Document:

EXHIBIT 4.3

 

REGISTRATION RIGHTS AGREEMENT

 

THIS  REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated as of [                   ],
2005, is by and among TRI-S SECURITY
CORPORATION, a Georgia corporation (the “Company”), and each
of the investors whose names appear on the signature pages hereof (each an “Investor”
and, collectively, the “Investors”).

 

The Company has agreed, on the terms and
subject to the conditions set forth in the Company’s Confidential Private
Offering Memorandum dated July 26, 2005, as may be amended or supplemented from
time to time (the “Memorandum”), and the Subscription Agreement executed
by each Investor and accepted by the Company on [                    ],
2005 (collectively, the “Subscription Agreements”), to issue and sell to
each Investor a Note and Warrant (each as hereinafter defined).  The Notes are convertible into shares (the “Conversion
Shares”) of the Company’s common stock, par value $0.001 per share (the “Common
Stock”), in accordance with their terms, and the Warrants are exercisable
into shares (the “Warrant Shares”) of Common Stock in accordance with
their terms.

 

In order to induce the Investors to purchase
the Notes and Warrants, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended (the “Securities Act”),
and under applicable state securities laws.

 

In consideration of each Investor purchasing
a Note and Warrant, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.                                      DEFINITIONS.

 

For purposes of this Agreement,
the following terms shall have the meanings specified below:

 

“Business Day” means any
day other than a Saturday, a Sunday or a day on which the Commission is closed
or on which banks in the City of Atlanta, Georgia are authorized by law to be
closed.

 

“Commission” means the
Securities and Exchange Commission.

 

“Effective Date” means
the date on which the Registration Statement covering the resale of the
Registrable Securities is declared effective by the Commission.

 

“Filing Deadline” means
no later than March 1, 2006, which is the date on which the Company will have
been subject to the reporting requirements of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), for a period at least twelve
calendar months and will become eligible to file a Registration Statement on
Form S-3 under the Securities Act.

 

“Holder”
means any person owning or having the right to acquire, through conversion of
the Notes, exercise of the Warrants or otherwise, Registrable Securities,
including initially each Investor and thereafter any permitted assignee
thereof.

 

 

“Note”
means each of the 10% Callable, Convertible Promissory Notes offered for sale
pursuant to the Memorandum and issued by the Company.

 

“Registrable
Securities” means the Conversion Shares, the Warrant Shares and any shares
of capital stock issued or issuable from time to time (with any adjustments) in
replacement of, in exchange for or otherwise in respect of, the Conversion
Shares or the Warrant Shares.

 

“Registration Deadline”
means the earlier of: (i) the date which is thirty (30) days prior to the
earliest Maturity Date (as defined in each Note) of any of the Notes; and (ii)
the date on which the Company delivers a Prepayment Notice (as defined in the
Notes) to any Investor.

 

“Registration Statement”
means a registration statement or statements prepared in compliance with the
Securities Act and pursuant to Rule 415 under the Securities Act (“Rule 415”)
or any successor rule providing for the offering of securities on a continuous
or delayed basis.

 

“Warrant” means each of
the Warrants to purchase Common Stock offered for sale pursuant to the
Memorandum and issued by the Company.

 

2.                                      REGISTRATION.

 

(a)                                  Filing
of Registration Statement.  On or
before the Filing Deadline, the Company shall prepare and file with the
Commission a Registration Statement on Form S-3 as a “shelf” registration
statement under Rule 415 covering the resale of a number of shares of Registrable
Securities equal to one hundred percent (100%) of the number of shares of
Common Stock issuable upon conversion of the Notes and exercise of the Warrants
in full (such number to be determined without regard to any restriction on such
conversion or exercise).  Such
Registration Statement shall state, to the extent permitted by Rule 416 under
the Securities Act, that it also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon the conversion of the Notes
and exercise of the Warrants in order to prevent dilution resulting from stock
splits, stock dividends or similar events.

 

(b)                                 Alternative
Registration Statement. 
Notwithstanding the foregoing paragraph 2(a), if on the Filing Deadline,
the Company does not meet the eligibility requirements for filing a
Registration Statement on Form S-3, then in such case the Company shall instead
prepare and file with the Commission a Registration Statement meeting the
foregoing requirements on Form S-1 or Form S-2.

