Exhibit 10.11


 


CONSENT, LIMITED WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT AND
CREDIT DOCUMENTS


 


This
CONSENT, LIMITED WAIVER  AND  THIRD
AMENDMENT TO CREDIT AGREEMENT AND CREDIT
DOCUMENTS (this “Amendment”) is dated as of October 20,
2010, by and among ALARM FUNDING, LLC, a Delaware limited liability company
(sometimes referred to herein as “Alarm Funding”), CASTLEROCK SECURITY
HOLDINGS, INC., a Delaware corporation (sometimes referred to herein as “NewCo”,
and together with Alarm Funding, “Borrower”), and CASTLEROCK SECURITY, INC.,
a Delaware corporation (sometimes referred to herein as “CastleRock”,
and together with Alarm Funding and NewCo, the “Credit Parties”),
LENDERS (as defined in the Credit Agreement, as defined below),  and SIEMENS
FIRST CAPITAL COMMERCIAL FINANCE, LLC, a Delaware limited liability
company, as successor in interest to FCC, LLC in its capacity as agent for
Lenders (hereinafter referred to in such capacity as “Agent”).


 


W  I  T 
N  E  S  S  E 
T  H:


 


WHEREAS, reference is made to that certain Credit Agreement,
dated as of May 25, 2007, as amended by that Amendment to Credit Agreement
and Credit Documents, dated as of August 16, 2007 (the “First Amendment”),
as further amended by that Amended and Restated Forbearance Agreement and Amendment
to Credit Agreement, dated as of February 16, 2008 (the “Forbearance
Agreement”), by and among Alarm Funding, the Lenders party thereto, and
Agent (collectively, the “Credit Agreement”);


 


WHEREAS, pursuant to a Sale, Assignment and Servicing Agreement
dated June 30, 2005 (as amended, the “SAI Servicing Agreement”),
Alarm Funding purchased certain security alarm accounts from various third
parties, and Security Associates International, Inc., a Delaware
corporation (“SAI”), agreed to provide the necessary and appropriate
servicing of the alarm accounts;


 


WHEREAS, on July 7, 2008, SA Systems, LLC, a Delaware
limited liability company (“SAS”), acquired substantially all of SAI’s
assets in a foreclosure sale conducted by Cordell Funding LLP, a Florida limited
liability limited partnership (“Cordell”), in its capacity as senior
lender to SAI;


 


WHEREAS, on August 25, 2008, Alarm Funding filed a
complaint and sought a temporary restraining order against SAI, Cordell and
others in the Circuit Court of Cook County, Illinois, seeking to enforce
Alarm Funding’s rights under the SAI Servicing Agreement (the “Litigation”),
and thereafter on September 10, 2008, Alarm Funding, SAI, SAS and Cordell
entered into a settlement agreement (the “Settlement Agreement”) in connection
with the Litigation;


 

















 


WHEREAS, as part of the Settlement Agreement and pursuant to
that certain Asset Purchase and Settlement Agreement, dated as of November 26,
2008, among Alarm Funding, SAS, CastleRock and Cordell (the “CastleRock
Asset Purchase Agreement”), Alarm Funding, CastleRock, SAI, SAS and Cordell
agreed that CastleRock would acquire all of the assets of SAS relating to the
retail monitoring and related services provided with respect to all of the
alarm accounts for which SAS provided services;


 


WHEREAS, as part of the Settlement Agreement and in
accordance with the Asset Purchase Agreement, Alarm Funding entered into that
certain Servicing Agreement with CastleRock dated November 26, 2008,
pursuant to which Alarm Funding engaged CastleRock to provide alarm monitoring
services with respect to the alarm monitoring contracts owned by Alarm Funding;


 


WHEREAS, Borrower has notified Agent and Lenders that it
desires to raise additional equity through one or more public or private
offerings which will occur in 2011 [the “Equity Raise”).


 


WHEREAS, the equity owners of Alarm Funding and CastleRock
desire to create a newly formed entity for the sole purpose of effecting the
Restructure (as defined below);


 


WHEREAS, Alarm Funding has requested that Agent and Lenders
consent to the Restructure,  the Equity
Raise and the Incentive Equity Issuance (as defined below); and


 


WHEREAS, Alarm Funding has requested that Agent and Lenders
amend certain terms of the Credit Agreement and other Credit Documents as
hereinafter provided, and Agent and Lenders are willing to make such modifications, subject to the terms and conditions
of this Amendment.


 


NOW, THEREFORE, the parties hereto, in consideration of
their mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree as follows:


 


1.             Capitalized Terms;
Construction.  All
capitalized terms used and not defined herein shall have the meanings given
them in the Credit Agreement and the rules of construction set forth in Section 1.2
[Construction] of the Credit Agreement shall apply to this Amendment.


 


2.             Consent and Limited Waiver.  Subject to the terms and conditions set forth
in this Amendment,


 


(a)           Agent and Lenders hereby
consent to: (i)  Alarm Funding’s formation of a Subsidiary, CastleRock, in
accordance with the terms of the CastleRock Stockholder Agreement (as
hereinafter defined) in effect prior to the Third Amendment Effective Date (as
hereinafter defined); (ii) Alarm Funding’s ownership in CastleRock in
accordance with the terms of the CastleRock Stockholder Agreement in effect
prior to the Third Amendment Effective Date; 


 


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(iii) the formation
of  NewCo; (iv) the conversion of
the Subordinated Debt into equity in Alarm Funding, and the issuance of
membership interests in Alarm Funding to (a) Whitecap, (b) Offshore I
(as hereinafter defined), (c) Offshore II (as hereinafter defined) and (d) Full
Circle (as hereinafter defined) in connection with such conversion; (v) Alarm
Funding’s contribution of all of its assets to NewCo in exchange for shares in
NewCo, all in accordance with the terms of the Contribution Agreement (as
hereinafter defined); (vi) the contribution of Cordell’s ownership
interests in CastleRock to SAS; (vii) the contribution of Alarm Funding’s
and SAS’ ownership interests in CastleRock to NewCo in exchange for shares in
NewCo in accordance with the Contribution Agreement; (viii) NewCo becoming
a “Borrower”, together with Alarm Funding, under the Credit Agreement and the
Credit Documents, and (ix) the Equity Raise and the Incentive Equity
Issuance (the actions described in clauses (iii), (iv), (v), (vi), (vii) and
(viii) being collectively referred to as the “Restructure”); and


 


(b)           Agent and Lenders hereby
waive Borrower’s non-compliance of (i) Sections 7.1.18 [Single Purpose
Entities] and 7.2.9 [Subsidiaries, Partnerships and Joint Ventures] resulting
from Alarm Funding’s formation of a Subsidiary and Alarm Funding’s ownership of
a 74% ownership interest in CastleRock; (ii) Section 7.1.20 [Servicer
Insolvency] resulting from the insolvency of SAI; and (iii) 7.2.13
[Issuance of Ownership Interests] and 7.2.14 [Changes in Documents] of the
Credit Agreement, such non-compliance in the case of (i) and (iii) resulting
from the Restructure,  the Equity Raise
and the Incentive Equity Issuance.


 


(c)           The Credit Parties represent
and warrant that as of the date of this Amendment, there exist no Events of
Default except for the following: (i) Alarm Funding’s noncompliance with Section 7.1.19
[Alarm Licenses] of the Credit Agreement, (ii) Alarm Funding’s
noncompliance with Section 7.1.21 [Compliance with FCC Mandate] of the
Credit Agreement,  (iii) Alarm
Funding’s noncompliance with Section 7.3.3 [Annual Financial Statements]
of the Credit Agreement with respect to those audited financial statements for
the fiscal years ending December 31, 2007 and December 31, 2008, (iv) Alarm
Funding’s noncompliance with Section 7.2.20 [Maximum Attrition Rate] by
permitting an Annual Attrition Rate for the period ending (A) July 31,
2010 of  39.42%  and (B) September 30, 2010 of
42.8%, in violation of the Annual Attrition Rate of 15% as required in Section 7.2.20
[Maximum Attrition Rate], and by permitting a Quarterly Attrition Rate for the
period ending (Y) July 31, 2010 
of 89.53% and (Z) September 30, 2010 of 63.3%, in violation of
the Quarterly Attrition Rate of 17% as required in Section 7.2.20 [Maximum
Attrition Rate],  (v) Alarm Funding’s
noncompliance with Section 7.2.18 [Senior Funded Debt to EBITDA Ratio] by
permitting the Senior Debt to Tangible Net Worth Ratio for the periods ending June 30
2010 and September 30, 2010 to be in violation of the Senior Debt to
Tangible Net Worth Ratio of 2.0 to 1.0 as required in Section 7.2.18
[Senior Funded Debt to EBITDA Ratio], (vi) Alarm Funding’s noncompliance
with Section 6.1.19 [Senior Funded Debt] prior to the Third Amendment
Effective Date in violation of the Senior Funded Debt to Subordinated Debt
ratio as required in Section 6.1.19 [Senior Funded Debt] and (vii) Borrower’s
failure to 


 


3

















 


pay the Existing Over
Advance (as hereinafter defined) for the period through and including the Third
Amendment Effective Date in violation of Section 4.5.2 [Borrowing Base
Exceeded] (collectively, the “Outstanding Defaults”).  Agent and Lenders hereby waive Borrower’s
non-compliance with the Outstanding Defaults.


 


(d)           Pursuant to Section 7.3.3
[Annual Financial Statements] of the Credit Agreement, Agent hereby consents to
Borrower’s use of RSM McGladrey and Pullen, LLP for the preparation of its
audited financial statements for the fiscal years ending December 31,
2007, December 31, 2008,  December 31,
2009, and December 31, 2010 and agrees that, with respect to the financial
statements for the fiscal year ending December 31, 2007, such financial
statements need only be reviewed by the applicable independent certified public
accounts, rather than audited.


 


3.             Amendment of Section 1
[Certain Definitions] of the Credit Agreement.


 


(a)           The first paragraph of the
definition of “Applicable Margin” set forth in Section 1.1 [Certain
Definitions] of the Credit Agreement is hereby amended and restated to read as
follows:


 


“Applicable Margin shall mean 8.25% per
annum.”


 


(b)           The definitions of the
following defined terms set forth in Section 1.1 [Certain Definitions] of
the Credit Agreement are hereby amended and restated to read as follows:


 


“Annual Fee shall mean (a) prior to the
Third Amendment Effective Date and to but not including the Third Amendment
Effective Date, the fee referred to in Section 2.3 [Annual Fees], and (b) from
and after the Third Amendment Effective Date, the fee referred to in Section 2A.4
[Term Loan Fees].”


