Exhibit 10.40
 
STOCK PURCHASE AGREEMENT
 
This Stock Purchase Agreement has been executed as of this 7th day of April,
2009, by and among Mace Security International, Inc (“Buyer”), a Delaware
corporation ; CSSS, Inc., California corporation (“CSSS”); David Keays and
Bradley Keays,  collectively, David Keays and Bradley Keays are referred to as
(the “Shareholders”).
 
RECITALS:
 
A.          CSSS is engaged in the business of providing residential and
commercial security systems alarm and video monitoring services through out the
United States of America (the “Business”).
 
B.           Buyer desires to acquire all of the outstanding securities,
including, without limitation, the issued common stock of CSSS.  Shareholders
own all of the issued and outstanding securities of CSSS.  David Keays owns
6,750 shares of CSSS common stock and Bradley Keays owns 1,750 shares of CSSS
common stock.  The total outstanding securities of CSSS are 8,500 shares of
common stock (“CSSS Stock”).
 
D.           At the time the CSSS Stock is purchased by Buyer and sold by
Shareholders, as set forth in this Agreement (“Closing”), CSSS shall own all the
assets, and contractual rights historically used in connection with the Business
and as further set forth in this Agreement.
 
D.           Buyer is not willing to enter into this Agreement without the
representations, warranties and agreements of the Shareholders set forth in this
Agreement.
 
E.           The Shareholders and CSSS to induce Buyer to enter into this
Agreement are willing to make the representations, warranties and agreements set
forth in this Agreement.
 
IN CONSIDERATION of the mutual covenants, agreements, representations and
warranties set forth herein, and in reliance thereon, intending to be legally
bound, the parties agree as follows:
 
SECTION 1.  DEFINITIONS
 
The capitalized and certain other terms used herein shall have the meanings
ascribed to them in Schedule I to this Agreement.
 
SECTION 2.  THE PROPOSED TRANSACTION
 
2.01                      Capital Stock.  Subject to the terms and conditions of
this Agreement, and in reliance on the representations, warranties and covenants
contained herein, at Closing and as of the Closing Date, the Shareholders will
sell, convey, assign, transfer and deliver to Buyer, and Buyer will purchase and
acquire, the CSSS Stock.
 

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2.02                      Assets To Be Owned by CSSS at Closing.  Subject to the
terms and conditions of this Agreement, and in reliance on the representations,
warranties and covenants contained herein, at Closing and as of the Closing
Date, CSSS will have good and marketable title to the following property, free
and clear of all liens, mortgages, security interests and claims of third
parties, together will any other property which is not listed but is used in the
Business (“Purchased Assets”):
 
(a)        the Customer Contracts, a complete and accurate list of which is set
forth on Schedule 2.02(a);
 
(b)        all Accounts Receivable, including without limitation those generated
by the advance billing of customers for services not yet rendered by CSSS;
 
(c)        Inventory;
 
(d)        all Equipment, a complete and accurate list of the major items of
which is set forth in Schedule 2.02(d);
 
(e)        cash and cash equivalents held as refundable deposits from customers
or other third parties which relate to the Business and all amounts billed and
collected by CSSS to its Customers on or prior to the Closing Date, for services
to be rendered by Buyer after the Closing Date;
 
(f)         all Intellectual Property, a complete and accurate complete and
accurate list of which is set forth in Schedule 2.02(f), together with the
goodwill associated therewith and symbolized thereby; and any licenses relating
to the Intellectual Property used in or useful to the Business, whether to or
from CSSS;
 
(g)        all Technical Information;
 
(h)        all Computer Software Assets, a complete and accurate list of which
is set forth in Schedule 2.02(h);
 
(i)         all Prepaid Expenses;
 
(j)         all Contracts and Leases, a complete and accurate list of which is
set forth in Schedule 2.02(j);
 
(k)        all Open Orders, a complete and accurate list of which is set forth
in Schedule 2.02(k);
 
(l)         all Permits, a complete and accurate list of which is set forth in
Schedule 2.02(l);
 
(m)       all Books and Records, including without limitation (i) all property
and records used or held for use in the Business, (ii) copies of personnel
records of employees who become Hired Employees after the Closing Date, (iii)
all office supplies and (iv) the right to receive and retain mail and other
communications relating to the Business;
 
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(n)        all certifications, ratings, listings and similar benefits from any
product or quality control certification organization and all systems and
manuals related thereto;
 
(o)        all memberships of CSSS relating to the Business in, and all rights
as a member of, the industry, trade, civic, social and other associations,
organizations and clubs listed in Schedule 2.02(o);
 
(p)        all other assets (including causes of action, rights of action,
contract rights and warranty and product liability claims against third parties,
telephone numbers and listings) relating to the Purchased Assets or the
Business;
 
(q)        Any insurance policies maintained by CSSS with respect to the
Business and any prepaid insurance expenses;
 
(r)         CSSS’s franchise to be a corporation, its certificate of
incorporation, bylaws, minute books and other records having to do with the
organization and capitalization of CSSS;
 
(s)        Any claims and rights against third parties (including, without
limitation, insurance carriers);
 
(t)         All payments made by CSSS which constitute prepaid Taxes of the
Business and all claims for refunds of Taxes and other governmental charges to
the extent such refunds relate to periods ending on or prior to the Closing
Date;
 
(u)        All Plans of CSSS and all payments made by CSSS which constitute
prepaid expenses of the Business relating to such Plans; and
 
(v)        CSSS’s depository and other accounts;
 
2.03                      Consideration for the Purchased Assets.  Subject to
the terms and conditions of this Agreement, and in reliance on the
representations, warranties and covenants contained herein, in consideration of
the sale, conveyance, assignment, transfer and delivery of the CSSS Stock, and
the obligations of the Shareholders under Section 8 of this Agreement, Buyer
agrees (a) subject to adjustment following Closing pursuant to Section 2.05, to
pay and deliver to CSSS on the Closing Date the Purchase Price, as set forth in
Section 2.04, and (b) to assume as of the Closing Date the Assumed Liabilities,
as set forth in Section 2.06.
 
2.04                      Purchase Price.   Buyer shall pay the amount of
$3,160,000 for the CSSS Stock, as reduced and increased, as set forth in this
Agreement (the “Purchase Price”).  The Purchase Price is subject to adjustment
at and following Closing pursuant to this Subsection 2.04 and Subsection 2.05
below.
 
(a)        The $3,160,000 Purchase Price shall be adjusted as of the date of
Closing by the Closing Date Adjustments.   The Closing Date Adjustments are the
total sum of the following amounts based on their balances as of the Closing
Date: (i) the Purchase Price shall be increased by the amount of cash in the
bank accounts of CSSS, not including cash held as deposits posted by third
parties; (ii) the Purchase Price shall be reduced by revenue collected by CSSS
for services not fully rendered by CSSS as of the Closing Date; (iii) the
Purchase Price shall be reduced by the accounts payable of CSSS, including
accrued payroll; and (iv) the Purchase Price shall be reduced by amounts
necessary for CSSS to pay Secure Global Solutions post Closing to complete the
installation and training of the monitoring software system Secure Global
Solutions is currently installing for CSSS, as further set forth in Schedule
2.04(a).  The Closing Date Adjustments shall be estimated by Buyer and
Shareholders on the Closing Date.  On the Closing Date, Buyer and Shareholders
shall execute a statement that details the amount of the estimate of each of the
Closing Date Adjustments (“Closing Date Adjustment Statement”).  Within sixty
(60) days after the Closing Date, Buyer and Shareholders shall cooperate with
each other to verify the amounts of the estimated Closing Date Adjustments based
on all post closing information.  If based on the post Closing information, the
Closing Date Adjustment was to large or to small in amount, the Buyer or
Shareholders, as applicable will pay the other party the amount necessary to
adjust the Closing Date Adjustment to the correct amount.  All payments of the
amount necessary to adjust the Closing Date Adjustment to the correct amount
shall be made within ninety (90) days after the Closing Date.
 
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(b)        As part of the Purchase Price for the CSSS Stock, Shareholders shall
receive the Accounts Receivables payments set forth in Section 2.05.
 
(c)        On the Closing Date, the Purchaser will pay to the Shareholders the
Purchase Price, after the Closing Date Adjustments, less: (i) the RMR Holdback,
as defined below; (ii) the $500,000 AT&T Holdback, as defined below; (iii) the
$500,000 General Holdback, as defined below; and (iv) the 100,000 Keays
Holdback, as defined below.  The Purchase Price less the RMR Holdback, the AT&T
Holdback, the General Holdback and the Keays Holdback shall be paid in
immediately available funds (the “Initial Payment”).  The Initial Payment and
all future payments shall be paid and divided between the Shareholders as
follows: (i) seventy eight  percent to David Keays and (ii) twenty two percent
to Bradley Keays.

(i)          $500,000 of the Purchase Price (“AT&T Holdback”) will be paid to
the Shareholders by Buyer upon either (a) the written release by AT&T to CSSS
from any and all liability CSSS has under AT&T Service Order and Addendum to
Comprehensive Service Order, between CSSS, Inc. and AT&T Corp, AT&T MA Reference
No. 109699, signed February 15, 2007 and March 3, 2007, Contract ID
1148971(“AT&T Contract”) or (b) the determination of Buyer, in its sole
discretion, that CSSS has no liability or obligations to AT&T under the AT&T
Contract.  Any and all amount CSSS is obligated to pay to discharge its
obligations under the AT&T Contract, including defense costs, shall reduce the
amount of the AT&T Holdback to be paid to the Shareholders.  The AT&T Holdback
will be paid to Shareholders on its due date along with accrued interest at the
rate of two percent per annum from the date of Closing.

(ii)         $500,000 of the Purchase Price (“General Holdback”) will be paid to
the Shareholders by Buyer on the day that is two years from the Closing Date,
less any amount of damages or costs incurred or suffered by Buyer, including
attorney fees, from the  Shareholders’ breach or default this Stock Purchase
Agreement, including the failure to pay an indemnity claim in accordance with
Section 12 of this Stock Purchase Agreement, or the falsity of any
representation or warranty of Shareholders in this Stock Purchase
Agreement.  The General Holdback will be paid to Shareholders on its due date
along with accrued interest at the rate of two percent per annum from the date
of Closing.
 
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(iv)       Six months from the Closing Date, Buyer will pay to Shareholders
$100,000 of the Purchase Price (“Keays Holdback”), if and only, if David Keays
fully performed the Employment Agreement, attached as Exhibit A to this Stock
Purchase Agreement, through the end of the Employment Agreement’s term.  If
David Keays failed to fully perform the Employment Agreement, except due to
death or physical disability, through the end of its term, the Purchase Price
shall be reduced by an amount equal to $100,000 of the Purchase Price.

(v)        On the day that is thirteen months from the Closing Date, Buyer shall
pay to Seller ten percent of the Purchase Price, after the Closing Date
Adjustments (“RMR Holdback”), less the Attrition Reduction, as hereafter
defined.   The “Attrition Reduction” shall equal 12 times the difference, if
any, between (a) the Qualified RMR attributable to the Customers Contracts of
CSSS in existence on the Closing Date, less (b) CSSS’s Qualified RMR,
attributable Customer Contracts of CSSS in existence on the Closing Date, for
the month ended twelve months from the Closing Date.  If the Attrition Reduction
is greater than the RMR Holdback, there shall be no payment to Shareholders but
Shareholders shall not be obligated to refund any of the Purchase Price.
 
2.05                      Accounts Receivables.
 
(a)        Buyer shall pay to Shareholders the amount equal to ninety five (95%)
of the accounts receivable of CSSS in existence on the Closing Date for services
fully rendered on or before the Closing Date ( “Accounts Receivable”) and that
are actually paid to Buyer during the ninety days after the Closing Date (the
“Account Payment Period”).  Buyer and Shareholders acknowledge that that the
Accounts Receivable do not include accounts receivable generated by CSSS from
the advance billing of customers for services that are to be rendered by CSSS
after Closing.  The payments due under this Section 2.05(a) shall be made by
Buyer to the Shareholders for each month on or before twenty days after the end
of each month.  The payment will be sent with a schedule detailing the Accounts
Receivable payments received by CSSS during the prior month.  No further payment
will be due or owning with respect to the Accounts Receivable regarding any
payments of Accounts Receivable made on and after the Account Payment Period.
 
(b)        If the Closing Date Adjustments as estimated on the Closing Date were
less then the actual Closing Date Adjustment as determined sixty days after the
Closing, Buyer may offset and credit against any amount owed to Shareholders
under Section 2.05(a) above, any amount Shareholders owe to Buyer under Section
2.04(a) as a result of the estimated Closing Date Adjustments being different
from the final Closing Date Adjustments.
 
2.06                      Assumed Liabilities.  The Buyer acknowledges that CSSS
at the Closing Date will have liabilities and obligations relating to the
Business, as set forth in Subsections (a), (b), (c), (d) and (e) below and that
Buyer will not make any indemnification claim of Shareholders arising out of any
of the liabilities and obligations of CSSS, as set forth in Subsections (a),
(b), (c), (d) and (e) below:
 
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(a)        the Liabilities and Obligations arising pursuant to the Customer
Contracts to the extent such Liabilities and Obligations first arise and are
related to periods subsequent to the Closing (provided that such obligations do
not arise as a result of actions or omissions by CSSS on or prior to Closing);
and
 
(b)        the obligation of CSSS to David Keays in the amount of Two Hundred
Thousand ($200,000) which Buyer agrees to cause CSSS to pay at Closing; and
 
(c)        the Liabilities and Obligations arising pursuant to Open Orders,
Contracts, and Leases included within the Purchased Assets and set forth and
identified in Schedule 2.02(j), but not including any liability or obligation
arising (i) from any payment or payments which became due and owing prior to the
Closing Date or (ii) out of or in connection with any breach thereof occurring
prior to the Closing Date, or the occurrence of any event prior to the Closing
Date which but for the giving of notice or lapse of time or both would
constitute a breach or default; and
 
(d)        the accounts payable in the amounts as listed on the Closing Date
Adjustment Statement agreed to by Buyer and Shareholders at Closing, as set
forth in Subsection 2.04(a) of this Agreement; and
 
(e)        Liabilities or Obligations of CSSS arising out of any transactions
first occurring, or liabilities or obligations first incurred after the Closing
Date relating to the Purchased Assets or the Assumed Liabilities.
 
2.07                      Indemnified Liabilities.  Notwithstanding anything to
the contrary contained in this Agreement, the Shareholders are indemnifying and
holding Buyer and CSSS harmless from and against, all of CSSS’s debts,
liabilities and obligations of any nature whatsoever (other than the Assumed
Liabilities), whether accrued, absolute or contingent, whether known or unknown,
whether due or to become due, including, without limitation, the following:
 
(a)        the Liabilities or Obligations of CSSS to the Shareholders,
respecting dividends, distributions in liquidation, redemptions of stock or
other payments;
 
(b)        Liabilities or Obligations of CSSS arising out of any transactions
occurring, or liabilities or obligations incurred, before the Closing Date,
other than relating to Buyer’s use or operation of the Purchased Assets or the
Assumed Liabilities after the Closing Date;
 
(c)        Liabilities or Obligations of CSSS arising out of those Contracts
identified on Schedule 2.07(c).
 