 

(c)                                  Effectiveness.  The Company shall use reasonable best efforts
to cause the Registration Statement to become effective as soon as practicable
following the filing thereof, but in no event later than the Registration
Deadline.  The Company shall respond
promptly to any and all comments made by the staff of the Commission with
respect to the Registration Statement, and shall submit to the Commission,
within three (3) Business Days after the Company learns that no review of the
Registration Statement will be made by the staff of the Commission or that the
staff of the Commission has no further comments on the Registration Statement,
as the case may be, a request for acceleration of the effectiveness of such
Registration Statement to a time and date not later than

 

2

 

three (3) Business Days after the submission
of such request.  The Company will
maintain the effectiveness of each Registration Statement filed pursuant to
this Agreement until the earliest to occur of: (i) the date on which all of the
Registrable Securities eligible for resale thereunder have been publicly sold
pursuant to either the Registration Statement or Rule 144 under the Securities
Act or any successor provision (“Rule 144”); (ii) the date on which all
of the Registrable Securities remaining to be sold under such Registration
Statement (in the reasonable opinion of counsel to the Company) may be
immediately sold to the public under Rule 144(k) under the Securities Act or
any successor provision; and (iii) the date that is 120 days after the
Effective Date (the period beginning on the date hereof and ending on the
earliest to occur of (i), (ii) or (iii) above being referred to herein as the “Registration
Period”).

 

(d)                                 Registration
of Other Securities.  The Company
shall not include any securities other than Registrable Securities on any
Registration Statement filed by the Company on behalf of the Holders pursuant
to the terms hereof.

 

3.                                      OBLIGATIONS
OF THE COMPANY.

 

In addition to performing its obligations
hereunder, including, without limitation, those pursuant to Section 2 above,
the Company shall, with respect to each Registration Statement:

 

(a)                                  prepare
and file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of the
Securities Act or to maintain the effectiveness of such Registration Statement
during the Registration Period, or as may be reasonably requested by a Holder
in order to incorporate information concerning such Holder or such Holder’s
intended method of distribution;

 

(b)                                 so
long as a Registration Statement is effective covering the resale of the
applicable Registrable Securities owned by a Holder, furnish to each Holder
such number of copies of the prospectus included in such Registration
Statement, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such Holder may
reasonably request in order to facilitate the disposition of such Holder’s
Registrable Securities;

 

(c)                                  use
commercially reasonable efforts to register or qualify the Registrable
Securities under the securities or “blue sky” laws of such jurisdictions within
the United States as shall be reasonably requested from time to time by a
Holder, and do any and all other acts or things which may reasonably be
necessary or advisable to enable such Holder to consummate the public sale or
other disposition of the Registrable Securities in such jurisdictions; provided, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
jurisdiction;

 

(d)                                 notify
each Holder immediately after becoming aware of the occurrence of any event
(but shall not, without the prior written consent of such Holder, disclose to
such Holder any facts or circumstances constituting material non-public
information) as a result of which the prospectus included in such Registration
Statement, as then in effect, contains an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, and as promptly as

 

3

 

practicable prepare and file with the
Commission and furnish to each Holder a reasonable number of copies of a
supplement or an amendment to such prospectus as may be necessary so that such
prospectus does not contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;

 

(e)                                  use
commercially reasonable efforts to prevent the issuance of any stop order or
other order suspending the effectiveness of such Registration Statement and, if
such an order is issued, to use commercially reasonable efforts obtain the
withdrawal thereof at the earliest possible time and to notify each Holder in
writing of the issuance of such order and the resolution thereof;

 

(f)                                    furnish
to each Holder no later than two (2) Business Days after the date that such
Registration Statement, or any successor registration statement, becomes
effective, a letter, dated such date, signed by an officer of the Company and
addressed to such Holder, confirming such effectiveness; and

 

(g)                                 permit
counsel for each Holder to review such Registration Statement and all
amendments and supplements thereto, and any comments made by the staff of the
Commission concerning such Holder and the Company’s responses thereto, within a
reasonable period of time prior to the filing thereof with the Commission (or,
in the case of comments made by the staff of the Commission, within a
reasonable period of time following the receipt thereof by the Company).

