Document:

EMPLOYMENT
      AGREEMENT

    OF

    LEONARD
      PETERSON

    

    This
      EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of January 1, 2008
      (the “Effective Date”), by and between ISI
      Detention Contracting Group, Inc.,
      a
      corporation organized under the laws of California (“Employer”), and
Leonard
      Peterson,
      an
      individual residing in Orange, CA (“Executive”) on the following terms and
      conditions:

    

    RECITALS:

     

    This
      Agreement is entered into with reference to the following facts:

    

    A. Employer
      has acquired substantially all of the assets of Peterson Detention Inc. (“PDI”)
      pursuant to an Asset Purchase Agreement of even date herewith (the “Asset
      Purchase Agreement”) ;

    

    B. Prior
      to
      the consummation of the transactions contemplated by the Asset Purchase
      Agreement, Executive was employed by PDI pursuant to an employment arrangement
      pursuant to which Executive was entitled to certain compensation and
      benefits;

    

    C. Executive
      is a principal shareholder in PDI and will receive significant benefits from
      the
      consummation of the transactions contemplated by the Asset Purchase Agreement;
      

    

    D The
      execution and delivery of this Agreement are conditions precedent to the
      consummation of the transactions contemplated by the Asset Purchase Agreement,
      and are inducements to ISI Security Group, Inc., a Delaware Corporation (“ISI
      Delaware”), Argyle Security, Inc., a Delaware corporation (“Argyle”), both of
      which are parent entities of the Employer, to facilitate the Asset Purchase
      Agreement; 

    

    E.
       The
      execution and delivery of this Agreement benefits ISI Detention Contracting
      Group, Inc., a Texas corporation (“ISI Texas”), an Affiliate of Employer, and to
      facilitate this Agreement, ISI Texas enters into the Guaranty Agreement attached
      to this Agreement;

    

    F. Employer
      desires to employ Executive in the capacity hereinafter stated, and Executive
      desires to be employed by Employer in such capacity for the period and on the
      terms and conditions set forth herein; and

    

    G. All
      capitalized terms, not otherwise defined in this Agreement, shall have the
      meanings set forth in the Asset Purchase Agreement.

    

    AGREEMENT

    

    THEREFORE,
      in consideration of the mutual covenants and agreements below, it is covenanted
      and agreed by Employer and Executive as follows:

    

    1. Recitals
      Incorporated. The preceding Recitals are incorporated in the this Agreement
      by
      this reference.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    2. Employment
      Period.
      Employer hereby agrees to employ Executive as its Operations Manager, and
      Executive, in such capacity, agrees to provide services to Employer for the
      period beginning on the Effective Date and ending on the third anniversary
      of
      the Effective Date (the “Employment Period”). Thereafter, Executive’s employment
      shall be at-will. For the entire Employment Period, and while he is employed
      by
      the Employer, Executive’s office will be located exclusively in Orange County,
      California.

    

    3. Performance
      of Duties.

    

    
      	 	
              (a)

            	
              Executive
                agrees that during the Employment Period, and while he is employed
                by
                Employer, he shall devote his full normal and customary working time,
                energies and talents exclusively to serving in the capacity of Operations
                Manager of Employer and will perform the duties set out in 2(b) below,
                and
                such other duties consistent with his position, as may be properly
                assigned to him by the Chief Executive Officer and/or the Board of
                Directors of Employer (the “Board”). He will carry out such duties
                faithfully, efficiently and in a professional
                manner.

            

    

    

    
      	 	
              (b)

            	
              The
                duties of Employee shall include the following: Management of the
                Plant;
                Manufacturing, Procurement and some Sales
                Oversight.

            

    

    

    
      	 	
              (c)

            	
              Subject
                to Subparagraph 3(d) below, and in addition to the limitations imposed
                upon Executive by the Restrictive Covenants contained in Paragraph
                5,
                Executive shall not during the Employment Period and while he is
                employed
                by the Employer, without prior written consent from the
                Board:

            

    

    

    
      	 	
              (i)

            	
              serve
                as, be a consultant to or employee, officer, manager, agent, or director
                of, any corporation, partnership or other entity other than Employer
                (other than civic, charitable, or other public service organizations)
                if,
                as determined at the reasonable discretion of the Board, such service,
                employment, or position would have a material adverse effect upon
                the
                ability of Executive to perform his duties hereunder and Executive
                is so
                advised in writing and given a period of not less than ninety (90)
                days to
                cease; or

            

    

    

    
      	 	
              (ii)

            	
              have
                more than a five percent (5%) ownership interest in any enterprise
                other
                than Employer if such ownership interest would have a material adverse
                effect upon the ability of Executive to perform his duties hereunder,
                and
                the Executive is so advised in writing and given a period of not
                less than
                ninety (90) days to divest the
                interest..

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	 	
              (d)

            	
              Notwithstanding
                the generality of the foregoing, Executive may own all or any part
                of PDI,
                Employer, ISI Delaware, and Argyle or any other Affiliate of ISI
                Delaware
                or Argyle, and act as an officer or director of any of them, and
                none of
                such activities shall be deemed to violate any duty of trust,
                confidentiality or non-usurpation of corporate opportunity, nor shall
                they
                violate any term or provision of this
                Agreement.