(d)        any Liabilities or Obligations of CSSS under or arising out of this
Stock Purchase Agreement prior to but not after the Closing Date;
 
(e)        Liabilities or Obligations arising from events occurring prior to
Closing against which CSSS would have been covered by insurance (or
indemnification) but for a claim by the insurer (or the indemnitor) that the
insured (or the indemnitee) had breached its obligations under the policy of
insurance (or the contract of indemnity) or had committed fraud in the insurance
application or in entering into the indemnity agreement;
 
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(f)         any Liabilities or Obligations of the CSSS to the Shareholders other
than the $200,000 obligation to be paid to David Keays as set forth in
Subsection 2.06(b) above;
 
(g)        any Liabilities and Obligations of CSSS to indemnify its officers,
directors, employees or agents for actions or inactions prior to Closing;
 
(h)        all Taxes imposed on CSSS relating to any and all periods prior to
Closing;
 
(i)         all Liabilities and Obligations arising under or imposed pursuant to
Environmental Laws, whether or not attributable to actions or failures to act by
CSSS, with respect to the ownership of, operation of, or properties utilized in
connection with, the Business at any time prior to the Closing Date, or to any
property being transferred or leased to Buyer pursuant to this Agreement;
 
(j)         all Liabilities and Obligations for employee benefits of the
Business incurred prior to the Closing Date;
 
(k)        all other Liabilities or Obligations of CSSS arising out of its
conduct of the Business prior to the Closing Date, including without limitation,
Product Liabilities; liabilities or obligations related to the infringement by
CSSS of any intellectual property of another Person; and any Liabilities or
Obligations related to any lawsuit, cause of action, litigation or legal
proceeding with respect to any losses, occurrences or events occurring prior to
the Closing Date, whether commenced prior to or after the Closing Date, except
for those liabilities or obligations constituting a part of the Assumed
Liabilities.
 
(l)         any Plan or any Liabilities or Obligations of the CSSS or the
Shareholders with respect to any Plan; and
 
(m)       all Liabilities and Obligations with respect to indebtedness for
borrowed money, bank debt and any mortgage on any real property whether
currently or previously occupied or used in the Business, except for those
Liabilities and Obligations constituting a part of the Assumed Liabilities.
 
2.08                      Allocation of Consideration.  Shareholders and Buyer
agree that the Purchase Price  shall be allocated ninety five percent to the
CSSS Stock and five percent to the Non-Competition covenants contained in
Section 8 of this Stock Purchase Agreement.
 
SECTION 3.  CLOSING
 
The Closing of the transactions contemplated by this Agreement shall take place
at 10:00 a.m. at the offices of the Business at 401 West Lincoln Avenue,
Anaheim, California, on the later of (a) April 30, 2009 and (b) the fifth
business day following the date when all of the conditions to the Closing
specified in Sections 9 and 10 have been satisfied or waived, or such other date
as the parties may mutually agree to in writing.
 
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SECTION 4.  REPRESENTATIONS AND WARRANTIES OF CSSS AND SHAREHOLDERS

CSSS and the Shareholders, jointly and severally, represent and warrant to Buyer
that the statements contained in this Section 4,  are correct and complete as of
the date of this Agreement and shall be correct and complete at the Closing
Date.  The mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made in this Agreement unless (a) the representation or warranty has to
do with the existence of the document or other item itself or (b) the Disclosure
Schedule identifies the exception with particularity (such as with a
cross-reference to a section in a disclosed agreement) and summarizes the
relevant facts in reasonable detail.
 
Wherever a representation or warranty in this Agreement is qualified as having
been made “to the best of CSSS’s knowledge,” such phrase shall mean the
knowledge of Shareholders, CSSS and the officers, directors and employees of
CSSS responsible for the operation of the Business or the Purchased Assets,
after reasonable inquiry.
 
4.01                      Organization; Authority; Name.
 
(a)        CSSS is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is duly
authorized, qualified and licensed under all applicable Laws to carry on its
business in the places and in the manner as presently conducted, except for
where the failure to be so authorized, qualified or licensed would not have a
Material Adverse Effect.
 
(b)        CSSS and the Shareholders have the full legal right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement.  All corporate action of CSSS necessary to
approve the transactions contemplated by this Agreement has been taken.  Each of
the Shareholders is of legal age and is competent to execute this Stock Purchase
Agreement.
 
(c)        Stock Ownership; Binding Effect.  Shareholders own all of the issued
and outstanding shares of CSSS’s capital stock free and clear of any
restrictions on transfer, security interests, liens, pledges, options, purchase
rights, contracts, commitments, claims, and demands.  The Shareholders are not
parties to any option, warrant, purchase right, or other contract or commitment
that could require the Shareholders to sell, transfer, or otherwise dispose of
the CSSS Stock (other than this Stock Purchase Agreement).  The Shareholders are
not parties to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of CSSS.
 
4.02                      Voting.  No Person other than Shareholders has any
right to vote the CSSS Stock.  CSSS and the Shareholders have duly executed and
delivered this Agreement, and (assuming due authorization, execution and
delivery by Buyer) this Agreement constitutes a legal, valid and binding
obligation of CSSS and the Shareholders enforceable against each of them in
accordance with its terms.
 
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4.03                      No Conflict.  The execution, delivery and performance
of this Stock Purchase Agreement by CSSS and the Shareholders and the
consummation of the transactions contemplated by this Agreement do not and will
not:  (a) violate, conflict with or result in the breach of any provision of
CSSS’s Articles of Incorporation or Bylaws; (b) conflict with or violate any Law
or Governmental Order applicable to the Purchased Assets, the Business, CSSS,
the Shareholders or any of their respective assets, properties or businesses; or
(c) except as set forth in Schedule 4.03, conflict with, result in any breach
of, constitute a default (or event which with the giving of notice or lapse of
time would become a default) under, require any consent under, or give to any
other Person any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Lien on the
Purchased Assets, the properties of CSSS, or the CSSS Stock pursuant to any
note, bond, mortgage, indenture, contract, agreement, lease, sublease, license,
permit, authorization, franchise or other instrument or arrangement to which
CSSS or any Shareholder is a party or by which any of the Purchased Assets or
the CSSS Stock are bound or affected.
 
4.04                      Governmental Consents and Approvals.  Except as set
forth on Schedule 4.04, the execution, delivery and performance of this
Agreement by CSSS and the Shareholders do not and will not require any consent
or action by, filing with or notification to, any Governmental Authority.
 
4.05                      Title to Assets.  CSSS has good and marketable title
to the Purchased Assets, free and clear of all Liens.  By virtue of the grant,
conveyance, sale, transfer and assignment of the CSSS Stock hereunder, Buyer
shall receive at Closing good and marketable title to the CSSS Stock, free and
clear of all Liens.
 
4.06                      Equipment.  Schedule 2.01(d) is a complete and
accurate list of all Equipment.  The Equipment is in good and serviceable
condition and repair (subject to normal wear and tear).  CSSS has not, nor, to
the best of Shareholder’s knowledge, has anyone else, made any modifications to
any of the Purchased Assets that would void or invalidate any manufacturer’s
warranty or cause the Purchased Assets not to be in compliance with any
Law.  CSSS owns all of the Equipment, except only Equipment that is leased under
Leases not in default and identified in Schedule 2.01(j).  CSSS’s central
station monitoring facility is listed with Underwriters Laboratories
(“UL”).  .  All UL deficiencies reported to CSSS by UL have been fixed or
otherwise resolved in all material respects, and to CSSS’s and the Shareholders’
knowledge there are no outstanding or unresolved UL deficiencies with respect to
CSSS’s central station or any of the Customer.
 
4.07                      Contracts.
 
(a)        Schedule 2.01(a) is a complete and accurate list of the Customer
Contracts as of the date of this Agreement.  Complete and accurate originals of
all Customer Contracts are filed in the CSSS’s records and will be on CSSS’s
leased premises  at Closing.  The Customer Contracts include all of CSSS’s
customers to whom CSSS is providing services as of the Closing Date in
connection with the Business.  CSSS has billed all of its customers accurately
and timely and in accordance with the Customer Contracts.  All Customer
Contracts are in full force and effect and are valid, binding and enforceable
against the respective parties thereto in accordance with their respective
terms, and CSSS is not in default in, nor has there occurred an event or
condition  which, with the passage of time or the giving of notice, would
constitute a default with regard to the payment or performance of any obligation
under any Customer Contract.  CSSS has not received any notice that any person
intends or desires to amend or terminate any Customer Contract.
 
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(b)        There is no contract, agreement or other arrangement granting any
Person any  right to purchase any of the Purchased Assets or the CSSS Stock.
 
(c)        Except as set forth on Schedule 2.01(a), no Customer Contract or any
other contract, agreement or other arrangement between CSSS and any of CSSS’s
customers or any third party, requires the Consent of any Person for the
purchase of the CSSS Stock by Buyer under this Agreement.
 
(d)        All Customers which are alarm dealers have written contracts with the
CSSS on a basic form of contract which is attached as Schedule 4.07(d) with only
minor non-material changes in the basic form.
 
(e)        Less than one percent (1%) of CSSS’s Customers are commercial or
residential end users of alarms that CSSS bills directly.  CSSS has executed a
Monitoring Activation Agreement in the basic form of the contract which is
attached as Schedule 4.07(e), with only minor non-material changes in the basic
form, with all persons and entities which are the end users of alarms and video
equipment that CSSS monitors.
 
4.08                      Qualified RMR; Attrition Rate.  The Customer Contracts
collectively generated monthly Qualified RMR in an amount not less than $280,000
for each of the months of February 2009 and March 2009.  CSSS’s annual Attrition
Rate for each of the calendar years, 2007 and 2008 has not exceeded 1.92%.
 
4.09                      Compliance with Law.  CSSS has always conducted and
continues to conduct the Business in accordance with all Laws, Permits and
Governmental Orders applicable to CSSS, the Purchased Assets or the
Business.  CSSS is not in material violation of any such Law, Permit or
Governmental Order.  Schedule 4.09 identifies each Governmental Order applicable
to CSSS, the Purchased Assets or the Business, and no such Governmental Order
has or has had a Material Adverse Effect.  Neither CSSS nor either of the
Shareholders has received any citation or notice that CSSS or any of its current
or former officers, directors, shareholders or employees is under investigation
or other form of review relating to the Purchased Assets or the Business with
respect to any applicable Law.
 
4.10                      Tax Matters.
 
(a)        Except as noted in Schedule 4.10, CSSS has duly and timely filed all
returns for Taxes required to be filed by it or for which it may be held
responsible under applicable Law, all such Tax returns are true, correct and
complete in all material respects, and CSSS has timely paid or accrued (or had
paid or accrued on its behalf) all Taxes due for all periods ending on or prior
to the Closing Date with respect to which a taxing or collection authority has
issued a proposed or final assessment or made any similar claim.  All amounts
required to be withheld or collected by CSSS from customers or from or on behalf
of employees or independent contractors for income, social security and
unemployment insurance Taxes have been collected or withheld and either paid to
the appropriate Governmental Authority or set aside and, to the extent required
by law, held in accounts for such purpose.
 
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(b)        CSSS has complied in all respects with all applicable laws relating
to withholding taxes and tax information reporting and has, within the time and
manner prescribed by Law, withheld from each employee’s wages and other payments
and paid over to the proper Governmental Authority all amounts required to have
been so withheld and paid.  All persons who have provided services to CSSS and
have been classified as independent contractors for tax purposes were properly
so classified.  The records of the CSSS contain all information and documents
necessary to comply in all material respects with applicable tax information
reporting and tax withholding requirements under applicable Law and such records
identify with specificity all amounts subject to backup holding under Section
3406 of the Code.  The CSSS has complied in all material respects with all sales
tax resale certificate exemption requirements.
 
(c)        There are no existing circumstances that will result in the assertion
of any claim for taxes against CSSS by any Governmental Authority with respect
to any period for which tax returns are required to have been filed or taxes
required to have been paid.
 
(d)        CSSS has not directly or through any subsidiary conducted any
activities in any jurisdiction which require CSSS (or such subsidiary) to pay
tax or file a tax return of a type that it has not filed in the most recently
ending preceding taxable period for which such type of tax or tax return would
be due.
 
(e)        There is no audit or other proceeding presently pending or threatened
with regard to any tax liability or any tax return of CSSS or any subsidiary or
affiliate of CSSS or any Shareholder relating to the CSSS or any of its
affiliates.
 
(f)         CSSS has not waived any statute of limitations or agreed to any
extension of time that has the effect of deferring the payment or collection of
any tax or the filing of any tax return. There is not currently in effect any
power of attorney authorizing any person to act on behalf of the CSSS or to
receive information relating to CSSS with respect to any tax matter (other than
authorizations included as an integral part of any tax return previously filed
by the CSSS).
 
(g)        CSSS has not been a beneficiary or otherwise participated in any
“reportable transaction” within the meaning of Treasury Regulation Section
1.6011-4(b)(1) that was or will ever be required to be disclosed under Treasury
Regulation Section 1.6011-4. No tax return filed by CSSS contained a disclosure
statement under Section 6662 of the Code (or any similar provision of Law) or
has been filed by or on behalf of CSSS nor has CSSS ever been advised to make
such disclosure which was not in fact made.
 
(h)        CSSS does not have any “permanent establishments” in any country
other than the United States and has not otherwise engaged in any activity that
has exposed,  or will expose, it to the taxing jurisdiction of any such other
country.
 
(i)         Schedule 4.10(i) identifies all tax returns of CSSS filed after
December 31, 2003, and the taxable period covered by each such tax return and
identifies those tax returns or periods that have been audited or are currently
the subject of an audit by a Governmental Authority. CSSS has provided to Buyer
complete and accurate copies of the following materials:
 
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(i)           All income tax returns filed by CSSS that relate to taxable
periods ending after December 31, 2003;
 
(ii)          All examination reports relating to taxes of CSSS issued since
December 31, 2003 in connection with tax audit or examinations or asserted
failures to file tax returns or to pay any taxes;
 
(iii)         All statements of taxes assessed since December 31, 2003 that were
not shown on tax returns filed by CSSS before assessment and all related
correspondence;
 
(iv)         All written rulings from and written agreements with any
Governmental Authority relating to taxes of CSSS that were received since
December 31, 2003;
 
(v)          Copies of all tax opinions relating to and in the audit files of
CSSS; and
 
(vi)         To the extent requested by Buyer, any document relating to taxes or
tax returns relating to CSSS or the Shareholders.
 
(j)          There is no dispute or claim concerning any Taxes of CSSS either
(i) claimed or raised by any Governmental Authority in writing or (ii) as to
which any of the directors, officers or representatives of CSSS have knowledge
except as disclosed in Schedule 4.10.  No returns for Taxes of CSSS are
currently under audit or examination by any Governmental Authority.
 
(k)        CSSS has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to an assessment or deficiency for
Taxes.
 
(l)         There are no Liens for Taxes (other than for current Taxes not yet
due and payable) on CSSS or any of the Purchased Assets.
 
(m)       CSSS has been a validly existing C corporation within the meaning of
the Code.
 