 


“Approved Central Stations shall mean (a) any
third party monitoring central  stations
acceptable to Agent in its reasonable discretion as evidenced in writing and (b) CastleRock’s
Illinois central station; provided that each central station has
delivered to Agent a fully-executed Assignment and Modification Agreement.”


 


“Assignment and Modification Agreement shall
mean collectively, (a) the 
Assignment and Modification Agreement by and among Agent, Alarm
Funding  and an Approved Central Station,
substantially in the form of Exhibit 1.1(A)(2) and (b) the  Assignment and Modification Agreement by and
among Agent, NewCo  and CastleRock,
substantially in the form of Exhibit 1.1(A)(3) attached to the
Third Amendment.”


 


“Attrition Rate shall mean the ratio of (a) to
(b), expressed as a percentage, each without duplication:


 


4

















 


(a)           (i)            all RMR that cancelled or failed to renew subsequent
to the initial contract expiration date,


 


(ii)           minus all RMR from Recovered
Accounts for which at least three consecutive monthly payments have been made
for the three months immediately preceding the date of determination,


 


(iii)          plus all RMR with balances more
than 90 days past Due Date minus the previous month’s RMR with balances
more than 90 days past Due Date,


 


(iv)          plus all RMR rate decreases,


 


(b)           the sum of which shall be divided by  all RMR with balances 90 days or less past
Due Date.


 


The “Annual Attrition Rate” shall be calculated as
of the last day of each calendar month for the 12 months then ended and
reported as a monthly average.  The “Quarterly
Attrition Rate” shall be calculated as of the last day of each calendar month
for the 3 months then ended.”


 


“Authorized Officer shall mean those
individuals, designated by written notice to Agent, authorized to execute
notices, reports and other documents on behalf of Alarm Funding, NewCo,
CastleRock and any Pledgor or, as the case may be, under the Credit
Documents.  Such notice may be amended by
the applicable party from time to time by giving written notice of such
amendment to Agent.”


 


“Borrower shall mean, jointly and severally,
Alarm Funding and NewCo. For the avoidance of doubt, all references to “Borrower”
shall be deemed to refer to all of Alarm Funding and NewCo.”


 


“Collateral Assignment of Contracts shall
mean, collectively, (a) the Collateral Assignment of Contracts of Alarm
Funding in the form of Exhibit 1.1(C)(1), and (b) the
Collateral Assignment of Contracts in form of Exhibit 1.1(C)(2) and
(3) attached to the Third Amendment and made a part hereof, executed
by each of CastleRock and NewCo and delivered to Agent for the benefit of
Lenders.”


 


“Credit Documents shall mean this Agreement,
the Collateral Assignment of Contracts, the Assignment and Modification
Agreement, any Note, the Borrower Joinder, the Pledge Agreement, the Security
Agreement, the Guaranty Agreement, the Assignment of Deposit Accounts, the Cash
Collateral Pledge Agreement, the Remaining Proceeds Pledge Agreement, the
Nonsolicitation Agreements, the Escrow Agreement, the deposit account control
agreements, and any other instruments, certificates or documents delivered or
contemplated to be delivered hereunder or thereunder or in connection herewith
or therewith, 


 


5

















 


as
the same may be supplemented or amended from time to time in accordance
herewith or therewith, and Credit Document shall mean any of the Credit
Documents.”


 


“Euro-Rate shall mean, with respect to the
Loans to which the Euro-Rate applies for any Interest Period, an interest rate
per annum equal to the interest rate per annum (rounded upwards, if necessary,
to the nearest 1/100th of 1%) as published in the “Money Rates”
section of The Wall Street Journal (or another national publication
selected by Agent) as the one month London Interbank Offered Rate for United
States dollar deposits or such other language (or, if such page shall
cease to be publicly available or, if the information/description contained on
such page, in Agent’s sole judgment, shall cease to accurately reflect such
London Interbank Offered Rate, then such rate as reported by any publicly
available recognized source of similar market data selected by Agent that, in
Agent’s reasonable judgment, accurately reflects such London Interbank Offered
Rate).”


 


“Guaranty Agreement shall mean collectively,
the Guaranty Agreement (Payment) in substantially the form of Exhibit 1.1(G) attached
to the Third Amendment and made a part hereof, executed and delivered by
CastleRock to Agent for the benefit of Lenders.


 


“Material Adverse Change shall mean any set
of circumstances or events which: 
(a) has or could reasonably be expected to have any material
adverse effect whatsoever upon the validity or enforceability of any Credit
Document or the Collateral, (b) is or could reasonably be expected to be
material and adverse to the business, properties, assets, or financial
condition of Borrower or any Guarantor,  (c) impairs
materially or could reasonably be expected to impair materially the ability of
Borrower or any Guarantor to duly and punctually pay or perform its
Indebtedness, (d) impairs materially or could reasonably be expected to
impair materially the value of the Collateral, or (e) impairs materially
or could reasonably be expected to impair materially the ability of Agent or
any Lender, to the extent permitted, to enforce their legal remedies pursuant
to any Credit Document.”


 


“Nonsolicitation Agreements shall mean the
Nonsolicitation Agreements (a) in substantially the form of Exhibit 1.1(N)(1),
executed by Alarm Funding and (b) in substantially the form of Exhibit 1.1(N)(2),
(3) and (4) attached to the Third Amendment and made a part
hereof, executed by CastleRock and NewCo and each member of the Senior
Management Team, respectively, and delivered to Agent for the benefit of
Lenders.”


 


“Permitted Liens shall mean:


 


6

















 


(a)           Liens for taxes, assessments or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable;


 


(b)           Liens in favor of Agent for the benefit of Lenders
securing the Obligations;


 


(c)           Liens on property leased by Borrower under capital
and operating  leases permitted in
Section 7.2.15 [Capital Expenditures and Leases] securing obligations of
Borrower to the lessor under such leases;


 


(d)           Any Lien existing on the date of this Agreement and
described on Schedule 1.1 (P), provided that the principal amount
secured thereby is not hereafter increased, and no additional assets become
subject to such Lien;


 


(e)           Purchase Money Security Interests, provided
that the aggregate amount of  Loans and
deferred payments secured by such Purchase Money Security Interests shall not
exceed $10,000 (excluding for the purpose of this computation any  Loans or deferred payments secured by Liens
described on Schedule 1.1(P));


 


(f)            The following, (A) if the validity or amount
thereof is being contested in good faith by appropriate and lawful proceedings
diligently conducted so long as levy and execution thereon have been stayed and
continue to be stayed or (B) if a final judgment is entered and such
judgment is discharged within 30 days of entry, and in either case they do not
affect the Collateral or, in the aggregate, materially impair the ability of
Borrower to perform its Obligations hereunder or under the other Credit
Documents:


 


(1)           Claims or Liens for taxes, assessments or charges
due and payable and subject to interest or penalty, provided that Borrower
maintains such reserves or other appropriate provisions as shall be required by
GAAP and pays all such taxes, assessments or charges forthwith upon the
commencement of proceedings to foreclose any such Lien; and


 


(2)           Liens resulting from final judgments or orders
described in Section 8.1.6 [Final Judgments or Orders]; and


 


(g)           First priority Liens in favor of a Subsidiary
Creditor securing a Permitted Subsidiary’s obligations under the Permitted
Subsidiary Indebtedness and complying with all the terms of Section 7.2.9  [Subsidiaries, Partnerships and Joint
Ventures].”


 


“Pledge Agreement shall mean collectively the
Pledge Agreements in substantially the form of Exhibit 1.1(P)(1)(2) and
(3) attached to the Third Amendment and made a part hereof, executed
by (i) NewCo, the 


 


7

















 


sole
shareholder of CastleRock, (ii) Alarm Funding, the majority shareholder of
NewCo prior to the Equity Raise and (iii) Whitecap, Offshore I, Offshore
II, and Full Circle, the sole shareholders of Alarm Funding, delivered to Agent
for the benefit of Lenders.”


 


“Security Agreement shall mean collectively (a) the
Security Agreement in substantially the form of Exhibit 1.1(S)(1) (executed
and delivered by Alarm Funding to Agent for the benefit of Lenders, and (b) the
Security Agreements in substantially the form attached to the Third Amendment
as Exhibit 1.1(S)(2) and (3) and made a part hereof,
executed by each of NewCo and CastleRock and delivered to Agent for the benefit
of Lenders.”


 


“Senior Management Team shall mean Michael
Snyder, Brian E. Johnson and James F. Ingold.”


 


“UCC Collateral shall mean the property in
which security interests are to be granted under the Security Agreement.”


 


(c)           Section 1.1 [Certain
Definitions] of the Credit Agreement is hereby amended to insert in
alphabetical order the following new definitions:


 


“Acceptable Appraiser shall mean any of the
following (a) Houlihan Smith Company, Inc., (b) Barnes &
Associates, (c) Henry Edmunds, (d) Peter Flynn and (e) Benchmark
Partners.


 


“Alarm Funding shall mean Alarm Funding,
LLC, a Delaware limited liability company.”


 


“Appraisal Dispute Notice shall have the
meaning given to such term in Section 2A.2(c)(ii).


 


“Borrower Joinder shall mean that certain
Borrower Joinder and Assumption Agreement executed and delivered by NewCo as of
the Third Amendment Effective Date in substantially the form attached to the
Third Amendment as Exhibit 1.1(B), and made a part hereof.”


 


“Business Management Consultant shall have
the meaning given to such term in Section 7.1.23 [Business Management
Consultant].”


 


“Business Plan shall have the meaning given
to such term in Section 7.3.6 [Monthly Operating Metrics Reports; Business
Plan].”


 


“Cash Collateral Pledge Agreement shall mean
the Pledge Agreement of Borrower in favor of Agent for the ratable benefit of
the Lenders,  dated as of the Third
Amendment Effective Date, in substantially the form attached to the Third
Amendment as Exhibit 1.1(C)(2), and made a part hereof .”


 


8

















 


“Cash Collateral Account shall have the
meaning given to such term in Section 2A.2(c) [Restricted Proceeds;
Updated Appraisals].”


 


“CastleRock shall mean CastleRock Security, Inc.,
a Delaware corporation.”


 


“CastleRock Assignment Agreement shall mean
that certain Assignment and Assumption Agreement dated as of November 26,
2008 between SAS (as “Assignor”) and CastleRock (as “Assignee”).”


