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Exhibit 10.24  

 
 

EMPLOYMENT AGREEMENT
  BETWEEN
  DIVERSIFIED SECURITY CORPORATION
  AND
  RONALD G. FARRELL    
    

        THIS AGREEMENT made and entered into as of this 1 day of January, 2002 by and between DIVERSIFIED SECURITY CORPORATION, a Georgia corporation (the "Corporation"),
and Ronald G. Farrell (hereinafter referred to as "Executive"). 

WITNESSETH THAT  

        The parties, for and in consideration of the mutual and reciprocal covenants and agreements hereinafter contained, do contract and agree as follows, to wit: 

        1.    Purpose and Employment.    The Corporation has been formed for the purpose of acquiring
and holding several existing companies in the security industry (the "Business"). The purpose of this Agreement is to define the relationship between the Corporation and Executive. The Corporation
hereby employs Executive, and Executive hereby accepts employment by the Corporation, all upon the terms and conditions hereinafter set forth. 

        2.    Position and Scope of Duties.    The Corporation hereby employs Executive as Chief
Executive Officer and President of the Corporation (the "Position"). Executive shall at all times discharge his duties in consultation with and under the supervision and authority of the Board of
Directors of the Corporation (the "Board"). The Executive shall devote such time as he deems necessary, and his best efforts, skills and attention to the business and affairs of the Corporation, shall
serve the Corporation faithfully and competently and shall at all times act in the Corporation's best interest. During his employment by the Corporation the Executive shall not, either directly or
indirectly (a) represent or be employed by any other person, firm or corporation; or (b) have any interest in or involvement with any person, firm or corporation the business of which is
competitive with any aspect of the business of the Corporation; provided, however, that nothing herein shall be construed to prevent Executive from (i) continuing to own and operate R.G.
Farrell, Inc. and R.G.F. Investments, Inc. in the same manner and to the same extent as owned and operated prior to the date hereof or (ii) investing in or participating in the
management of companies or other entities which do not compete with the Corporation. During the term of this Agreement, it shall not be a violation of this Agreement for the Executive to (i) 
serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions and (iii) manage personal
investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities. As to employees under his jurisdiction including those working directly
under his supervision, Executive shall use his best efforts to employ individuals who are capable and willing to perform their duties according to applicable legal requirements and the Corporation's
policies, and shall use his efforts to cause such personnel to be properly supervised. All companies the corporation may acquire shall be bound to the same terms and conditions of this agreement for
the benefit of the executive. Funds to pay executive may be provided by the companies acquired. 

        3.    Term.    The term of employment under this Agreement shall commence on January 1,
2002, and shall terminate, unless extended or unless earlier terminated in accordance with Section 9, Section 10 or Section 11 hereof, on December 31, 2008 (the "Term"). 

        4.    Relocation.    Executive will have the right to refuse any request that Executive be
asked to relocate his principal address during the Term of the Agreement. Executive may at his option work from his home office if he relocates away from the Corporations current headquarters. 

        5.    Working Facilities.    Executive shall be furnished with a private office, necessary
secretarial and administrative assistance, and other facilities, amenities and services necessary for Executive to perform services under this Agreement. 

        6.    Compensation During Employment.    For all the services to be rendered by Executive
hereunder, the Corporation shall pay to Executive a base salary (the "Base Salary") and bonus and incentive compensation in accordance with the compensation schedule attached hereto as  Exhibit A
which is incorporated herein and made a part hereof by this reference. Executive's Base Salary shall not be reduced during the Term.
 

        7.    Expenses.    During the Term, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by him (in accordance with the policies and procedures regarding employee business expenses established from time to time by the Board for its
officers) in performing services hereunder, provided that the Executive properly accounts therefor in accordance with the applicable corporate policy and procedures. Executive may at his discretion
travel (fly) first class and stay in hotels of his choice. Executive shall be reimbursed for any trade or professional memberships, charity events, or public fund raises that he, in his discretion,
elects to join or participate in. Executive may at his discretion have his wife accompany him on business trips or any functions he chooses at his discretion. 

        Executive
agrees that, if any time, any payment made to Executive by the Corporation as a business expense reimbursement shall be disallowed in whole or in part as a deductible expense
to the Corporation by the appropriate taxing authorities. Executive shall reimburse the Corporation to the full extent of such disallowance. 

        8.    Other Benefits.    In addition to the employee benefits conferred under this Agreement,
Executive shall receive or participate in any additional employee benefit plans, stock option plans and "fringe" benefits (including, without limitation, permissible sick days or leave days) that the
Board shall confer; provided, however, that during the Term, Executive shall be provided with: 

	(a)
	Medical
and Dental insurance for himself and his family under a formal Corporate plan or, at the election of the Executive, Executive may continue his existing medical and dental
insurance plan covering himself and his family and the Corporation shall reimburse Executive for all amounts paid by Executive for such plan coverage;

	(b)
	Paid
physical examination annually;

	(c)
	Reimbursement
of medical costs not covered by the Corporation's policy; and

	(d)
	A
minimum of $1 million face amount of level term life insurance, the beneficiaries of which shall be the Corporation as to fifty percent (50%) and Executive's designated
beneficiary as to fifty (50%). If Executive's employment is terminated for any reason other than death or permanent disability during the Term, the Executive shall have the right to such policy.

	(e)
	Personal
financial planning, tax preparation and planning, and tax accounting services provided by such persons as selected by Executive. 

        9.    Disability.    If Executive is unable to perform his services for reasons of illness or
incapacity, the compensation thereafter payable to him under Section 6 hereof during the period of such illness or incapacity shall be continued until the Executive is eligible to receive
benefits under the disability insurance provided by the Corporation, after which time no further amounts shall be payable by the
Corporation for so long as the disability continues. Executive's full compensation shall be reinstated upon his return to full employment and discharge of his full duties. 