4.11                      Litigation.  Except as set forth on Schedule 4.11, no
Action is pending or, to the best of CSSS’s knowledge, threatened, against CSSS
or the Shareholders relating to the Purchased Assets or the Business, at law or
in equity.  Neither CSSS nor any Shareholder has received notice of any of the
above, and, to the best of CSSS’s knowledge, no facts or circumstances exist
which would give rise to any of the foregoing.  Also listed on Schedule 4.11 are
all instances where CSSS or any Shareholder is the plaintiff, or complaining or
moving party, in any action that is in any way related to the Purchased Assets
or the Business.
 
4.12                      Conduct of CSSS’s Business.  Since December 31, 2008,
except for the execution and delivery of this Agreement or as disclosed on
Schedule 4.12, the Business has been conducted in all material respects in the
ordinary course and consistent with past practice, and there has not been any:
 
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(a)        sale or transfer of, or any agreement to sell or transfer, any of the
Purchased Assets or any plan, agreement or arrangement granting any  right to
purchase or acquire any interest in any of the Purchased Assets, or requiring
Consent of any party to the transfer and assignment of any of the Purchased
Assets, or any loss or damage to the Assets;
 
(b)        waiver of any material rights or claims of CSSS related to the
Purchased Assets;
 
(c)        material breach, amendment or termination of any Customer Contract;
 
(d)        transaction by CSSS outside the ordinary course of its business and
related to the Purchased Assets;
 
(e)        any increase in rates for service to Customers and there has not been
any amnesty or incentive program regarding payment of overdue accounts
receivable;
 
(f)         all Customer Contract entered into by CSSS have been in the ordinary
course of business with standard terms and pricing;
 
(g)        occurrence, event, incident, action or failure to act that has had,
or that reasonably is expected to have, a Material Adverse Effect on CSSS or the
Business; or
 
(h)        any action by CSSS, the Shareholders, or any employee, officer or
agent of CSSS or the Shareholders committing to do any of the foregoing.
 
4.13                      Noncompete Agreements.  Schedule 4.13 is a complete
and accurate list of all Restrictive Agreements as of the date of this
Agreement, complete and accurate copies of which are attached to Schedule
4.13.  None of the Restrictive Agreements have been modified, altered,
terminated or otherwise amended.  The Transactions do not violate any of the
terms and provisions of the Restrictive Agreements.  The Customer Contracts do
not contain any restrictive covenant provisions.
 
4.14                      Reliance on Advisors.  CSSS and the Shareholders have
relied on their own advisors for all legal, accounting, tax or other advice
whatsoever in connection with this Agreement and the Transactions.
 
4.15                      Contracts.
 
(a)        Schedule 4.15(a) sets forth a list of all Material Contracts to be
assumed by Buyer as part of the Assumed Liabilities.  The Material Contracts
constitute all contracts material to the conduct of the Business as presently
conducted by CSSS.  All Contracts are valid, binding and in full force and
effect, and neither CSSS nor any other party to any Contract is in default there
under.  The Business is in compliance with all applicable cost accounting
standards (“CAS”) requirements with respect to any Contracts with the United
States or any agency thereof or any prime contractor thereof, except for such
noncompliance that would not (i) result in the United States or any agency
thereof or any prime contractor thereof having the right to terminate or
otherwise cease performance of such Contracts; (ii) result in the United States
or any agency thereof having the right or ability to bar CSSS from engaging in
any future business arrangements with the United States or any agency thereof;
or (iii) have a Material Adverse Effect.
 
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(b)        Except as noted in Schedule 4.15(b), none of the Material Contracts
contains any provision providing for the termination of the Contract or giving
any party thereto the right to terminate such Contract by reason of the
execution of this Agreement or the consummation of the transactions contemplated
herein, and none of the terms of any Material Contract will be altered by reason
of the execution of this Agreement or the consummation of the transactions
contemplated herein.
 
(c)        None of the Material Contracts has been awarded to CSSS as a result
of or on the condition that, and none of the Open Orders has been bid on the
condition that, (i) CSSS was, is or remains a “small business” enterprise or
(ii) CSSS qualifies under any other governmental set aside program, in either
case, the eligibility for which may be terminated as a result of the
consummation of the transactions contemplated by this Agreement.
 
4.16                      Open Orders.  All Open Orders to connect alarm end
users to CSSS’s monitoring equipment have been and are processed in a timely
manner in the ordinary course of business.  There are valid and executed
Customer Contracts and Monitoring Activation Agreements in existence for each
Open Order.
 
4.17                      Permits.  Schedule 2.02(l) sets forth a list of all
Permits required or useful in the conduct of the Business.  All Permits are in
full force and effect and no suspension or cancellation of any have been
threatened.  No Permits or parts thereof are subject to loss by reason of
dormancy or non use.  No claims have been made by any Governmental Authority or
any Person relating to the Permits and no such claim is contemplated by any
Governmental Authority or other Person, nor does any basis therefore
exist.  Except as noted in Schedule 2.01(l), no Permit will be terminated or
require the consent of the issuer to continue in effect as a result of the
execution of this Agreement or the consummation of the transactions contemplated
herein.
 
4.18                      Technical Information.  Except as noted in Schedule
4.18, the patterns, manufacturer’s manuals and copies of all other Technical
Information included in the Purchased Assets constitute all such items in the
possession of CSSS and required to permit CSSS to carry on the Business in
substantially the same manner as the Business was conducted by under the
ownership of the Shareholders.
 
4.19                      Depositary Accounts, Etc.  Schedule 4.19 sets forth a
list of (a) all banks, trust companies, savings and loan associations, and
brokerage or other firms at which CSSS has depository accounts or have issued
bank guarantees, bills of exchange, letters of credit or banker’s acceptances
for the account of CSSS, and (b) all credit card and similar accounts on which
CSSS may be liable and the names of the persons holding such cards or authorized
to use such accounts.
 
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4.20                      Insurance.  Schedule 4.20 sets forth a list of all
insurance policies held by or on behalf of CSSS as of the date hereof and of all
public liability insurance and errors and omission policies held by or on behalf
of CSSS for the past three (3) years, copies of which have been supplied to
Buyer.  Such policies are sufficient in all respects for compliance by CSSS with
all requirements of law and with the requirements of all of the Contracts, and,
except as noted on Schedule 4.20, CSSS has not received any notice of actual or
proposed cancellation or of reduction in coverage of, or of any increase in
premium under, such policies of insurance, and to the best of CSSS’s knowledge,
there are no retrospective or audit premium charges due under any insurance
policies now or formerly in effect with respect to CSSS.
 
4.21                      Compliance with Laws; Litigation.  CSSS has been, and
is, operating the Business in compliance with the requirements of all applicable
laws regarding such operations.  Except as noted in Schedule 4.21, CSSS is not
engaged in, or a party to, or threatened with, any Actions and after due
inquiry, CSSS does not know of any basis for any such Actions.  There are no
outstanding orders, rulings, decrees, judgments, stipulations or proceedings to
which CSSS is a party or by which CSSS is bound, by or with any court,
arbitrator or administrative agency.
 
4.22                      Absence of Sensitive Payments.  CSSS has not made any
contributions, payments or gifts to or for the private use of any governmental
official, governmental employee or governmental agent in any amount where either
the payment or the purpose in making such contribution, payment or gift is
illegal under the laws of the United States or any other jurisdiction; CSSS has
not established or maintained any unrecorded fund or asset for any purpose or
made any false or artificial entries on its books; and CSSS has not made any
payments to any Person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the document
supporting the payment.
 
4.23                      Environmental Matters.  Except as noted in Schedule
4.23, CSSS has conducted all activities of the Business in compliance with, and
all properties owned, leased or operated by CSSS in connection with the Business
comply with, all Environmental Laws.  Except as noted in Schedule 4.23, no
facts, events or conditions relating to the facilities, properties or operations
of the Business will prevent, hinder or limit continued compliance with any
Environmental Laws.
 
4.24                      Benefit Plans and Employment Arrangements.
 
(a)        Schedule 4.24(a) sets forth a true and correct list of (i) the name,
current annual compensation rate (including bonus and commissions), title,
current base salary rate, accrued bonuses, accrued sick leave, accrued severance
pay and accrued vacation benefits for each present employee of the Business;
(ii) each collective bargaining, union or other employee organization agreement;
(iii) each employment, advisory or consulting agreement; (iv) each employee
confidentiality or other agreement protecting proprietary processes, formulae or
information; (v) each corporation or other trade or business which is an ERISA
Affiliate; and (vi) each Plan.  Schedule 4.24(a) identifies which Plans, if any,
are (i) defined benefit pension plans intended to be qualified under Section
401(a) of the Code, (ii) defined contribution plans intended to be qualified
under Section 401(a) of the Code, (iii) Multiemployer Plans, (iv) any other Plan
(including but not limited to any such program, contract or arrangement
contained in an employment, advisory or consulting agreement), which provides
benefits of any kind after termination of employment, such as, but not limited
to, severance pay, continuation pay, termination pay or deferred compensation,
(v) “employee welfare benefit plans” within the meaning of ERISA, and (vi) not
“employee welfare benefit plans” within the meaning of ERISA.
 
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(b)        With respect to each Plan, CSSS has delivered to Buyer true, correct
and complete copies of all current written documents setting forth the terms and
conditions of such Plan (or a written summary of such terms in the case of an
unwritten Plan) and, in the case of each Plan subject to ERISA, copies of the
plan document, the most current summary plan description and any modifications
thereto, the most recently filed IRS Form 5500 (including attachments) and the
most recent actuarial valuation and report, as applicable, and other material
related documents of such Plan such as insurance contracts.
 
(c)        The acquisition by Buyer of the Purchased Assets and the employment
of the Hired Employees by Buyer will not, directly or indirectly, give rise to
any withdrawal liability or potential withdrawal liability on the part of Buyer
with respect to any Multiemployer Plan in which CSSS or any ERISA Affiliate
participates or to which CSSS or any ERISA Affiliate has or has had any
obligation to contribute.  Except as noted in Schedule 4.24, CSSS has no
unfulfilled obligation to contribute to any Multiemployer Plan or collectively
bargained welfare plan.  Neither CSSS nor any ERISA Affiliate has incurred any
liability which arises from either a complete or partial withdrawal (as defined
in Section 4203 or 4205 of ERISA, respectively) from any Multiemployer Plan that
has not been discharged and neither CSSS nor any ERISA Affiliate has incurred a
decline in contributions to a Multiemployer Plan such that, if the current rate
of contributions continues, a 70% or greater decline in contributions will occur
within the next three plan years.
 
(d)        Except as noted in Schedule 4.24, neither CSSS nor any ERISA
Affiliate maintains or contributes to, or has ever maintained or had an
obligation to contribute to, a Plan subject to Title IV of ERISA or to the
minimum funding requirements or standards of Section 412 of the Code or Section
302 of ERISA.  All liabilities of CSSS and of each ERISA Affiliate with respect
to each Plan and to each Multiemployer Plan have been fully paid.  The assets of
each Plan subject to Title IV of ERISA are sufficient to fund all benefit
liabilities (within the meaning of Section 4001(a)(16) of ERISA) and there are
no unfunded vested benefits under any Multiemployer Plan allocable to CSSS or
any ERISA Affiliate.  There does not exist any condition, there has not occurred
any event, and there has not been any omission, with respect to the sponsorship,
funding or administration of any Plan, which has or could result in a Lien upon
or claim with respect to any of CSSS, the Purchased Assets, or Buyer’s being
liable for any contribution, withdrawal liability, benefit, claim, settlement,
Tax, penalty or payment of any nature.  All contributions required to be made
under the terms of any Plan have been timely made in accordance with applicable
law, including without limitation, Department of Labor Reg. §2510.3-102.
 
(e)        Except as noted in Schedule 4.24(e), each group health plan that
provides health coverage to any present or former employee of the Business has
operated in compliance with all requirements of Sections 601 through 608 of
ERISA and/or Section 4980B of the Code, relating to the continuation of coverage
under certain circumstances in which coverage would otherwise cease.  Schedule
4.24(e) sets forth a true and complete list of all current employees, and former
employees since March 1, 2009, of the Business and their respective
beneficiaries who are receiving or who are eligible to elect to receive such
continuation coverage under such group health plans pursuant to such provisions
of ERISA and the Code.  Each group health plan that is subject to the
requirements of the Health Insurance Portability and Accountability Act,
including, without limitation, the privacy and security provisions thereof, has
been operated in compliance therewith.
 
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(f)         Each Plan has at all times been administered in accordance with its
terms, all applicable provisions of ERISA (including the “fiduciary
responsibility” and “prohibited transaction” rules thereof), the Code and other
applicable laws, and each Plan intended to be a qualified plan under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service which has not been revoked and has been timely amended
to comply with all changes in law that have become effective with respect to the
Plan since the effective date of its most recent determination letter.  All
applicable requirements under ERISA or the Code as to the filing of reports,
documents and notices regarding the Plans with the Department of Labor, the
Internal Revenue Service and the Pension Benefit Guaranty Corporation and the
furnishing of such reports, documents or notices to participants and
beneficiaries on or prior to the date hereof have been complied with.  There are
no active suits, governmental investigations or proceedings pending or
threatened against any Plan or against any fiduciary thereof respecting the
fiduciary’s duties to the Plan or any trust under the Plan.  There is no action
or claim (other than routine claims for benefits made in the ordinary course of
Plan administration) pending or, to the knowledge of CSSS, threatened against or
with respect to any Plan, and no facts exist which could give rise to any such
action or claim.
 
(g)        Except as noted in Schedule 4.24, CSSS has not carried on discussions
regarding organization with any labor union and there has not been any strike,
work stoppage, labor dispute or other labor trouble relating to employees of the
Business, and there are no significant threats of work stoppage or labor trouble
by employees of the Business.
 
(h)        None of the Plans that are welfare benefit plans within the meaning
of §3(1) of ERISA provides for benefits or coverage for any former or retired
employee or their beneficiaries, except to the extent required by §4980B of the
Code.
 
(i)         All insurance premiums have been paid in full subject only to normal
retrospective adjustments in the ordinary course, with respect to the Plans for
Plan or contract years ending on or before the Closing Date.  All insurance
premiums due or payable with respect to the periods from the end of the most
recent Plan or contract year to and including the Closing Date have been paid or
fully accrued in the Financial Statements.  No such premium is overdue or in a
grace period for late payments.
 
(j)         All expenses and liabilities relating to all of the Plans have been
paid or fully accrued in the Financial Statements and, to the extent required,
in the financial statements of the applicable Plan.
 
(k)        Any fidelity bond required to be obtained under ERISA with respect to
any Plan has been obtained and is in full force and effect.
 
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(l)         Except as noted in Schedule 4.25(l), neither (i) the execution of
this Agreement or the instruments of transfer and other documents and agreements
delivered or to be delivered pursuant hereto by CSSS, (ii) the performance by
CSSS, hereunder or thereunder, nor (iii) the consummation of the transactions
contemplated hereby or thereby, will result in the creation or acceleration of
any obligation or liability to any Plan or to any employee or former employee of
CSSS.
 
(m)       Each Plan or any other arrangement that is a nonqualified deferred
compensation plan subject to the requirements of Section 409A of the Code has
been operated at all times in compliance therewith.
 
4.25                      Obligations to Pay Fees.  Except as noted in Schedule
4.25, CSSS has no liability or obligation to pay any fees or commissions to any
investment banker, broker, finder or agent with respect to the transactions
contemplated by this Agreement for which Buyer could become liable or obligated.
 