            

    

    

    4. Compensation.
      Subject
      to the terms and conditions of this Agreement, during the Employment Period,
      Executive shall be compensated by Employer for his services as
      follows:

    

    
      	 	
              (a)

            	
              Executive
                shall receive, for each consecutive twelve (12) month period beginning
                on
                the Effective Date and ending on each anniversary thereof, a rate
                of pay
                equal to $291,000.00 per year. Such compensation shall be payable
                in
                substantially equal monthly or more frequent installments and subject
                to
                customary tax withholding. During the Employment Period, Executive’s
                annual salary rate shall be increased by the Board, effective on
                or before
                each anniversary of the Effective Date, by an amount of at least
                the
                amount of change in the Consumer Price Index for “Los Angeles - Riverside
                - Orange County, CA - All Items (not seasonally adjusted)”, during the
                immediately preceding year, when compared to the same index for the
                same
                region for the calendar year two years prior, as published by the
                U.S.
                Department of Labor Bureau of Labor
                Statistics.

            

    

    

    
      	 	
              (b)

            	
              Executive
                shall be entitled to receive incentive compensation payments in accordance
                with the discretionary bonus plan of Employer or ISI Texas, whichever
                is
                more beneficial to Executive.

            

    

    

    
      	 	
              (c)

            	
              Executive
                shall be entitled to participate in all executive benefit plans maintained
                by Employer (or ISI Texas, whichever is more beneficial to Executive)
                on
                substantially the same terms and conditions as other executives of
                Employer (or ISI Texas, whichever is more beneficial to Executive)
                including, but not limited to all health plans, insurance, retirement,
                deferred compensation and other plans and programs generally available
                to
                such executives of Employer (or ISI Texas, whichever is more beneficial
                to
                Executive).

            

    

    

    
      	 	
              (d)

            	
              Executive
                shall receive at least three (3) weeks paid vacation per year, provided,
                however, that such vacation shall be scheduled and taken in accordance
                with Employer’s standard vacation policies applicable to Employer’s other
                executives (or those of ISI Texas, whichever is more beneficial to
                Executive). Executive shall also be entitled to all other holiday
                and
                leave pay generally available to Employer’s other executives (or the
                executives of ISI Texas, whichever is more beneficial to
                Executive).

            

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	 	
              (e)

            	
              Employer
                will provide Executive with a company credit card to be used by Executive
                to pay for expenses incurred in connection with the performance of
                his
                duties for the Company. Such expenses shall include, but not be limited
                to, hotels, meals, airline tickets (on a business class basis), other
                transportation, automobile rentals and other similar charges. Said
                credit
                card will be issued to Executive after he has executed the standard
                reimbursement agreement required of an
                executive.

            

    

    

    
      	 	
              (f)

            	
              In
                the event Executive consents to a relocation requiring a move of
                residence, Employer shall advance or reimburse Executive, on a grossed-up
                basis at Executive’s marginal tax rate, for all moving, house-hunting,
                temporary housing, and real estate transaction costs for both sale
                and
                purchase on a fully grossed-up, after-tax
                basis.

            

    

    

    
      	 	
              (g)

            	
              Executive
                shall be reimbursed by Employer for all reasonable business, promotional,
                travel and entertainment expenses incurred or paid by Executive during
                the
                Employment Period in the performance of his services under this Employment
                Agreement. In order that Employer reimburse Executive for such allowable
                expenses, Executive shall furnish to Employer, in a timely fashion,
                appropriate documentation required by the Internal Revenue Code in
                connection with such expenses and shall furnish such other documentation
                and accounting as Employer may from time to time reasonably request.
                As
                used herein the term “Internal Revenue Code” shall mean the Internal
                Revenue Code of 1986, as now or hereafter amended, and the regulations
                and
                revenue rulings and procedures issues pursuant thereto from time
                to
                time.

            

    

    

    5. Restrictive
      Covenants.
      Executive acknowledges and agrees that:

    

    
      	 	
              (a)

            	
              After
                this Agreement is signed by both parties, Employer shall disclose
                to
                Executive certain of Employer’s confidential,
                proprietary, and/or trade secret information in
                connection with the performance of his
                duties.

            

    

    

    
      	 	
              (b)

            	
              Executive
                is a principal shareholder and senior executive officer of PDI with
                major
                responsibility for the operation, development, and growth of its
                business
                prior to its sale of substantially all of its assets, including its
                substantial goodwill, to Employer. Executive, acknowledges and agrees
                that
                his employment by Employer in a similar capacity, effective immediately
                as
                of the closing of the Asset Purchase Agreement, is intended to preserve
                and maintain such goodwill;

            

    

    

    
      	 	
              (c)

            	
              Employer
                has agreed to disclose to Executive, and Executive’s work for Employer
                will routinely bring him into close contact with, confidential,
                proprietary, and/or trade secret information of Employer and its
                customers; and

            

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      	 	
              (d)

            	
              The
                agreements and covenants contained in this Paragraph 5 are essential
                to
                protect the business interests of Employer and Employer will not
                enter
                into this Agreement but for such agreements and covenants. Accordingly,
                Executive covenants and agrees to the
                following:

            

    

    

    
      	 	
              (i)

            	
              Confidential
                Information. Except as may be required by the lawful order of a court,
                regulatory body or similar agency of competent jurisdiction, and
                at the
                sole cost and expense of the Employer, if any, unless disclosed with
                the
                Employer’s permission, Executive agrees to keep secret and confidential,
                during the Employment Period and while he is employed by Employer,
                all
                confidential non-public information of Employer, and its respective
                Affiliates that was acquired by, or disclosed to, Executive during
                the
                course of his employment by Employer or any of its Affiliates, including
                information relating to customers (including, without limitation,
                credit
                history, repayment history, financial information and financial
                statements), costs, operations, financial data and plans, and employee
                information, whether past, current or planned, and not to disclose
                the
                same, either directly or indirectly, to any other person, firm or
                business
                entity, or to use it in any way; provided, however, that the provisions
                of
                this Subparagraph 5(d)(i) shall not apply to information that: (A)
                was, is
                now, or becomes generally available to the public (but not as a result
                of
                a breach of any duty of confidentiality by which Executive is bound);
                (B)
                was disclosed to Executive by a third party (other than PDI) not
                subject
                to any duty of confidentiality to Employer prior to its disclosure
                to
                Executive; (C)  was known to Executive prior to his employment from a
                source other than his employment, ownership of, or relationship with
                PDI,
                (D) is disclosed by Executive in the ordinary course of Employer’s
                business as a proper part of his employment in connection with
                communications with customers, vendors and other proper parties,
                provided
                that it is for a proper business purpose solely for the benefit of
                Employer. During the Employment Period and while he is employed by
                Employer, Executive further agrees that he shall not make any statement
                or
                disclosure that is intended by Executive to be detrimental to Employer
                or
                any of its Affiliates.