 


“CastleRock Asset Purchase Agreement shall
mean that certain Asset Purchase and Settlement Agreement dated as of November 26,
2008 by and among Alarm Funding, CastleRock, SAS, and Cordell.”


 


“CastleRock Bill of Sale shall mean that
certain Bill of Sale and Assignment of Contracts dated as of November 26,
2008 between SAS and CastleRock.”


 


“CastleRock Principal shall mean Brian
Johnson.”


 


“CastleRock Servicer Agreements shall mean collectively
all servicing agreements pursuant to which CastleRock services security alarm
contracts of third parties, including that certain Servicing Agreement dated as
of November 26, 2008 by and between CastleRock (as the servicer) and Alarm
Funding (as the owner), as the same may be further amended or modified from
time to time as permitted by Section 7.2.14 [Changes in Documents].”


 


“CastleRock Shares shall have the meaning
assigned to that term in Section 5.1.3 [Subsidiaries].”


 


“CastleRock Stockholder Agreement shall mean
the Stockholder Agreement dated as of November 26, 2008, among CastleRock,
Alarm Funding and Cordell.”


 


“CastleRock Transaction Documents shall mean
the CastleRock Asset Purchase Agreement, the CastleRock Stockholder Agreement,
the CastleRock Servicer Agreements, the CastleRock Transition Services
Agreements, the CastleRock Assignment Agreement, the CastleRock Bill of Sale
and each and every other agreement, instrument, certificate or document
executed and/or delivered or filed in connection with the transactions
contemplated by the foregoing agreements.”


 


“CastleRock Transition Services Agreement
shall mean that certain Transition Services Agreement dated as of November 26,
2008, by and among CastleRock, SAS and SAI.”


 


9

















 


“Collateral Management Fee shall have the
meaning given to such term in Section 2A.4 [Term Loan Fees].”


 


“Contribution Agreement shall mean the
Contribution Agreement by and among NewCo, Alarm Funding and SAS dated as of September 24,
2010, as the same may be amended or modified from time to time as permitted by Section 7.2.14
[Changes in Documents].”


 


“Cordell shall mean Cordell Funding, LLLP,
Florida limited liability limited partnership.”


 


“December Deficiency Amount shall have
the meaning assigned to such term in Section 7.1.28 [Working Capital
Funding].”


 


“December Working Capital Payment shall
have the meaning assigned to such term in Section 7.1.28 [Working Capital
Funding].”


 


“Deposit Date shall mean the date that the
Net Proceeds have been deposited in the Cash Collateral Account and the
Remaining Proceeds Account in accordance with Section 2A.2(c) [Restricted
Proceeds; Updated Appraisals].”


 


“EBITDA shall mean the sum, without
duplication, of the following:  Net Income
determined in accordance with GAAP, plus (a) Interest Expense, (b) taxes
on income, (c) depreciation expense, (d) amortization expense, (e) all
other non-cash and/or non-recurring charges and expenses approved by Agent in
its discretion, excluding accruals for cash expenses made in the ordinary
course of business,  less (i) gain
from any sale of assets, other than sales in the ordinary course of business,
and (ii) all non-cash and/or non-recurring income, all of the foregoing
determined in accordance with GAAP for Borrower.  EBITDA shall be calculated as of the last day
of each calendar month for the 12 months then ended.”


 


“Equity Raise shall have the meaning given to
such term in the Recitals.”


 


“Equity Raise Termination Notice shall have
the meaning given to such term in the Escrow Agreement.”


 


“Escrow Account  shall have the meaning given to such term in
the Escrow Agreement.”


 


“Escrow Agent shall mean Hanson Bridgett LLP.”


 


“Escrow Agreement  shall mean that certain Escrow Agreement by
and among Agent, Borrower and Escrow Agent, as escrow agent, dated as of the
Third Amendment Date,”


 


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“Excess Restricted Proceeds shall have the
meaning assigned to that term in Section 2A.2(c)(iii).”


 


“Existing Over Advance shall mean the amount
by which the aggregate principal amount outstanding of the Loans exceeds the
Maximum Term Loan Amount, determined as of the Deposit Date.”


 


“Fair Market Value  shall mean the most probable price which
Security Alarm Contracts would command in a competitive and open market, under
all conditions requisite to a fair sale, the buyer and seller each acting
prudently and knowledgeably and as determined by a methodology commonly
employed within the  security alarm
industry.


 


“Full Circle shall mean Full Circle Partners,
L.P., a Delaware limited partnership.”


 


“Guarantor shall mean CastleRock.”


 


“HB Client Trust Account shall have the
meaning given to such term in Section 17 (b) [Initial Working Capital
Payment] of the Credit Agreement.


 


“Incentive Equity  Issuance shall mean
the issuance of shares of NewCo Shares to the Senior Management Team and other
employees pursuant to the CastleRock Security Holdings, Inc. 2010 Equity
Incentive Plan described on Schedule 5.13.


 


“Initial Working Capital Payment  shall have the meaning given to such term in Section 17
(b) [Initial Working Capital Payment] of the Credit Agreement.


 


“Interest Expense shall mean, for any period:
total interest expense of Borrower (including interest attributable to capital
leases in accordance with GAAP, and interest paid in kind).”


 


“Loans shall mean collectively all, and “Loan”
shall mean separately any, (a) prior to the Third Amendment Effective
Date, of the Revolving Credit Loans, and (b) on and after the Third
Amendment Effective Date, of the Term Loans and the Retention Advance, which
shall not exceed for each Lender the respective amounts set forth on Schedule
1.1(B).”


 


“Maximum Term Loan Amount shall mean, as of
any date of determination, commencing on the Deposit Date and continuing
thereafter, the amount equal to the sum of (a) the product of the
Multiplier multiplied by the Eligible RMR (other than the Puerto Rican Eligible
RMR) plus (b) the lesser of (i) 10
multiplied by the Puerto Rican Eligible RMR and (ii) $1,500,000, all as
calculated with reference to the most recent Maximum 


 


11

















 


Term
Loan Certificate acceptable to Agent and otherwise in accordance with this
Agreement.”


 


“Multiplier shall mean 23 for the period
commencing on the Third Amendment Effective Date and thereafter.”


 


“Net Income shall mean, for any period, the
net income (or loss) of Borrower on a consolidated basis determined in
accordance with GAAP; provided, however, that there shall be
excluded (a) the income (or loss) of any Person in which any other Person
(other than Borrower) has a joint interest, except to the extent of the amount
of dividends or other distributions actually paid to Borrower by such Person, (b) the
income (or loss) of any Person accrued prior to the date it becomes a Borrower
or is merged into or consolidated with Borrower or that Person’s assets are
acquired by Borrower, (c) the income of any Subsidiary of Borrower to the
extent that the declaration or payment of dividends or similar distributions of
that income by that Subsidiary is not at the time permitted by operation of the
terms of the charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, (d) compensation
expense resulting from the issuance of capital stock, stock options or stock
appreciation rights issued to former or current employees, including officers,
of Borrower, or the exercise of such options or rights, in each case to the
extent the obligation (if any) associated therewith is not expected to be
settled by the payment of cash by Borrower or any affiliate thereof, and
(e) compensation expense resulting from the repurchase of capital stock,
options and rights described in clause (d) of this definition of Net
Income.”


 


“Net Proceeds shall mean the gross proceeds
resulting from the Equity Raise less the Permitted Expenses.”


 


“NewCo shall mean CastleRock Security
Holdings, Inc., a Delaware corporation.”


 


“NewCo Shares shall have the meaning assigned
to such term in Section 5.1.3 [Subsidiaries].”


 


“Notes shall mean collectively all, and “Note”
shall mean separately any of, (a) prior to the Third Amendment Effective
Date, the Revolving Credit Notes, and (b) on and after the Third Amendment
Effective Date, the Term Notes and the Retention Advance Notes.”


 


“November Deficiency Amount” shall have
the meaning assigned to such term in Section 7.1.28 [Working Capital
Funding].


 


“November Working Capital Payment” shall
have the meaning assigned to such term in Section 7.1.28 [Working Capital
Funding].


 


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“Offshore I shall mean Whitecap (Offshore)
Fund I, Ltd., a British Virgin Islands company.”


 


“Offshore II shall mean Whitecap (Offshore)
Fund II, Ltd., a British Virgin Islands company.”


 


“Over Advance shall have the meaning given to
such term in Section 2A.2(c) [Restricted Proceeds; Updated
Appraisals].”


 


“Permitted Affiliate Transactions shall have
the meaning given to such term in Section 7.2.8 [Permitted Affiliate
Transactions].”


 


“Permitted Capital Expenditures shall have
the meaning given to such term in Section 7.2.15 [Capital Expenditures and
Leases].”


 


“Permitted Expenses shall mean the following
costs incurred by or on behalf of Borrower in connection with the Equity Raise,
the Incentive Equity Issuance and the Third Amendment to be paid or reimbursed
from the gross proceeds of the Equity Raise: (a) SEC registration fee, (b) FINRA
filing fee, (c) listing fee, (d) blue sky fees and expenses, (e) printing
and engraving expenses, (f) legal fees and expenses of Borrower’s counsel
and counsel for Agent and Lenders, (g) accounting fees and expenses of RSM
MCGladrey, (h) transfer agent and registrar fees and expenses, (i) the
commission and reimbursable expenses due and payable to Rodman &
Renshaw, LLC pursuant to that certain engagement letter dated May 11, 2010
and the reasonable fees and expenses of the underwriting counsel for the Equity
Raise, (j) an amount not to exceed $1,000,000 to be used by CastleRock to
pay past due amounts to service providers, vendors and other creditors,
and  (k) an amount not to exceed the
Permitted Capital Expenditures.”


 


“Permitted Subsidiary shall have the meaning
given to such term in Section 7.2.9 [Subsidiaries, Partnerships and Joint
Ventures].”


 


“Permitted Subsidiary Acquisition shall have
the meaning given to such term in Section 7.2.9 [Subsidiaries,
Partnerships and Joint Ventures].”


 


“Permitted Subsidiary Indebtedness shall have the
meaning given to such term in Section 7.2.9 [Subsidiaries, Partnerships
and Joint Ventures].”


 


“Pledgors shall mean collectively all, and “Pledgor”
shall mean separately, any of Alarm Funding, NewCo, Whitecap, Offshore I,
Offshore II and Full Circle.”