4.26                      Completeness of Disclosure.  This Agreement, the
Disclosure Schedules, and all other documents and written information furnished
to Buyer and its representatives by CSSS, the Shareholders or their respective
representatives, taken as a whole, do not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading.  If CSSS or the Shareholders become aware
of any fact or circumstance that would change a representation or warranty of
CSSS or the Shareholders in this Agreement or any other statement made or
document provided to Buyer, the party with such knowledge shall promptly give
notice of such fact or circumstance to Buyer.  None of (a) such notification,
(b) any pre-closing investigation by Buyer or CSSS, the Purchased Assets or the
Business, or (c) the Closing, shall relieve the Shareholders of their
indemnification or other obligations under this Agreement.
 
SECTION 5.  REPRESENTATIONS AND WARRANTIES OF BUYER
 
Buyer represents and warrants that the statements contained in this Section 5
are correct and complete as of the date of this Agreement.
 
5.01                      Organization, Good Standing, and Authority.  Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has full corporate power and authority to
execute this Agreement and the other documents and agreements delivered or to be
delivered pursuant hereto, to perform all the terms and conditions hereof and
thereof to be performed by it, and to consummate the transactions contemplated
hereby and thereby.  This Agreement and the other documents and agreements
delivered or to be delivered by Buyer in connection with this Agreement have
been duly authorized and approved by all necessary and proper corporate action
and constitute, and will constitute the valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms.
 
5.02                      No Violation.  Neither the execution and delivery by
Buyer of this Agreement or the other documents and agreements delivered or to be
delivered pursuant hereto by Buyer and the performance by Buyer hereunder or
thereunder, nor the consummation of the transactions contemplated hereby or
thereby, will violate, conflict with, result in the breach of, or accelerate the
performance required by any of the terms, conditions or provisions of (a) the
Articles of Organization of Buyer, (b) any covenant, agreement or understanding
to which Buyer is a party, or (c) any order, ruling, decree, judgment,
arbitration award or stipulation to which Buyer is subject, or constitute a
default there under.
 
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5.03                      Consents and Approvals of Governmental Authorities and
Others.  No approval or authorization of, filing or registration with, or
notification to, any Governmental Authority is required in connection with the
execution and delivery of this Agreement by Buyer or the performance of its
obligations hereunder or the consummation of the transactions contemplated
hereby.  No consent, approval or authorization of any Person is required in
connection with the execution or delivery of this Agreement by Buyer, the
purchase by Buyer of the Business and the Purchased Assets, or the performance
by Buyer of any other obligation under this Agreement.
 
5.04                      Obligation to Pay Certain Fees.  Neither Buyer nor any
of its officers, members, managers, employees or Affiliates has agreed to pay
any fees or commissions to any investment banker, broker, finder or agent with
respect to the transactions contemplated by this Agreement, except for a
broker’s fee to Vertex Capital Corporation (Barry Epstein, sole owner).   Buyer
represents that CSSS is not liable or obligated to pay the fee of Vertex Capital
Corporation.
 
5.05                      Litigation.  There are no Actions pending, or, to the
knowledge of Buyer, threatened, by any Person or Governmental Authority
challenging the legality, validity or propriety of the transactions contemplated
by this Agreement.
 
5.06                      Completeness of Disclosure.  The representations and
warranties contained in this Section 5 and in the Disclosure Schedules delivered
pursuant hereto do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.
 
SECTION 6.  COVENANTS OF CSSS AND SHAREHOLDERS
 
6.01                      Employees.  CSSS shall permit Buyer to discuss the
possibility of employment with current employees of the Business, and shall not
interfere with or impede Buyer’s right to do so, either directly or indirectly.
 
6.02                      Taxes.  CSSS and the Shareholders shall pay, or cause
to be paid, in a timely manner, all Taxes arising from the sale of the CSSS
Stock and all Taxes due or payable by CSSS for all periods prior to the
Closing..  When determining liability for Taxes for the year 2009, Buyer shall
cause CSSS to calculate Taxes as though Taxes for a stub year commencing on
January 1, 2009 and ending on the Closing Date were due and Shareholders shall
pay Buyer, the amount due for such Taxes computed for such stub year promptly
within fifteen days of receiving Buyer’s calculation.
 
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6.03                      Access to Offices, Officers, Accountants, Etc.  CSSS
will afford to the officers and authorized representatives of Buyer (including
without limitation, attorneys, accountants, insurance brokers, financial
advisors and bankers) access to the offices, officers, properties, Books and
Records of CSSS and the Business, and to the attorneys, accountants and other
representatives of CSSS and with any and all Persons Buyer deems appropriate in
order to enable Buyer to consummate the transactions contemplated hereby, and
will furnish Buyer with such additional financial and operating data and other
information as to the Business and Purchased Assets as Buyer may from time to
time reasonably request.  CSSS will cooperate with Buyer to facilitate Buyer’s
contacting vendors, dealers, customers and such other Persons as Buyer and its
representatives may desire to contact in connection with Buyer’s investigation
of the Business.
 
6.04                      Preservation of Business Organization.  CSSS will
conduct the Business in the ordinary course, in a manner consistent with
applicable federal, state and local regulations, and use its best efforts to
preserve CSSS’s business relationships intact and to preserve the goodwill of
CSSS with its suppliers, customers and others having business relations with it.
 
6.05                      Change of the CSSS’s Name.  Buyer may change or keep
the current corporate name of CSSS at its sole discretion.
 
6.06                      Approval of Certain Transactions.  Except as
specifically contemplated by this Agreement, without the prior written consent
of Buyer, CSSS will not, in the conduct of the Business through the Closing
Date:
 
(a)        incur or agree to incur any liability or obligation or enter into any
agreement or transaction that cannot be cancelled upon not more than thirty days
notice, except for Customer Contracts entered into in the ordinary course of
business for standard rates on the basic form of agreement;
 
(b)        mortgage, pledge or otherwise encumber or convey any similar interest
in, any Purchased Assets or sell, lease or convey any interest in any Purchased
Assets, except in the ordinary course of CSSS’s operation of the Business and
consistent with past practice;
 
(c)        declare or pay any dividends or distribute cash or securities to its
shareholders, make any direct or indirect redemption, purchase or other
acquisition of any of its capital structure, or issue any additional shares of
its capital stock , or permit any transfer, assignment, pledge or other
encumbrance of its capital stock;
 
(d)        make any capital expenditures;
 
(e)        conduct the Business other than in the ordinary course;
 
(f)         waive or release any rights with respect to the Purchased Assets or
the Business;
 
(g)        change its methods of accounting;
 
(h)        adopt or modify or pay any bonus, pension, profit sharing or other
compensation plan or enter into or modify any Contract of, or terms and
conditions of, employment other than: (i) offering and employing persons
pursuant to at will employment relationships and terminating employees in
accordance with the exercise of prudent business judgment and CSSS’s policies
and practices; or
 
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(i)         take any other action (A) which would have a Material Adverse Effect
or result in a material adverse change in the condition (financial or other), of
CSSS, the Business or the Purchased Assets or (B) which, if taken prior to the
date hereof, would constitute a breach of any representation or warranty
contained in Section 4 of this Agreement.
 
6.07                      Exclusive Dealing.  CSSS and the Shareholders will
not:
 
(a)        solicit or initiate discussions or engage in negotiations with any
Person other than Buyer (whether or not such discussions are initiated by CSSS),
with respect to the possible acquisition of, CSSS, the Business or the Purchased
Assets by such Person (whether by merger, purchase of capital stock, purchase of
assets, consolidation or otherwise);
 
(b)        provide any information with respect to CSSS, the Business or the
Purchased Assets to any Person other than Buyer relating to the possible
acquisition of CSSS, the Business or the Purchased Assets by such Person
(whether by merger, purchase of capital stock, purchase of assets, consolidation
or otherwise); or
 
(c)        enter into a transaction with any Person other than Buyer concerning
the possible acquisition of CSSS, the Business or the Purchased Assets by such
Person (whether by merger, purchase of capital stock, purchase of assets,
consolidation or otherwise).
 
6.08                      CSSS’s Insurance.   CSSS shall maintain in full force
and effect comprehensive general liability insurance policies (including without
limitation insurance against errors and omissions) with respect to the Business
and the services provided by CSSS prior to the Closing Date and insuring against
claims now or hereafter made, and shall cause Buyer to be named as an additional
insured on all such policies and shall deliver to Buyer evidence of such
insurance and proof of premium payments within thirty days of the issuance of
each such policy.  CSSS shall cause the insurers issuing such policies to
certify to Buyer that if such insurance be proposed to be cancelled or changed,
such insurer shall promptly notify Buyer and such cancellation or change shall
not be effective as to Buyer for sixty (60) days after receipt by Buyer of such
notice, unless the effect of such change is to extend or increase coverage under
such policy.  Any insurance policies insuring similar risks maintained by Buyer
shall be excess and non-contributory to CSSS’s policies.  CSSS shall obtain from
CSSS’s insurance carriers, and will deliver to Buyer, waivers of the subrogation
rights under CSSS’s insurance policies, together with cross-liability
endorsements to each such policy.
 
6.09                      Update Disclosure Schedules.  Prior to the Closing
Date, CSSS or Shareholders, as appropriate, shall disclose to Buyer any
information contained in the representations and warranties of CSSS and
Shareholders contained in Section 4 or in the Disclosure Schedules delivered
pursuant thereto which is no longer true or complete.  Any such disclosure shall
not be deemed to modify, amend or supplement CSSS’s or the Shareholders’
representations and warranties unless otherwise agreed in writing by Buyer.
 
6.10                      Employees.  Shareholders at Closing shall provide
Buyer with the amount of all accrued  wages, salaries, vacation pay, sick pay
and other sums due employees through the close of business on the Closing Date,
which amount shall be considered to be an account payable for purposes of
estimating the Closing Date Adjustments..
 
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6.11                      Intercompany Accounts.  As of the opening of business
on the Closing Date, CSSS and the Business will have cancelled and forgiven
(without recourse), as between CSSS and any of its Subsidiaries on the one hand
and Shareholders and any other business entity owned by the Shareholders on the
other hand, all amounts with respect to any intercompany accounts or otherwise
(a) due by CSSS or any Subsidiary to the Business or (b) due by CSSS or the
Business to Shareholders or any business entity owned by the Shareholders,
except for those liabilities assumed by Buyer pursuant to this Stock Purchase
Agreement.  Any liability for Taxes arising from such cancellation and
forgiveness of intercompany accounts shall be the responsibility of
Shareholders;  CSSS and Buyer shall have no responsibility for any such Taxes.
 
6.12                      Further Assurances.  From time to time after the
Closing, at Buyer’s request and without further consideration, the Shareholders
will execute and deliver such other and further instruments of conveyance,
assignment and transfer, and take such other action as Buyer may reasonably
request for the more effective conveyance, transfer and enjoyment of the
Purchased Assets and CSSS Stock to CSSS or Buyer, as applicable.  To the extent
that the assignment of confidentiality and noncompetition agreements to CSSS is
not enforceable against the other parties to such agreements, Shareholders will
use its best efforts to enforce such agreements operating in their benefit, if
any, with respect to the Business for CSSS’s and Buyer’s benefit.  Shareholders
will cooperate with Buyer in obtaining execution of any documents by current or
prior employees of CSSS with respect to inventions, invention disclosures and
patent applications for goods or processes invented prior to the Closing
Date.  Shareholders shall promptly forward to Buyer any and all monies received
by Shareholders at any time after Closing with respect to any of CSSS, the
Purchased Assets or any products sold or services provided by CSSS from and
after the Closing Date, or otherwise received for the account, or on behalf, of
CSSS on or after the Closing Date.  All remittances shall be forwarded to Buyer
within two (2) business days after receipt by the Shareholders.  Payments
received by check shall be properly endorsed by Shareholders to Buyer and
promptly delivered to Buyer for deposit.
 
6.13                      Profit Sharing Plan Termination and
Distributions.  CSSS shall take all action necessary to (i) terminate the CSSS,
Inc Profit Sharing Plan (“CSSS Plan”) as of the Closing Date, (ii) permit CSSS
Plan participants to receive distribution of their accrued benefits immediately
after the Closing Date and (iii) permit CSSS Plan participants who become  to
transfer their accrued benefits, including any outstanding CSSS Plan loan by
direct rollover to a 401k plan that Buyer may, but shall not be required to
sponsor.  In addition, prior to the Closing, CSSS shall adopt any plan
amendments and administrative procedures as may be necessary to preclude any
CSSS Plan loan to a participant from going into default by reason of a
participant’s termination of employment with CSSS incident to the transaction
contemplated by this Agreement or by reason of postponement of any direct
transfer.  CSSS shall use its best efforts to cause the CSSS Plan service
providers to facilitate the direct rollovers provided for under this section.
 
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SECTION 7.  COVENANTS OF BUYER
 
7.01                      Confidentiality.  If the transactions provided for
herein are not consummated, unless otherwise required by law, Buyer and its
officers, managers, members, agents and representatives will hold in strict
confidence all information obtained from CSSS and its officers, managers,
members, agents or representatives and will promptly return to CSSS, all
documents obtained from CSSS and its officers, agents or representatives and all
copies of such documents made by Buyer and its officers, managers, members,
agents and representatives, or, alternatively, if requested by CSSS, will
destroy all such documents and copies, as well as all analysis, compilations,
summaries, studies or other documents prepared by Buyer or its officers, agents
and representatives which contain information obtained from CSSS or its
officers, managers, members, agents or representatives; provided, Buyer may
retain any documents obtained from CSSS or prepared by Buyer if Buyer reasonably
determines that litigation may result from the failure to consummate the
transactions and such documents may be relevant in such litigation.
 
7.02                      Hired Employees.  Except as noted in Schedule 7.02, on
the Closing Date, CSSS will not terminate any employees or change the terms and
condition of employment, .  Buyer shall offer a bonus payment of one month
salary to the following employees of CSSS, if the employee remains employed with
CSSS for twelve months and one day from the Closing Date: (i) Joseph Pierce,
(ii) Toni Pierce, (iii) Michael Kallio; and (iv) Allan Baker.  The bonus payment
will be due and payable to the each of the four employees named above 366 days
after the Closing Date, if the employee is still employed by the Buyer on such
date.
 
7.03                      David Keays Employment Agreement.  At Closing CSSS
will enter into an employment agreement with David Keays for a term of from
Closing through September 30, 2009 pursuant to which David Keays will be
employed as Buyer’s day to day operation operations manager, at an annualized
salary of $160,000.  The Keays Employment Agreement shall also provide that
David Keys will serve as a technical advisor to Buyer for the term of October 1,
2009 to December 31, 2009 pursuant to which David Keays provide technical advice
to Buyer at an annualized salary of $82,500.  The Employment Agreement shall be
substantially in the form attached hereto as Exhibit A.
 
SECTION 8.  NON-COMPETITION
 
In order to induce Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, the CSSS and Shareholders hereby covenant as
follows:
 
8.01                      Restriction of Management and Investment.  During the
Restricted Period,  the Shareholders shall not engage, directly or indirectly
(except as a consultant and/or employee of CSSS), as a proprietor, equity
holder, investor (except as an investor holding not more than 1% of the
outstanding capital stock or other securities of a publicly held company),
lender, partner, director, officer, employee, consultant, or representative, or
in any other capacity, in the Business.  The “Restricted Period” commences on
the Closing Date and expires three (3) years thereafter with respect to and
Bradley Keays.  The Restricted Period commences on the Closing Date and expires
on January 1, 2014 with respect to David Keays.
 