            

    

    

    
      	 	
              (ii)

            	
              Non-Competition.

            

    

    

    
      	 	
              (A)

            	
              Executive
                agrees that for the period commencing on the Effective Date and ending
                on
                the date on which Executive’s employment with Employer is terminated for
                any reason or no reason (the “Non-Competition Period”), Executive shall
                not directly or indirectly, alone or as a partner, officer, director,
                manager, employee, consultant, agent, independent contractor, member
                or
                stockholder of any person or entity (“Person”), engage in any business
                activity in North America that is directly or indirectly in competition
                with the Business of Employer or which is known by Executive to be
                detrimental to the Business or business plans of Employer or its
                Affiliates; provided, however, that the record or beneficial ownership
                by
                Executive or his immediate family members of five percent (5%) or
                less of
                the outstanding publicly traded capital stock of any company for
                investment purposes shall not be deemed to be in violation of this
                Subparagraph 5(d)(ii) so long as Executive is not an officer, director,
                manager, employee or consultant of such Person. The “Business” of Employer
                shall mean providing construction materials, design, engineering,
                procurement, installation, maintenance and related goods and services
                to:
                (x) the detention facilities construction and renovation industry;
                (y) the
                industrial/commercial controls and fire and security alarm industry;
                and
                (z) the access control and security observation industry, and other
                related businesses. Executive further agrees that during the
                Non-Competition Period, he shall not in any capacity, either separately
                or
                in association with others: (1) employ or solicit for employment
                or
                endeavor in any way to entice away from employment with Employer
                or its
                Affiliates (a) any current employee of Employer or its Affiliates
                or (b)
                any Person who was employed by Employer or its Affiliates in any
                preceding
                12-month period; (2) solicit, induce or influence any supplier, customer,
                agent, consultant or other Person that has a business relationship
                with
                Employer to discontinue, reduce or modify such relationship with
                Employer;
                nor (3) solicit or enter into negotiations with any of Employer’s
                identified potential acquisition
                candidates.

            

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      	 	
              (B)

            	
              Executive
                understands that the foregoing restrictions may limit his ability
                to
                engage in a business similar to Employer’s Business for the duration of
                the Non-Competition Period, but acknowledges that he will receive
                sufficiently high remuneration and other benefits to justify such
                restriction as an employee of Employer pursuant to this
                Agreement.

            

    

    

    
      	 	
              (C)

            	
              Notwithstanding
                the generality of any other provision of this Agreement, during the
                Non-Competition Period, it shall not be a violation of Subparagraph
                3(c)
                or this Paragraph 5 for Executive to (i) be an owner, partner, officer,
                director, manager, employee, consultant, agent, independent contractor,
                member or stockholder of any person or entity that does not compete
                with
                the Business of Employer or (ii) make unlimited investments with
                other
                family members in any person or entity that does not compete with
                the
                Business of Employer.

            

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    
      	 	
              (iii)

            	
              Remedies.
                If Executive breaches any of the provisions contained in Subparagraphs
                5(d)(i) or 5(d)(ii) (the “Restrictive Covenants”), Employer shall have the
                following rights and remedies, each of which shall be enforceable,
                and
                each of which is in addition to, and not in lieu of, any other rights
                and
                remedies available to Employer at law or in
                equity.

            

    

    

    
      	 	
              (A)

            	
              Executive
                shall account for and pay over to Employer all compensation, profits,
                and
                other benefits which inure to Executive’s benefit which are derived or
                received by Executive or any person or business entity controlled
                by
                Executive, resulting from any action or transactions constituting
                a breach
                of any of the Restrictive
                Covenants.

            

    

    

    
      	 	
              (B)

            	
              Notwithstanding
                the provisions of Subparagraph 5(d)(iii)(A) above, Executive acknowledges
                and agrees that in the event of a violation or Executive’s threatened
                violation of any of the Restrictive Covenants, Employer shall have
                no
                adequate remedy at law and shall therefore be entitled to enforce
                each
                such provision by temporary or permanent injunction or mandatory
                relief
                obtained in any court of competent jurisdiction without the necessity
                of
                proving damages, posting any bond or other security, and without
                prejudice
                to any other rights and remedies that may be available at law or
                in
                equity, and Employer shall also be entitled to recover its attorneys’ fees
                and costs incurred to enforce any of the Restrictive Covenants from
                Executive.

            

    

    

    
      	 	
              (iv)

            	
              Severability.
                If any of the Restrictive Covenants, or any part thereof, are held
                to be
                invalid or unenforceable, the same shall not affect the remainder
                of the
                covenant or covenants, which shall be given full effect, without
                regard to
                the invalid or unenforceable portions. Without limiting the generality
                of
                the foregoing, if any of the Restrictive Covenants, or any part thereof,
                are held to be unenforceable because of the duration of such provision
                or
                the area covered thereby, the parties hereto agree that the court
                making
                such determination shall have the power to reduce the duration and/or
                area
                of such provision and, in its reduced form, such provision shall
                then be
                enforceable.