 


“Recovered Accounts shall mean (a) those
accounts for which, in each case, the applicable customer cancelled or failed
to renew upon the 


 


13

















 


initial
contract expiration date and subsequently rescinded the cancellation and
brought the account current, and (b) those accounts written-off by
Borrower but which, in each case, the applicable customer has brought the
account current.  Recovered Accounts
shall not include accounts that have been cancelled or written-off more than
once.”


 


“Remaining Proceeds shall have the meaning
given to such term in Section 2A.2(c) [Restricted Proceeds; Updated
Appraisals].”


 


“Remaining Proceeds Account shall have the
meaning given to such term in Section 2A.2(c) [Restricted Proceeds;
Updated Appraisals].”


 


“Remaining Proceeds Pledge Agreement shall
mean the Pledge Agreement of Borrower in favor of Agent for the ratable benefit
of the Lenders, dated as of the Third Amendment Effective Date, in
substantially the form attached to the Third Amendment as Exhibit 1.1(R)(1),
and made a part hereof.”


 


“Restricted Proceeds shall have the meaning
given to such term in Section 2A.2(c) [Restricted Proceeds; Updated
Appraisals].”


 


“Restructure Documents shall mean
collectively those documents listed on Exhibit 5.1.32 attached
hereto, each dated the Third Amendment Effective Date, as the same may be
amended, restated, modified or supplemented as permitted by Section 7.2.14
[Changes in Documents].”


 


“Retention Advance shall have the meaning
given to such term in Section 2A.2 [Conversion to Term Loans; etc.].”


 


“Retention Advance Fee shall mean the amount
of $60,000.”


 


“Retention Advance Notes shall mean
collectively all, and Retention Advance Note shall mean separately any,
of the Retention Advance Notes of Borrower in form and substance satisfactory
to Agent evidencing the Retention Advance, as the same may be amended,
restated, modified or supplemented from time to time.”


 


“Retention Program shall mean the actions to
be undertaken by Borrower to retain customers and the costs of such actions, as
have been previously disclosed to the Agent and the Lenders.”


 


“SAS shall mean SA Systems LLC, a Delaware
limited liability company.”


 


“Second Appraisal shall have the meaning
assigned to that term in Section 2A.2(c)(ii).”


 


14

















 


“Shares shall mean collectively, the
CastleRock Shares and the NewCo Shares.”


 


“SPV Date shall have the meaning
assigned to that term in Section 7.1.24 [Single Purpose Entity - NewCo].”


 


“Term Loan shall have the meaning assigned to
that term in Section 2A.2 [Conversion to Term Loans; Retention Advance]; Term
Loans shall mean collectively all of the Term Loans.”


 


“Term Note shall mean collectively all, and Term
Note shall mean separately any, of the Replacement Term Notes of Borrower
in form and substance satisfactory to Agent evidencing the Term Loans, as the
same may be amended, restated, modified, or supplemented from time to time.”


 


“Third Amendment shall mean the Consent,
Limited Waiver and Third Amendment to Credit Agreement and Credit Documents by
and among Alarm Funding, CastleRock, Lenders and Agent dated as of October 20,
2010.”


 


“Third Amendment Effective Date shall mean October 20,
2010.”


 


“Updated Appraisal shall have the meaning
given to such term in Section 2A.2(c) [Cash Collateral Amount;
Updated Appraisal].”


 


(d)           The term “Borrowing Base”
shall be deleted from Section 1.1 [Certain Definitions].  All references in the Credit Agreement to “Borrowing
Base Certificate” shall be replaced with references to “Maximum Term Loan
Certificate.”


 


(e)           All references in the Credit
Agreement to “Revolving Credit Loans” or a “Revolving Credit Loan”, except those
references in Section 2A [Revolving Credit Facility Conversion] shall be
replaced with references to “Loans” or “Loan”, respectively.


 


(f)            All references in the Credit
Agreement to “Guaranty Agreement (Anti-Fraud)” shall be replaced with
references to “Guaranty Agreement”.


 


(g)           All references in the Credit
Agreement to “Revolving Credit Notes” or a “Revolving Credit Note” shall be
replaced with references to “Notes” or “Note”, respectively.


 


(h)           All references to “SAI” in
the following Sections of the Credit Agreement shall be changed to “CastleRock”:  Sections 5.1.28 [Telephone Numbers], 7.1.20
[Servicer Insolvency], 7.3.1 [Monthly Financial Statements], 7.3.3 [Annual
Financial Statements], and 8.1.2 [Breach of Warranty].


 


15

















 


4.             Joinder of NewCo; Joint and
Several Liability; Waivers.


 


(a)           As a condition to Agent and
Lenders entering into this Amendment and consenting to the Restructure, NewCo
shall, on the Third Amendment Effective Date, become a Borrower under the terms
of the Credit Agreement and the other Credit Documents and assume the
obligations of Borrower under the Credit Agreement and the other Credit
Documents pursuant to the terms of the Borrower Joinder.  Commencing on the Third Amendment Effective
Date, all references to the term “Borrower” in the Credit Agreement and the
other Credit Documents shall refer to Alarm Funding and NewCo, jointly and
severally.


 


(b)           Commencing
on the Third Amendment Effective Date, Alarm Funding and NewCo
shall each be a Borrower and shall be jointly and severally liable for the
Obligations under the Credit Agreement and each of the other Credit Documents.
Without limiting the generality of the foregoing, each of Alarm Funding and
NewCo hereby acknowledges and agrees that any and all Loans, actions, inactions
or omissions by any one or more, or all, of Alarm Funding or NewCo or of
CastleRock in connection with, related to or otherwise affecting this Agreement
or any of the other Loan Documents is the Obligation of, and inures to and is
binding upon, each and all of Alarm Funding and NewCo jointly and severally.


 


(c)           Each Borrower hereby waives
to the full extent permitted by Law any defense it may otherwise have to the
payment and performance of the Obligations based on any contention that its
liability under the Credit Agreement and the other Credit Documents is limited
and not joint and several. Each Borrower acknowledges and agrees that the
foregoing waivers and those set forth below serve as a material inducement to the
agreement of Agent and Lenders to enter into the Third Amendment, and that
Lenders are relying on each specific waiver and all such waivers in entering
into the Third Amendment. The undertakings of each Borrower hereunder secure
the Obligations of itself and the other Borrower. Each Borrower further agrees
that:


 


(i)            Agent or any Lender may do
any of the following without notice to such Borrower and without adversely
affecting the validity or enforceability of this Agreement or the Obligations
(or any portion thereof): (A) release, surrender, exchange, compromise or
settle the Obligations, or any portion thereof, with respect to the other
Borrower; (B) change, renew or waive the terms of the Obligations, or any
part thereof with respect to the other Borrower; (C) change, renew or
waive the terms of any of the Loan Documents or any other agreements relating
to the Obligations, or any portion thereof, with respect to the other Borrower;
(D) grant any extension or indulgence with respect to the payment or performance
of the Obligations, or any portion thereof, with respect to the other Borrower;
(E) enter into any agreement of forbearance with respect to the
Obligations, or any portion thereof, with respect to the other Borrower; and (F) release,
surrender, exchange, impair or compromise any security of the 


 


16

















 


other Borrower held by Agent
or any Lender for the Obligations or any portion thereof. Each Borrower agrees
that Agent or any Lender may do any of the above as Agent or such Lender deems
necessary or advisable, in Agent’s or such Lender’s sole discretion, without
giving notice to such Borrower, and that such Borrower will remain liable for
full payment and performance of the Obligations.


 


(ii)           Each Borrower waives and
agrees not to enforce any of the rights of Agent or Lenders against the other
Borrower or CastleRock or any other obligor of the Obligations, or any portion
thereof, or any Collateral securing the same unless and until all of the
Obligations shall have been indefeasibly paid in cash in full and the Borrowers’
rights to borrow have terminated, including any right of such Borrower to be
subrogated in whole or in part to any right or claim of Agent or any Lender
with respect to the Obligations or any portion thereof. Each Borrower hereby
irrevocably agrees that following the occurrence of any Event of Default which
has not been waived by Agent and the Required Lenders, such Borrower shall not
enforce any rights of contribution, indemnity or reimbursement from the other
Borrower on account of such Borrower’s payment of the Obligations, or any
portion thereof, unless and until all of the Obligations shall have been
indefeasibly paid in cash in full and the Borrowers’ rights to borrow hereunder
have terminated. Each Borrower hereby waives any defenses based on suretyship
or impairment of collateral or the like.


 


5.             Amendment of Section 2
[Revolving Credit Facility] of the Credit Agreement.  A new Article 2A shall be inserted
immediately following Section 2.9 [Increase in Revolving Credit
Commitments] of the Credit Agreement as follows:


 


“2A.        REVOLVING CREDIT FACILITY CONVERSION.


 


2A.1        Effectiveness of Article 2 [Revolving Credit
Facility].


 


The provisions of Article 2 of the Credit
Agreement shall remain in full force and effect up to, but not including, the
Third Amendment Effective Date, and thereafter shall be of no further force or
effect.


 


2A.2        Conversion to Term Loans; Retention Advance;
Restricted Proceeds; Updated Appraisals.


 


(a)           On and as of the Third Amendment Effective Date,
without further action by any party, all Revolving Credit Loans of each Lender
shall be converted to a single term loan (the “Term Loan” or


 


17

















 


“Term
Loans”) of such Lender to the Borrower which Term Loan shall be in the
principal amount of the aggregate Revolving Credit Loans made by such Lender
outstanding on such date, not to exceed $40,075,220.35 in the aggregate for all
Lenders.  The Term Loans are not
revolving credit loans and Borrower shall not have the right to borrow, repay,
and reborrow under this Section.  
Commencing on May 31, 2011, in no event shall the aggregate amount
of the Term Loans exceed the Maximum Term Loan Amount, and in no event shall
the aggregate amount of the Term Loans for each Lender exceed the lesser of (a) the
respective amounts for each Lender as set forth on Schedule 1.1(B) and
(b) such Lender’s ratable share of the Maximum Term Loan Amount.