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8.02                      Restriction on Solicitation of Employees.  During the
Restricted Period,  the  Shareholders shall not hire, or directly or indirectly
recruit, solicit, induce, or attempt to induce any of the employees or
independent contractors of CSSS to terminate their employment or contractual
relationship with CSSS; and  the Shareholders shall not assist any other Person
to do so, or be a proprietor, equity holder, investor (except as an investor
holding not more than 1% of the capital stock or other securities of a publicly
held company), lender, partner, director, officer, employee, consultant, or
representative of any Person who does or attempts to do so.
 
8.03                      Restrictions on Solicitations of Customers.  During
the Restricted Period,  the Shareholders shall not directly or indirectly
solicit, divert, take away, or attempt to divert or take away, from CSSS, Buyer
or any of its Affiliates any of the business or patronage of any of their
respective customers, clients, accounts, vendors, or suppliers, and  the
Shareholders shall not assist any other Person to do so, or be a proprietor,
equity holder, investor (except as an investor holding not more than 1% of the
capital stock or other securities of a publicly held company), lender, partner,
director, officer, employee, consultant, or representative of any Person who
does or attempts to do so.
 
8.04                      Confidential Information.  During the Restricted
Period, the Shareholders shall not divulge or disclose Confidential Information
to third parties.  Confidential Information is the prospect lists, employee
names and addresses, documents containing the names or addresses of existing or
potential customers of the Business, the design of and operating code of
software, information regarding CSSS’s financial condition or business plans,
the methods by which the CSSS served its customers or conducted its operations,
as well as any other operating procedures of CSSS or the
Business.  Notwithstanding the foregoing, Confidential Information does not
include information which is or becomes generally known to the public or others
in the industry of CSSS through no breach by the Shareholders of this Section
8.04.   Shareholders agrees to maintain the confidentiality of the Confidential
Information and further agrees that they will not, directly or indirectly, use
or disclose Confidential Information to any natural or legal person, other than
authorized employees or agents of the Buyer, during the Restricted Term.  After
Closing, all Confidential Information and all correspondence, reports, charts,
products, records, designs, patents, patent applications, plans, manuals, vendor
lists, memoranda, advertising materials, lists and other data or property
produced by CSSS or the Business shall be and shall remain the property of CSSS,
and shall be delivered, together with any and all copies thereof, promptly to
Buyer at Closing by the Shareholders.
 
8.05                      Equitable Relief.  The  Shareholders hereby
acknowledge that any breach by any of them of their obligations under this
Section 8 would cause substantial and irreparable damage to CSSS, Buyer and
their Affiliates; and that money damages would be an inadequate remedy
therefore, and accordingly, acknowledge and agree that each Buyer, CSSS or any
Affiliate shall be entitled to an injunction, specific performance, and/or other
equitable relief to prevent the breach of such obligations (in addition to all
other rights and remedies to which such party may be entitled in respect of any
such breach).

 
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8.06                      Enforceability.  In the event that a court of
competent jurisdiction determines that any of the provisions of this Section 8
would be unenforceable as written because they cover too extensive a geographic
area, too broad a range of activities, or too long a period of time, or
otherwise, then such provisions shall automatically be modified to cover the
maximum geographic area, range of activities, and period of time as may be
enforceable, and in addition, such court or arbitrators are hereby expressly
authorized so to modify this Agreement and to enforce it as so modified.  No
invalidity or enforceability of any section of this Agreement or any portion
thereof shall affect the validity or enforceability of any other section or of
the remainder of such section.
 
SECTION 9.  CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
 
The obligation of Buyer to acquire the CSSS Stock, pay the Purchase Price and
assume the Assumed Liabilities is subject to the satisfaction or waiver in
writing by the Buyer, on or prior to the Closing Date, of each of the following
express conditions precedent:
 
9.01                      Authorization.  All corporate and other actions
necessary to authorize and effectuate the consummation of the transactions
contemplated hereby by CSSS and Shareholders shall have been duly taken prior to
the Closing, and Shareholders shall have delivered to Buyer a certificate to
that effect with respect to Shareholders.
 
9.02                      Representations and Warranties.  The representations
and warranties of CSSS and the Shareholders made in or pursuant to this
Agreement (without giving any effect to the modifications to the Disclosure
Schedules contemplated in Section 6.09) shall be true and correct on and as of
the Closing Date (i) in all respects with regard to representations and
warranties limited by materiality qualifications or by reference to Material
Adverse Effect, and (ii) in all material respects with regard to all other
representations and warranties, with the same effect as though all such
representations and warranties had been made on and as of such date (except for
representations and warranties that expressly relate to a specified date, which
need be true and correct only as of the specified date), and there shall have
been delivered to Buyer a certificate to that effect, dated the Closing Date,
signed by the Shareholders and a duly authorized officer of CSSS.
 
9.03                      Performance of Obligations.  Each and all of the
covenants and agreements of CSSS and the Shareholders to be performed or
complied with pursuant to this Agreement on or prior to the Closing Date shall
have been duly performed and complied with or duly waived and there shall have
been delivered to Buyer a certificate to that effect, dated the Closing Date,
signed by the Shareholders and a duly authorized officer of CSSS.
 
9.04                      Due Diligence Investigation,  Lease Space, California
Alarm Company License and Certain other Buyer Approvals.  Each and all the
following items are satisfied or waived by Buyer.
 
(a)           The results of Buyer’s due diligence investigation shall have been
satisfactory to Buyer.
 
(b)           CSSS shall have entered into lease by the Closing Date with
Granite El Camino, LLC allowing occupancy after July 31, 2009 for the second
floor of 401 West Lincoln Avenue, Anaheim, California having 4,977 square feet
of space and for unit 252 at 451 West Lincoln Avenue, Anaheim, California having
approximately 1,100 square feet space, for a rental rate, rental period and
other terms and conditions acceptable to Buyer, in Buyer’s sole
discretion.  Granite El Camino, LLC shall consent to Buyer’s purchase of the
CSSS Stock.

 
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(c)           CSSS shall have a duly issued Alarm Company License from the State
of California which allows the CSSS to legally operate the Business, after
Closing when Buyer owns the capital stock of CSSS.
 
(d)           J.P. Morgan Chase Bank, Buyer’s lender, shall have consented to
Buyer consummating the transactions set forth in this Agreement.
 
9.05                      Instruments of Conveyance, Etc.  Shareholders shall
have executed and delivered such assignments of the CSSS Stock and other
instruments of transfer and conveyance,  as shall be reasonably required by
Buyer for the transfer to the Buyer of all of the CSSS Stock free and clear of
any Liens   and shall have delivered, with such instruments and documents,
financing statement releases or termination statements with respect to any
security interests constituting Liens on the Purchased Assets  and CSSS
Stock.  The Shareholders shall at Closing, deliver to Buyer the written consent
to this transactions set forth in this Stock Purchase Agreement of each spouse
of the Shareholders.  The spousal consent shall be in a form acceptable to
Buyer.
 
9.06                      Delivery of Physical Possession.  CSSS shall own at
Closing and have physical possession of all Equipment, Inventory, Technical
Information and Tangible Purchased Assets and any tangible evidence of all
Intellectual Property, Open Orders and Accounts Receivable.
 
9.07                      Opinion of Counsel.  Buyer shall have been provided
with an opinion of Shareholder’s counsel in a form satisfactory to Buyer in its
reasonable discretion.
 
9.08                      Required Consents.  CSSS shall have obtained all
consents and approvals of all Persons and all Governmental Authorities required
for the transactions contemplated hereby.
 
9.09                      Litigation.  No order of any court or administrative
agency shall be in effect which restrains or prohibits the transactions
contemplated hereby and there shall not have been threatened, nor shall there be
pending, any action or proceeding by or before any court or governmental agency
or other regulatory or administrative agency or commission (a) challenging any
of the transactions contemplated by this Agreement; (b) seeking monetary relief
by reason of the consummation of such transactions; or (c) which would adversely
affect the Purchased Assets or the Business following the Closing Date.
 
9.10                      Governmental Action; Damage to Property.  There shall
not have occurred any (a) seizure by any Governmental Authority of all or a
portion of the Purchased Assets, or (b) damage, destruction or other impairment
of or to all or a portion of the Purchased Assets including, without limitation,
damage, destruction or other impairment caused by theft, fire, any casualty or
the negligence of any Person, including CSSS.

 
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9.11                      UCC-3 Lien Release.  The pay-off statements and UCC-3
termination statements and/or mortgage satisfaction pieces releasing and
terminating any Liens on the Purchased Assets shall have been executed and
delivered.
 
9.12                      Tax Status Letter.  CSSS shall have delivered to Buyer
a tax status letter from the California Department Franchise Tax Board
confirming that as of a date within 30 days the Closing Date, the CSSS shall be
current on all applicable taxes covered by such tax status letter or shall have
paid any outstanding amounts on or before the Closing Date.
 
9.13                      No Adverse Change.  There have been no adverse changes
to the financial condition of CSSS or the Business.
 
SECTION 10.  CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SHAREHOLDERS

The obligation of Shareholders to sell or otherwise transfer the CSSS Stock
hereunder is subject to the satisfaction, or waiver in writing by Shareholders,
on or prior to the Closing Date, of each of the following express conditions
precedent:
 
10.01                      Corporate Action.  All corporate actions necessary to
authorize and effectuate the consummation of the transactions contemplated
hereby by Buyer shall have been duly taken prior to the Closing, and Buyer shall
have delivered to CSSS certificates of duly authorized officers of Buyer to that
effect.
 
10.02                      Representations and Warranties.  The representations
and warranties of Buyer made in or pursuant to this Agreement shall be true and
correct (i) in all respects with regard to representations and warranties
limited by materiality qualifications, and (ii) in all material respects with
regard to all other representations and warranties, on and as of the Closing
Date with the same effect as though all such representations and warranties had
been made on and as of such date (except for representations and warranties that
expressly relate to a specified date, which need be true and correct only as of
the specified date) and there shall have been delivered to Shareholders
certificates to that effect, dated the Closing Date, signed by duly authorized
officers of Buyer.
 
10.03                      Performance of Obligations.  Each and all of the
covenants and agreements of Buyer to be performed or complied with pursuant to
this Agreement on or prior to the Closing Date shall have been duly performed or
complied with or duly waived and there shall have delivered to Shareholders
certificates to such effect, dated the Closing Date, signed by duly authorized
officers of Buyer.
 
10.04                      Payment.  Buyer shall have paid the Purchase Price to
Shareholders in accordance with Section 2.04 of this Agreement.
 
10.05                      Litigation.  No order of any court or administrative
agency shall be in effect which restrains or prohibits the transactions
contemplated hereby, and there shall not have been threatened, nor shall there
be pending, any action or proceeding by or before any court or governmental
agency or other regulatory or administrative agency or commission:  (a)
challenging any of the transactions contemplated by this Stock Purchase
Agreement or (b) seeking monetary relief by reason of the consummation of such
transactions.

 
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SECTION 11.  SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND
COVENANTS
 
All representations and warranties made by , the Shareholders or Buyer as to any
fact or condition existing on or before the Closing Date in this Agreement, in
any Exhibit, Schedule or in any certificate delivered pursuant hereto shall
survive the Closing (i) indefinitely with respect to the representations and
warranties contained in Sections 4.01, 4.02, 4.03, 4.04, 4.09, 4.10, 4.25, 5.01,
5.02 and 5.03, (ii) for the applicable limitations period plus sixty (60) days
with respect to the representations and warranties contained in Section 4.24,
and (iii) for a period of 24 months with respect to all other representations
and warranties; provided, that there shall be no termination of any such
representation or warranty as to which a claim has been asserted in writing
prior to the termination of any such survival period.  The representations and
warranties of CSSS shall terminate and expire at Closing.  The knowledge of CSSS
as to any fact in existence at or before Closing or the non-existence of a fact
in not in existence at or prior to Closing shall not be attributable to Buyer
but shall be attributed to Shareholders.  All representations and warranties
shall be unaffected by any investigation made by or on behalf of Buyer, the
Shareholders or CSSS or by any knowledge obtained as a result thereof or
otherwise.  Except as otherwise expressly provided in this Agreement, all
covenants, agreements, undertakings and indemnities set forth in this Agreement
shall survive indefinitely.
 
SECTION 12.  INDEMNIFICATION
 
12.01                      Indemnity by CSSS and Shareholders.  The indemnity of
CSSS to Buyer set forth in this Section 12.01, applies only in the event Closing
does not occur.  If Closing takes place Buyer may seek indemnity solely from the
Shareholders and CSSS shall not contribute to any indemnity claims asserted
against Shareholders by Buyer.  CSSS and the Shareholders, jointly and
severally, shall defend, indemnify and hold Buyer, its officers, managers,
members, directors, employees, subsidiaries and Affiliates harmless from and
against all Losses arising out of or resulting from:
 
(a)           any breach of any representations and warranties made by either
CSSS or the Shareholders in or pursuant to this Agreement or the failure of such
representations and warranties to be true and correct;
 
(b)           any failure by CSSS or the Shareholders to carry out, perform,
satisfy and discharge any of its covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the other
agreements or documents delivered by CSSS or Shareholders pursuant to this
Agreement;
 
(c)           any infringement of any patent, trademark, copyright and/or unfair
competition rights arising out of CSSS’s use of any Intellectual Property,
Technical Information or Computer Software Assets, or the use or sale by CSSS of
any products or services incorporating or reflecting any Intellectual Property
or Technical Information;

 
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(d)           any Liabilities or Obligations with respect to Taxes relating to
CSSS for all periods  ending before  Closing;
 
(e)           any fees or commissions to any investment banker, broker, finder
or agent claiming by, through or under CSSS or the Shareholders with respect to
the transactions contemplated by this Agreement;
 
(f)           any failure of  the Shareholders to pay and discharge in a timely
fashion any of the Indemnified  Liabilities, as described in Subsection 2.07 of
this Agreement;
 
(g)           any claims asserted by third parties against Buyer relating to the
ownership, occupation and/or operation of the Business, the Purchased Assets or
any other property occupied by CSSS in connection with the Business prior to the
Closing Date, including but not limited to all Liabilities and Obligations
arising out of the acts, omissions, breaches or nonperformance of CSSS with
respect to the Contracts, Leases and Open Orders at or prior to the Closing
Date, regardless of whether such liability or obligation is claimed, known or
asserted prior to or after the Closing Date; and
 
(h)           any suit, action or other proceeding brought by any Person or
Governmental Authority asserting any of the matters referred to in this Section
12.01.
 
12.02                      Indemnity by Buyer.  Buyer shall defend, indemnify
and hold Shareholders harmless from and against all Losses arising out of or
resulting from:
 
(a)           any breach of any representations and warranties made by Buyer in
or pursuant to this Agreement or the failure of such representations and
warranties to be true and correct;
 
(b)           any failure by Buyer to carry out, perform, satisfy and discharge
any of its respective covenants, agreements, undertakings, liabilities or
obligations under this Agreement or any of the other agreements or documents
delivered by Buyer pursuant to this Agreement;
 
(c)           the failure by Buyer to pay, discharge or perform in a timely
fashion any Assumed Liabilities;
 
(d)           any claims asserted by third parties against Shareholders relating
to the ownership, occupation or operation of the Business or the Purchased
Assets by Buyer after the Closing Date;
 
(e)           any fees or commissions to any investment banker, broker, finder
or agent claiming by, through or under Buyer with respect to the transactions
contemplated by this Agreement; and
 
(f)           any suit, action, or other proceeding brought by any Person or
Governmental Authority asserting any of the matters referred to in this Section
12.02.