 

4.                                      OBLIGATIONS
OF EACH HOLDER.

 

In connection with the registration of
Registrable Securities pursuant to a Registration Statement, each Holder shall:

 

(a)                                  timely
furnish to the Company (i) a completed shareholder questionnaire, in form and
substance which is reasonably acceptable to the Company, and (ii) such
information in writing regarding such Holder and the intended method of
disposition of the Registrable Securities held by such Holder as the Company
shall reasonably request in order to effect the registration thereof;

 

(b)                                 upon
receipt of any notice from the Company of the happening of any event of the
kind described in paragraphs 3(d) or 3(e), immediately discontinue any sale or
other disposition of such Registrable Securities pursuant to such Registration
Statement until the filing of an amendment or supplement as described in
paragraph 3(d) or withdrawal of the stop order referred to in paragraph 3(e),
and use commercially reasonable efforts to maintain the confidentiality of such
notice and its contents;

 

(c)                                  to
the extent required by applicable law, deliver a prospectus to the purchaser of
such Registrable Securities;

 

(d)                                 notify
the Company when such Holder has sold all of the Registrable Securities held by
such Holder; and

 

4

 

(e)                                  notify
the Company in the event that any information supplied by such Holder in writing
for inclusion in such Registration Statement or related prospectus is untrue or
omits to state a material fact required to be stated therein or necessary to
make such information not misleading in light of the circumstances then
existing; immediately discontinue any sale or other disposition of such
Registrable Securities pursuant to such Registration Statement until the filing
of an amendment or supplement to such prospectus as may be necessary so that
such prospectus does not contain an untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
and use commercially reasonable efforts to assist the Company as may be
appropriate to make such amendment or supplement effective for such purpose.

 

5.                                      INDEMNIFICATION.

 

In the event that any Registrable Securities
are included in a Registration Statement under this Agreement:

 

(a)                                  To
the extent permitted by law, the Company shall indemnify and hold harmless each
Holder, the officers, directors, employees, agents and representatives of such
Holder, and each person, if any, who controls such Holder within the meaning of
the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), against any losses, claims, damages, liabilities or reasonable
out-of-pocket expenses (whether joint or several) (collectively, including
reasonable legal expenses or other expenses reasonably incurred in connection with
investigating or defending same, “Losses”), insofar as any such Losses
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement under
which such Registrable Securities were registered, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto; or (ii) the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  Subject to the
provisions of paragraph 5(c) below, the Company will reimburse such Holder, and
each such officer, director, employee, agent, representative or controlling
person, for any reasonable legal expenses or other out-of-pocket expenses as
reasonably incurred by any such entity or person in connection with
investigating or defending any Loss; provided,
however, that the foregoing indemnity shall not apply to amounts
paid in settlement of any Loss if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be obligated to indemnify any person for any Loss to the extent
that such Loss arises out of or is based upon: (i) any disclosure or any
omission or alleged omission (to state a material fact required to be stated
therein or necessary to make statements therein not misleading) that is based
upon or in conformity with written information furnished (or not furnished, in
the case of an omission) by such person expressly for use in such Registration
Statement; or (ii) a failure of such person to deliver or cause to be delivered
the final prospectus contained in the Registration Statement and made available
by the Company, if such delivery is required by applicable law.

 

(b)                                 To
the extent permitted by law, each Holder who is named in such Registration
Statement as a selling shareholder, acting severally and not jointly, shall
indemnify and hold harmless the Company, the officers, directors, employees,
agents and representatives of the Company, and each person, if any, who
controls the Company within the meaning of the Securities 

 

5

 

Act or the Exchange Act, against any Losses
to the extent (and only to the extent) that any such Losses arise out of or are
based upon: (i) any disclosure or any omission or alleged omission (to state a
material fact required to be stated therein or necessary to make statements
therein not misleading) that is based upon or in conformity with written
information furnished (or not furnished, in the case of an omission) by such
person expressly for use in such Registration Statement; or (ii) a failure of
such Holder to deliver or cause to be delivered the final prospectus contained
in the Registration Statement and made available by the Company, if such
delivery is required under applicable law. Subject to the provisions of
paragraph 5(c) below, such Holder will reimburse any legal or other expenses as
reasonably incurred by the Company and any such officer, director, employee,
agent, representative, or controlling person, in connection with investigating
or defending any such Loss; provided,
however, that the foregoing indemnity shall not apply to amounts
paid in settlement of any such Loss if such settlement is effected without the
consent of such Holder (which consent shall not be unreasonably withheld).