            

    

     

    
      
         

      

      
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              (v)

            	
              Proprietary
                Rights. Executive acknowledges and agrees that all know-how, documents,
                reports, plans, proposals, marketing and sales plans, client lists,
                employee files, client files, and any materials made by Executive
                or by
                Employer during the period of Executive’s employment are the property of
                Employer and shall not be used by Executive in any way adverse to
                Employer’s interests while he is so employed by Employer.
                

            

    

    

    6. Termination
      and Compensation Due Upon Termination. Executive’s right to compensation for the
      period after the date Executive’s employment with Employer terminates shall be
      determined in accordance with the following:

    

    
      	 	
              (a)

            	
              Termination
                Without Cause. In the event Employer terminates Executive’s employment
                during the Employment Period without Cause, Employer shall pay Executive
                compensation, incentive compensation and benefits as specified in
                Paragraph 4 through the earlier of eighteen (18) months or the balance
                of
                the Employment Period, during which time Executive shall be entitled
                to:
                

            

    

    

    
      	 	
              (i)

            	
              receive
                payment of his salary in accordance with the provisions of Subparagraph
                4(a) ;

            

    

    

    
      	 	
              (ii)

            	
              receive
                payment of any incentive compensation payments that otherwise would
                have
                been payable to Executive under Subparagraph 4(b); and
                

            

    

    

    
      	 	
              (iii)

            	
              continued
                participation in the group health insurance plans of Employer as
                specified
                in Subparagraph 4(c) at Employer’s
                expense.

            

    

    

    
      	 	
              (b)

            	
              Voluntary
                Resignation. Executive may terminate his employment with Employer
                for any
                reason (or no reason at all) at any time by giving Employer ninety
                (90)
                days prior written notice of voluntary resignation; provided, however,
                that Employer may decide that Executive’s voluntary resignation be
                effective immediately upon notice of such resignation. Employer shall
                have
                no obligation to make payments to Executive in accordance with the
                provisions of Paragraph 3 for periods after the date on which Executive’s
                employment terminates due to Executive’s voluntary resignation, including
                in the event Employer accelerates the effectiveness of the resignation
                in
                accordance with this Subparagraph 6(b).

            

    

    

    
      	 	
              (c)

            	
              However,
                for purposes of this Paragraph 6, if Executive resigns within 90
                days
                following the occurrence of one of the following events, Executive
                shall
                be deemed to be Terminated without Cause in accordance with Subparagraph
                6(a):

            

    

    

    
      	 	
              (i)

            	
              Executive’s
                duties are materially reduced from those described in Paragraph 3;
                

            

    

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

       

    

    
      	 	
              (ii)

            	
              the
                relocation of Executive’s office outside Orange County, California without
                Executive’s consent; 

            

    

    

    
      	 	
              (iii)

            	
              a
                material breach of any of the provisions of this Agreement by the
                Employer; 

            

    

    
      	 	 	 

    

    
      	 	
              (d)

            	
              Termination
                for Cause. Employer shall have no obligation to make payments to
                Executive
                in accordance with the provisions of Paragraph 4 or otherwise for
                periods
                after Executive’s employment with Employer is terminated because of
                Executive’s termination for Cause. For purposes of this Paragraph 6,
                Executive shall be considered terminated for “Cause” if he is discharged
                by Employer on account of the occurrence of one or more of the following
                events:

            

    

    

    
      	 	
              (i)

            	
              Executive
                becomes habitually addicted to drugs or alcohol, as confirmed by
                the
                written opinion of a medical doctor;

            

    

    

    
      	 	
              (ii)

            	
              Executive
                intentionally discloses confidential information in violation of
                Subparagraph 5(d)(i) or engages in any action in violation of Subparagraph
                5(d)(ii). 

            

    

    

    
      	 	
              (iii)

            	
              Employer
                is directed by regulatory or governmental authorities to terminate
                the
                employment of Executive or Executive intentionally engages in activities
                that cause actions to be taken by regulatory or governmental authorities
                that have a material adverse effect on
                Employer;

            

    

    

    
      	 	
              (iv)

            	
              Executive
                is convicted of a felony crime (other than a felony resulting from
                a minor
                traffic violation);

            

    

    

    
      	 	
              (v)

            	
              Executive
                flagrantly disregards his duties under this Agreement after (A) written
                notice has been given to Executive by the Board that it views Executive
                to
                be flagrantly disregarding his duties under this Agreement and (B)
                Executive has been given a period of ten (10) days after such notice
                to
                cease such misconduct. However, no notice or cure period shall be
                required
                hereunder if Executive’s disregard of his duties has materially and
                adversely affected Employer or is illegal
                ;

            

    

    

    
      	 	
              (vi)

            	
              Executive
                commits an act of fraud against Employer, violates a duty of loyalty
                to
                Employer, or violates an obligation owed to Employer pursuant to
                Paragraphs 3 or 5 hereof. 

            

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
      	 	
              (d)

            	
              In
                the event Employer attempts to terminate Executive’s employment pursuant
                to Subparagraph 6(c) and it is ultimately determined that the Employer
                lacked Cause, the provisions of Subparagraph 6(a) shall apply and,
                in
                addition to any other remedies that Executive may have, Executive
                shall be
                entitled to receive the payments called for by Subparagraph 6(a)
                with
                interest on any past due payments at the rate of ten percent (10%)
                per
                year from the date on which the applicable payment would have been
                made,
                plus Executive’s costs and expenses (including but not limited to
                reasonable attorneys’ fees) incurred in connection with such dispute and
                interest thereon at the rate of ten percent (10%) per year from the
                date
                incurred by the Executive. 