 


(b)           Retention Advance.  Borrower acknowledges and agrees that no
further advances shall be permitted under the Term Loans; provided, however,
that the Agent and Lenders may, in their sole discretion, permit advances in
the aggregate amount not to exceed $700,000 prior to December 31, 2010,
the proceeds of which shall be used to fund the Retention Program (the “Retention
Advance”).  As of the Third Amendment
Effective Date, the sum of $700,000.00 has been advanced as a Retention
Advance.  Borrower shall have no right to
borrow, repay and reborrow the Retention Advance.  The Retention Advance shall be evidenced by
the Retention Advance Notes in favor of the Lenders.  The Retention Advance Fee shall be deemed
fully earned as of the date that the Retention Advance is advanced.  Borrower shall pay the Retention Advance Fee
to Agent, for the benefit of Lenders in accordance with their prior written
agreement, payable in twelve (12) monthly installments of $5,000 each on the
first day of each month, commencing on the first day of the calendar month
following the date that the Retention Advance is made.  In the event Borrower fails to pay any
portion of the Retention Advance Fee when due, such unpaid amount shall bear
interest at the Default Rate.  Upon the
occurrence of an Event of Default, any unpaid portion of the Retention Advance
Fee shall be immediately due and payable in full.


 


(c)           Restricted Proceeds; Updated Appraisals


 


(i)            Agent shall conduct an appraisal pursuant to the
terms of Section 7.1.6 [Visitation Rights] for the period ending October 31,
2010 and shall conduct additional appraisals thereafter from time to time as
Agent determines necessary or desirable, or as Borrower may request, but no
less frequently than every 60 days (subject to Section 7.1.6 [Visitation
Rights]) (each an “Updated Appraisal”). The Updated Appraisals
shall be conducted at the sole cost and expense of Borrower.   In the event that any Updated Appraisal
discloses that the Fair Market Value of the Collateral is less than
the outstanding principal amount of the Loans, then Agent shall notify
Borrower in writing (the “Over Advance


 


18

















 


Notice”) of the amount by which the outstanding principal
amount of the Loans exceeds the Fair Market Value of the Collateral (the “Over
Advance”).


 


(ii)           As a condition to Agent and Lenders entering into
the Third Amendment, Borrower agrees that it shall, contemporaneously with the
closing of the Equity Raise: (A) deposit proceeds of the Equity Raise in
an amount not less than the Over Advance (the “Restricted Proceeds”)
into a cash collateral account at JP Morgan Chase, or another financial
institution reasonably acceptable to Agent, pledged to Agent for the ratable
benefit of the Lenders (the “Cash Collateral Account” ), as additional
collateral security for the Loans; (B) execute and deliver the Cash
Collateral Pledge Agreement in favor of the Agent for the benefit of the
Lenders; and (C) cause an account control agreement, in form and
substance satisfactory to Agent, to be executed and delivered in favor of Agent
for the benefit of the Lenders by JP Morgan Chase, or another financial
institution reasonably acceptable to Agent, as the depository bank holding the
Restricted Proceeds.  Thereafter, in
the event that the Over Advance at any time exceeds the Restricted Proceeds,
Borrower shall within seven (7) days of receipt of an Over Advance Notice,
without the necessity of any demand by Agent, make a mandatory deposit of
additional funds into the Cash Collateral Account equal to the amount by which
the Over Advance exceeds Restricted Proceeds.


 


(A)          In the event
that the Borrower disagrees with the valuation of the Collateral resulting from
an Updated Appraisal, Borrower may, at its sole cost and expense,  obtain a second appraisal of the same
Collateral which was the subject of the Updated Appraisal,  prepared by an Acceptable Appraiser within
the time limits and requirements set forth in this Section 2.A2(c)(ii)(A) (a
“Second Appraisal”) provided that Borrower notifies the Agent in writing
that it disagrees with the Over Advance determined with respect to an Updated
Appraisal within four (4) days of the Over Advance Notice corresponding to
the disputed Updated Appraisal (an “Appraisal Dispute Notice”).  If the Borrower delivers an Appraisal Dispute
Notice then Borrower shall either 
(i)  deposit the Over Advance specified in the Over Advance Notice
in the Cash Collateral Account in accordance with the terms of this Section 2A.2
(c) [Restricted Proceeds; Updated Appraisals] and deliver the Second
Appraisal to Agent no later than 30 days following the Over Advance Notice, or
(ii) deliver the Second Appraisal within fifteen (15) days of the
Appraisal Dispute Notice and pay the Over Advance, as the same may be adjusted


 


19

















 


pursuant
to this Section 2.A2(c)(ii)(B) within twenty-four (24) hours after
delivery of the Second Appraisal.


 


(B)           In the event that the Second Appraisal concludes
that the Fair Market Value of the Collateral is more than that determined by
the Updated Appraisal, the Fair Market Value of the disputed Updated Appraisal
and the Second Appraisal (but in no event more than one hundred  twenty-five percent (125%) of the Fair Market
Value of the disputed Updated Appraisal) shall be added together and divided by
two (2), resulting in an average of the Fair Market Value of the two appraisals
for purposes of determining the Over Advance. In the event that the Borrower
fails to provide the Appraisal Dispute Notice, fails to deposit the Over
Advance to the extent required in Section 2A.2(c)(ii)(A)(ii), fails to
deliver the Second Appraisal or fails to pay the adjusted Over Advance, if
applicable, within the time periods specified herein, the Over Advance
specified in the Over Advance Notice shall be final.


 


(iii)          In the event
that:


 


(a) as a result of any Updated Appraisal, it is
determined  that the amount of the
Restricted Proceeds then deposited in the Cash Collateral Account exceeds the
Over Advance, or


 


(b) the Borrower has deposited the Over
Advance, and the Over Advance is subsequently reduced in connection with a
Second Appraisal pursuant to the process described in Section 2A.2(c)(ii)(B),


 


then, to the extent, if any, that proceeds in excess
of the Over Advance are being held in the Cash Collateral Account  (such excess amount being  the “Excess Restricted Proceeds”),  Agent shall promptly notify the Borrower in
writing of the amount of the Excess Restricted Proceeds and shall cause such
Excess Restricted Proceeds to be deposited in the Remaining Proceeds Account
within seven (7) days of determination thereof.


 


(iv)         In addition, and as a condition to Agent and Lenders
entering into the Third Amendment, Borrower agrees that it shall,
contemporaneously with the closing of the Equity Raise: (A) deposit the
Net Proceeds less the Restricted Proceeds (the “Remaining Proceeds”)
into a cash collateral account at JP Morgan Chase, or another financial
institution reasonably acceptable to Agent, pledged to Agent for the ratable
benefit of the Lenders (the “Remaining Proceeds Account” ), as
additional collateral security


 


20














 


for
the Loans; (B) execute and deliver the Remaining Proceeds Pledge Agreement
in favor of the Agent for the benefit of the Lenders; and (C) cause a
springing account control agreement, in form and substance satisfactory to
Agent, to be executed and delivered in favor of Agent for the benefit of the
Lenders by JP Morgan Chase, or another financial institution reasonably
acceptable to Agent, as the depository bank holding the Remaining Proceeds.
Provided no Event of Default is in existence, the Remaining Proceeds may only
be used by Borrower to fund ordinary and customary working capital expenses of
NewCo, then servicing fees payable by Alarm Funding to CastleRock as and when
due in accordance with the CastleRock Servicer Agreement to the extent not
funded pursuant to Section 2A.3, and then, to the extent available,
Permitted Acquisitions.  For the
avoidance of doubt, in no event shall Borrower be permitted to make Permitted
Acquisitions unless the Equity Raise has occurred and the Restricted Proceeds
and the Remaining Proceeds have been deposited in accordance with Section 2A.2(c) [Restricted
Proceeds; Updated Appraisals] On or before the Deposit Date, Borrower will
provide Agent with wire instructions to effect the transfer of any Excess
Restricted Proceeds to the Remaining Proceeds Account. In no event shall
Remaining Proceeds be used to pay for the monitoring or servicing of any
Security Alarm Contracts, including NewCo Contracts, acquired by any Permitted
Subsidiary or for the working capital of any Subsidiary of NewCo.


 


(v)           Borrower shall be permitted to withdraw funds for
purposes permitted under Section 2A.2 (c)(iv) from the Remaining
Proceeds Account, provided that:


 


(1)           no Event of Default or
Potential Default exists at the time that Borrower makes a withdrawal from the
Remaining Proceeds Account;


 


(2)           to the extent that Remaining
Proceeds are available to fund Permitted Acquisitions pursuant to Section 2A.2(c)(iv),
the Remaining Proceeds shall be used solely to fund one or more  Permitted Acquisitions which
shall comply with all the terms and conditions set forth in Section 7.2.6
[Liquidations, Mergers, Consolidations, Acquisitions], and to the extent
applicable, the provisions of subsections (c), (d), (e) and (f) of Section 7.2.9
[Subsidiaries, Partnerships and Joint Ventures]; and


 


(3)           Borrower shall
deliver to Agent a signed certificate each month certifying that all amounts
drawn from the Remaining Proceeds Account in the previous 


 


21

















 


month were withdrawn in
compliance with Section 2A.2 (c)(v) (1) and (2), to the extent
applicable.


 


(vi)          Borrower will have until May 31, 2011 to
either: (1) acquire sufficient additional Collateral to eliminate any Over
Advance (for the avoidance of doubt, the additional Collateral will be valued
using the same valuation methodology that was used to determine the Over
Advance) or (2) repay in full the total amount of the Over Advance as of
that date.  In the event that NewCo has
failed to eliminate any Over Advance existing as of May 31, 2011, whether
by acquisition of additional Collateral or repayment of the Over Advance, then
the Restricted Proceeds in the amount of the then existing Over Advance shall
be paid to Agent for the ratable benefit of the Lenders no later than June 1,
2011 as a prepayment of the Loans, and the outstanding principal balance of the
Loans and the Maximum Term Loan Amount shall be reduced by such
prepayment.  After such prepayment, the
balance of the Remaining Proceeds shall continue to be held in the Remaining
Proceeds Account, subject to release in accordance with Section 2.A(c)(v) (1),
(2) and (3).


 


2A.3        Nature of Lenders’ Obligations With Respect to Term
Loans and Retention Advance; Repayment Terms.


 


The Lenders shall have no obligation to make Term
Loans hereunder after the Third Amendment Effective Date.  The Term Loans and the Retention Advance
shall be payable from the collections received by Agent from the Blocked
Accounts in the following order:  (i) interest
due and payable on the Loans, (ii) fees and expenses due and payable to
Agent and Lenders under the Credit Documents, (iii) the servicing fees due
and payable to CastleRock, (iv) such other expenses of Borrower approved
by Agent, including an amount not to exceed $250,000 in the aggregate to
compensate the Business Management Consultant, (v) unpaid principal
balance of the Term Loan, and (vi) unpaid principal balance of the
Retention Advance. In no event shall any collections be used to pay for the
monitoring or servicing of any Security Alarm Contracts, including without
limitation NewCo Contracts, acquired by any Permitted Subsidiary.


