AND SECURITY AGREEMENT

 

THIS
PLEDGE AND ASSIGNMENT OF STOCK AND SECURITY AGREEMENT (“Agreement”)
is  made
and entered into as of the 29th day of September, 2004, by the undersigned, Tri-S Security Corporation, a Georgia
corporation (the “Borrower”), in favor of Robert Luther (the “Lender”);

 

W  I  T  N
E  S  S  E  T  H:

 

WHEREAS,
the Borrower and the Lender have entered into that certain Promissory Note,
(the “Note,” the terms defined therein and not otherwise defined herein being
used herein as therein defined), of even date herewith;

 

WHEREAS,
pursuant to all of its obligations under the Note,
Borrower desires to execute and deliver this Agreement to satisfy such
obligations; and

 

WHEREAS,
all capitalized terms used herein but not otherwise defined herein shall have
the terms ascribed to them in that certain Agreement Regarding Notes and
Preferred Shares dated of even date herewith among the Borrower, the Lender and
others;

 

NOW,
THEREFORE, for and in consideration of the foregoing
premises, the mutual covenants and conditions herein contained, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower covenants to and agrees with the Lender as
follows:

 

1.             Pledge.  As security for the
payment or performance, as the case may be, of the Secured Obligations (as
hereinafter defined), the Borrower hereby creates, assigns, hypothecates,
pledges and grants to the Lender, its successors and assigns, a security interest
in all of the Borrower’s right, title and interest in and to the following
property or interest in property of the Borrower, whether now owned or
hereafter acquired or arising (the “Collateral”):

 

(a)           137 shares of capital stock of
Paragon Systems, Inc. (the “Corporation”) evidenced by Certificates No.
                                          ,
a copy of which is attached to and labeled as Exhibit “A” (the “Pledged Stock”)
that are obtained directly or indirectly in the future by the Borrower;

 

(b)  all other property that may be delivered to
and held by the Lender pursuant to the terms hereof;

 

(c) all
payments of principal and interest, cash, instruments and other property from
time to time received, receivable or otherwise distributed, in respect of, in
exchange for or upon the conversion of the Pledged Stock or property referred
to in clause (b) above;

 

(d) all rights
and privileges of the Borrower with respect to the Pledged Stock or property
referred to in clause (b) above; and

 

 

(e) all
proceeds of any and all of the foregoing Collateral.

 

The Borrower will instruct the Corporation to register the transfer of
the Collateral on the books of the Corporation and to give written
confirmation, in form satisfactory to the Lender, to the Lender of the registration
of the transfer of the Collateral.  The
Borrower shall immediately deliver the certificates representing the Collateral
to the Lender, accompanied by executed transfer powers in blank, if requested
by the Lender, and by such other instruments or documents as the Lender or its
counsel may reasonably request.

 

TO
HAVE AND TO HOLD the Collateral, together with all
rights, title, interests, powers, privileges and preferences pertaining or
incidental thereto, unto the Lender, its successors and assigns, forever, subject,
however, to the terms, covenants and conditions hereinafter set forth.

 

2.             Obligations
Secured.  This
Pledge Agreement is made, and the security interest created hereby is granted
to the Lender, to secure prompt payment and performance when due of (i) all
obligations, duties, and covenants of the Borrower as set forth in the Amended
and Restated Parent Note in the principal amount of $1,462,450 dated of even
date herewith and the Unamended Note in the principal amount of $398,850 dated
February 24, 2004 (herein collectively the “Note”), and this Pledge Agreement;
and (ii) any other debts or obligations of the Borrower to the Lender which
state that such debts or obligations are secured hereby (collectively, the
“Secured Obligations”).  The Borrower was
formerly named Diversified Security Corporation and has amended its Articles of
Incorporation to amend its name from Diversified Security Corporation to Tri-S
Security Corporation.

 

3.             Representations and Warranties.  The Borrower hereby
represents and warrants to the Lender that: 
(a)  the Borrower is the legal and
equitable owner of, and has the complete and unconditional authority to pledge,
the Collateral in the manner hereby contemplated, and holds the same free and
clear of all liens, charges, encumbrances and security interests of every kind
and nature; that the Borrower will defend its title thereto against the claims
of all persons whomsoever; and that no consent or approval of any person or
entity or governmental body or regulatory authority, or of any securities
exchange, was or is necessary to the validity of such pledge which has not been
obtained; (b) the execution, delivery and performance by the Borrower of this
Agreement will not violate the terms of the Articles of Incorporation for the
Corporation and any articles of amendment to such Articles of Incorporation
(collectively the “Articles”), the Bylaws for the Corporation and any
amendments to such Bylaws (collectively the “Bylaws”) and any instrument,
document or agreement to which the Borrower is a party, or by which the
Borrower or any of its property is bound, or be in conflict with, result in a
breach of or constitute (with giving of notice or lapse of time or both) a
default under either the Articles or the Bylaws or any such instrument,
document or agreement, or result in the creation or imposition of any lien upon
any of the property or assets of the Borrower, except for the lien in favor of
the Lender created hereby; (c) this Agreement constitutes the valid and legally
binding obligations of the Borrower, enforceable in accordance with its terms;
and (d) upon the possession of the Collateral by the Lender , the pledge
created hereby constitutes a first priority perfected pledge of and security
interest in the Collateral, and no other or further action is required on the
part of the Lender to perfect, continue or protect the priority of  the pledge and security interest created
hereby.