            

    

    

    
      	 	
              (e)

            	
              Employer
                shall have no obligation to make payments to Executive in accordance
                with
                the provisions of Paragraph 4 for periods after the date of Executive’s
                employment with Employer terminates on account of disability, except
                payments due and owing through the effective date of termination.
                For
                purposes of this Subparagraph 6(e), determination of whether Executive
                is
                disabled shall be determined in accordance with Employer’s long term
                disability plan (if any) and applicable
                law.

            

    

    

    
      	 	
              (f)

            	
              Employer
                shall have no obligation to make payments to Executive in accordance
                with
                the provisions of Paragraph 4 for periods after the date of Executive’s
                death, except payments due and owing as of such
                date.

            

    

    

    7. Indemnification.
      Executive shall be defended, held harmless by and indemnified by Employer to
      the
      fullest extent permitted by applicable law (including, but not limited to
      payment of all legal fees and costs and by counsel reasonably satisfactory
      to
      him) against claims asserted against him by third parties, arising out of,
      or
      related to, the business of the Employer or Executive’s services for Employer or
      its Affiliates, where such services were within the scope of authority of
      Employee, or specifically authorized in advance by Employer. However, Employer
      shall have no obligation to defend, indemnify or hold Executive harmless from
      any claims relying in whole or in part upon any intentionally tortious, grossly
      negligent or fraudulent conduct by Executive. This duty of indemnification
      shall
      survive the termination of this Agreement for a period of two years.

    

    8. Assignment
      and Successors.
      This
      Agreement is personal in its nature and neither of the parties shall, without
      the written consent of the other, which may be given or withheld in the absolute
      discretion of each, assign, delegate or otherwise transfer this Agreement or
      any
      rights or obligations hereunder; provided, however, that in the event of a
      merger, consolidation, transfer or sale of all or substantially all of the
      assets or other reorganization of the Employer with or to any other
      individual(s) or entity, this Agreement shall, subject to the provisions hereof,
      be binding upon and inure to the benefit of such successor and such successor
      shall discharge and perform all the promises, covenants, duties and obligations
      of the Employer hereunder; provided, however, Employer shall continue to remain
      obligated hereunder.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    9. Governing
      Law.
      THIS
      AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
      THE
      STATE OF TEXAS WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS OR
      ANY
      OTHER PRINCIPLE THAT COULD RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER
      JURISDICTION. ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
      THIS
      AGREEMENT MUST BE INSTITUTED IN THE STATE OR FEDERAL COURTS LOCATED IN BEXAR
      COUNTY, TEXAS, TO THE JURISDICTION OF WHICH EACH OF THE PARTIES HEREBY EXPRESSLY
      AND IRREVOCABLY AGREES TO SUBMIT. THE PARTIES AGREE TO ENTER INTO MEDIATION
      PRIOR TO TRIAL IN ANY SUIT, ACTION, OR PROCEEDING ARISING OUT OF OR RELATING
      TO
      THIS AGREEMENT. 

    

    10. Entire
      Agreement.
      This
      Agreement embodies the entire agreement of the parties respecting the matters
      within its scope. This Agreement supersedes all prior agreements of the parties
      on this subject matter . Any prior negotiations, correspondence, agreements,
      proposals or understandings relating to the subject matter shall be deemed
      to be
      merged into this Agreement and to the extent inconsistent herewith, such
      negotiations, correspondence, agreements, proposals or understandings shall
      be
      deemed to be of no force or effect. There are no representations, warranties
      or
      agreements, whether express or implied, or oral or written, with respect to
      the
      subject matter , except as set forth herein.

    

    11. Modifications.
      This
      Agreement shall not be modified by any oral agreement, either express or
      implied, and all modifications shall be in writing and signed by the parties
      .

    

    12. Waiver.
      Failure
      to insist upon strict compliance with any of the terms, covenants or conditions
      shall not be deemed a waiver of such terms, covenant or condition, nor shall
      any
      waiver or relinquishment of, or failure to insist upon strict compliance with,
      any right or power at any one or more times be deemed a waiver or relinquishment
      of such right or power at any other time or times. All waivers shall be in
      writing and signed by Executive and Employer.

    

    13. Number
      and Gender.
      Where
      the context requires, the singular shall include the plural, the plural shall
      include the singular, and any gender shall include all other
      genders.

    

    14. Headings.
      The
      section and paragraph headings in this Agreement are for the purpose of
      convenience only and shall not limit or otherwise affect any of its terms
      .

    

    15. Waiver
      of Jury Trial.
      The
      parties acknowledge that they are hereby waiving any right to trial by jury
      in
      any action, proceeding or counterclaim brought by either of the parties against
      the other in connection with any matter whatsoever arising out of or in any
      way
      connected with this Agreement or Executive’s Employment.

    

    16. Attorneys’
      Fees.
      Executive and the Employer agree that in any dispute resolution proceedings
      arising out of this Agreement, the prevailing party shall be entitled to its
      or
      his reasonable attorneys’ fees and costs incurred by it or him in connection
      with resolution of the dispute, in addition to any other relief
      granted.

    

    17. Severability.
      In the
      event that it is determined that any portion of this Agreement is in violation
      of any statute or public policy, then only the portions of this Agreement which
      violate such statute or public policy shall be stricken, and all portions of
      this Agreement which do not violate any statute or public policy shall continue
      in full force and effect. Furthermore, any determination striking any portion
      of
      this Agreement shall be done as narrowly as possible so as to give as much
      effect as possible to the intentions of the parties under this
      Agreement.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    18. Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original and all of which together shall constitute one and the same
      document .