        If
Executive is unable to perform his services for reasons of illness or incapacity for a period of more that nine (9) consecutive months, then the Board may at its option
terminate this Agreement. In event of such termination, the Executive shall be paid any bonuses and incentive compensation or portion thereof for any preceding year or for the current year that have
been earned but have not been received and Executive's compensation and fringe benefits (to the extent practicable) shall be continued 

for
a period of twelve (12) months after such termination, and shall be paid to the Executive. The Executive shall continue to be entitled to receive any payments prescribed under the
Corporation's disability insurance under which he is covered. 

        10.    Termination of Employment by Corporation.    Prior to its termination under Section 3,
9 or 11 hereof, the Corporation may terminate this Agreement with cause upon satisfying the prior written notice requirement hereinafter provided, unless Executive cures such cause prior to the end of
the period set forth below. Executive shall not be deemed to have been terminated for cause unless and until there shall have been delivered to Executive a written notice setting forth in reasonable
detail the conduct warranting termination for cause together with a statement in reasonable detail of any evidence alleged to support such charge. Upon receiving a copy of such notice, Executive shall
be given a period of sixty (60) days within which to cure such cause to the reasonable satisfaction of the Corporation. Upon failing to cure such cause, Executive's employment shall terminate at the
end of such sixty (60) day period. In the event of such termination the Corporation shall be obligated only to continue to pay to Executive his compensation, if any, owed to Executive under any
employee benefit and/or welfare plans provided for Executive in accordance with the terms of such plans as in effect on the date of termination of employment and monies owed to Executive for any
reason (loans, bonus, vacation, fees, expense reimbursements, accrued payroll, etc.). 

        The
Corporation shall not terminate this Agreement without cause except with the prior written agreement of Executive. If the Corporation should terminate this Agreement without cause
and without the Executive's prior written consent, the Executive shall be entitled to receive from the Corporation the same Base Salary and benefits that would be payable to Executive pursuant to
Section 11(b) hereof upon the Executive's termination of this Agreement in the event of the Corporation's breach of this Agreement. 

        The
term "cause" as contemplated by this Section 10 shall mean gross negligence, gross malfeasance or willful disregard for duty in the performance of this Agreement, other than as a
result of Executive's part shall be considered willful, unless done, or omitted to be done, by him not in good faith and without reasonable belief that this action or omission was in the best interest
of the Corporation. 

        11.    Termination by Executive.    

        (a)   Prior
to its termination under Section 3, 9 or 10 hereof, Executive's employment with the Corporation can be terminated by the Executive upon sixty (60) days written
notice to the Corporation. In the event of such termination, the Corporation shall be obligated only to continue to pay Executive his compensation if any, earned to the date of termination. In
addition, the Corporation shall pay vested benefits, if any, owed to Executive under any employee benefit/and or welfare plans provided for Executive in accordance with the terms of such plans, as in
effect on the date of termination of employment and monies owned to Executive for any reason (including but not limited to loans, bonus, vacation, fees expense reimbursement and accrued payroll). 

        (b)   Prior
to its termination under Section 3, 9, or 10 hereof, Executive's employment with the Corporation can be terminated by the Executive in the event of: (1) the
Corporation's breach of any material provision of this Agreement, including, without limitation, the Corporation's failure to provide the Base Salary or employee benefits to which Executive is
entitled; (2) except as otherwise provided herein, the Corporation's reduction or change in any material authority, responsibility, prerequisite or prerogative associated with the Executive's
Position without the Executive's written consent; (3) the Corporation's assigning the Executive, without the written consent of the Executive, to a place of employment situated beyond a radius
of twenty-five (25) miles from the place of employment to which the Executive is assigned as of the date of this Agreement as long as the Executive shall give written notice to the Corporation
of his intent to terminate setting forth the basis for such termination and the Corporation shall have thirty (30) days after receipt of such notice to rectify or rebut the claimed basis for
termination; or (4) the bankruptcy of or cessation of business by the Corporation. In the event the Executive shall terminate this Agreement for a reason set forth in this Section 11(b),
other than under Section 11(b)(4): (i) within ten (10) days after the date of termination the Corporation shall pay to the 

Executive
in a lump sum his Base Salary for the unexpired Term calculated using the amounts stated in Exhibit A, attached herein, plus any
benefits earned by Executive under the Corporation's employee benefit and/or welfare plans (qualified or otherwise); (ii) the Corporation shall continue to timely provide all of the other
employee benefits and payments due the Executive as provided under this Agreement for the unexpired Term (as though no termination had occurred), and (iv) all COBRA payments payable by
Executive shall be paid by the Corporation for the greater of the unexpired Term or eighteen (18) months from the date of termination. If the terms of any welfare benefit plan of the
Corporation does not permit continued participation by Executive, then, the Corporation shall arrange to provide the Executive, within ten (10) days of the date of termination, a benefit
substantially similar to and no less favorable than the benefit Executive was entitled to receive under such plan at the end of the period of coverage. 

        12.    Mitigation.    Executive shall not be required to mitigate the amount of any payments
provided for in Section 11(b) hereof by seeking other employment or otherwise, (but shall not be prohibited from seeking such employment), nor shall the amount of any payment provided for in
Section 11(b) hereof be reduced by any compensation earned by the Executive as a result of self-employment or employment by an affiliate of the Executive. In the event that the Executive is
employed by an unrelated third party,
the compensation earned by the Executive as a result of such employment shall reduce on a dollar-for-dollar basis the amount of the payments required to be made by the Corporation pursuant to
Section 11(b) hereof. 