 
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12.03                      Notice of Claim.  The indemnified party shall
promptly notify the indemnifying party in writing in reasonable detail of any
claim, demand, action or proceeding for which indemnification will be sought
under this Section 12.  If such claim, demand, action or proceeding is a third
party claim, demand, action or proceeding (a “Third Party Claim”), the
indemnifying party will have the right at its expense to assume the defense
thereof using counsel reasonably acceptable to the indemnified party.  The
indemnified party shall have the right to participate, at its own expense, with
respect to any such Third Party Claim.  In connection with any such Third Party
Claim, the parties shall cooperate with each other and provide each other with
access to relevant books and records in their possession.  No such Third Party
Claim shall be settled without the prior written consent of the indemnified
party.  Notwithstanding the foregoing, if the indemnified party determines in
good faith that any Third Party Claim, or the conduct of the defense or
settlement thereof, could have a substantial adverse effect on the indemnified
party’s relationship with any Governmental Authority or important supplier or
customer, or that the indemnified party may have available to it one or more
defenses or counterclaims that are conflicting with one or more of those which
may be available to, or asserted by the indemnifying party in respect of such
Third Party Claim, the indemnified party shall have the right to take over and
assume control of the defense, settlement, negotiations or litigation relating
to such claim, and the indemnifying party shall be responsible for the cost of
such defense.  No such Third Party Claim shall be settled without the prior
written consent of the indemnifying party which consent shall not be
unreasonably withheld, delayed or conditioned.  The party controlling the
defense of any Third Party Claim shall not consent to entry of any judgment or
enter into any settlement that provides for injunctive or other monetary relief
affecting the other party or that does not include as a term thereof the giving
by each claimant to the other parties a complete release from all liabilities
with respect to such claim or litigation.
 
12.04                      Limitations on Amount -  the Shareholders.   the
Shareholders shall have no liability for indemnification or otherwise with
respect to claims under Section 12.01(a):
 
(a)           Until the total of all Losses with respect to such matters exceeds
$25,000, and thereafter for the aggregate amount of all Losses; provided, that
this Section 12.04(a) will not apply to claims under Section 12.01(b) through
(h), or to any breach of any of CSSS’s or the Shareholders’ representations and
warranties of which CSSS or the Shareholders had knowledge at any time prior to
the Closing or any intentional breach by CSSS or the Shareholders of any
covenant or obligation, and CSSS and the Shareholders will be jointly and
severally liable for all Losses with respect to such breaches; and
 
(b)           To the extent that the total amount of indemnification to be paid
jointly and severally by  the Shareholders pursuant to Section 12.01(a) shall
exceed fifty percent (50%) of the Purchase Price; provided that this Section
12.04(b) will not apply to claims under Section 12.01(b) through (h) or to any
breach of any of CSSS’s or the Shareholders’ representations and warranties of
which CSSS or the Shareholders had knowledge at any time prior to the Closing
Date or any intentional breach by CSSS or the Shareholders of any covenant or
obligation, and  the Shareholders will be jointly and severally liable for all
Losses with respect to such breaches.
 
12.05                      Limitations on Amount - Buyer.  Buyer shall have no
liability for indemnification or otherwise with respect to claims under Section
12.02(a):

 
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(a)           Until the total of all Losses with respect to such matters exceeds
$25,000, and thereafter for the aggregate amount of all Losses; provided, that
this Section 12.05(a) will not apply to claims under Section 12.02(b) through
(f) or to any breach of any of Buyer’s representations and warranties of which
Buyer had knowledge at the Closing Date or any intentional breach by Buyer of
any covenant or obligation, and Buyer will be liable for all Losses with respect
to such breaches; and
 
(b)           To the extent that the total amount of indemnification to be paid
by Buyer pursuant to Section 12.02(a) shall exceed fifty percent (50%) of the
Purchase Price; provided, that this Section 12.05(b) will not apply to claims
under Section 12.02(b) through (f) or to any breach of any of Buyer’s
representations and warranties of which Buyer had knowledge at the Closing Date
or any intentional breach by Buyer of any covenant or obligation, and Buyer will
be liable for all Losses with respect to such breaches.
 
12.06                      Qualifications.  Notwithstanding anything to the
contrary in this Agreement, for purposes of the application of the indemnity
provisions in this Section 12, the determination of whether a breach of any
representation, warranty, covenant or obligation in this Agreement has occurred
and the amount of any Losses resulting there from shall be determined without
giving effect to any “Material Adverse Effect” qualification or any other
materiality or similar qualification contained in the representations,
warranties, covenants or obligations herein.
 
12.07                      Termination of Indemnification.
 
(a)           As to Buyer.  The right of Buyer to be indemnified under this
Section 12 shall survive:
 
(i)           as to matters described in Section 12.01(a), for the applicable
period of survival set forth in Section 11 of this Agreement;
 
(ii)          as to the matters described in Section 12.01(b) through (h),
whether or not arising from Third Party Claims, without limitation.
 
(b)           As to Shareholders.  The right of Shareholders to be indemnified
under this Section 12 shall survive:
 
(i)           as to matters described in Section 12.02(a), for the applicable
period of survival set forth in Section 11 of this Agreement; and
 
(ii)          as to the matters described in Section 12.02(b) through (f),
whether or not arising from Third Party Claims, without limitation.
 
(c)           Exceptions.  Notwithstanding subsections (a) and (b) hereof:
 
(i)           any indemnity claim based on fraudulent misrepresentations or
fraudulent material omission or fraudulent breach of warranty shall survive
without any time limitations; and
 
(ii)          any indemnity claim based on any matter which has been described
in a notice to an indemnifying party pursuant to Section 12.03 of this Agreement
prior to the expiration of the applicable time limitation set forth in
subsections (a) and (b) above shall survive until the claim is finally resolved.

 
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12.08                      Set Off.  Buyer may and is hereby authorized at any
time and from time to time to set off and apply against any sum which is due and
payable to Buyer by Shareholders under this Section 12 any sum, liability or
other obligation which may be owed by Buyer to Shareholders under this
Agreement, pending final determination of such matters.  The rights under this
Section 12.08 are in addition to any other rights and remedies which Buyer may
otherwise have.
 
SECTION 13.  TERMINATION AND AMENDMENT
 
13.01                      Termination.  This Agreement may be terminated at any
time on or prior to the Closing Date:
 
(a)          by mutual written agreement of Buyer and the Shareholders;
 
(b)          by Buyer if at any time it determines that the conditions precedent
to its obligations hereunder in Section 9 hereof will not be satisfied prior to
April 30, 2009;
 
(c)          by Shareholders if at any time it determines that the conditions
precedent to its obligations hereunder in Section 10 hereof will not be
satisfied prior to April 30, 2009;
 
(d)          by Buyer if the transactions contemplated hereby have not been
consummated, through no fault or failure of the Buyer, on or before April 30,
2009; or
 
(e)          by Shareholders if such transactions have not been consummated,
through no fault or failure of CSSS or its Shareholders, on or before April 30,
2009.
 
13.02                      Effect of Termination.  If either Buyer or CSSS
terminates this Agreement pursuant to Section 13.01, this Agreement, except for
the provisions of Sections 7.01, 14.03, 14.04, 14.05 and 14.06 shall become void
and have no effect.  Notwithstanding the foregoing, nothing in this Section
13.02 shall relieve any party to this Agreement for breach of any provision of
this Agreement.  If it is judicially determined that termination of this
Agreement was the result of any intentional breach of this Agreement, then, in
addition to other remedies at law or in equity for breach of this Agreement, the
party so found to have breached this Agreement intentionally shall indemnify and
hold harmless the other party for its respective costs, fees and expenses of
counsel, accountants, financial advisors or other experts and advisors as well
as fees and expenses incident to negotiation, preparation and execution of this
Stock Purchase Agreement and related documentation.
 
13.03                      Amendment.  No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Buyer, Shareholders and CSSS.  No waiver by any party of any default,
misrepresentation or breach of a warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of a warranty or covenant hereunder or
effect in any way any rights arising by virtue of any prior or subsequent to
such occurrence.
 
 
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SECTION 14.  GENERAL
 
14.01                      Costs and Expenses.  Each of the parties hereto shall
pay, without right of reimbursement from the other, all costs incurred by it
incident to the preparation, execution and delivery of this Agreement and the
performance of its obligations hereunder, whether or not the transactions
contemplated by this Agreement shall be consummated, including, without
limitation, fees and disbursements of legal counsel, accountants, and
consultants employed by the respective parties hereto in connection with the
transactions contemplated by this Agreement.
 
14.02                      Parties in Interest; Assignment; Stockholders
Representative.
 
(a)           This Agreement shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and permitted
assigns.  Except as otherwise expressly provided in this Agreement, this
Agreement is not made for the benefit of any Person not a party hereto, and
nothing in this Agreement will be construed as giving any Person, other than the
parties hereto and their respective successors and permitted assigns, any right,
remedy, or claim under or in respect of this Agreement, or any provision
hereof.  There are no third party beneficiaries to this Agreement except for the
Affiliates of Buyer and the Shareholders, solely in their capacities as such
Shareholders.
 
(b)           This Agreement shall not be assigned by Buyer, CSSS or the
Shareholders without the prior written consent of the other party; provided,
that Buyer shall have the right to assign all or any portion of its rights and
obligations under this Agreement to an Affiliate of Buyer without the CSSS’s or
the Shareholders’ consent (including the right to receive title to the CSSS
Stock).  Any such assignment shall not release Buyer from its obligations
herein, including its obligations with respect to the Assumed Liabilities.
 
(c)           CSSS and the Shareholders hereby irrevocably make, constitute,
designate and appoint David Keays as their agent (the “Shareholders
Representative”), and authorize and empower him to fulfill the role of
Shareholders Representative hereunder, and under any and all other documents or
instruments delivered in connection herewith.  In the event of the death,
resignation, unavailability or incapacity of Bradley Keays shall act as the
successor Shareholders Representative.  In the event of death, resignation,
unavailability or incapacity of any successor Shareholders Representative, the
successor shall be appointed within thirty (30) days of such death, resignation,
unavailability, or incapacity by the legal representatives of the Shareholders,
whose choice shall be evidenced in writing and delivered to Buyer and shall be
final and binding upon  all of the Shareholders.  The decisions and actions of
any successor Shareholders Representative shall be, for all purposes, those of
the Shareholders Representative as if originally named herein.  The death or
incapacity of any Shareholders shall not terminate the authority and agency of
the Shareholders Representative with respect to such deceased or incapacitated
Shareholder.

 
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(d)           The Shareholders Representative is hereby fully authorized by  the
Shareholders for them and in their names (i) to receive all notices and other
communications directed to  the Shareholders under this Agreement and any and
all other documents or instruments delivered in connection herewith, and to take
any action (or to determine to take no action) with respect thereto as he may
deem appropriate as effectively as the Shareholders and CSSS could act
themselves including, without limitation, the settlement or compromise of any
dispute or controversy and (ii) to amend, modify or waive any of the provisions
of this Stock Purchase Agreement and any and all other documents or instruments
delivered in connection herewith.  The Shareholders Representative shall have
the sole and exclusive power to act on behalf of the   Shareholders under this
Agreement and any and all other documents or instruments delivered in connection
herewith, and any and all actions or decisions of the Shareholders
Representative shall be binding upon and enforceable against the Shareholders.
 
14.03                      Confidentiality.  Each party to this Agreement shall
take all reasonable precautions to maintain the confidentiality of the
negotiation or existence of this Agreement, the identity of the parties hereto
and any nonpublic information concerning the other parties or their Subsidiaries
or Affiliates provided to or discovered by any of them or their respective
representatives and shall not disclose any of the above information to anyone
other than (a) those people directly involved in the investigation and
negotiations pertaining to the transactions contemplated by this Agreement,
including without limitation, attorneys, accountants and similar
representatives, (b) such lenders or investors as may be necessary to finance
the transactions contemplated hereby,  (c) such Persons or Governmental
Authorities whose consents or approvals may be necessary or to whom notice needs
to be given to permit consummation of the transactions contemplated hereby, and
(d) as required by the Securities and Exchange Act of 1934, as amended and the
rules and regulation issued there under.
 
14.04                      Public Statements.  No party to this Agreement shall,
without the prior written consent of the other parties hereto, make or cause to
be made any press release or other public statement or announcement that
directly or indirectly discloses the transactions contemplated by this
Agreement; except that Buyer is authorized to file press release and a Form 8-K
under the Securities Exchange Act of 1934, as amended, if legally required.
 
14.05                      Choice of Law.  This Agreement shall be governed by,
construed, interpreted and the rights of the parties determined in accordance
with the laws, including equitable principles but without regard to principles
of conflict of laws, of the State of California.
 
14.06                      Dispute Resolution.  In the event that there shall be
any dispute arising out of or in any way relating to this Agreement, the breach,
termination, or validity thereof, or the transactions contemplated hereby, the
parties covenant and agree as follows:
 
(a)           The parties shall first use reasonable efforts to resolve such
dispute among them, and failing to achieve any resolution within thirty (30)
days of the initiation of this dispute resolution process, the parties shall
submit the dispute for mediation under the commercial mediation rules of the
American Arbitration Association (“AAA”) in Los Angeles, California.  The
parties shall select the mediator by mutual agreement; provided however, if the
parties fail to agree upon a mediator within thirty (30) days of submission of
the dispute for mediation, they shall proceed with selection of a mediator
utilizing AAA’s services and procedures for selection of a mediator.  The
mediator shall be neutral, disinterested, unbiased and independent of the
parties and others having an interest in the outcome.  Each party will bear its
own cost of mediation; provided, however, the fees and costs of the mediator
will be borne equally by Buyer and  and the Shareholders.  In the event that any
party has substantial need for information in the possession of another party in
order to prepare for the mediation, the parties shall attempt in good faith to
agree on procedures for the expeditious exchange of information.  The mediator
shall resolve any disputes as to what discovery may be had.  The parties hereby
acknowledge and agree that such mediation shall be deemed to be in the nature of
settlement discussions and that neither the fact that such discussions took
place, nor any statement or conduct of any participant in such discussions shall
be admissible into evidence in any subsequent litigation or arbitration or other
dispute resolution proceeding involving the parties, and they shall be treated
as non-discoverable, confidential and privileged communications by the parties
and the mediator.  It is further understood and agreed that any disclosure in
any form, including oral, by any Person participating in such mediations shall
not operate as a waiver of any privilege, including work product or
attorney-client privilege, applicable to the subject matter thereof.