    

    19. Notices.
      All
      notices and other communications provided for in the Agreement shall be in
      writing and will be deemed duly given (a) when delivered by hand, (b) two
      days after being given to an express courier with a reliable system for tracking
      delivery, (c) when sent by confirmed facsimile with a copy sent by another
      means specified in this provision or ((d) five days after the day of
      mailing, when mailed by registered or certified mail, return receipt requested,
      postage prepaid, and addressed as set forth below. A party may from time to
      time
      change its address or designee for notification purposes by giving the other
      written notice of the new address or designee and the date upon which it will
      become effective.. The addresses for such notices shall be:(a) If
      to
      Executive, at the address set forth in the preamble immediately following
      Executive’s name. 

    

    
      	 	
              (b)

            	
              If
                to Employer, to it at:

            

    

    

    ISI
      Detention Contracting Group, Inc., a California
      corporation

    Attention:
      Sam Youngblood and the Board of Directors

    12903
      Delivery Drive

    San
      Antonio, Texas 78297

    Tel:
      210.495.5245

    Fax:
      210.495.5613

    

    20. Time
      of the Essence.
      Time is
      expressly made of the essence with respect to each and every provision of the
      Agreement.

    

    21. 
      Inurement.
      Except
      as otherwise specified herein, no Person, other than the parties (and
      Executive’s estate upon his death, including his personal representative,
      administrator or heirs), shall have any rights under or interest in this
      Agreement or its subject matter .

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

    Executive
      and Employer have executed this Agreement as of the Effective Date.

    
      	 	 	 
	 	“EXECUTIVE”
	 
 	 
 	 
 
	
            	        	/s/
              Leonard Peterson
	 	
              
Leonard
              Peterson
	 	
            

      	 	 	 
	 	“EMPLOYER”
	 	 
	 	
              ISI
                Detention Contracting Group, Inc.

              a
                California corporation

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Sam
              Youngblood
	 	
              
                

              

              Sam Youngblood, 

              CEO

            

    

    

    Guaranty
      Agreement

    

    ISI
      Detention Contracting Group, Inc., a Texas corporation, an Affiliate of
      Employer, and which benefits from the Asset Purchase Agreement and the
      Employment Agreement, guarantees each and every promise and covenant, and the
      performance of each and every duty and obligation of Employer contained in
      the
      Employment Agreement.

    
      	 	 	 
	 	
              ISI
                Detention Contracting Group, Inc.

              a
                Texas corporation

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Sam
              Youngblood
	 	
              
                

              

              Sam Youngblood, 

              CEO

            

    

    

    

    (Signature
      Page to Leonard Peterson Employment Agreement)

    
      
         

      

      
        13MCFSA,
      Ltd.

     

    UNSECURED
      PROMISSORY NOTE

     

    
       

      
        	$250,000.00	
                 January
                  1, 2008

              
	 	 
	 	
                San
                  Antonio,
                  Texas

              

      

    

     

    FOR
      VALUE
      RECEIVED, MCFSA, Ltd., a Texas limited partnership (the “Company”)
      promises to pay to Fire Quest, Inc., a Texas corporation (“Seller”),
      or
      its registered assigns, in lawful money of the United States of America the
      principal sum of TWO HUNDRED FIFTY THOUSAND AND NO/100 ($250,000.00), or such
      lesser amount as shall equal the outstanding principal amount hereof, together
      with interest from the date of this Note on the unpaid principal balance at
      a
      rate equal to 7.25
      % per
      annum, computed on the basis of the actual number of days elapsed and a year
      of
      365 days. All unpaid principal, together with any then unpaid and accrued
      interest and other amounts payable hereunder, shall be due and payable on
      (i) January 1, 2009 (the “Maturity
      Date”),
      or
      (ii) when, upon or after the occurrence of an Event of Default (as defined
      below), such amounts are declared due and payable by Seller or made
      automatically due and payable in accordance with the terms hereof. Until the
      Maturity Date, payments shall be due and payable in accordance with the Payment
      Schedule attached hereto as Schedule
      A.
      This
      Note is issued pursuant to the Asset Purchase Agreement effective January 1,
      2008 (as
      previously or hereafter amended, modified or supplemented, the “Purchase
      Agreement”)
      between the Company and the Seller, and is guarantied by affiliates of the
      Company pursuant to Guaranty Agreements of even date herewith.

     

    The
      following is a statement of the rights of Seller and the conditions to which
      this Note is subject, and to which Seller, by the acceptance of this Note,
      agrees:

     

    1. Definitions.
      As used
      in this Note, the following capitalized terms have the following
      meanings:

     

    (a) “Company”
      includes the corporation initially executing this Note and any Person which
      shall succeed to or assume the obligations of the Company under this
      Note.

     

    (b) “Event
      of Default”
has
      the
      meaning given in Section 5
      hereof.

     

    (c) “Seller”
shall
      mean the Person specified in the introductory paragraph of this Note or any
      Person who shall at the time be the registered holder of this Note.

     

    (d) “Purchase
      Agreement”
has
      the
      meaning given in the introductory paragraph hereof.

     

    (e) “Obligations”
shall
      mean and include all loans, advances, debts, liabilities and obligations,
      howsoever arising, owed by the Company to Seller of every kind and description
      (whether or not evidenced by any note or instrument and whether or not for
      the
      payment of money), now existing or hereafter arising under or pursuant to the
      terms of this Note, including, all interest, fees, charges, expenses, attorneys’
fees and costs and accountants’ fees and costs chargeable to and payable by the
      Company hereunder, in each case, whether direct or indirect, absolute or
      contingent, due or to become due, and whether or not arising after the
      commencement of a proceeding under Title 11 of the United States Code (11
      U.S.C. Section 101 et
      seq.),
      as
      amended from time to time (including post-petition interest) and whether or
      not
      allowed or allowable as a claim in any such proceeding.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (f) “Person”
shall
      mean and include an individual, a partnership, a corporation (including a
      business trust), a joint stock company, a limited liability company, an
      unincorporated association, a joint venture or other entity or a governmental
      authority.