 


2A.4        Term Loan Fees.


 


(a)           Borrower agrees to pay in advance to Agent, for the
account of each Lender as consideration for such Lender’s Loan, a facility fee
(the “Annual Fee”).  The Annual
Fee shall be paid as follows:


 


22

















 


(i)            On May 25, 2010, .50% of the principal balance
of the Loans outstanding on such date;


 


(ii)           On the Third Amendment Effective Date, .50% of the
principal balance of the Loans outstanding on such date; and


 


(iii)          On May 25, 2011, 1.0% of the principal balance
of the Loans outstanding on such date.


 


In the event that the Deposit Date occurs on or
before March 1, 2011, and no Event of Default or Potential Default exists,
Borrower shall be refunded, as of March 15, 2011, one half (1/2) of the
portion of the Annual Fee paid on the Third Amendment Effective Date pursuant
to subsection (ii) of this Section.


 


(b)           Borrower agrees to pay Agent, for the account of
Lenders, an aggregate collateral management fee, which fee shall accrue in the
amount of $20,000 per month until the Loans are paid in full and which shall be
payable in full upon the maturity or earlier termination of the Loans (the “Collateral
Management Fee”).


 


2A.5        Term Loan Notes and Retention Advance Notes.


 


Borrower hereby unconditionally promises to pay to
the order of each Lender the principal amount of the Term Loan and the
Retention Advance made by such Lender, payable as set forth herein, together
with interest on such unpaid principal amount from time to time outstanding
from the date hereof at the rate or rates per annum as provided herein.  Interest on the Term Loans and the Retention
Advance shall be due and payable in accordance with the terms of Section 4.3
[Interest Payment Dates].  Unless sooner
paid in full, the outstanding principal balance of the Term Loans and the
Retention Advance shall be paid in full on the Expiration Date.  The Obligation of Borrower to repay the
aggregate unpaid principal amount of each Term Loan made to Borrower by such
Lender, together with interest thereon, shall be evidenced by a Term Note
payable to the order of such Lender in a face amount equal to the outstanding
principal amount of such Term Loan made by such Lender and in form and
substance satisfactory to Agent and such Lender.  The Obligation of Borrower to repay the
aggregate unpaid principal amount of the Retention Advance made to Borrower by such
Lender, together with interest thereon, shall be evidenced by the Retention
Advance Note payable to the order of such Lender in a face amount equal to the
outstanding principal amount of such Retention Advance made by such Lender and
in form and substance satisfactory to Agent and such Lender.


 


23

















 


2A.6        Use of Proceeds.


 


The proceeds of the Term Loans and the Retention
Advance shall be used in accordance with Section 7.1.10 [Use of Proceeds].”


 


6.             Amendment of Section 4
[Payments] of the Credit Agreement.


 


(a)           The first paragraph of Section 4.4.1
[Right to Prepay] of the Credit Agreement is hereby amended and restated to
read as follows:


 


“Borrower shall have the right at its option from
time to time to prepay the Loans (including, for the avoidance of doubt, the
Retention Advance) in whole, but not in part,
without premium or penalty (except as provided in Section 4.6[Additional
Compensation in Certain Circumstances]):


 


(a)           on the last day of the applicable Interest Period
with respect to Loans to which the Euro-Rate applies,


 


(b)           on the date specified in a notice by any Lender
pursuant to Section 3.4 [Euro-Rate Unascertainable, Etc.] with
respect to any Loan to which the Euro-Rate applies.”


 


(b)           Section 4.4.3
[Prepayment Fee] of the Credit Agreement is hereby deleted in its entirety and
is replaced with the following:


 


“Section 4.4.3 
Reserved”


 


(c)           Section 4.5.2
[Borrowing Base Exceeded] of the Credit Agreement is hereby amended and
restated to read as follows:


 


“Section 4.5.2 Maximum Term Loan Amount
Exceeded. Commencing on May 31, 2011, whenever the aggregate principal
amount outstanding of the Loans exceeds the Maximum Term Loan Amount, Borrower
shall immediately make, without the necessity of any demand by Agent, a
mandatory prepayment of principal on the Loans equal to the amount by which the
aggregate principal amount outstanding of the Loans exceeds the Maximum Term
Loan Amount, together with accrued interest on such principal amount; provided,
however, that in the event such a mandatory prepayment is due as a
result of the payment of interest of the first day of the month pursuant to Section 4.3
[Interest Payment Dates], Borrower shall have until the fifth day of such month
to either make such mandatory prepayment or ensure that the Maximum Term Loan
Amount is not less than aggregate principal amount outstanding of the Loans.”


 


24

















 


7.             Amendment of Section 5
[Representations and Warranties] of the Credit Agreement.


 


(a)           Section 5.1.1
[Organization and Qualification] of the Credit Agreement is hereby amended and
restated to read as follows:


 


“Alarm Funding is a limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization.  CastleRock
is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization. NewCo is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization.  Alarm
Funding, NewCo and CastleRock each have the lawful power to own or lease their
respective properties, if any, and to engage in the business each presently
conducts or proposes to conduct.  Alarm
Funding,  NewCo and CastleRock are each
duly licensed or qualified and in good standing in each jurisdiction listed on Schedule
5.1.1 and in all other jurisdictions where the property owned or leased by
it or the nature of the business transacted by it or both makes such licensing
or qualification necessary, except where the failure to do so would not
constitute a Material Adverse Change.”


 


(b)           Section 5.1.2
[Capitalization and Ownership] of the Credit Agreement is hereby amended and
restated to read as follows:


 


“Schedule 5.1.2 sets forth the authorized membership
ownership interests of Alarm Funding (referred to hereinafter as “Membership
Interests”) which are issued and outstanding as of the Third Amendment
Effective Date and the owners thereof. 
As of the Third Amendment Effective Date, NewCo owns all of the assets
of Alarm Funding and all the CastleRock Shares. 
As of the Third Amendment Effective Date, Whitecap, Offshore I, Offshore
II and Full Circle own all of the issued and outstanding Membership Interests
of Alarm Funding.  All of the Membership
Interests have been validly issued and are fully paid and non-assessable.  There are no options, warrants or other
rights outstanding to purchase any of Alarm Funding’s membership ownership
interests.  Borrower hereby certifies
that a true, correct and complete copy of Alarm Funding’s operating agreement,
including all amendments thereto, is attached hereto as Schedule 5.1.2B.”


 


(c)           Section 5.1.3
[Subsidiaries] of the Credit Agreement is hereby amended and restated to read
as follows:


 


“(a)  CastleRock has no Subsidiaries.  Schedule 5.1.3 sets forth the
authorized capital stock of CastleRock, the issued and outstanding shares of
CastleRock (referred to herein as the “CastleRock Shares”) and the
owners thereof.  NewCo has good and
marketable title to all CastleRock Shares it purports to own, free and clear of
any Lien.  All CastleRock Shares have
been validly issued and are fully paid and nonassessable.  Except as set forth on Schedule 5.1.3,
there are no options, warrants or 


 


25

















 


other
rights outstanding to purchase any such CastleRock Shares.  Borrower hereby certifies that a true,
correct and complete copy of the CastleRock Stockholder Agreement, including
all amendments thereto, is attached hereto as Schedule 5.1.3A.  Borrower represents and warrants that the
Put-Call Agreement was terminated in connection with the closing of the
CastleRock Asset Purchase Agreement, and is of no further force and effect.


 


(b)  As of the Third Amendment Effective Date,
NewCo has no Subsidiaries, other than CastleRock, which is and shall remain
NewCo’s sole Subsidiary, except as a result of the Equity Raise.   Schedule 5.1.3 sets forth the
authorized capital stock of NewCo, the issued and outstanding shares of NewCo
(referred to herein as the “NewCo Shares”) and the owners thereof.  Alarm Funding and SAS have good and
marketable title to all NewCo Shares they purport to own, free and clear of any
Lien.  All NewCo Shares have been validly
issued and are fully paid and nonassessable. 
Except as set forth on Schedule 5.1.3, there are no options,
warrants or other rights outstanding to purchase any such NewCo Shares, and no
NewCo Shares shall be issued to any entity other than Alarm Funding, except as
a result of the Equity Raise and the Incentive Equity  Issuance. In no event shall the Incentive
Equity Issuance occur prior to the Equity Raise.


 


(c)           Alarm Funding has no Subsidiaries other than NewCo
and CastleRock.”


 


(d)           Section 5.1.7
[Litigation] of the Credit Agreement is hereby amended and restated to read as
follows:


 


“Except as set forth on Schedule 5.1.7, there
are no actions, suits, or proceedings pending, or, to the knowledge of
Borrower, threatened against Alarm Funding, NewCo or CastleRock at law or in
equity before any Official Body which could result in a Material Adverse
Change. Except as set forth on Schedule 5.1.7, to the knowledge of
Borrower, there are no investigations pending or threatened against Alarm
Funding, NewCo or CastleRock by any Official Body which could result in a
Material Adverse Change.  Except as set
forth on Schedule 5.1.7, neither Alarm Funding, NewCo nor CastleRock are
in violation of any order, writ, injunction or any decree of any Official Body.”


 


(e)           Section 5.1.9(c) [Accuracy
of Financial Statements] of the Credit Agreement is hereby amended and restated
to read as follows:


 


“(c)         Accuracy of Financial Statements. Alarm Funding
has no liabilities, contingent or otherwise, or forward or long-term
commitments that are not disclosed in the Annual Statements or in the notes
thereto to the extent required to be disclosed in accordance with GAAP, and
except 


 


26

















 


as
disclosed therein, there are no unrealized or anticipated losses from any
commitments which may cause a Material Adverse Change with respect to Alarm
Funding. Since December 31, 2006,  no Material Adverse Change with respect to the Alarm
Funding has occurred, other than as summarized on Schedule 5.1.9(c).
Neither CastleRock nor NewCo has any liabilities, contingent or otherwise, or
forward or long-term commitments that are not disclosed in the [describe
financial statements] or in the notes thereto, except as disclosed therein,
there are no unrealized or anticipated losses from any commitments which may cause
a Material Adverse Change with respect to CastleRock or NewCo.  Since June 30, 2010,  no Material
Adverse Change with respect to the CastleRock or NewCo has occurred other than
as summarized on Schedule 5.1.9(c).”