 

2

 

4.             Dividends; Voting Rights; Etc.

 

(a)           The Lender shall be entitled to receive, and upon the
occurrence and during the continuance of any Default, retain any cash dividends
or other cash distributions declared and paid to the Borrower as a shareholder
of the Corporation.  Any and all liquidating
distributions, other distributions in property, return of capital or other
distributions made on or in respect of the Collateral, whether resulting from a
subdivision, combination or reclassification of the ownership interests of the
Corporation, or received in exchange for Collateral or any part thereof or as a
result of any merger, consolidation, acquisition or other exchange of assets to
which the Corporation may be a party or otherwise, shall be and become part of
the Collateral pledged hereunder and, if received by the Borrower, shall
forthwith be delivered to the Lender to be held subject to the terms of this
Agreement.

 

(b)           Any dividends or distributions received by the Lender with
respect to the Collateral and any and all money paid over to or received by the
Lender pursuant to the provisions of this Section 4 shall be applied towards
the Secured Obligations.  Any other
property paid over to or received by the Lender pursuant to this Section 4
shall be retained by the Lender as Collateral and shall be applied in
accordance with the provisions hereof.

 

(c)           The Lender, upon and after the occurrence of any Default
hereunder, shall be entitled to exercise all voting rights and powers
pertaining to the Collateral, and any and all proxies theretofore executed by
the Borrower in favor of any Person other than the Lender shall terminate and
thereafter be null and void.  The Lender,
upon and after the occurrence of any Default hereunder, and at its election, is
hereby irrevocably appointed to vote the Collateral as to any matter.

 

5.             Covenants
With Respect to Collateral; Default. 
The Borrower agrees with the Lender with
respect to the Collateral as follows:

 

(a)           The Borrower covenants that it will cause any additional
interests in the Corporation and any securities or property issued to or
received by it with respect to any of the Collateral, whether for value paid by
it or otherwise, to the extent certificated, to be forthwith deposited and
pledged hereunder, in each case accompanied by proper confirmation of
registration of the transfer on the books of the Corporation or by proper
instruments of assignment duly executed in blank by the Borrower.

 

(b)           The Lender may hold any of the Collateral that is
evidenced by a certificate, endorsed or assigned in blank or in the name of any
nominee or nominees of the Lender, and the Lender may deliver any of the
Collateral to the Corporation thereof for the purpose of making denominational
exchanges or registrations or transfers or for such other purpose in furtherance
of this Agreement as the Lender may deem desirable.

 

(c)           The Borrower will pay all taxes, assessments and other
charges levied, assessed or imposed upon the Collateral when the same become
due.

 

(d)           A “Default” shall exist hereunder if any of the following
shall occur:  (i) the Borrower shall or
shall attempt to encumber, subject to any further pledge or security interest,
sell, transfer or otherwise dispose of any of the Collateral or any interest
therein; (ii) any

 

3

 

of the Collateral shall be attached or levied
upon or seized in any legal proceedings, or held by virtue of any lien or
distress; (iii) the Borrower shall fail or refuse to pay promptly all
taxes and assessments upon any of the Collateral; (iv) the Borrower shall
fail to perform any covenant or agreement set forth herein; (v) any
representation, warranty or statement made by the Borrower under or in
connection with this Agreement shall have been false or misleading in any
material respect when made; (vi) the pledge and security interest created
hereby shall cease for any reason to constitute a first priority perfected lien
in the Collateral or any part thereof; or (vii) the Borrower shall fail to
perform any of the Secured Obligations as defined in this Agreement.

 

6.             Remedies Upon Default.

 

(a)           If a Default shall have occurred, the Lender may sell the
Collateral, or any part thereof, at public or private sale or at any broker’s
board or on any securities exchange, for cash, upon credit or for future
delivery as the Lender shall deem appropriate. 
The Lender shall be authorized at any such sale (if, on the advice of
counsel, it deems it advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the Lender
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. 
Each such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Borrower, and the
Borrower hereby waives (to the extent permitted by law) all rights of Stock
Purchase, stay and/or appraisal which the Borrower now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted.  The Borrower will execute and
deliver such documents and take such action as the Lender deems necessary or
advisable in order that any such sale may be made in compliance with the law.