 

(c)                                  Promptly
after receipt by an indemnified party under this Section 5 (an “Indemnified
Party”) of notice of the commencement of any action (including any
governmental action), such Indemnified Party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 5
(an “Indemnifying Party”), promptly deliver to the Indemnifying Party a
written notice of the commencement thereof and the Indemnifying Party shall
have the right to participate in and to assume the defense thereof with counsel
selected by the Indemnifying Party and reasonably acceptable to the Indemnified
Party; provided, however, that an
Indemnified Party shall have the right to retain its own counsel, with the
reasonably incurred fees and expenses of one such counsel for all Indemnified
Parties to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate under applicable standards of professional conduct due to actual
or potential conflicting interests between such Indemnified Party and any other
party represented by such counsel in such proceeding.  The failure to deliver written notice to the
Indemnifying Party within a reasonable time of the delivery of notice of any
such action, to the extent prejudicial to its ability to defend such action,
shall relieve such Indemnifying Party of any liability to the Indemnified Party
under this Section 5 with respect to such action, but the omission so to
deliver written notice to the Indemnifying Party will not relieve it of any
liability that it may have to any Indemnified Party otherwise than under this
Section 5 or with respect to any other action unless the Indemnifying Party is
materially prejudiced as a result of not receiving such notice.

 

(d)                                 In
the event that the indemnity provided in paragraph (a) or (b) of this Section 5
is unavailable or insufficient to hold harmless an Indemnified Party for any
reason, the Company and each Holder agree, severally and not jointly, to
contribute to the aggregate Losses to which the Company or such Holder may be
subject in such proportion as is appropriate to reflect the relative fault of
the Company and such Holder in connection with the statements or omissions
which resulted in such Losses.  Relative
fault shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the Company or by such
Holder.  The Company and each Holder
agree that it would not be just and equitable if contribution were determined
by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. 
Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent 

 

6

 

misrepresentation.  For purposes of this Section 5, each person
who controls a Holder within the meaning of either the Securities Act or the
Exchange Act and each officer, director, employee, agent or representative of
such Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company within the meaning of either the Securities Act
or the Exchange Act and each officer, director, employee, agent or
representative of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d).

 

(e)                                  The
obligations of the Company and each Holder under this Section 5 shall
survive the conversion of the Notes and exercise of the Warrants in full and
the completion of any offering or sale of Registrable Securities pursuant to a
Registration Statement under this Agreement or otherwise.

 

6.                                      REPORTS.

 

With a view to
making available to each Holder the benefits of Rule 144 and any other similar
rule or regulation of the Commission that may at any time permit such Holder to
sell securities of the Company to the public without registration, the Company
agrees to:

 

(a)                                  make
and keep public information available, as those terms are understood and
defined in Rule 144;

 

(b)                                 file
with the Commission in a timely manner all reports and other documents required
of the Company under the Exchange Act; and

 

(c)                                  furnish
to such Holder, so long as such Holder owns any Registrable Securities,
promptly upon written request: (i) a written statement by the Company, if true,
that it has complied with the reporting requirements of Rule 144 and the
Exchange Act; (ii) to the extent not publicly available through the Commission’s
EDGAR database, a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company with the
Commission; and (iii) such other information as may be reasonably requested by
such Holder in connection with such Holder’s compliance with any rule or
regulation of the Commission which permits the selling of any such securities
without registration.

 

7.                                      MISCELLANEOUS.

 

(a)                                  Expenses
of Registration.  All reasonable
expenses, other than underwriting discounts and commissions and fees and
expenses of counsel and other advisors to each Holder, incurred in connection
with the registrations, filings or qualifications described herein, including
(without limitation) all registration, filing and qualification fees, printers’
and accounting fees, shall be borne by the Company.