        13.    Compensation Upon Termination of Employment.    

        (a)   Death.    If during the Term the Executive's employment shall be terminated by reason of death, the Corporation
shall thereafter have no liability or obligation to the Executive's estate hereunder, except for (i) the portion, if any, of the Executive's Base Salary for the period up to the date of death
which remains unpaid and the Executive's Base Salary for a period of eighteen (18) months after such termination; (ii) any bonuses and incentive compensation or portion thereof for any
preceding year or for the current year that have been earned, but have not been received prior to the date of death; and (iii) any other payments or benefits that the Executive is eligible to
receive or would have received (to the extent practicable) for a period of eighteen (18) months after such termination under any benefit or retirement plans or other arrangement that would, by
their terms, apply. 

        (b)   Cause.    If the Executive's employment shall be terminated for cause, the Corporation shall not have any
further obligation or liability under this Agreement, except that the Corporation shall pay to the Executive within ten (10) days of the date of termination: (i) the portion, if any, of
the Executive's Base Salary for the period up to the date of termination which remains unpaid; (ii) any bonuses and incentive compensation or portion thereof for any preceding year or for the
current year that have been earned, but have not been received prior to the date of termination; and (iii) any other payments or benefits that the Executive is eligible to receive under any
benefit or retirement plans or other arrangements that would, by their terms, apply and the Corporation shall pay all COBRA payments payable by Executive for a period of eighteen (18) months
from the date of termination. 

        14.    Vacation, Holidays, etc.    Executive shall be entitled to four weeks vacation with pay
(or such greater length of time as may be approved from time to time by the Board) during each fiscal year of the Corporation, such vacation to be taken by Executive at such times as shall be
consistent with the business requirements of the Corporation. Such vacation time allowance shall be a cumulative accrual, and any unused vacation time for each year of the Term shall not be forfeited
by Executive if not used during such year, provided that at no time shall Executive take more than (4) weeks of vacation consecutively. In lieu of accruing vacation time from one year to the
next, Executive may elect to take the cash equivalent of the unused vacation time for such year, which, if elected, shall be paid by January 31 of next year. 

        15.    Restrictive Covenants of Executive.    

        (a)   Definitions.    For purposes of this Agreement: 

          (i)  "Confidential Information" shall mean any information belonging to the Corporation (or to any of its parents,
subsidiaries or affiliates) (whether proprietary or otherwise) treated by the Corporation as being confidential, including, but not limited to, research, marketing customer lists, financing sources,
methods, techniques and systems, all of which shall be deemed by the Corporation and Executive as being Confidential Information. The foregoing provisions of this paragraph to the contrary not
withstanding, Confidential Information shall not include (1) Executive's knowledge and/or skills relating to business in general or his general knowledge of the industries/businesses in which
the Corporation is or may become involved or (2) information which is generally know to the public or in the trade or industry in which the Corporation competes. 

         (ii)  "Person" shall mean an individual, a partnership, an association, a corporation, a trust, an unincorporated
organization, or any other business entity or enterprise, provided, however, that the term "Person" shall not include the Corporation (or any of its parents, subsidiaries or affiliates). 

        (b)   Acknowledgments.    Executive agrees and acknowledges that: (i) he will be in a position of confidence
and trust with the Corporation and he will have access to Confidential Information; (ii) the nature and periods of restrictions imposed by the covenants set forth in this Section 15 are
fair, reasonable and necessary to protect and preserve for the Corporation the benefits of this Agreement and that such restrictions will not prevent Executive from earning a livelihood;
(iii) the Corporation would sustain irreparable loss and damage if Executive were to breach any of such covenants; (iv) the covenants herein set forth are made as an inducement to and
have been relied upon the Corporation in entering into this Agreement. 

        (c)   Confidential Information.    Executive hereby covenants and agrees that during the Term and for one year (1)
after Executive's employment is terminated for whatever reason, Executive shall not, directly or indirectly, at any time, disclose to any Person or use or otherwise exploit for Executive's own benefit
or for the benefit of any other Person any Confidential Information that was disclosed to Executive or acquired by Executive while an employee of the Corporation except (1) in response to
subpoena or other legal process or proceeding, or (ii) to directors, consultants or employees of the Corporation in the course of his duties. 

        (d)   Non-Solicitation of Employees.    Executive hereby covenants and agrees that during the Term and for one
(1) year after Executive's employment is terminated for whatever reason, Executive shall not, directly or indirectly, either for Executive's own benefit or as an officer, director, shareholder,
partner, proprietor, employee, agent consultant, or independent contractor of any Person, induce any person who is at that time employed by the Corporation, other that Executive's administrative
assistant, to leave such person's employment thereat, unless the Corporation has given Executive its prior written consent. 

        (e)   Non-Competition.    Executive acknowledges that his services and responsibilities are unique in character and
are of particular significance to the Corporation, that the Corporation is a competitive business and Executive's continued service to the Corporation under this Agreement is important to the
Corporation. Therefore, during the Term and, for an additional period of one (1) year following the date Executive is terminated or voluntarily terminates his employment with the Corporation
(the "Non-compete Period"), Executive shall not, directly or indirectly, except as an employee or agent of the Corporation, and shall not, directly or indirectly, as owner, partner, joint venturer,
owner of no more than five percent (5%) of the issued and outstanding capital stock of such entity if such stock is traded on a major securities exchange or NASDAQ or otherwise as a purely passive
shareholder) engage in or have any connection with any business which is competitive with the Business, and which operated anywhere in the United States. In the event that Executive terminates his
employment under this Agreement pursuant to Section 11(b) hereof or the Corporation terminates his employment without cause, this Section 15(e) shall not apply. 