 

(b)           The Lender shall give the Borrower ten (10) days’ written
notice of the Lender’s intention to make any such public or private sale or
sale at any broker’s board or on any such securities exchange.  Such notice, in case of public sale, shall
state the time and place for such sale, and, in the case of sale at a broker’s
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange.  Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Lender may fix and shall state in the notice (if any) of such sale.  At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Lender may (in its sole and absolute discretion) determine.  The Lender shall not be obligated to make any
sale of Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of Collateral may have been given.  The Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned.  In
case sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Lender until the sale
price is paid by the purchaser or purchasers thereof, but the Lender shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. 
As an alternative to exercising the power of sale herein conferred upon
it, the Lender may proceed by a suit or suits at law or in equity to foreclose
this Agreement and

 

4

 

to sell the Collateral, or any portion
thereof, pursuant to a judgment or decree of a court or courts of competent
jurisdiction.

 

(c)           In addition to the rights and remedies provided herein and
the Note, (herein collectively the “Loan Documents”) and otherwise available
under any applicable law, whenever a Default shall have occurred, the Lender
shall have all the rights and remedies of a secured party upon default under
the Uniform Commercial Code as then in effect in the State of Alabama.

 

7.             Application
of Proceeds of Sale and Cash.  The
proceeds of a sale of the Collateral sold pursuant to Section 6 hereof or
otherwise realized shall be applied by the Lender as follows:

 

First:  to the payment of all costs and expenses
incurred by the Lender in connection with such sale, including, but not limited
to, all court costs and the reasonable fees and expenses of counsel for the
Lender in connection therewith and unpaid fees owing to the Lender under the
Note;

 

Second:  to the ratable payment of accrued but
unpaid interest on the Secured Obligations in accordance with the provisions of
the Note;

 

Third:   to
the ratable payment in full of the unpaid principal of the Secured Obligations;

 

Fourth:   to the ratable payment of all other Secured
Obligations until all Secured Obligations have been paid in full; and

 

Fifth:
     to the Borrower or to any other
person then legally entitled thereto, of any remainder of such proceeds.

 

8.             Exercise
of Powers.  The
Lender shall have and be entitled to exercise all such powers hereunder as are
specifically delegated to the Lender by the terms hereof, together with such
powers as are reasonably incidental thereto. 
The Lender may execute any of its duties hereunder by or through agents
or employees and shall be entitled to retain counsel and to act in reliance
upon the advice of such counsel concerning all matters pertaining to its duties
hereunder.

 

9.             Lender
Appointed Attorney-in-Fact.  The
Borrower hereby appoints the Lender as its attorney-in-fact for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any instrument which the Lender either may deem necessary or
advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest.  Without
limiting the generality of the foregoing, the Lender shall have the right and
power to receive, endorse and collect all checks and other orders for the
payment of money made payable to the Borrower representing any interest or
dividend or other distribution payable in respect of the Collateral or any part
thereof and to give full discharge for the same.

 

10.          No
Waiver.  No
failure on the part of the Lender to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy by the Lender
preclude any other or

 

5

 

further exercise thereof or the
exercise of any other right, power or remedy. 
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.

 

11.          Securities
Law, Etc.  The
Borrower recognizes that the Lender may be unable or shall determine that it is
undesirable to effect a public sale of any or all of the collateral by reason
of certain prohibitions contained in Federal and state securities laws, but may
be compelled or determine that it is desirable to resort to one or more private
sales thereof to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof.  The Borrower acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, AGREES
THAT ANY SUCH PRIVATE SALE SUBJECT TO SUCH CONDITIONS AND MADE IN ACCORDANCE
WITH APPLICABLE LAW SHALL BE DEEMED TO HAVE BEEN MADE IN A COMMERCIALLY
REASONABLE MANNER.  Without limiting the
generality of the foregoing, the provisions of this Section would apply if, for
example, the Lender were to place all or any part of the Collateral for private
placement by an investment banking or similar firm, or if such firm purchased
all or any part of the Collateral for its own account, or if the Lender placed
all or any part of the Collateral privately with a purchaser or
purchasers.  The Borrower further agrees
to do or cause to be done all such other acts and things as may be requested by
the Lender and necessary to make such private sale or sales of any portion or
all of the Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at the Borrower’s
expense.

 

12.          Termination.  This Pledge
Agreement will terminate when all of the Secured Obligations have been fully
paid and performed by Borrower and all Secured Obligations of Borrower have
terminated, at which time the Lender will, upon the Borrower’s request, execute
and deliver to the Borrower such documents as the Borrower shall reasonably
request to evidence the termination of the security interests or release of
such Collateral, as the case may be.  Any
such assignment shall be without recourse upon or warranty by the Lender.