 

(b)                                 Amendment;
Waiver.  Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended or waived except pursuant to a written instrument
executed by the Company and the Holders of at least a majority of the Registrable
Securities into which all of the Notes and Warrants then outstanding are
convertible or exercisable (without regard

 

7

 

to any limitation on such conversion or
exercise). Any amendment or waiver effected
in accordance with this paragraph shall be binding upon each Holder, each
future Holder and the Company. 
The failure of any party to exercise any right or remedy under this
Agreement or otherwise, or the delay by any party in exercising such right or
remedy, shall not operate as a waiver thereof.

 

(c)                                  Notices.  Any notice, demand or request required or
permitted to be given by the Company or a Holder pursuant to the terms of this
Agreement shall be in writing and shall be deemed delivered: (i) when delivered
personally or by verifiable facsimile transmission, unless such delivery is
made on a day that is not a Business Day, in which case such delivery will be
deemed to be made on the next succeeding Business Day; (ii) on the next
Business Day after timely delivery to a reputable overnight courier; and (iii) on the Business Day actually received if deposited
in the U.S. mail (certified or registered mail, return receipt requested,
postage prepaid), addressed as follows:

 

 

If to the Company:

 

Tri-S Security Corporation

3700 Mansell Road, Suite 220

Alpharetta, GA 30022

Attn:                  Chief Executive Officer

Tel:                            (770) 625-4945

Fax:                         (770) 625-4946

 

with a copy (which shall not
constitute notice) to:

 

Rogers & Hardin LLP

2700 International Tower

229 Peachtree Street NE

Atlanta, GA 30303

Attn:                    Steven E. Fox, Esq.

Tel:                            (404) 522-4700

Fax:                           (404) 525-2224

 

and if to a Holder, to such address as shall
be designated by such Holder in writing to the Company.

 

(d)                                 Assignment.  Upon the transfer of any Notes, Warrants or
Registrable Securities by a Holder, the rights of such Holder hereunder with
respect to such securities so transferred shall be assigned automatically to
the transferee thereof, and such transferee shall thereupon be deemed to be a “Holder”
for purposes of this Agreement, as long as: (i) the Company is, within a
reasonable period of time following such transfer, furnished with written
notice of the name and address of such transferee; (ii) the transferee agrees
in writing with the Company to be bound by all of the provisions hereof; and
(iii) such transfer is made in accordance with the applicable requirements of
the Notes, Warrants and all applicable law.

 

(e)                                  Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed one and the same instrument.  This Agreement, once executed by a party, may
be delivered to any other party hereto by facsimile transmission.

 

8

 

(f)                                    Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Georgia
applicable to contracts made and to be performed entirely within the State of
Georgia.

 

(g)                                 Holder
of Record.  A person is deemed to be
a Holder whenever such person owns or is deemed to own of record such
Registrable Securities.  If the Company
receives conflicting instructions, notices or elections from two or more
persons with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from the record
owner of such Registrable Securities.

 

(h)                                 Entire
Agreement. This Agreement and the Notes, Warrants, Subscription Agreements
and Memorandum (collectively, the “Transaction Documents”) constitute
the entire agreement among the parties hereto with respect to the subject
matter hereof and thereof.  There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein.  This
Agreement and the other Transaction Documents supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.

 

(i)                                     Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

(j)                                     Third
Party Beneficiaries.  This Agreement
is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.

 

 

[Signature
Page to Follow]

 

9

 

IN WITNESS WHEREOF, the undersigned have executed this Registration
Rights Agreement as of the date first-above written.

 

	
   

  	
  TRI-S
  SECURITY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Ronald G. Farrell

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  INVESTOR:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Investor Name

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
                                                  ,
  its                      

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:EXHIBIT 4.4

 

THIS NOTE AND THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO: (A) THE RESTRICTIONS SET FORTH
HEREIN AND (B) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO TRI-S SECURITY CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.

 

10% CALLABLE, CONVERTIBLE PROMISSORY NOTE

 

	
  No. [               ]

  	
   

  	
  Issue Date: [         ],
  2005

  
	
   

  	
   

  	
  Alpharetta, Georgia

  

 

Tri-S Security Corporation, a Georgia corporation (“Payor”), hereby promises
to pay to [                      ]
(“Holder”), at the address listed on the signature page hereto or such
address as Holder may from time to time designate in writing to Payor, the
principal sum of [            ] DOLLARS
($                  ),
together with interest thereon as provided herein, in such coin or currency of
the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts, in accordance with the terms and
conditions of this promissory note (the “Note”).