        (f)    Consent to Injunction.    Executive acknowledges that his breach of any covenant set forth in this
section 15 will result in irreparable injury to the Corporation and that the Corporation's remedies at law for such a breach are inadequate and extremely difficult to calculate or determine.
Accordingly, Executive agrees and consents that upon such a breach by Executive of any covenant set forth herein, the Corporation shall, in addition to all other remedies available at law and in
equity, be entitled to both preliminary and permanent injunctions to prevent or hold such a breach or threatened breach. 

        (g)   Reformation.    If any of the provisions of this Section 15 should ever be held to exceed the time or
geographic limitations permitted by applicable law in a final judgment by a court of competent jurisdiction, then such a provision shall be automatically reformed to the maximum time or geographic
limitations permitted by applicable law. 

        (h)   Remedies Cumulative and Concurrent.    The rights and remedies of the Corporation as provided in this
Section 15 shall be cumulative and concurrent and may be pursued separately, successively or together against Executive at the sole discretion of the Corporation, and may be exercised as often
its occasion therefor shall arise. The failure to exercise any right or remedy shall in no event be construed as a waiver or release thereof. 

        (i)    Expenses.    The Corporation and the Executive agree that the prevailing party shall be reimbursed by the other
party for any reasonable expenses incurred by such prevailing party in any action involving the enforcement of the provisions of this Section 15. 

        16.    Insurance.    At its cost, the Corporation agrees to provide comprehensive medical
insurance with full dental and pharmaceutical coverage, in such amounts and with such deductibles as the Corporation determines with beneficiaries as Executive shall select. At its cost, the
Corporation agrees to provide the following: (i) disability insurance coverage providing benefits per year until demise in an amount of not less than sixty percent (60%) of the Executive's Base
Salary, as determined by the Board, with coverage in the event Executive should suffer a disability event rendering him incapable of performing duties such as those he performs for the Corporation,
and (ii) group term life insurance for Executive during the Term in an amount not less than $1,000,000, with beneficiaries as Executive shall select. 

        17.    Waiver of Breach of Violation Not Deemed Continuing.    The waiver by either party of a
breach or violation of any provision of this Agreement shall not operate as or be construed to be a waiver of any subsequent breach hereof. 

        18.    Appointment to Board.    Executive will be appointed and shall remain Chairman of the
Corporation's Board of Directors during his employment. 

        19.    Notices.    Any and all notices required or permitted to be given under this Agreement
will be sufficient if furnished in writing, personally delivered or sent by certified or registered mail, return receipt requested to Executive's last known residence in care of Executive. Notices
shall be deemed to have been given when personally delivered to the party entitled thereto, or five (5) business days after it is sent by United States mail with postage prepaid, addressed to
the party entitled thereto. A party may from time to time change address for the purpose of notices to that party by a similar notice specifying a new address sent in the manner provided by this
Section 19. 

        20.    Governing Law.    This Agreement shall be interpreted, construed and governed according
to the laws of the State of Georgia. Executive hereto consents to jurisdiction and venue in the Georgia Courts of Fulton County, Georgia and in the United States District Court for the Northern
District of Georgia for all actions and proceedings relating to this Agreement and the transactions contemplated herein commenced by the Corporation. 

        21.    Successors and Assignment.    The provisions of this Agreement shall extend to the
successors, surviving corporations and assignees of the Corporation and to any purchaser of substantially all of the assets and business of the Corporation (hereinafter referred to as a "Successor").
The assignment by Executive of this Agreement or any interest herein or of any money due or to become due by reason of the terms hereof without the prior written consent of the Corporation, which
shall not be unreasonably 

withheld
shall be void. The Corporation will require any Successor, by written agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Corporation would be required to perform it if no such succession had take place. As used in this Agreement, "Corporation" shall mean the Corporation
and any Successor to its business and/or assets as aforesaid which executes and delivers the written agreement provided for in this Section 18 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law. 

        22.    Section Headings.    The section headings contained in this Agreement are for
convenience of reference only and shall in no manner be construed as a part of this Agreement. 

        23.    Entire Agreement.    This Agreement supersedes all prior discussions and agreements
between the Corporation, or any of its officers, directors, employees, or agents, and Executive with respect to all matters relating to the employment by the Corporation of Executive and all other
matters contained herein, and this Agreement constitutes the sole and entire agreement with respect thereto. Any representation, inducement, promise or agreement, whether oral or written, between the
Corporation, or any of its officers, directors, employees, or agents, and Executive which is not embodied herein shall be of no force or effect. This Agreement may not be modified or amended orally,
but only by an instrument in writing, signed by both parties. 

        24.    Burden and Benefit.    This agreement shall be binding upon, and shall inure to the benefit of, the Corporation
and Executive and their respective heirs, personal and legal representatives, successors, and assigns. If the Executive should die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there
be no such designee, to the Executive's estate. 

        25.    Severability.    If any term, covenant or condition of this agreement or the
application of such terms, covenants and conditions to persons or circumstances other than those as to which it is held invalid or unenforceable shall be affected thereby and each term, covenant or
condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law. 

        26.    Indemnification.    The Corporation agrees to defend, indemnify and hold harmless the
Executive from and against any liabilities and expenses arising in relation to this Agreement or the Executive's services as a director or officer of the Corporation or its subsidiaries or affiliates,
to the fullest extent permitted by applicable law. The foregoing indemnification obligation shall not be applicable in the event the Executive is finally found by a court of competent jurisdiction,
with all appeals completed, to have been grossly negligent with respect to the matter for which he is seeking indemnification. The Corporation shall pay on a regular basis, to the fullest extent
permitted by law, in advance of the final disposition of any action, suite or proceeding, any legal and other professional fees and expenses incurred in connection therewith, upon receipt by the
Corporation of a written undertaking by the Executive to repay such amounts if it shall ultimately be determined that the Executive is not entitled to be indemnified. This indemnification obligation
shall survive the termination of the Executive's employment hereunder. 

