MEDIATION SETTLEMENT AGREEMENT

Exhibit 99.1

MEDIATION SETTLEMENT AGREEMENT

This Mediation Settlement Agreement is made as of May 18, 2007 by and among TRI-S SECURITY CORPORATION, a Georgia corporation formerly known as Diversified Security Corporation (the “Company”), PARAGON SYSTEMS, INC., an Alabama corporation and a wholly-owned subsidiary of the Company (“Paragon”), and RONALD G. FARRELL (“Farrell”) on the one hand, and HAROLD BRIGHT, a resident of the State of Tennessee (“Bright”), CHARLES KEATHLEY, a resident of the State of Alabama (“Keathley”), ROBERT LUTHER, a resident of the State of Alabama (“Luther”), and JOHN WILSON, a resident of the State of Alabama (“Wilson”) (collectively, the “Selling Shareholders”), on the other hand.

WHEREAS, the Company, Paragon, and the Selling Shareholders are participants to a mediation to resolve the litigation among them, Tri-S Security Corporation v. Keathley, et al. (N.D. Ga., Civ. A. No. 1:06-CV-00450-TCB), Tri-S Security Corporation v. Keathley, et al. (N.D. Ga., Civ. A. No. 1:07-CV-00111-TCB), Luther and Keathley v. Paragon Systems, Inc. and Tri-S Security Corp. (Circuit Court for Madison County, AL, Civ. A. No. 05-2019-LWH), Paragon Systems, Inc. v. Bright and Wilson and Bright and Wilson v. Paragon Systems, Inc., Tri-S Security Corporation, and Ronald G. Farrell (American Arbitration Association Case No. 30 16600815 06), and In the Matter of the Arbitration Before the American Arbitration Association Between Paragon Systems, Inc. v. Luther and Keathley (all of these actions collectively, the “Litigation”);

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged, the parties hereto agree that they are duly authorized to execute this Mediation Settlement Agreement and further agree as follows:

1) The Company will issue to the Selling Shareholders 35,000 shares of its common stock no later than June 1, 2007, to be divided among the Selling Shareholders as follows: Keathley – 15,694; Luther – 9,306; Bright – 5,000; Wilson – 5,000.

2) The Company will pay to the Selling Shareholders $50,000 in cash to be paid by wire transfer no later than May 21, 2007 to be divided equally among them.

3) The parties agree jointly to request by May 25, 2007 of the respective courts or other appropriate venue to stay all the Litigation pending for 120 days of the date hereof.

4) Contingent upon (i) the Company obtaining the financing (on terms acceptable to it in its sole discretion) to make the payment referred to in Section 4(a) below within 120 days of the date hereof (which the Company shall use its reasonable efforts to secure), at a closing to take place within 120 days of the date hereof (the “Closing Date”); (ii) the parties arriving at an agreement with respect to the representation and indemnification of the Selling Shareholders in the litigation styled Unschuld v. Tri-S Security Corporation, et al. (N.D. Ga., 1:06-CV-02931-JEC); and (iii) the respective courts or other appropriate venue staying all of the Litigation:

(f)

the designations with respect to the Series C Redeemable Preferred Shares shall be amended to provide (i) for dividends of $750 per share on the 100 shares of the Series C Redeemable Preferred Shares per annum, to be paid quarterly on March 31; June 30; September 30; and December 31 each year until redemption and (ii) that, in the event of a default by the Company on any dividend payment due under the terms of Section 4(g) above, all of the Series C Redeemable Preferred Shares shall be immediately redeemable, except that the Company shall have an opportunity to cure one default within 30 days from the date it receives notice of the default;