 

1.                                       Series of Notes.  This Note is issued as part of a series of
similar notes issued pursuant to Payor’s Confidential Private Offering
Memorandum dated July 26, 2005, as the same may be amended or supplemented
from time to time (the “Memorandum”), and the terms of that certain Subscription
Agreement entered into between Payor and Holder, accepted by Payor on [              ],
2005.

 

2.                                       Interest.  The outstanding principal balance hereunder
shall bear interest at a rate of 10% per annum from the date of issuance of
this Note as indicated above (the “Issue Date”), computed on the basis of a 360-day
year consisting of twelve 30-day months. 
All accrued interest under this Note shall be payable monthly on the
last Trading Day (as hereinafter defined) of each month, commencing the month
after the Issue Date.  All payments made
hereunder shall be applied first to accrued interest and thereafter to
principal.  For purposes of this Note, “Trading
Day” means any day on which the shares of Payor’s common stock, par value
$0.001 per share (the “Common Stock”), are purchased and sold on the principal
securities exchange or market on which the Common Stock is then listed or
traded.

 

3.                                       Maturity Date.  The outstanding principal balance hereunder and
all unpaid, accrued interest thereon shall be payable on the date which is the
third anniversary of the Issue Date, or [                ],
2008 (the “Maturity Date”).

 

4.                                       Conversion.  At any time after Shareholder Approval (as
defined in Section 7 hereof) is obtained and prior to the Maturity Date,
Holder may elect to convert all, but not less than all, of the outstanding
principal balance hereunder (the “Converted Amount”) into a number

 

 

of shares of Common Stock (the “Conversion Shares”) equal to the quotient
obtained by dividing the Converted Amount by the Conversion Price.  For purposes of this Note, the “Conversion
Price” shall equal $4.80 per share, subject to adjustment as set forth in Section 6
hereof.

 

5.                                       Conversion Procedure.

 

(a)                                  Holder shall exercise the
conversion right set forth in Section 4 hereof by delivering to Payor a
completed Notice of Conversion in the form attached hereto as Exhibit A
(a “Conversion Notice”).  No later than
five Trading Days after Holder delivers to Payor the Conversion Notice, Payor
shall issue to Holder a certificate or certificates representing the Conversion
Shares into which the Converted Amount has been converted.  Such conversion shall be deemed to have been
effected as of the close of business on the date the Conversion Notice is
delivered to Payor, and Holder will be deemed to have become the holder of
record of the Conversion Shares issuable pursuant to such notice on such date.

 

(b)                                 Payor shall not be required to
pay any Federal or state transfer tax or charge that may be payable in respect
of the issuance or delivery of certificates representing the Conversion Shares
in a name other than that of Holder.

 

(c)                                  Upon conversion of this Note
pursuant to Sections 4 and 5 hereof, Payor will take all such actions as are
necessary in order to ensure that the Conversion Shares will be validly issued,
fully paid and nonassessable.

 

(d)                                 If Holder is required to make
any governmental filings or to obtain any governmental approval in connection
with the issuance or conversion of this Note, Payor will provide Holder with
reasonable assistance in preparing such filings or obtaining such
approval.  Payor will make all filings
Payor is required to make with the Securities and Exchange Commission (the “SEC”)
and the applicable state securities commissions in connection with the issuance
of this Note and the Conversion Shares.

 

(e)                                  No fractional share of Common
Stock or scrip representing any fractional share of Common Stock shall be
issued upon the conversion of the Converted Amount.  If the conversion of the Converted Amount
results in a fraction, the number of shares of Common Stock to be issued to
Holder shall be rounded up to the nearest whole share.

 

(f)                                    Upon conversion of the entire
outstanding principal balance hereunder and the payment of the accrued but
unpaid interest due thereon, the rights of Holder with respect to this Note
will cease.