        27.    Counterparts.    This Agreement is executed in multiple counterparts, each of which
shall be deemed an original and together shall constitute one and the same agreement, with one counterpart being delivered to each party hereto. 

        IN WITNESS WHEREOF, the Corporation has hereunto caused this Agreement to be executed by its duly authorized officer and to have its seal
hereunto affixed, and Executive has hereunto set his hand and seal, all being done in duplicate originals delivered to each party as of the day and year first above written. 

Agreed
and Accepted 

	/s/  RONALD G. FARRELL      
 Ronald G. Farrell	 	 
	

Agreed and Accepted	
 	

 
	

/s/ R.G. FARRELL (Chairman)
 Diversified Security Corporation	
 	

 

Exhibit A  

COMPENSATION  

        1.    Minimum Base Salary.    

	January 1, 2002 through December 31, 2002	 	$	210,000
	

January 1, 2003 through December 31, 2003	
 	
$	

231,000
	

January 1, 2004 through December 31, 2004	
 	
$	

254,000
	

January 1, 2005 through December 31, 2005	
 	
$	

279,510
	

January 1, 2006 through December 31, 2006	
 	
$	

307,460
	

January 1, 2007 through December 31, 2007	
 	
$	

338,210
	

January 1, 2008 through December 31, 2008	
 	
$	

372,025

        The
amounts shown above are approximate. 

        Base
Salary is payable in cash in monthly installments (or on such other periodic basis as may be mutually agreed upon), pro rated for any partial year during which Executive's
employment under the Agreement terminates, but reduced or eliminated in the events set forth in Section 9 of the Employment Agreement. In addition, Executive shall be entitled to reimbursement
by the Corporation for Executive's monthly automobile expenses in the amount of $1,500 per month, plus gas, oil and tires. Reimbursement for gas, oil and tires shall be made to Executive within ten
(10) days after receipt by the Company of documentary evidence detailing such expenses. Company shall reimburse executive for auto travel at the rate of 35 cents per mile for company related
travel. 

        2.    Salary Increases.    Executive shall receive as additional salary such amounts as the
Corporation shall from time to time elect. 

        3.    Bonus and Incentive Compensation.    (a) Executive shall be entitled to receive, for
each fiscal year of the Corporation ("Fiscal Year"), or part thereof as of Fiscal 2002, during the term, a bonus equal to five percent (5%) of the operating income (EBITDA) which shall include any
cash dividends paid to the corporation on investments made by the Corporation ("Profit Bonus") for such Fiscal Year; provided,
however, that at no time may the Profit Bonus due Executive with respect to a particular Fiscal Year exceed the Executive's base salary paid for that Fiscal Year. (b) The Profit Bonus due
Executive, if any, with respect to a particular Fiscal Year shall be payable in cash quarterly, based on unaudited quarterly financial information. If any particular quarter results in a loss, no
bonus is to be paid in future quarters of the same fiscal year until such loss has been made up. The bonus, if any, for the fourth quarter of any particular fiscal year shall be paid with thirty (30)
days after receipt by the Corporation of the Audited Financial Statements for said Fiscal Year. Executive shall receive a acquisition bonus equal to 2% of all acquisitions made by the Company during
the term of this agreement. The acquisition bonus shall be paid at the time of closing of each acquisition. If Executive's employment is terminated prior to the end of any Fiscal Year during the Term,
the (Profit Bonus) and (Acquisition Bonus) due Executive for such Fiscal Year shall be prorated through the last day of employment of Executive during such fiscal year. 

        4.    Additional Benefits.    (a) The corporation shall pay the fees due of membership for
Executive in a country club selected by Executive. (b) The Corporation shall as soon as practical adopt and maintain and the Executive shall be entitled to participate in a 401(k) retirement
plan. For each plan year, The Corporation shall contribute the maximum permitted amount on behalf of Executive. 

        5.    Stock Options.    Upon execution of this Agreement, the Corporation shall grant to
Executive stock options for a total of 300,000 shares of the Corporation's common stock vesting as follows: (i) 100,000 shares on December 31, 2002, (ii) 100,000 shares on
December 31, 2003, and (iii) 100,000 shares on December 31, 2004, provided, Executive remains and employee of the Corporation, or any of its subsidiaries or affiliated companies
through each such date as to the shares vesting on such date. 

Any
termination of Executive shall not affect shares vested as provided hereinabove prior to such termination. Each stock option shall be exercisable for a 10-year term and at a price equal to the
fair market value ($.04) of the stock on the date of the Employment Agreement and have a cashless exercise feature. 

        This  Exhibit A and the Agreement to which it is attached is solely beneficial to the parties to that agreement, who may waive or modify
any provision hereof in their sole discretion. No party other than the Corporation and the Executive has any rights herein, or may make any claim hereunder. The provisions hereof shall terminate
automatically, upon the termination of Executive's employment with the Corporation. 

        6.     In
the event of a change of control, the executive shall be paid 100% of all monies that would have been paid to him
through the end of December 31, 2008. All funds will be due and payable within 5 business days of the change of control. Funds due shall mean the entire base salary which would have been paid
for the entire term, along with all benefits and bonus fees due at the time. Change of control would include the sale of the company, removal of executive as Chairman of Board, or one person or group
gaining a majority 51% interest in the company or a majority of the members of the board of directors of the company. 