 


(f)            Section 5.1.18 [Status
of Pledged Collateral] of the Credit Agreement is hereby amended and restated
to read as follows:


 


“All the Membership Interests and Shares included in
the Pledged Collateral to be pledged pursuant to the Pledge Agreements are or
will be upon issuance validly issued and nonassessable and owned beneficially
and of record by the pledgor free and clear of any Lien or restriction on
transfer, except as otherwise provided by the Pledge Agreements and except as
the right of Lenders to dispose of the Membership Interests and Shares may be
limited by the Securities Act of 1933, as amended, and the regulations
promulgated by the Securities and Exchange Commission thereunder and by
applicable state securities laws.  There
are no shareholder, limited liability company or other agreements or
understandings with respect to the Membership Interests and Shares included in
the Pledged Collateral, except as described on Schedule 5.1.18.”


 


(g)           Section 5.1.26
[Security Alarm Contracts] of the Credit Agreement is hereby amended and
restated to read as follows:


 


“(a)         Borrower has
supplied Agent with true and correct copies of all its form Security Alarm
Contracts.  All of the Security Alarm Contracts
are valid, enforceable and in full force and effect in accordance with their
terms (except to the extent any lack of such validity, binding effect or
enforceability may be the result of bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforceability of creditors’ rights generally
and by general principles of equity, whether considered in a proceeding at law
or in equity), are assignable to Agent
without obtaining the consent of or providing notice to any customer or other
Person, and contain terms and conditions which are standard within the
electronic security industry, including those involving limitation of
liability/liquidated damages, third-party indemnification, automatic renewals
and the right to increase customer rates. 
None of the Security Alarm Contracts has been pledged, assigned, or
otherwise transferred to 


 


27

















 


any Person other than to the Agent for the benefit of
Lenders.  Without limiting the foregoing,
to the best of Borrower’s
knowledge, its business and all equipment used in connection with it, are now
being utilized, operated and maintained in conformity with the Security Alarm
Contracts.  To the best of Borrower’s
knowledge, Borrower has not in any manner at any time failed to so
utilize, operate and maintain its business in a manner that could now or
hereafter result in cancellation or termination of any of the Security Alarm
Contracts, or in liability for damages under any of the Security Alarm
Contracts nor has Borrower defaulted
in its obligations pursuant to any of the Security Alarm Contracts, which default
could result in the cancellation of any Security Alarm Contract or adversely
affect the rights of Borrower under
that Security Alarm Contract.  Borrower
requires that its servicers not utilize,
operate or maintain their business in a manner that could now or hereafter
result in cancellation or termination of any of the Security Alarm Contracts,
or in liability for damages under any of the Security Alarm Contracts, and such
servicers have not defaulted in their obligations pursuant to any of the Security
Alarm Contracts, which default could result in the cancellation of any Security
Alarm Contract or adversely affect the rights of Borrower under that Security Alarm Contract.  Borrower is not a party to any franchise, license, distributor or other similar type
of agreement.  No person has any right to
acquire any of Borrower’s accounts.  Borrower has not sold or otherwise made its existing customer lists available to
any third party.  Over 80% of
Borrower’s customers pay their RMR invoices by credit card, ACH or other EFT’s.


 


(b)           Borrower represents and warrants that as of the
Third Amendment Effective Date, Borrower and CastleRock have reviewed the
applicable law in each jurisdiction where Alarm Funding or NewCo owns Security
Alarm Contracts and have determined that neither Alarm Funding nor NewCo is
required to obtain or maintain alarm licenses in any such jurisdiction.  Borrower represents and warrants that
CastleRock has obtained and is maintaining alarm licenses in compliance with
all alarm license requirements in each jurisdiction in which it services
security alarm contracts, including the Security Alarm Contracts.”


 


(h)           Section 5.1.31 [Prior
Acquisitions] of the Credit Agreement is hereby amended and restated to read as
follows:


 


“All of Alarm Funding’s prior acquisitions have been
completed pursuant to, and in material compliance with, the terms outlined for
such acquisitions in the SAI Servicer Agreement.  Alarm Funding’s acquisition of CastleRock was
completed pursuant to, and in material compliance with, the terms outlined for
such acquisition in the CastleRock Asset Purchase Agreement. NewCo’s
acquisition of the CastleRock Shares and the assets of Alarm Funding was
completed pursuant to, and in material 


 


28

















 


compliance
with, the terms outlined for such acquisition in the Contribution Agreement”


 


(i)            The following Section is
hereby inserted as Section 5.1.33 [Restructure Documents] of the Credit
Agreement:


 


“5.1.33  Restructure
Documents.


 


5.1.33.1   Schedule 5.1.33 contains a true, correct
and  complete list of the agreements evidencing the Restructure. Neither
Alarm Funding, NewCo nor CastleRock is in default on any of its obligations
under any of the Restructure Documents; all representations and warranties made
by Alarm Funding, NewCo and CastleRock in the Restructure Documents and in the
certificates delivered in connection therewith are true and correct in all
material respects as of the date thereof; no representation, warranty or
statement made by Alarm Funding, NewCo or CastleRock, at the time they were
made, in any Restructure Document, or any agreement, certificate, statement or
document required to be delivered pursuant to any Restructure Document,
contains any untrue statement of material fact or omits to state a material
fact necessary in order to make the statements contained in such Restructure
Document not misleading in light of the circumstances in which they were made;
after giving effect to the transactions contemplated by the Restructure Documents.  NewCo has good title to the CastleRock Shares
and assets of Alarm Funding acquired in connection with the Contribution
Agreement,  free and clear of all Liens
other than the Liens created by the Credit Documents and other than Permitted
Liens.


 


5.1.33.2   Each of Alarm Funding, CastleRock and NewCo have
adequate power and authority and have full legal right to enter into each
Restructure Document to which it is a party, and to perform, observe and comply
with all of its agreements and obligations under each of the Restructure
Documents to which it is a party.  The
Restructure Documents are valid and binding obligations of Alarm Funding,
CastleRock and NewCo  to the extent that
it is a party thereto, enforceable against Alarm Funding, CastleRock or NewCo
to the extent it is a party thereto, except as limited by equitable principles
and by bankruptcy, insolvency or similar laws affecting the rights of creditors
generally.


 


5.1.33.3   The execution and delivery by Alarm Funding,
CastleRock and NewCo of the Restructure Documents to which it is a party, the
performance by Alarm Funding, CastleRock and NewCo of all of its agreements and
obligations under the Restructure Documents to which it is a party, and the
consummation of the transactions pursuant to the Restructure Documents have
been duly authorized by all necessary limited liability company action on the
part of Alarm Funding, and all


 


29

















 


corporate
actions of NewCo and CastleRock and do not and will not: (i) contravene
any provision of any such party’s Organizational Documents; (ii) conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under any agreement or instrument to which Alarm Funding,
CastleRock or NewCo is a party or by which its assets are bound, which would
reasonably be expected to have a Material Adverse Effect; or (iii) violate
or contravene any provision of any Law thereunder or any decree, order or
judgment of any Official Body which would reasonably be expected to have a
Material Adverse Effect.


 


5.1.33.4   There are no proceedings pending or, to the
knowledge of Borrower, threatened, against Alarm Funding, NewCo or CastleRock
which call into question the validity or enforceability of any of the
Restructure Documents.


 


5.1.33.5   The transactions contemplated under the Restructure
Documents have been consummated in accordance with the terms and conditions of
the Restructure Documents and all Laws. 
All consents and approvals of, and filings and permits with, and all
other actions in respect of, all Official Bodies required in order to
consummate the transactions in accordance with the terms and conditions of the
Restructure Documents and all Laws have been, or prior to the time required,
have been, obtained, given, filed, taken or waived, and are in full force and
effect.”


 


(j)            The following Section is
hereby inserted as Section 5.1.34 [CastleRock Transaction Documents] of
the Credit Agreement:


 


“5.1.34  CastleRock
Transaction Documents.


 


5.1.34.1   Neither Alarm Funding nor CastleRock is  in default on any of its obligations under
the CastleRock Transaction Documents; all representations and warranties made
by Alarm Funding and CastleRock in the CastleRock Transaction Documents and in
the certificates delivered in connection therewith are true and correct in all
material respects as of the date thereof; no representation, warranty or
statement made by Alarm Funding or CastleRock, at the time they were made, in
any CastleRock Transaction Document, or any agreement, certificate, statement
or document required to be delivered pursuant to any CastleRock Transaction
Document, contains any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements contained in such
CastleRock Transaction Document not misleading in light of the circumstances in
which they were made; after giving effect to the CastleRock Transaction
Documents.  CastleRock has good title to
the assets acquired in respect of the acquisition of certain assets of
SAS,  free and clear of all Liens other
than the Liens created by the Credit Documents and other than Permitted Liens.


 


30














 


5.1.34.2   Alarm Funding and CastleRock each had adequate power
and authority and had full legal right to enter into each CastleRock
Transaction Document to which it is a party, and to perform, observe and comply
with all of its agreements and obligations under each of the CastleRock
Transaction Documents.  The CastleRock
Transaction Documents are valid and binding obligations of Alarm Funding and
CastleRock to the extent that each is a party thereto, enforceable against
Alarm Funding to the extent it is a party thereto, except as limited by
equitable principles and by bankruptcy, insolvency or similar laws affecting
the rights of creditors generally.


 


5.1.34.3   The execution and delivery by Alarm Funding and
CastleRock of the CastleRock Transaction Documents to which it is a party, the
performance by each of Alarm Funding and CastleRock of all of its agreements
and obligations under the CastleRock Transaction Documents to which it is a
party, and the consummation of the transactions pursuant to the CastleRock Transaction
Documents have been duly authorized by all necessary limited liability company
action on the part of Alarm Funding and CastleRock and do not and will not: (i) contravene
any provision of Alarm Funding’s Organizational Documents; (ii) conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute
a default under any agreement or instrument to which Alarm Funding or
CastleRock is a party or by which its assets are bound, which would reasonably
be expected to have a Material Adverse Effect; or (iii) violate or
contravene any provision of any Law thereunder or any decree, order or judgment
of any Official Body which would reasonably be expected to have a Material
Adverse Effect.


 


5.1.34.4   There are no proceedings pending or, to the
knowledge of Borrower, threatened, against Alarm Funding or CastleRock, which
call into question the validity or enforceability of any of the CastleRock
Transaction Documents.