     

    (g) “Securities
      Act”
shall
      mean the Securities Act of 1933, as amended.

     

    (h) “Senior
      Indebtedness”
means,
      unless expressly subordinated to or made on a parity with the amounts due under
      this Note, the principal of (and premium, if any), unpaid interest on, amounts
      reimbursable, fees, expenses, costs of enforcement and any other amounts due
      in
      connection with (i) indebtedness of the Company, or with respect to which the
      Company is a guarantor, to banks or other lending institutions regularly engaged
      in the business of lending money, which is for money borrowed, or purchase
      or
      leasing of equipment in the case of lease or other equipment financing, whether
      or not secured, and (ii) any such indebtedness or any notes or other evidence
      of
      indebtedness issued in exchange for such Senior Indebtedness, or any
      indebtedness arising from the satisfaction of such Senior Indebtedness by a
      guarantor.

     

    (i) “Subsidiary”
shall
      mean (a) any corporation of which more than 50% of the issued and
      outstanding equity securities having ordinary voting power to elect a majority
      of the Board of Directors of such corporation is at the time directly or
      indirectly owned or controlled by the Company, (b) any partnership, joint
      venture, or other association of which more than 50% of the equity interest
      having the power to vote, direct or control the management of such partnership,
      joint venture or other association is at the time directly or indirectly owned
      and controlled by the Company, (c) any other entity included in the
      financial statements of the Company on a consolidated basis.

     

    2. Interest.
      Accrued
      and unpaid interest on this Note shall be paid as set forth in Part 1 of
      Schedule A attached hereto, and in addition, at maturity until the outstanding
      principal amount hereof shall be paid in full at maturity.

     

    3. Prepayment.
      This
      Note may be prepaid at any time after February 28, 2008 without consent of
      the
      Seller.

     

    4. Subordination.
      

     

    (a) General
      Subordination.
      The
      indebtedness evidenced by this Note is hereby expressly subordinated in right
      of
      payment to the prior payment in full of all of the Company’s Senior
      Indebtedness, whether now or hereafter existing, as such agreement may be
      supplemented, modified, restated or amended from time to time. Seller hereby
      agrees to execute and deliver such documents as may be reasonably requested
      from
      time to time by the Company or a holder of any Senior Indebtedness, including
      customary forms of subordination agreement requested from time to time by a
      holder of Senior Indebtedness, in order to implement Section 4 hereof. The
      Company may require that the Seller execute such documents as a condition to
      the
      Seller’s rights hereunder.

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    (b) Specific
      Subordination. The
      obligations evidenced hereby are subordinate in the manner and to the extent
      set
      forth in that certain Subordination Agreement (the “Subordination Agreement”)
      created as of January 1, 2008, among, without limitation, Fire Quest, Inc.,
      a
      Texas corporation (“Subordinated Lender”), MCFSA, LTD., a Texas limited
      partnership and LaSalle Bank National Association, a national banking
      association (“Senior Lender”) to the obligations (including interest) owed by
      ISI Security Group, Inc., formerly known as ISI Detention Contracting Group,
      Inc, a Delaware corporation (“ISI”) to the holders of all of the notes issued
      pursuant to that certain Loan and Security Agreement dated as of October 21,
      2004, between ISI and Senior Lender, as such Agreement may be supplemented,
      modified, restated or amended from time to time; and each holder hereof, by
      its
      acceptance hereof, shall be bound by the provisions of the Subordination
      Agreement.

     

    5. Events
      of Default.
      The
      occurrence of any of the following shall constitute an “Event
      of Default”
under
      this Note:

     

    (a) Failure
      to Pay.
      The
      Company shall fail to pay (i) when due any principal or interest payment on
      the due date hereunder or (ii) any other payment required under the terms
      of this Note on the date due and such payment shall not have been made within
      five days of the Company’s receipt of Seller’s written notice to the
      Company of such failure to pay; or

     

    (b) Voluntary
      Bankruptcy or Insolvency Proceedings. The
      Company shall (i) apply for or consent to the appointment of a receiver,
      trustee, liquidator or custodian of itself or of all or a substantial part
      of
      its property, (ii) be unable, or admit in writing its inability, to pay its
      debts generally as they mature, (iii) make a general assignment for the
      benefit of its or any of its creditors, (iv) be dissolved or liquidated,
      (v) become insolvent (as such term may be defined or interpreted under any
      applicable statute), (vi) commence a voluntary case or other proceeding
      seeking liquidation, reorganization or other relief with respect to itself
      or
      its debts under any bankruptcy, insolvency or other similar law now or hereafter
      in effect or consent to any such relief or to the appointment of or taking
      possession of its property by any official in an involuntary case or other
      proceeding commenced against it, or (vii) take any action for the purpose
      of effecting any of the foregoing; or

     

    (c) Involuntary
      Bankruptcy or Insolvency Proceedings. Proceedings
      for the appointment of a receiver, trustee, liquidator or custodian of the
      Company or of all or a substantial part of the property thereof, or an
      involuntary case or other proceedings seeking liquidation, reorganization or
      other relief with respect to the Company or the debts thereof under any
      bankruptcy, insolvency or other similar law now or hereafter in effect shall
      be
      commenced and an order for relief entered or such proceeding shall not be
      dismissed or discharged within 30 days of commencement.