 

13.          Binding
Agreement; Assignment.  This
Agreement, and the terms, covenants and conditions hereof, shall be binding
upon and inure to the benefit of the parties hereto and to all holders of
indebtedness secured hereby and their respective successors and assigns, except
that the Borrower shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise pledge,
encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Lender as collateral under this
Agreement.

 

14.          Governing
Law; Amendments.  This
Agreement shall in all respects be construed in accordance with and governed by
the laws of the State of Alabama.  This
Agreement may not be amended or modified, nor may any of the Collateral be
released or the pledge or security interest created hereby be extended, except
pursuant to a writing signed by the parties hereto.

 

6

 

15.          Further
Assurances.  The
Borrower agrees to do such further acts and things, and to execute and deliver
such additional conveyances, assignments, agreements and instruments, as the
Lender may at any time request in connection with the administration and
enforcement of this Agreement or relative to the Collateral or any part thereof
or in order better to assure and confirm unto the Lender its rights and
remedies hereunder.

 

16.          The
Borrower’s Obligations Absolute, Etc. 
The obligations of the Borrower under this
Agreement shall be absolute and unconditional in accordance with its terms and
shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation: (a) any
change in the time, place or manner of payment of, or in any other term of, all
or any of the Secured Obligations, any waiver, indulgence, renewal, extension,
amendment or modification of or addition, consent or supplement to or deletion
from or any other action or inaction under or in respect of the Note or any
other Loan Document, or any of the other documents, instruments or agreements
relating to the Secured Obligations or any other instrument or agreement
referred to therein or any assignment or transfer of any thereof; (b) any lack
of validity or enforceability of the Loan Documents, or any other documents,
instruments or agreements referred to therein or any assignment or transfer of
any thereof; (c) any furnishing of any additional security to the Lender, or
its assignees or any acceptance thereof or any release of any security by the
Lender or its assignees; (d) any limitation on any party’s liability or obligations
under any such instrument or agreement or any invalidity or unenforceability,
in whole or in part, of any such instrument or agreement or any term thereof;
(e) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to the Borrower, or
any action taken with respect to this Agreement by any trustee or receiver, or
by any court, in any such proceeding, whether or not the Borrower shall have
notice or knowledge of any of the foregoing; or (f) any exchange, release or
nonperfection of any other collateral, or any release, or amendment or waiver
of or consent to departure from any guaranty or security, for all or any of the
Secured Obligations.

 

17.          Headings.  Section headings
used herein are for convenience only and are not to affect the construction of
or be taken into consideration in interpreting this Agreement.

 

18.          Notices.  Except as otherwise
provided herein, all notices, requests and demands to or upon a party hereto
shall be in writing and shall be sent by certified or registered mail, return
receipt requested, personal delivery against receipt or by telecopier or other
facsimile transmission and, unless otherwise expressly provided herein, shall
be deemed to have been validly served, given or delivered when delivered
against receipt or one Business Day after deposit in the mail, postage prepaid,
or, in the case of facsimile transmission, when received at the office of the
noticed party, addressed as follows:

 

	
  (A)

  	
  If to the Lender:

  	
  Robert Luther

  
	
   

  	
   

  	
  2115 Buckingham Drive

  
	
   

  	
   

  	
  Hunstville, Alabama 35803

  
	
   

  	
   

  	
   

  
	
  (B)

  	
  If to the Borrower:

  	
  3700 Mansell Road

  
	
   

  	
   

  	
  Suite 220

  
	
   

  	
   

  	
  Alpharetta, Georgia 30022

  

 

7

 

or to such other address as each party may designate for itself by like
notice given in accordance with this Section 19.

 

19.          Acceptance.  The Borrower waives any requirement that the
Lender acknowledge its acceptance of this Agreement.

 

[The Remainder of This Page Intentionally
Left Blank]

 

8

 

IN
WITNESS WHEREOF, the Borrower has caused this Pledge
Agreement to be duly executed under seal as of the day and year first above
written.

 

	
   

  	
  Tri-S Security Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronald G. Farrell

  	
   

  
	
   

  	
  Its: Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  STATE OF
                                 

  	
  )

  	
   

  
	
   

  	
  ) ss:

  	
   

  
	
  COUNTY OF
                             

  	
  )

  	
   

  

 

I,
the undersigned Notary Public in and for said County in said State, hereby
certify that Ronald G. Farrell, who is personally known to me and whose
name is signed to the foregoing instrument as the Chief Executive Officer of
Tri-S Security Corporation, a Georgia corporation,  acknowledged before me on this day that,
being informed of the contents of said instrument, he, as such officer,
executed the same voluntarily and with full authority on behalf of Tri-S
Security Corporation on the date first therein set forth.

 

Given
under my hand and official seal this the
          day of
                                 ,
2004.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  My Commission Expires:

  	
   

  	
   

  
					

 

9

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