Item 1.01 Entry into a Material Definitive Agreement.

Series B Purchase Agreement

On January 8, 2009, Argyle Security, Inc. (the "Company") entered into a Securities Purchase Agreement (the "Purchase Agreement ") with Mezzanine Management Fund IV A, L.P. and Mezzanine Management Fund IV Coinvest A, L.P. (the "Purchasers"), and Sam Youngblood, Ron Chaimovski and Bob Marbut (together, with their affiliates, the "Stockholders"), pursuant to which the Purchasers purchased 27,273 shares of a newly created series of our preferred stock, designated "Series B Convertible Preferred Stock", par value $0.0001 per share (the "Series B Preferred Shares") for $110 per share, for an aggregate purchase price of $3,000,030 (the "Series B Financing").

Each Series B Preferred Share is convertible into 100 shares of the Company's common stock, $0.0001 par value ("Common Stock"), at any time, at the option of the holder, initially at a conversion price of $1.10 per share of Common Stock, subject to adjustment for stock dividends, stock splits or similar capital reorganizations, and weighted average price protection for certain issuances below the conversion price.

The Series B Preferred Shares have voting rights equal to the number of shares of Common Stock the holder would receive if all Series B Preferred Shares had been converted into Common Stock. The holders of the Series B Preferred Shares may also designate one individual to serve on the Company's Board of Directors.

The holders of the Series B Preferred Shares shall be entitled to receive, on a cumulative basis, cash dividends, when, as and if declared by the Company's Board of Directors, at the greater of (i) 4% per annum or (ii) the dividend payable on the equivalent amount of Common Stock into which the Series B Preferred Shares could be converted; provided, however, that such cash dividend must be paid at the earliest any of the following occur: (A) the Company pays a dividend on the Common Stock, (B) the Company liquidates or there is a change in control, or (C) upon conversion of the Series B Preferred Shares, but only with respect to those Series B Preferred Shares so converted.

The Series B Preferred Shares have a liquidation preference as to both the Company's Series A Convertible Preferred Stock, par value $0.0001 per share ("Series A Preferred Shares") and the Common Stock equal to the greater of
(i) the sum of the original issue price (subject to adjustment for stock dividends, stock splits or similar capital reorganizations) plus all accrued but unpaid dividends, or (ii) the amount the holder would receive if all Series B Preferred Shares had been converted into Common Stock.

For as long as any shares of Series B Preferred Shares remain outstanding, the Company will be prohibited from (i) amending, waiving, altering or repealing in a way that adversely affects the rights, powers, preferences, or other special rights or privileges of the holders of the Series B Preferred Shares, whether by amendment to the Certificate of Incorporation, Bylaws, Certificate of Designation or other organization documents, or by merger, consolidation, reorganization or otherwise, (ii) increasing or decreasing (other than by redemption or conversion) the authorized number of shares of preferred stock or Series B Preferred Shares, (iii) creating, issuing or authorizing the issuance of any equity securities senior to the Series B Preferred Shares, or
(iv) repurchasing, redeeming or reissuing any equity securities of the Company to which the Series B Preferred Shares rank senior and prior (whether with respect to dividends, redemption, or upon liquidation or otherwise), including the Series A Preferred Shares and the Common Stock, and any rights or options exercisable or convertible therefor, other than repurchases of shares of Common Stock from employees, officers, directors or consultants under agreements providing for such repurchase under certain conditions.

Under the Purchase Agreement, the Company also granted piggyback registration rights to the Purchasers.

The Company has granted a preemptive right to the Purchasers with respect to future financings by the Company and a right of first offer to provide financing for certain transactions. In addition, the Stockholders have granted a right of first refusal to the Purchasers until January 31, 2010 as to any transfers of the Company's securities held by the Stockholders.

The gross proceeds of the Series B Financing were used to reduce a portion of the outstanding balance of the PrivateBank Loans (see below).

. . .

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information related to the Guaranty disclosed in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

Item 3.02 Unregistered Sales of Equity Securities.

The information disclosed in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02. The sale and issuance of the Series B Preferred Shares to the Purchasers, on January 8, 2009, and the issuance of shares of Common Stock upon conversion thereof, have been determined to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. The Purchasers have represented that they are accredited investors, as that term is defined in Regulation D, and that they have acquired the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

The information disclosed in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.03. On January 8, 2009, the Company filed with the Delaware Secretary of State a Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock, that created the new Series B Preferred Shares, authorized 27,273 Series B Preferred Shares and designated the rights, preferences, privileges and limitations of the Series B Preferred Shares, as described in Item 1.01 of this Current Report on Form 8-K.

Item 8.01 Other Events.

On January 9, 2009, the Company issued a press release announcing the completion of the Series B Financing and the amendment to the PrivateBank Loans, as well as, the Blair Amendment. A copy of the press release is filed herewith as Exhibit 99.1 to this Current Report.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

A list of exhibits filed herewith is contained on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.

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