 
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(b)           If the parties are unable to resolve such dispute among themselves
or through mediation, such dispute shall be submitted to binding arbitration in
Los Angeles, California, under the auspices of the AAA and pursuant to its
Commercial Arbitration Rules as then in effect, to the extent such rules are not
inconsistent with this Section 14.06, or such other procedures as the Parties
may agree to at the time.  The arbitration shall be conducted before a panel of
three arbitrators who shall be selected by mutual agreement of the parties.  If
the parties fail to select the arbitrators within forty (40) days after the
commencement of the arbitration, then the arbitrators shall be selected in
accordance with the rules of the AAA.  All ex parte communications between a
party and the arbitrators shall be prohibited and the arbitrators shall serve in
an impartial and neutral capacity.  Any award issued as a result of such
arbitration shall be final and binding between the parties and shall be
enforceable by any court having jurisdiction over the party against whom
enforcement is sought.  A ruling by the arbitrators shall be
non-appealable.  The parties agree to abide by and perform any award rendered by
the arbitrators.  Either the Shareholders or the Buyer may cause an arbitration
proceeding to commence by giving the other party notice in writing of such
arbitration, and the date of such notice shall be the date of the commencement
of the arbitration for the purposes of the third sentence of this
subsection.  In rendering their award, the arbitrators shall interpret this
Agreement and determine the rights and obligations of the parties in accordance
with the laws of the State of California, without regard to conflict of law
principles.  The arbitrators shall not have the authority to award, and no party
shall have the right to recover, punitive damages, exemplary damages, multiple
damages, treble damages, or any other damages aside from actual damages, and any
purported award of punitive damages, exemplary damages, multiple damages, treble
damages, or damages aside from actual damages shall be beyond the arbitrators’
authority, void, and unenforceable.  In addition, the arbitrators are not
authorized to consider or award attorneys’ fees or costs of the
arbitration.  All costs and fees of the arbitrators shall be borne by
the  Shareholders, and the Buyer equally.  Except as provided in the preceding
sentence, each Party shall bear its own costs, expenses, and fees, including the
fees and expenses of counsel and expert witnesses.
 
(c)           The procedures specified in this Section shall be the sole and
exclusive procedures for the resolution of disputes between the parties arising
out of or relating to this Stock Purchase Agreement, the breach, termination, or
validity thereof, the transactions contemplated hereby; provided, however, that
(1) any party may without prejudice and in its sole discretion seek injunctive
or other equitable remedies in order to prevent breaches of this Stock Purchase
Agreement, enforce specifically this Stock Purchase Agreement and the terms and
provisions hereof, maintain the status quo, or aid the jurisdiction of the
arbitrators until an arbitration award is rendered or the controversy is
otherwise resolved, (2) this Section 14.06 shall not apply to claims for
violation of Sections 8 or 14.03 or as may be necessary to protect proprietary
information.  Except as otherwise provided in this Agreement, no action may be
brought in any court of law and EACH OF THE PARTIES WAIVES ANY RIGHTS THAT IT
MAY HAVE TO BRING A CAUSE OF ACTION IN ANY COURT OR IN ANY PROCEEDING INVOLVING
A JURY TO THE MAXIMUM EXTENT PERMITTED BY LAW.

 
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14.07                      Notices.  Any notice, request, consent, waiver or
other communication required or permitted to be given hereunder shall be
effective only if in writing and shall be deemed sufficiently given only if
delivered in person or sent by telecopy, electronic mail (followed by hard
copy), by a nationally recognized overnight courier or by certified or
registered mail, postage prepaid, return receipt requested, addressed as
follows:
 
If to CSSS, prior to Closing:
 
David Keays, President
CSSS, Inc.
9 Rodeo
Foothill Ranch, CA 92610

If to Shareholders:
 
David Keays
9 Rodeo
Foothill Ranch, CA. 92610

Bradley Keays
2711 N. Sepulveda
No. 292
Manhattan Beach, CA 90266

If to Buyer and CSSS after Closing:
 
Dennis Raefield
1530 No. Main ST #230
Walnut Creek, CA 94596
Fax:  (925) 933-2730
 
with a copy to:
 
Robert Kramer
240 Gibraltar Road
Suite 220
Horsham, Pennsylvania 19044
Fax:  (215) 672-8900

 
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or to such other Person or address as either such party may have specified in a
notice duly given by the sender as provided herein.  Such notice or
communication shall be deemed to have been given as of the date so personally
delivered, on the business day following delivery by sender to such an overnight
courier, three business days after mailing or when receipt is confirmed if
delivered by telecopy or e-mail.
 
14.08                      Entire Agreement.  This Stock Purchase Agreement
(including the Disclosure Schedules and Exhibits attached hereto) and the
documents referred to herein as having been entered into by any of the parties
hereto or delivered by a party hereto to another party hereto constitute the
entire agreement and understanding of the parties relating to the subject matter
hereof and supersede all prior and contemporaneous agreements and
understandings, representations and warranties, whether oral or written,
relating to the subject matter hereof.
 
14.09                      Cumulative Remedies.  The rights and remedies
provided in this Stock Purchase Agreement are cumulative and are not exclusive
of any rights or remedies a party may otherwise have at law or in equity.
 
14.10                      Waiver.  Any failure of CSSS, the Shareholders or
Buyer to comply with any obligation, covenant, agreement or condition contained
herein may be expressly waived in writing by Buyer in the case of any such
failure by the Shareholders in the case of any such failure by Buyer, but such
waiver or failure to insist upon strict compliance shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.  Whenever this
Stock Purchase Agreement requires or permits consent by or on behalf of any
party hereto, such consent shall be given in writing in a manner consistent with
the requirements for a waiver of compliance as set forth in this Section 14.10.
 
14.11                      Severability.  The unenforceability or invalidity of
any Section or subsection or provision of this Stock Purchase Agreement shall
not affect the enforceability or validity of the balance of this Stock Purchase
Agreement.  If any provision of this Stock Purchase Agreement is so broad as to
be unenforceable, such provision shall be interpreted to be only as broad as is
enforceable.
 
14.12                      Headings.  The headings of the Sections and
subsections contained in this Stock Purchase Agreement are for reference
purposes only and shall not in any way affect the meaning, interpretation,
enforceability or validity of this Stock Purchase Agreement.
 
14.13                      Counterparts.  This Stock Purchase Agreement may be
executed in any number of counterparts, each of which so executed will be deemed
to be an original, but all of which together will constitute one and the same
agreement.
 
14.14                      Facsimiles.  Any facsimile signature of any party
hereto or to any other agreement executed in connection herewith shall
constitute a legal, valid and binding execution hereof by such party.

 
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14.15                      Construction.  CSSS, the Shareholders and the Buyer
hereby agree that any rule of law or any legal decision that would require
interpretation of any claimed ambiguities in this Stock Purchase Agreement
against the party that drafted it has no application and is expressly
waived.  Within this Stock Purchase Agreement, the singular shall include the
plural and the plural shall include the singular, and any gender shall include
all other genders, all as the meaning and the context of this Stock Purchase
Agreement shall require.  Section, Exhibit and Disclosure Schedule references
contained in this Stock Purchase Agreement refer to those contained in or
attached to this Stock Purchase Agreement unless otherwise specified.
 
[Signatures appear on next page]

 
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IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to be executed as of the date first above written.
 

 
BUYER
 
Mace Security International,  Inc.
     
By:
/s/ Dennis Raefield
  Name:   Dennis Raefield   Title:     Chief Executive Officer      
CSSS
 
CSSS, Inc.
     
By:
/s/ David Keays
  Name:   David Keays   Title:     President      
SHAREHOLDERS
 
David Keays
 
Bradley Keays
     
/s/ David Keays
 
David Keays
      /s/ Bradley Keays  
Bradley Keays

 
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Schedule I - Definitions
 
“Accounts Receivable” means all accounts receivable of CSSS in existence on the
Closing Date with respect to services fully rendered by CSSS on or before the
Closing Date. .
 
“Action” means any claim, action, suit, formal or informal arbitration or
mediation, inquiry, proceeding or investigation by or before any Governmental
Authority or private authority.
 
“Affiliate” shall mean any Person who controls, is controlled by, or is under
common control with, the designated entity.  Ownership, directly or indirectly,
of 20% or more of the voting stock or other equity interest shall be deemed to
constitute control.
 
“Assumed Liabilities” means the liabilities and obligations of CSSS acknowledged
by Buyer under Section 2.06 of the Agreement, but not including the Indemnified
Liabilities.
 
“AT&T Contract” is defined and has the meaning as set forth in Subsection
2.04(c)(i).
 
“AT&T Holdback” is defined and has the meaning as set forth in Section
2.04(c)(i).
 
“Attrition Rate” means, for any period, the ratio of the following (x) and (y),
expressed as a percentage, (x) the difference between Qualified RMR for the
first month of the period and Qualified RMR for the last month of the period,
divided by (y) Qualified RMR for the first month of the period.
 
“Attrition Reduction” is defined and has the meaning as set forth in Subsection
2.04(c)(v), which amount is twelve (12) times the difference, if any of (i)
CSSS’s Qualified RMR attributable to the Customer Contracts in existence on the
Closing Date, for the month ended April 30, 2009 (“Closing Qualified RMR”); and
(ii) the Qualified RMR of the Business as operated by Buyer and attributable to
the Customer Contracts in existence on the Closing Date, for the month ended
March 31, 2010.
 
“Books and Records” means all books of account and other financial records of
CSSS relating to the Business.
 
“Business” means providing residential and commercial security system alarm
monitoring and/or video monitoring services anywhere in the United States of
America.
 
“Buyer” means Mace Security International, Inc., a Delaware corporation.
 
“Closing” means the act or acts by which the transactions contemplated by the
Agreement are accomplished.
 
“Closing Date” means the date on which the Closing occurs.  Unless the parties
otherwise agree, any references to “after the Closing Date” means any time after
the normal close of business of CSSS on the Closing Date.
 
“Code” means the Internal Revenue Code of 1986, as amended.

 

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“Computer Software Assets” means all Software, data rights, documentation and
associated license, escrow, support and maintenance agreements used in the
conduct of the Business, including, but not limited to, those listed in Schedule
2.01(h).
 
“Confidential Information” has the meaning given the term in Section 8.04 of
this Agreement.
 
“Consents” means those authorizations, consents, waivers, orders, approvals and
clearances of Governmental Authorities and officials and other Persons which are
necessary for the sale and transfer to Buyer of the Purchased Assets or the
consummation of the transactions contemplated by this Agreement (including the
continuation of Customer Contracts) where the approval of any other Person may
be required.
 
“Contamination” means the uncontained presence of Hazardous Substances at any
property, or arising from any property, which may require remediation or
otherwise give rise to liability under any applicable law.
 
“Contracts” means all contracts, distribution agreements, service agreements,
development agreements, consulting agreements, guarantees, commitments,
instruments and other agreements relating to the acquisition or ownership of any
of the Purchased Assets or the operation of the Business.
 
“Closing Date Adjustments” means the total sum that the Purchase Price is to be
increased or decreased at Closing computed by increasing or decreasing the
Purchase Price as follows based on the following amounts as of the Closing Date:
(i) increasing the Purchase Price by the amount of cash in the deposit accounts
of CSSS, not including cash held as deposits; (ii) reducing the Purchase Price
by revenue collected by CSSS for services not fully rendered by CSSS as of the
Closing Date; (iii) reducing the Purchase Price by the accounts payable of CSSS;
and (iv) reducing the Purchase Price by amounts necessary for CSSS to pay Secure
Global Solutions to complete the installation and training of the monitoring
software system Secure Global Solutions is currently installing for CSSS
 
“Closing Date Adjustment Statement” means the statement that Buyer and
Shareholders execute on the Closing Date, that details the amount of the
estimate of each of the Closing Date Adjustments.
 
“CSSS” means CSSS, Inc., a California Corporation owned by the Shareholders.
 
“CSSS Stock” means 6,750 shares of CSSS common stock owned by David Keays and
1,750 shares of CSSS common stock owned by Bradley Keays, for a total of 8,500
shares of CSSS common stock.
 
“Customer Contracts” means any written contract, agreement or arrangement
(including all amendments thereto) between CSSS (or any party that has validly
assigned its rights and obligations with respect to the provision of Monitoring
Services by CSSS) and its respective customers with respect to the provision of
Monitoring Services.

 

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“Disclosure Schedules” means the disclosure schedules that shall be prepared by
CSSS and the Shareholders and delivered to Buyer and either attached to the
Agreement or separately executed and identified as the Disclosure Schedules to
this Agreement.
 
“General Holdback” is defined and has the meaning as set forth in Subsection
2.04(c)(ii).
 
“Environmental Laws” means all environmental or health and safety statutes,
ordinances, regulations, orders, directives, decrees, permits, governmental
approvals, contractual requirements and requirements of common law concerning
(i) activities relating to the Business, (ii) the Purchased Assets or any other
properties or assets now or previously owned, leased or operated by CSSS in
connection with the Business, (iii) repairs or construction of any improvements,
(iv) handling of any materials, (v) discharges into the air, soil, surface,
water or ground water, and (vi) storage, treatment or disposal of any waste at
or connected with any activity at such properties.
 
“Equipment” means all machinery, equipment, leasehold improvements, owned
trucks, owned automobiles, office furniture, office equipment, computing and
telecommunications equipment (including the software loaded on such equipment
unless separately listed in Schedule 2.01(h)), including leased equipment, and
the two generators which are in the parking lot of the Leased Real Property.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“ERISA Affiliate” means an entity the employees of which are treated as the
employees of the CSSS under Section 414(b), (c), (m) or (o) of the Code.
 
 “GAAP” means generally accepted accounting principles in the United States of
America as established from time to time by the Financial Accounting Standards
Board.
 
“Governmental Authority” means the government of the United States, any state or
political subdivision thereof, any foreign country and any entity exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government.
 
“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
 
“Indemnified Liabilities” means the liabilities and obligations of CSSS
identified under Subsection 2.07 of the Agreement.
 
“Intellectual Property” means all unpatented inventions, invention disclosures,
multinational invention registrations, patents and patent applications
(including, but not limited to, all reissues, divisions, continuations,
continuations in part, extensions and re-examinations) and all rights therein
provided by law, multinational treaties or conventions; all publications and
copyrights; all trade secrets, know how, formulas, and all common law and
registered trademarks, trademark registrations, applications for trademark
registrations, tradenames (including, but not limited to, the names listed in
Schedule 4.03), or any derivation thereof, trade dress, brand names, service
marks and logos, whether owned or licensed, including in each case, without
limitation, those listed in Schedule 2.01(f).

 

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“Inventory” means all raw materials inventory, work in process inventory,
finished goods inventory and spare parts inventory, together with all
installation, testing and monitoring supplies and boxing, labeling and other
shipping materials and, to the extent permitted by law, an assignment of all
related manufacturer or fabricator warranties, guarantees and indemnities.
 
“Keays Employment Agreement” means the Employment Agreement executed between
David Keays and CSSS at Closing.
 
“Keays Holdback” is defined and has the meaning as set forth in Subsection
2.04(c)(iv).
 
“Laws” means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, governmental order, requirement or rule of common law.
 
“Leased Real Property” means parcels of land, together with all rights,
interests and appurtenances therein or thereto, and the buildings, structures,
installations, fixtures and other improvements thereon, leased by CSSS and used
in the Business, as described in Schedule 4.12(b).
 
“Leases” means leases of Equipment and other tangible personal property, leases
of Leased Real Property and other leases of Tangible Purchased Assets or
intangible personal property, in each case whether classified as a capital or
operating lease for accounting purposes.
 