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EXHIBIT 10.31  

 
 

EXCHANGE AND RECAPITALIZATION AGREEMENT    
    

        This Exchange and Recapitalization Agreement (together with the Exhibits hereto, the "Agreement") is made as of November 15, 2004 by and among
Tri-S Security Corporation, a Georgia corporation (the "Company"), the holders (collectively, the "Shareholders") of all the Company's outstanding shares of common stock, $0.001 par value
per share (the "Common Stock"), series A convertible preferred stock, $1.00 par value per share (the "Series A Convertible Preferred Stock"), and series B convertible preferred
stock, $1.00 par value per share (the "Series B Convertible Preferred Stock"), and the holders of all the Company's outstanding options and warrants to purchase Common Stock (the "Option
Holders"). 

        WHEREAS, the Company presently is preparing for an underwritten initial public offering of Common Stock to be registered on a registration
statement on Form S-1 (together with all amendments and supplements thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Initial Public
Offering"); 

        WHEREAS, the Company currently has authorized (i) 25,000,000 shares of Common Stock, of which 2,558,000 shares are outstanding on
the date hereof, and (ii) 10,000,000 shares of preferred stock, $1.00 par value per share (the "Preferred Stock"), of which (a) 1,000,000 shares are designated as Series A
Convertible Preferred Stock and 100,000 shares of which are outstanding as of the date hereof, (b) 250,000 shares are designated as Series B Convertible Preferred Stock and 40,000 shares
of which are outstanding as of the date hereof, and (c) 100 shares are designated as series C redeemable preferred stock, $1.00 par value per share (the "Series C Redeemable
Preferred Stock"), and all of which are outstanding as of the date hereof, with the Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and Series C
Redeemable Preferred Stock having the relative rights and preferences as set forth in the Company's Articles of Incorporation in effect as of the date hereof; and 

        WHEREAS, in anticipation of the Initial Public Offering, the Company desires to exchange all of the Company's outstanding Common Stock,
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock and all of the outstanding options and warrants to purchase Common Stock as set forth herein (the
"Exchange"), with the Exchange to be effective on a date to be chosen by the Company's Chief Executive Officer (the "Exchange Date"), which date shall be a date immediately prior to the date upon
which the Company, in the judgment of its Chief Executive Officer, anticipates
that the Registration Statement shall be declared effective by the Securities and Exchange Commission ("SEC"); 

        NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration,
the receipt and sufficiency of which is hereby mutually acknowledged, the parties hereto agree as follows: 

        1.    Exchange.    

        1.1.    The
Company and each Shareholder acknowledge and agree that, effective upon the Exchange Date, the shares of capital stock of the Company held by such Shareholder as of
the date hereof as set forth on Exhibit A attached hereto shall be exchanged for a number of post-Exchange shares of Common Stock equal to the product of such Shareholder's
Ownership Percentage multiplied by the Post-Exchange Outstanding Share Number. As used herein (i) "Ownership Percentage" for each Shareholder is set forth opposite such
Shareholder's name on Exhibit A and is calculated for each Shareholder by dividing (a) the number of shares of Common Stock held by such Shareholder as of the date hereof (assuming the
conversion into Common Stock on the date hereof of all shares of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock held by such Shareholder immediately prior
to the date hereof) as set forth opposite such Shareholder's name on Exhibit A, by (b) 3,708,000, which is the total number of shares of Common Stock outstanding on the date hereof
(assuming the conversion into Common Stock on the date hereof of all shares of Series A Convertible Preferred Stock and 

 

Series B
Convertible Preferred Stock outstanding immediately prior to the date hereof) as set forth on Exhibit A (the "Pre-Exchange Outstanding Share Number"); and
(ii) "Post-Exchange Outstanding Share Number" means the number of shares of Common Stock which the Company's Chief Executive Officer determines should be outstanding upon the
completion of the Exchange; provided, however, that the Post-Exchange Outstanding Share Number shall in no event be less than 1,200,000 and shall not include the shares of Common Stock
underlying any Post-Exchange Option (as defined below). For purposes of example, Exhibit B sets forth opposite each Shareholder's name the number of shares of Common Stock such
Shareholder would receive upon completion of the Exchange pursuant to this Section 1.1 if the Post-Exchange Outstanding Share Number is 1,200,000. 

        1.2.    Each
of the Shareholders acknowledges and agrees that all certificates representing shares of capital stock of the Company that are issued and outstanding immediately
prior to the Exchange Date (the "Original Certificates") shall, upon the Exchange Date, be deemed to represent only a right to receive a replacement certificate (each, a "Replacement Certificate")
representing the applicable number of
shares of Common Stock to be received by such Shareholder in connection with the Exchange. Each Shareholder further acknowledges and agrees that upon issuance of the Replacement Certificates, the
Original Certificates shall be deemed cancelled without any further action on the part of the Company or such Shareholder. 

        1.3.    The
Company and each Option Holder acknowledge and agree that, effective upon the Exchange Date, the option or warrant to purchase shares of Common Stock held by such
Option Holder as of the date hereof as set forth on Exhibit B attached hereto (the "Pre-Exchange Option") shall be exchanged for an option (the "Post-Exchange Option")
to purchase a number of post-Exchange shares of Common Stock equal to the product of (i) the quotient obtained by dividing the Post-Exchange Outstanding Share Number by
the Pre-Exchange Outstanding Share Number, multiplied by (ii) the number of shares of Common Stock underlying the Pre-Exchange Option. Each Post-Exchange
Option shall have an exercise price equal to the quotient obtained by dividing (i) the product of the number of shares of Common Stock underlying the associated Pre-Exchange Option
multiplied by the per share exercise price of such Pre-Exchange Option, by (ii) the number of shares of Common Stock underlying such Post-Exchange Option. On the
Exchange Date, the Company shall deliver to each Option Holder an executed option agreement representing the Post-Exchange Option such holder is entitled to receive in a form reasonably
acceptable to the parties thereto. Each Option Holder acknowledges and agrees that all agreements or certificates representing the Pre-Exchange Option held by such Option Holder as of the
date hereof shall, upon the Exchange Date, be cancelled and terminated without any further action on the part of the Company or such Option Holder. 