 

6.                                       Adjustment of
Conversion Price. 
In the event that, after the Issue Date, Payor shall: (i) pay a
dividend or make a distribution on the outstanding shares of Common Stock in
Payor’s capital stock (which shall include any options, warrants or other
rights to acquire capital stock), (ii) subdivide the outstanding shares of
Common Stock into a larger number of shares, (iii) combine the outstanding
shares of Common Stock into a smaller number of shares, or (iv) issue any
shares of Payor’s capital stock in reclassification of the Common Stock, then,
and in each such case, the Conversion Price in effect immediately prior to such
event shall be adjusted so that, upon conversion of the Conversion Amount,
Holder shall be entitled to receive the number of Conversion Shares or other
securities of Payor that Holder would have owned or

 

2

 

would have been entitled to receive upon or by reason of any of the events
described above had the Conversion Amount been converted immediately prior to
the occurrence of such event.  In the
event that the outstanding shares of Common Stock are ever converted into a
greater or lesser number of shares of another corporation or entity through a
merger or similar transaction, a proportionate adjustment shall be made to the
Conversion Price to account for such change. 
Payor shall give prompt written notice to Holder following the
occurrence of any event which requires an adjustment to the Conversion Price
pursuant to the terms hereof.

 

7.                                       Limitations on Right
to Convert.

 

(a)                                  In no
event shall Holder be permitted to convert the outstanding principal balance
hereunder pursuant to Sections 4 and 5 hereof until Payor has obtained Shareholder Approval. 
For purposes of this Note, “Shareholder Approval” means the affirmative
vote of at least a majority of the votes cast at a meeting of Payor’s
shareholders (a “Shareholders Meeting”) at which a quorum is present to
approve the potential issuance in connection with the offering contemplated by
the Memorandum (the “Offering”) of more than 20% of the outstanding shares of
Common Stock for purposes of complying with the rules governing The Nasdaq
Stock Market, Inc.  No later than
thirty (30) days after the termination of the Offering, Payor shall file with
the SEC a preliminary proxy statement pursuant to the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), in connection with a Shareholder
Meeting and shall seek to convene such meeting as promptly thereafter as
practicable.  Payor’s Chief Executive
Officer, who in the aggregate beneficially owns approximately 24% of the Common
Stock outstanding as of the date of the Memorandum has agreed to vote all such
shares in a manner to obtain Shareholder Approval.

 

(b)                                 In no
event shall Holder be permitted to convert the outstanding principal balance
hereunder pursuant to Sections 4 and 5 hereof if, upon such conversion, the
number of Conversion Shares to be issued pursuant to such conversion plus
the number of shares of Common Stock beneficially owned by Holder would exceed
9.99% of the number of shares of Common Stock then issued and outstanding, it
being the intent of Payor and Holder that Holder not be deemed at any time to
have the power to vote or dispose of greater than 9.99% of the number of shares
of Common Stock issued and outstanding at any time. Nothing contained herein
shall be deemed to restrict the right of Holder to convert such excess
principal amount at such time as such conversion will not violate the
provisions of this Section 7. As used herein, beneficial ownership shall
be determined in accordance with Section 13(d) of the Exchange
Act.  To the extent that the limitation
contained in this Section 7 applies (and without limiting any rights Payor
may otherwise have), Payor may rely on Holder’s determination of whether this
Note is convertible pursuant to the terms hereof, Payor shall have no
obligation whatsoever to verify or confirm the accuracy of such determination,
and the submission of a Conversion Notice by Holder shall be deemed to be
Holder’s representation that this Note is convertible pursuant to the terms
hereof.

 

8.                                       Securities Laws; Share
Legend.  Holder, by acceptance
of this Note, agrees that the Conversion Shares will be disposed of only in
accordance with the Securities Act and the rules and regulations of the
SEC promulgated thereunder.  In addition
to any other legend which Payor may deem advisable under the Securities Act and
applicable state securities laws, all

 

3

 

certificates representing the Conversion Shares (as well as any other
securities issued hereunder in respect of any such shares) issued upon conversion
of this Note shall be endorsed as follows:

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT SUCH REGISTRATION IS NOT REQUIRED.

 

Any
certificate issued at any time in exchange or substitution for any certificate
bearing such legend (except a new certificate issued upon completion of a
public distribution pursuant to a registration statement under the Securities
Act) shall also bear such legend unless, in the opinion of counsel (in form and
substance reasonably satisfactory to Payor) selected by Holder of such
certificate, the securities represented thereby need no longer be subject to
restrictions on resale under the Securities Act.