“Liabilities and Obligations” means any direct or indirect indebtedness, lease
obligation, guaranty, endorsement, claim, loss, damage, deficiency, cost
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured, whether arising in contract, tort or otherwise, whether now
existing or hereafter arising.
 
“Liens” means all mortgages, liens, pledges, charges, security interests, title
retention or security agreements, claims, restrictions, leases, options, rights
of first offer or first refusal, confidentiality or secrecy agreements,
noncompetition agreements, defects in title and other encumbrances or rights of
others with respect to any of the Purchased Assets.
 
“Losses” means all claims, damages, losses, liabilities, costs and expenses
(including attorneys’ fees and disbursements and any other legal costs) suffered
or incurred by a party.
 
“Material Adverse Effect” means any circumstance, change in, or effect on, the
Purchased Assets or the Business that, individually or in the aggregate with any
other circumstances, changes in, or effects thereon:  (i) is or could reasonably
be expected to be materially adverse to the Purchased Assets or to the business,
financial condition, assets or Liabilities and Obligations (including contingent
Liabilities and Obligations), customer or supplier relationships, prospects,
value, results of operations or the condition (financial or otherwise) of the
Business; or (ii) could reasonably be expected to materially adversely affect
the ability of CSSS to use the Purchased Assets or operate the Business after
Closing in the manner in which they are currently used or operated by CSSS; or
(iii) could reasonably be expected to increase the  expenses of operating the
Business by ten percent or more or decrease the revenue of the Business after
Closing by ten percent or more from the annual expenses or revenue, as
applicable, currently in existence for the Business as operated by CSSS.

 

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“Material Contracts” means any Contract or series of related Contracts which
involve the expenditure by CSSS of more than $10,000 to perform its obligations
thereunder or to obtain the benefit thereof or which is otherwise material to
the operation of the Business or the use and enjoyment of Purchased Assets,
including, but not limited to, those listed in Schedule 4.15(a).
 
“Monitoring Services” or “Services” means services provided to customers of the
Business for the monitoring of electronic burglar alarms, fire alarms, and
similar security and life safety systems, including without limitation, video
and/or audio monitoring.
 
“Multiemployer Plan” means a “multiemployer plan” within the meaning of Section
3(37(A)) of ERISA.
 
“Open Orders” means all open orders for the connection of Monitoring Services to
end users of electronic burglar alarms, fire alarms and video and/or audio
equipment arising from the Business, together with related purchase orders,
contracts, subcontracts and accounts receivable.
 
“Permits” means all governmental permits, licenses, registrations, orders and
approvals relating to the Business, all of which are listed in Schedule 2.01(l).
 
“Person” shall mean an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture, limited
liability company, or any other entity of whatever nature.
 
“Plan” means any welfare plan as defined by Section 3(1) of ERISA, any pension
plan as defined by Section 3(2) of ERISA, any other retirement, severance,
continuation pay, termination pay, bonus, stock bonus, deferred compensation,
insurance, vacation, personal leave, tuition reimbursement, dependent care
assistance, cafeteria plan or other plan, policy or arrangement providing
employee benefits (whether or not described in ERISA) maintained by or sponsored
by CSSS or an ERISA Affiliate of CSSS to which CSSS or any ERISA Affiliate
contributes or is obligated to contribute.
 
“Product Liability” means Liabilities and Obligations for property damage, death
or personal injury (whether suffered or discovered prior to or after the Closing
Date) arising from, caused by or attributable to, products manufactured, sold or
distributed, or services performed or rendered by CSSS or CSSS’s agents prior to
the Closing Date.
 
“Purchase Price” means the consideration payable for the CSSS Stock under
Section 2.04 of the Agreement and the obligations of the Shareholders under
Section 8 of the Agreement.
 
“Purchased Assets” means all of the assets, properties and rights of every kind
and description, real, personal and mixed, tangible and intangible, wherever
situated, used in the Business as set forth in Section 2.02..
 
“Restricted Period” has the meaning given the term in Section 8.01 of this
Agreement.  The “Restricted Period” commences on the Closing Date and expires
three (3) years thereafter with respect to Bradley Keays.  The Restricted Period
commences on the Closing Date and expires on January 1, 2014 with respect to
David Keays.

 

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“Restrictive Agreements” mean any noncompetition or nonsolicitation agreements
related to the Customer Contracts, regardless of whether such agreements
restrict or benefit CSSS or the Business.
 
“RMR Holdback” is defined and has the meaning as set forth in Subsection
2.04(c)(v).
 
“Qualified RMR” means the total recurring revenue received on accounts of
customers subscribing for Monitoring Services under written, fully executed and
enforceable contracts which shall be calculated as the sum of the following:
 
(i)           the total recurring revenue (net of any telephone communication,
utility company or third-party pass-through charges, assessments or taxes) for a
one-month period recognized under GAAP by CSSS with respect to the accounts of
customers that have no outstanding receivables for Monitoring Services ;
 
(ii)           plus the total recurring revenue (net of any telephone
communication, utility company or third-party pass-through charges, assessments
or taxes) for a one-month period recognized under GAAP by CSSS with respect to
the accounts of customers which had outstanding receivable balances for
Monitoring Services that were ninety (90) days or less past due;
 
(iii)           minus the total recurring revenue (net of any telephone
communication, utility company or third-party pass-through charges, assessments
or taxes) for a one-month period recognized under GAAP by CSSS with respect to
the accounts of such customers as are included in (i) or (ii) above, but which
customers’ contracts have either been cancelled by such customers’ or which such
customers have sent a notice of cancellation, at any time prior to the date of
such calculation.
 
“Software” means all software owned, developed, licensed or used, including (i)
all modifications, enhancements, fixes, updates, upgrades, bypasses and
workarounds, (ii) the source code and object code for any of the foregoing and
(iii) all operating systems, bridgeware, firmware, middleware and utilities.
 
“Subsidiary” means a corporation in which CSSS or any Subsidiary of CSSS owns a
majority of the common stock or has the power to elect a majority of the
directors.
 
“Tangible Purchased Assets” means all tangible properties and assets, whether
real or personal and whether owned or leased, included in the Purchased Assets.
 
“Taxes” mean all income or profits taxes (including, but not limited to, federal
income taxes and state income taxes), estimated taxes, payroll and employee
withholding taxes, unemployment insurance, social security taxes, sales and use
taxes, duties, ad valorem taxes, value added taxes, excise taxes, capital stock
or franchise taxes, gross receipts taxes, business license taxes, occupation
taxes, real and personal property taxes, stamp taxes, environmental taxes,
recordation fees, transfer taxes, workers’ compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges and other
obligations of the same or of a similar nature to any of the foregoing
(including any interest or penalties relating to any of the foregoing), which a
corporation or other entity may be required to pay, withhold or collect, imposed
by any federal, territorial, state, local, or foreign government or any agency
or political subdivision of any such government;

 

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“Technical Information” means all customer, dealer and supplier lists; serial
number records; engineering, testing, manufacturing, design, configuration,
installation and other technical drawings, techniques, specifications and
calculations; research and development information; operating, maintenance and
repair manuals and instruction books; cost and estimating information, cost
records, vendor data and other business records (including without limitation,
sales histories); sales inquiries; consultant’s reports; bills of material, test
data and selected test material samples; advertising and promotional literature,
including reproducible masters and all other commercial, sales, marketing, and
technical data (including, but not limited to, data stored electronically or on
other format, together with rights under any third party licenses necessary to
use such data).
 
“Warranty Claim” means a claim for the repair or replacement of products
manufactured by the Business under unexpired warranties or for credits or price
adjustments for such products, as a result of their failure to perform in
accordance with the warranties made in connection with their sale, whether
express or implied.

 

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AMENDMENT 1 TO
STOCK PURCHASE AGREEMENT
 
This Amendment 1 to Stock Purchase Agreement (“Amendment”) has been executed as
of this 30th day of April 2009 by and among Mace Security International, Inc
(“Buyer”), a Delaware corporation; CSSS, Inc., California corporation (“CSSS”);
David Keays and Bradley Keays,  collectively, David Keays and Bradley Keays are
referred to as (the “Shareholders”).
 
RECITALS:
 
The Buyer, CSSS and the Shareholders are parties to a Stock Purchase Agreement
dated April 30, 2009 (“Agreement”).  The parties hereto have entered into this
Amendment to modify and amend certain of the terms and provisions of the
Agreement.  The terms and provisions of the Agreement are in full force and
effect and are unchanged except as specifically modified and amended by this
Amendment.
 
IN CONSIDERATION, of the mutual covenants, agreements, representations and
warranties set forth herein, and in reliance thereon, intending to be legally
bound, the parties agree as follows.
 
1.           Defined Terms.  The capitalized and certain other terms used in
this Amendment shall have the meanings ascribed to them in Schedule I to the
Agreement, unless otherwise defined in Schedule I to this Amendment.
 
2.           Amendment of Section 2.04(c) of the Agreement.  Section 2.04(c) of
the Agreement is deleted in its entirety and is replaced by Section 2.04(c) set
forth below.

(c)           On the Closing Date, the Purchaser will pay to the Shareholders
the Purchase Price, after the Closing Date Adjustments, less: (i) the $300,000
AT&T Holdback, as defined below; (ii) the $200,000 Inter-Tel Holdback, as
defined below; (iii) the $500,000 General Holdback, as defined below; (iv) the
100,000 Keays Holdback, as defined below; and (v) the RMR Holdback, as defined
below.  The Purchase Price less the AT&T Holdback, the Inter-Tel Holdback, the
General Holdback, the Keays Holdback and the RMR Holdback shall be paid in
immediately available funds (the “Initial Payment”).  The Initial Payment and
all future payments shall be paid and divided between the Shareholders as
follows: (i) seventy eight percent (78%) to David Keays and (ii) twenty two
percent (22%) to Bradley Keays.

(i)          $300,000 of the Purchase Price (“AT&T Holdback”) will be paid to
the Shareholders by Buyer upon either (a) the written release by AT&T or its
legal successor, to CSSS from any and all liability CSSS has under AT&T Service
Order and Addendum to Comprehensive Service Order, between CSSS, Inc. and AT&T
Corp, AT&T MA Reference No. 109699, signed February 15, 2007 and March 3, 2007,
Contract ID 1148971(“AT&T Contract”) or (b) the determination of Buyer, in its
sole discretion, that CSSS has no liability or obligations to AT&T, or its
successors, under the AT&T Contract.  Any and all amount CSSS is obligated to
pay to discharge its obligations under the AT&T Contract, including defense
costs and legal fees, shall reduce the amount of the AT&T Holdback to be paid to
the Shareholders.  The AT&T Holdback will be paid to Shareholders on its due
date along with accrued interest at the rate of two percent per annum from the
date of Closing.

 
 

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(ii)          $200,000 of the Purchase Price (“Inter-Tel Holdback”) will be paid
to the Shareholders by Buyer upon either (a) the written release by Inter-Tel
NetSolutions, or its legal successor, to CSSS from any and all liability CSSS
has under the Dedicated Long Distance Service Agreement Continental United
States dated October 26, 2004, and executed on October 28, 2004 between CSSS,
Inc. and Inter-Tel NetSolutions, or any renewal thereof (“Inter-Tel Contract”)
or (b) the determination of Buyer, in its sole discretion, that CSSS has no
liability or obligations to Inter-Tel NetSolutions or its successors under the
Inter-Tel  Contract.  Any and all amount CSSS is obligated to pay to discharge
its obligations under the Inter-Tel Contract, including defense costs and legal
fees, shall reduce the amount of the Inter-Tel Holdback to be paid to the
Shareholders.  The Inter-Tel Holdback will be paid to Shareholders on its due
date along with accrued interest at the rate of two percent per annum from the
date of Closing.
 
(iii)          $500,000 of the Purchase Price (“General Holdback”) will be paid
to the Shareholders by Buyer on the day that is two years from the Closing Date,
less any amount of damages or costs incurred or suffered by Buyer, including
attorney fees, from the  Shareholders’ breach or default this Stock Purchase
Agreement, including the failure to pay an indemnity claim in accordance with
Section 12 of this Stock Purchase Agreement, or the falsity of any
representation or warranty of Shareholders in this Stock Purchase
Agreement.  The General Holdback will be paid to Shareholders on its due date
along with accrued interest at the rate of two percent per annum from the date
of Closing.

(iv)          Six months from the Closing Date, Buyer will pay to Shareholders
$100,000 of the Purchase Price (“Keays Holdback”), if and only, if David Keays
fully performed the Employment Agreement, attached as Exhibit A to the
Agreement, through the end of the Employment Agreement’s term.  If David Keays
failed to fully perform the Employment Agreement, except due to death or
physical disability, through the end of its term, the Purchase Price shall be
reduced by an amount equal to $100,000 of the Purchase Price.

(v)          On the day that is thirteen months from the Closing Date, Buyer
shall pay to Seller ten percent of the Purchase Price, after the Closing Date
Adjustments (“RMR Holdback”), less the Attrition Reduction, as defined in the
Agreement.   The “Attrition Reduction” shall equal 12 times the difference, if
any, between (a) the Qualified RMR attributable to the Customers Contracts of
CSSS in existence on the Closing Date, less (b) CSSS’s Qualified RMR,
attributable Customer Contracts of CSSS in existence on the Closing Date, for
the month ended twelve months from the Closing Date.  If the Attrition Reduction
is greater than the RMR Holdback, there shall be no payment to Shareholders but
Shareholders shall not be obligated to refund any of the Purchase Price.
 
3.           Entire Agreement.  This Amendment and the Agreement (including the
Disclosure Schedules and Exhibits attached thereto) and the documents referred
to herein and in the Agreement as having been entered into by any of the parties
hereto or delivered by a party hereto to another party hereto constitute the
entire agreement and understanding of the parties relating to the subject matter
hereof and supersede all prior and contemporaneous agreements and
understandings, representations and warranties, whether oral or written,
relating to the subject matter hereof.

 
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
as of the date first above written.
 
BUYER
Mace Security International, Inc.
   
By: 
/s/ Dennis Raefield
Name:  Dennis Raefield
Title:    Chief Executive Officer
   
CSSS
CSSS, Inc.
   
By:
/s/ David Keays
Name:  David Keays
Title:    President
   
SHAREHOLDERS
David Keays
Bradley Keays
 
/s/ David Keays
David Keays
 
/s/ Bradley Keays
Bradley Keays

 
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Schedule I - Definitions
 
 “AT&T Contract” is defined and has the meaning as set forth in Subsection
2.04(c)(i) of this Amendment.
 
“AT&T Holdback” is defined and has the meaning as set forth in Section
2.04(c)(i) of this Amendment.
 
 “General Holdback” is defined and has the meaning as set forth in Subsection
2.04(c)(iii) of this Amendment.
 
“Inter-Tel Contract” is defined and has the meaning as set forth in Section
2.04(c)(ii) of this Amendment.
 
“Inter-Tell Holdback” is defined and has the meaning as set forth in Section
2.04(c)(ii) of this Amendment.
 
“Keays Holdback” is defined and has the meaning as set forth in Subsection
2.04(c)(iv) of this Amendment.
 
 “RMR Holdback” is defined and has the meaning as set forth in Subsection
2.04(c)(v).

 
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