        2.    Exchange Date.    The parties hereto intend for the Exchange to occur on a date prior to
the date upon which the Registration Statement shall be declared effective by the SEC. In the event that the SEC has not declared the Registration Statement effective on or before a date which is five
business days following the Exchange Date, then the Shareholders and the Company (unless they otherwise unanimously agree) intend and agree that the Exchange (as contemplated by Section 1)
shall become null and void and of no further force or effect (except that such nullification shall not limit any right of enforcement of, or for damages in connection with, any breach of this
Agreement on the part of any party). In the event that the Exchange shall become null and void as herein specified and certain partial performances hereunder shall have been completed by the parties
hereto with respect to the Exchange, the parties severally covenant and agree to take any and all action and to file any and all instruments and documents as shall be necessary, appropriate or, upon
the reasonable request of any party hereto, desirable in order to restore all parties to their respective rights and obligations immediately prior to the Exchange Date. 

2

 
	3.
	Representations and Warranties of Shareholders. Each Shareholder represents and warrants to the Company that the following statements
are true and correct: 

        (i)    the
shares of Common Stock, Series A Convertible Preferred Stock and Series B Convertible Preferred Stock held by such Shareholder as of the date hereof as
set forth on Exhibit A are owned by such Shareholder free and clear of all claims, liens, pledges, options, charges, security interests, mortgages, deeds of trust, encumbrances or rights of any
third party of any nature whatsoever; 

        (ii)    in
the Exchange, each Shareholder will convey to the Company good title to the shares of Common Stock, Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock held by such Shareholder as of the date hereof as set forth on Exhibit A attached hereto free and clear of all claims, liens, pledges, options, charges, security
interests, mortgages, deeds of trust, encumbrances or rights of any third party of any nature whatsoever; 

        (iii)    if
such Shareholder is not a natural person, then this Agreement, when executed and delivered by such Shareholder, shall have been duly authorized, executed and
delivered by and on behalf of such Shareholder, and shall constitute the valid and binding agreement of such Shareholder, enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; 

        (iv)    if
such Shareholder is not a natural person, then such Shareholder has the requisite power and authority to enter into this Agreement and to perform its obligations
hereunder; 

        (v)    such
Shareholder is acquiring the shares of Common Stock issuable to such Shareholder upon the Exchange for investment purposes only, for its own account and not with a
view to, or for resale in connection with, any distribution thereof in violation of applicable securities laws; 

        (vi)    such
Shareholder has been advised that the shares of Common Stock issuable to such Shareholder upon the Exchange will not be registered under the Securities Act of
1933, as amended ("Securities Act"), or applicable state securities laws and that such shares must be held indefinitely unless the offer and sale thereof are subsequently registered under the
Securities Act or an exemption from such registration is available; 

        (vii)    such
Shareholder (a) has knowledge, skill and experience in financial, business and investment matters, (b) is capable of evaluating the merits and risks
of the receipt of the shares of Common Stock issuable to such Shareholder upon the Exchange, (c) is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act, and (d) has the ability to bear the risk of losing such Shareholder's entire position in shares of Common
Stock issuable to such Shareholder upon the Exchange; and 

        (viii)    such
Shareholder acknowledges and agrees that the certificates evidencing the shares of Common Stock issuable to such Shareholder upon the Exchange will bear a
restrictive legend in substantially the following form: 

THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND THEY MAY NOT BE OFFERED FOR SALE OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT THEREUNDER OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. 

3

 

THESE
SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973,' AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT. 

        4.    Representations and Warranties of the Company.    The Company represents and warrants to
the Shareholders that the following statements are true and correct: 

        (i)    upon
issuance and delivery to the Shareholders of the shares of Common Stock issuable to the Shareholders upon the Exchange, such shares will be validly issued, fully
paid and non-assessable; 

        (ii)    the
issuance and sale of the shares of Common Stock issuable to the Shareholders upon the Exchange will not give rise to any preemptive rights or rights of first
refusal which have not been duly waived by the holders thereof and will not violate any laws to which the Company or any of its assets are subject; 

        (iii)    this
Agreement, when executed and delivered by the Company, shall have been duly authorized, executed and delivered by and on behalf of the Company, and shall
constitute the valid and binding agreement of the Company, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; 

        (iv)    the
Company has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder; and 

        (v)    neither
the execution and delivery of this Agreement and the other agreements, certificates or instruments required to be executed and delivered pursuant to the terms
and conditions of this Agreement nor the consummation of the transactions contemplated thereby will (a) conflict with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, (1) the governing documents of the Company, (2) any agreement or instrument to which the Company or any of its subsidiaries is now a party or by which any of
them is bound, (3) any provision of any judgment, decree, order, statute, rule or regulation applicable to or binding on the Company or (4) result in the creation of any mortgage,
pledge, lien, encumbrance, or charge upon any of the properties or assets of the Company. 

        5.    Miscellaneous.    

        5.1.    This
Agreement shall be binding upon the parties hereto and their respective successors, assigns, heirs and legal representatives. 

        5.2.    This
Agreement shall be subject to the laws of the State of Georgia without regard to principles of conflict of law. 

        5.3.    Headings
and captions are included herein for convenience, do not form a part of this Agreement, and are not admissible as to construction. 

        5.4.    This
instrument is the entire expression of the agreement of the parties with respect to its subject matter, and supersedes all prior understandings, agreements or
representations in such regard. 

        5.5.    Neither
this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought 

        5.6.    The
parties acknowledge the unique nature of the provisions hereof, and agree that damages in event of breach would be both difficult to calculate and an inadequate
remedy. 