     

    6. Rights
      of Seller upon Default.
      Upon
      the occurrence or existence of any Event of Default (other than an Event of
      Default described in Sections 5(b)
      or
5(c))
      and at
      any time thereafter during the continuance of such Event of Default, Seller
      may,
      by written notice to the Company, declare all outstanding Obligations payable
      by
      the Company hereunder to be immediately due and payable without presentment,
      demand, protest or any other notice of any kind, all of which are hereby
      expressly waived. Upon the occurrence or existence of any Event of Default
      described in Sections 5(b)
      and
5(c), immediately
      and without notice, all outstanding Obligations payable by the Company hereunder
      shall automatically become immediately due and payable, without presentment,
      demand, protest or any other notice of any kind, all of which are hereby
      expressly waived. In addition to the foregoing remedies, upon the occurrence
      or
      existence of any Event of Default, Seller may exercise any other right power
      or
      remedy permitted to it by law, either by suit in equity or by action at law,
      or
      both. 

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    7. Successors
      and Assigns.
      Subject
      to the restrictions on transfer described in Sections 10
      and
11
      below,
      the rights and obligations of the Company and Seller shall be binding upon
      and
      benefit the successors, assigns, heirs, administrators and transferees of the
      parties.

     

    8. Waiver
      and Amendment.
      Any
      provision of this Note may be amended, waived or modified upon the written
      consent of the Company and Seller.

     

    9. Assignment
      by the Seller.
      Neither
      this Note nor any of the rights, interests or obligations hereunder may be
      assigned, in whole or in part, by the Company without the prior written consent
      of the Seller, which shall not be unreasonably withheld.

     

    10. Assignment
      by the Company.
      Neither
      this Note nor any of the rights, interests or obligations hereunder may be
      assigned, in whole or in part, by the Company without the prior written consent
      of the Seller, which shall not be unreasonably withheld.

     

    11. Notices.
      All
      notices, requests, demands, consents, instructions or other communications
      required or permitted hereunder shall in writing and faxed, mailed or delivered
      to each party at the respective addresses of the parties as set forth below,
      or
      at such other address or facsimile number as shall have been furnished to the
      receiving party in writing. All such notices and communications will be deemed
      effectively given the earlier of (i) when received, (ii) when
      delivered personally, (iii) one business day after being delivered by
      facsimile or by email (with evidence of delivery or confirmation), (iv) one
      business day after being deposited with a reliable overnight courier service,
      or
      (v) four days after being deposited in the U.S. mail, first class with
      postage prepaid.

    

      
        	
                If
                  to the Company:

              	 	
                MCFSA,
                  Ltd.

              
	 	 	
                12903
                  Delivery Drive

              
	 	 	
                San
                  Antonio, TX 78247

              
	 	 	
                Attention:
                  Sam Youngblood

              
	 	 	
                Facsimile:
                  (210) 495-5613

              
	 	 	
                email:
                  syoungblood@isidet.com

              

      

    

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    

      
        	
                with
                  a copy to:

              	 	
                K&L
                  Gates

              
	 	 	
                111
                  Congress Avenue, Suite 900

              
	 	 	
                Austin,
                  Texas 78701

              
	 	 	
                Attention:
                  D. Hull Youngblood, Jr.

              
	 	 	
                Facsimile:
                  (512) 482-6859

              
	 	 	
                email:
                  hull.youngblood@klgates.com

              
	 	 	 
	 	 	 
	
                If
                  to Seller:

              	 	
                Fire
                  Quest, Inc.

              
	 	 	
                7823
                  Fortune Drive

              
	 	 	
                San
                  Antonio, TX 78520

              
	 	 	
                Attn:
                  William L. Cavin

              
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	
                with
                  a copy to:

              	 	
                James
                  M. Hughes

              
	 	 	
                1100
                  N.E. Loop 410, Suite 900

              
	 	 	
                San
                  Antonio, TX 78209

              
	 	 	
                email:
                  j_hughes@tetco.com

              
	 	 	
                Facsimile:
                  210-930-3073

              

      

    

     

    12. Usury.
      In the
      event any interest is paid on this Note which is deemed to be in excess of
      the
      then legal maximum rate, then that portion of the interest payment representing
      an amount in excess of the then legal maximum rate shall be deemed a payment
      of
      principal and applied against the principal of this Note.

     

    13. Waivers.
      The
      Company hereby waives notice of default, presentment or demand for payment,
      protest or notice of nonpayment or dishonor and all other notices or demands
      relative to this instrument.

     

    14. Governing
      Law.
      This
      Note and all actions arising out of or in connection with this Note shall be
      governed by and construed in accordance with the laws of the State of Texas,
      without regard to the conflicts of law provisions of the State of Texas, or
      of
      any other state.

     

    [Signature
      Page Follows]

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    The
      Company has caused this Note to be issued as of the date first written
      above.

     

    
      	 	 	 
	 	MCFSA, Ltd., a Texas limited
              partnership
	 	 
	 	
              By: Metroplex Commercial Fire and Security Alarms,
                Inc.

              Its: Sole General Partner

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Sam
              Youngblood 
	 	
              
Sam
              Youngblood, Chief Executive
              Officer

    

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Schedule
      A

     

    Payment
      Schedule 

     

    Part
      1.
      Quarterly payments of accrued and unpaid interest, to be paid as
      follows:

       

    
      	
              Due
                Date

            	 	
              Amount 

            	 	
               Prin
                Bal

            	 
	
              April
                1, 2008

            	 	
              $

            	
              4,531.25

            	 	
              $

            	
              250,000.00

            	 
	
              July
                1, 2008

            	 	
              $

            	
              4,531.25

            	 	
              $

            	
              250,000.00

            	 
	
              October
                1, 2008

            	 	
              $

            	
              4,531.25

            	 	
              $

            	
              250,000.00

            	 

    

     

    Part
      2.
      One final payment on the Maturity Date equal to the unpaid principal, together
      with any then unpaid and accrued interest and other amounts payable
      hereunder.

     

    
      
         

      

      
        -2-

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