 

9.                                       Call Provision.  Payor has the option to prepay all or any
portion of the outstanding principal balance hereunder at any time after the
one year anniversary of the Issue Date with no prepayment penalty in accordance
with the terms of this Section 9. 
Payor may exercise this right of prepayment by delivering to Holder a
written notice (a “Prepayment Notice”) indicating the amount of the outstanding
principal balance hereunder to be prepaid and the date on which Payor intends
to make such prepayment, which date may be no earlier than 30 days after the
Prepayment Notice is delivered to Holder. 
Notwithstanding the foregoing, Payor may exercise this right of
prepayment only if a registration statement filed pursuant to the Securities
Act covering the resale of the Conversion Shares has been declared effective by
the SEC on or prior to the date on which Payor delivers the Prepayment Notice
to Holder.

 

10.                                 Governing Law.  The terms of this Note shall be construed in
accordance with the laws of the State of Georgia.

 

11.                                 Restrictions on
Transfer.  Holder, by
acceptance of this Note, agrees and understands that: (i) this Note may
not be transferred, sold pledged or hypothecated by Holder; and (ii) any
attempted transfer, sale, pledge or hypothecation of this Note by Holder shall
be void and of no effect.

 

[SIGNATURE
PAGE FOLLOWS]

 

4

 

IN WITNESS WHEREOF, the Payor and Holder have duly
executed and delivered this Note, or caused this Note to be duly executed and
delivered, all as of the date first written above.

 

	
   

  	
  TRI-S SECURITY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
     By: Ronald G. Farrell

  
	
   

  	
     Its: Chief Executive
  Officer

  

 

ACCEPTED BY:

 

HOLDER:

 

[NAME OF HOLDER]

 

 

	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  

 

	
  Address of Holder:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Facsimile Number:

  	
   

  	
   

  
	
  E-mail:

  	
   

  	
   

  

 

5

 

EXHIBIT A

 

NOTICE
OF CONVERSION

 

TO:
TRI-S SECURITY CORPORATION

 

(1)                                  The undersigned
hereby elects to convert the entire outstanding principal balance of that
certain 10% Callable, Convertible Promissory Note, dated                     ,
2005, issued by Tri-S Security Corporation (the “Company”) to the undersigned (“the
Note”), into               
shares (the “Shares”) of the Company’s common stock, $.001 par value per share,
pursuant to the terms of the Note.

 

(2)                                  Please issue a
certificate or certificates representing the Shares in the following name:

 

	
  Name

  	
   

  	
  Address  

  
	
   

  	
   

  	
   

  

 

(3)                                  The undersigned
represents that:  (i) the Shares are
being acquired for the account of the undersigned for investment purposes only and
not with a view to, or for resale in connection with, the distribution thereof,
and the undersigned has no present intention of distributing or reselling the Shares;
(ii) the undersigned is aware of the Company’s business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision regarding the undersigned’s
investment in the Company; (iii) the undersigned is experienced in making
investments of this type and has such knowledge and background in financial and
business maters that the undersigned is capable of evaluating the merits and
risks of this investment and protecting the undersigned’s own interests; (iv) the
undersigned understands that the Shares have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”), by reason of a
specific exemption from the registration provisions of the Securities Act (which
exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein) and, because the Shares have not been
registered under the Securities Act, they may not be sold or transferred by the
undersigned unless so registered or an exemption from such registration is
available; (v) the undersigned is aware that the Shares may not be sold
pursuant to Rule 144 adopted under the Securities Act (the “Rule”) unless
certain conditions are met and until the undersigned has held the Shares for
the number of years prescribed by the Rule and that among the conditions for
use of the Rule is the availability to the public of current information about
the Company; (vi) the undersigned agrees not to make any disposition of
all or any part of the Shares unless and until there is then in effect a
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with said registration
statement or the undersigned has provided the Company with an opinion of counsel
satisfactory to the Company stating that such registration is not required; and
(vii) the undersigned is an “accredited investor” as such term is defined
in Rule 501 promulgated pursuant to the Securities Act.

 

	
  Date:

  	
   

  	
   

  	
  [NAME
  OF UNDERSIGNED]

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

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