4

 

Consequently,
in the event of breach, and in addition to recovering any provable damages and reimbursement of any legal fees, the injured party shall be entitled to equitable relief, including
specific performance. 

        5.7.    No
person or entity not signatory shall have any rights as a third party beneficiary under this Agreement, or to enforce the provisions hereof on behalf of any
signatory hereto. 

        5.8.    Any
signature page delivered by a fax machine or telecopy machine shall be binding to the same extent as an original signature page, with regard to any agreement
subject to the terms hereof or any amendment thereto. Any party who delivers such a signature page agrees to later deliver an original counterpart to any party that requests it. 

        5.9.    This
Agreement may be executed in any number of counterparts, all of which together shall constitute one instrument, and each of which may be executed by less than all
of the parties to this Agreement. 

        5.10.    In
the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision. In such event, the parties shall negotiate, in good faith, a valid, legal and enforceable substitute provision which most nearly effects
the intent of the parties in entering into this Agreement. 

[SIGNATURE PAGES FOLLOW]

5

 

        IN WITNESS WHEREOF, the parties hereto have executed and delivered this Exchange and Recapitalization Agreement, or caused this Exchange
and Recapitalization Agreement to be executed and delivered, as of the date first written above. 

	 	 	TRI-S SECURITY CORPORATION
	

 	
 	

By:	
 	

 
	 	 	 	 	
 Printed Name: Ronald G. Farrell

Title: Chief Executive Officer

	

 	
 	
SHAREHOLDERS:
	

 	
 	

DOUGLAS K. BALL
	

 	
 	

 MICHAEL F. BENNETT
	

 	
 	

 BONNIE LYNN FARRELL
	

 	
 	

 HAROLD E. HODGE
	

 	
 	

 JUNE D. HODGE
	

 	
 	

 TIMOTHY J. MCGAUGHEY
	

 	
 	

 MICHAEL MCKINZIE
	

 	
 	

 KENNETH E. MOORE
	

 	
 	

 ROBERT PARKER

6

 

	 	 	R.G.F. INVESTMENTS, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Printed Name:

Title:

	

 	
 	

 BRYANT W. SCOTT
	

 	
 	

 SOUTHWICK CAPITAL, LLC
	

 	
 	

 RODNEY A. TAYLOR
	

 	

 	

OPTION HOLDERS:
	

 	
 	

 RONALD G. FARRELL
	

 	
 	

 BRE LLC

7

EXHIBIT A  

	Name of Shareholder
 
	 	Number of Shares of the Company's Capital Stock Held as of the Date of the Agreement
	 	Number of Shares of Common Stock Held as of the Agreement (assuming the conversion of all shares of Series A Preferred Stock and Series B Preferred Stock)
	 	Ownership

Percentage
	 
	Douglas K. Ball	 	20,000 shares Series B Convertible Preferred Stock	 	200,000	 	5.39	%
	Michael F. Bennett	 	15,000 shares Common Stock, 50,000 shares Series A Convertible Preferred Stock, and 10,000 shares Series B Convertible Preferred Stock	 	490,000	 	13.21	%
	Bonnie Lynn Farrell	 	300,000 shares Common Stock	 	300,000	 	8.09	%
	Harold E. Hodge	 	10,000 shares Series A Convertible Preferred Stock	 	75,000	 	2.02	%
	June D. Hodge	 	10,000 shares Series A Convertible Preferred Stock	 	75,000	 	2.02	%
	Timothy J. McGaughey	 	25,000 shares Common Stock	 	25,000	 	0.67	%
	Michael McKinzie	 	9,000 shares Common Stock	 	9,000	 	0.24	%
	Kenneth E. Moore	 	4,500 shares Common Stock	 	4,500	 	0.12	%
	Robert Parker	 	5,000 shares Series A Convertible Preferred Stock, and 10,000 shares Series B Convertible Preferred Stock	 	137,500	 	3.71	%
	R.G.F. Investments, Inc.	 	2,200,000 shares Common Stock	 	2,200,000	 	59.33	%
	Bryant W. Scott	 	10,000 shares Series A Convertible Preferred Stock	 	75,000	 	2.02	%
	Southwick Capital, LLC	 	15,000 shares Series A Convertible Preferred Stock	 	112,500	 	3.03	%
	Rodney A. Taylor	 	4,500 shares Common Stock	 	4,500	 	0.12	%
	 	Pre-Exchange Outstanding Share Number	 	3,708,000	 	 	 

EXHIBIT B  

	Name of Shareholder
 
	 	Aggregate Number of Shares of Common Stock to be Issued Upon the Exchange if the Post-Exchange Outstanding Share Number is 1,200,000

	Douglas K. Ball	 	64,725
	Michael F. Bennett	 	158,576
	Bonnie Lynn Farrell	 	97,087
	Harold E. Hodge	 	24,272
	June D. Hodge	 	24,272
	Timothy J. McGaughey	 	8,091
	Michael McKinzie	 	2,913
	Kenneth E. Moore	 	1,456
	Robert Parker	 	44,498
	R.G.F. Investments, Inc.	 	711,974
	Bryant W. Scott	 	24,272
	Southwick Capital, LLC	 	36,408
	Rodney A. Taylor	 	1,456

EXHIBIT C  

	Name of Option Holder
 
	 	Number of Shares of Common Stock Purchase Agreement Underlying Options or Warrants Held as of the Date Hereof
	 	Pre-Exchange Exercise Price Per Share

	Ronald G. Farrell, Inc.	 	300,000	 	$	0.04
	BRE LLC	 	50,000	 	$	1.00

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EXCHANGE AND RECAPITALIZATION AGREEMENT

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