 


5.1.34.5   The transactions contemplated under the CastleRock
Transaction Documents have been consummated in accordance with the terms and
conditions of the CastleRock Transaction Documents and all Laws.  All consents and approvals of, and filings
and permits with, and all other actions in respect of, all Official Bodies required
in order to consummate the transactions in accordance with the terms and
conditions of the CastleRock Transaction Documents and all Laws have been, or
prior to the time required, have been, obtained, given, filed, taken or waived,
and are in full force and effect.”


 


(k)           The following Section is
hereby inserted as Section 5.1.35 [Subordinated Debt] of the Credit
Agreement:


 


31

















 


“5.1.35  Subordinated
Debt.  Borrower represents and
warrants that the Subordinated Debt has been terminated, the Subordinated Debt
Documents are of no further force and effect, and Alarm Funding has been
relieved of all obligations and liabilities under the Subordinated Debt
Documents and Borrower has no further obligation to pay the Subordinated Debt,
or any other amount, whether in cash or in-kind, to the Subordinated Creditor.”


 


8.             Amendment of Section 6
[Conditions of Lending] of the Credit Agreement.


 


(a)           Section 6.1.19 [Senior
Funded Debt] of the Credit Agreement is hereby amended and restated as follows:


 


“Section 6.1.19   Reserved.”


 


9.             Amendment of Section 7
[Covenants] of the Credit Agreement.


 


(a)           Section 7.1.10 [Use of
Proceeds] of the Credit Agreement is hereby amended and restated to read as
follows:


 


“The proceeds of the Term Loans shall be used only
to refinance the Revolving Credit Loans. Borrower shall not use the proceeds of
the Term Loans or the Retention Advance for any purpose which contravenes any
applicable Law or any provisions hereof.”


 


(b)           Section 7.1.6
[Visitation Rights] of the Credit Agreement is hereby amended and restated to
read as follows:


 


“Borrower shall permit any of the officers,
authorized employees or representatives of Agent to visit and inspect any of
its properties and to examine and make excerpts from its books and records and
discuss its business affairs, finances and accounts with Borrower’s officers,
all in such detail and at such times during normal business hours and as often
as Agent may reasonably request, provided that Agent shall provide
Borrower with reasonable notice prior to any visit or inspection.  Any Lender wishing to participate in such a
visit shall be entitled to do so.  In the
event any Lender desires to conduct an audit of Borrower, it is hereby agreed
that such audit shall be performed by Agent and Agent’s officers, authorized
employees or representatives.  Agent in
its sole discretion may conduct, at Borrower’s expense, (a) up to 4 times
within any 12 month period field audits of Borrower’s business, property, and
locations, and (b) no less frequently than every sixty (60) days an
appraisal of the Collateral; provided,  however, such limitation
regarding the frequency of such audits and appraisals shall not apply if an
Event of Default exists.


 


Borrower will pay Agent a field examination fee of
$850 per day for all on-site examinations. 
In addition, Borrower will pay (a) all of 


 


32

















 


Agent’s
and Lender’s out-of-pocket expenses for such field examinations up to a maximum
of $20,000 (including the field examination fee) within any 12 month period and
(b) all of Agent’s and Lender’s out-of-pocket expenses for appraisals; provided,
however, such limitations regarding the field examination fee shall not
apply if an Event of Default has occurred and is continuing.”


 


(c)           Section 7.1.11 [Further
Assurances] of the Credit Agreement is hereby amended by inserting the
following immediately after the last period in such section:


 


“Until the closing of the Equity Raise, Borrower
shall cause all owners of any Ownership Interests in NewCo (other than SAS) to
promptly pledge such interests to Agent for the benefit of the Lenders pursuant
to a Pledge Agreement in form and substance satisfactory to Agent.  Borrower shall cause all owners of Ownership
Interests in Alarm Funding to promptly pledge such interest to the Agent for
the benefit of the Lenders pursuant to a Pledge Agreement in form and substance
satisfactory to Agent.”


 


(d)           Section 7.1.14 [Trade
Payables] of the Credit Agreement shall hereby be amended and restated in its
entirety to read as follows:


 


“In
no event shall Borrower or Guarantor permit more than (i) 10%  of its
trade payables (based on a dollar amount and excluding professional service
fees and any amounts which Borrower or Guarantor dispute) to be aged more than
60 days from the invoice date and (ii) 20%  of its trade payables
(based on a dollar amount and excluding professional service fees and any
amounts which Borrower or Guarantor dispute) to be aged more than 45 days and
less than 60 days from the invoice date.  In addition, in no event shall
Borrower or Guarantor permit more than 12.5% of its trade payables (based on a
dollar amount and excluding professional service fees and any amounts which
Borrower or Guarantor dispute) aged in excess of 45 days from the invoice date
to be comprised of payables owed to dealers providing technical field services
(including maintenance, repair and replacement services) or vendors providing
equipment critical to the day to day operating and monitoring of residential
alarm systems.”


 


(e)           Section 7.1.18 [Single
Purpose Entity] of the Credit Agreement shall hereby be amended and restated in
its entirety to read as follows:


 


“(a)         Alarm Funding at all times since its formation has
been, and will continue to be, a duly formed and existing limited liability
company and a Single Purpose Entity.  
Alarm Funding at all times since 


 


33

















 


its
formation has been, and will continue to be, duly qualified as a limited
liability company, in each jurisdiction in which such qualification was or may
be necessary for the conduct of its business.


 


(b)           Alarm Funding at all times since its formation has
complied and will continue to comply with the provisions of its organizational
documents and the laws of its jurisdiction of formation relating to limited
liability companies.


 


(c)           With the exception of Alarm Funding’s ownership in
CastleRock, all formalities regarding the existence of Alarm Funding as a
Single Purpose Entity have been observed since its formation and will continue
to be observed.


 


(d)           Alarm Funding has at all times since its formation
accurately maintained, and will continue to accurately maintain its financial
statements, accounting records and limited liability company documents.  Alarm Funding has maintained and will
maintain books, records, resolutions and agreements.  Alarm Funding has at all times since its
formation accurately maintained, and will continue to accurately maintain, its
own bank accounts and payroll.  Alarm
Funding has not and will not commingle its funds or assets with those of any
other entity, and has held and will hold its assets in its own name.


 


(e)           Alarm Funding has at all times since its formation
paid, and will continue to pay, its own liabilities from its own separate
assets.


 


(f)            Alarm Funding was organized solely for the purpose
described in the definition of Single Purpose Entity and as set forth in this Section and
will not engage in any business unrelated to acting as the Borrower hereunder
which is inconsistent with or in violation of this Section or this
Agreement.


 


(g)           Alarm Funding will not have any assets other than
its ownership interest in NewCo.


 


(h)           Whitecap, Offshore I, Offshore II, Full Circle
and Alarm Funding have not and will not engage in, seek or consent to any
dissolution, winding up, liquidation, consolidation, merger (other than as
contemplated in this Agreement), asset sale (other than as contemplated in this
Agreement), transfer of membership interest of Alarm Funding or amendment
of the operating agreement or articles of formation of Alarm Funding.


 


(i)            Except as expressly permitted herein, Whitecap,
Offshore I, Offshore II and Full Circle are and shall remain the sole
economic members of Alarm Funding.


 


34

















 


(j)            Alarm Funding shall not file a bankruptcy or
insolvency petition or otherwise institute insolvency proceedings with respect
to itself or to any other entity in which it has a direct or indirect legal or
beneficial ownership interest, dissolve, liquidate, consolidate, merge, or sell
all or substantially all of its assets or any other entity in which it has a
direct or indirect legal or beneficial ownership interest, engage in any other
business activity, or amend its organizational documents.


 


(k)           Alarm Funding has at all times since its formation
identified itself, and will continue to identify itself, in all dealings with
the public, under Alarm Funding’s own name and as a separate and
distinct entity.   Alarm Funding has not
at any time since its formation identified itself, and will not identify
itself, as being a division or a part of any other entity.   Alarm Funding has not at any time since its
formation identified, and will not identify, any other Person as being a
division or part of Alarm Funding.  Alarm
Funding has not and will not fail to correct any known misunderstanding
regarding the separate identity of such entity. 
Alarm Funding has conducted and will conduct its business in its own
name.


 


(l)            Alarm Funding has at all times since its formation,
and will continue to be, adequately capitalized in light of the nature of its
business.


 


(m)          Alarm Funding has not at any time since its
formation assumed or guaranteed, and will not assume or guarantee, the
liabilities of any other Persons except in the ordinary course of acquiring
Security Alarm Contracts.  Alarm Funding
has not at any time since its formation acquired, and will not acquire,
obligations or securities of any other Persons other than NewCo.  Except for   
servicing payments paid to CastleRock pursuant to the CastleRock
Servicer Agreement, Alarm Funding has not at any time since its formation made,
and will not make, loans or advances to any Person.  Alarm Funding has not and will not pledge its
assets for the benefit of any other Person or entity, except in favor of the
Agent for the benefit of the Lenders.


 


(n)           Alarm Funding has not at any time since its
formation entered into and was not a party to, and, will not enter into or be a
party to, any transaction with any Affiliate, except in the ordinary course of
business of Alarm Funding on terms which are no less favorable
to Alarm Funding than would be obtained in a comparable arm’s length
transaction with an unrelated third party.


 


(o)           Alarm Funding has no Indebtedness other than the
Indebtedness to the Agent and the Lenders under the Loan Documents, except as
expressly permitted herein.”


 


(f)            Section 7.1.21
[Compliance with FCC Mandate] of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:


 


35

















 


“Borrower represents and warrants that CastleRock is
in compliance in all material respects with the mandate of the Federal
Communications Commission requiring that all analog radios be converted from
analog to digital technology.”


 


(g)           The following provision
shall be inserted as Section 7.1.23 [Equity Raise] of the Credit
Agreement:


 


“7.1.23  Equity
Raise.


 


No later than two weeks following the Third Amendment
Effective Date, Borrower shall deliver to Agent either (x) executed
commitment letters with respect to a private Equity Raise (including from
Whitecap or any of its Affiliates) or (y) evidence of the filing of an S-1
with respect to a public Equity Raise.”


 


(h)           The following provision
shall be inserted as Section 7.1.24 [Business Management Consultant] of
the Credit Agreement:


 


“7.1.24  Business
Management Consultant.


 


Borrower has informed Agent and Lenders that
Borrower has engaged Nachman & Hayes (“Business Management
Consultant”), the cost of which shall be paid by Borrower, to evaluate
Borrower and provide certain management services.  Borrower will retain the Business Management
Consultant until the Loans are paid in full. 
The Business Management Consultant will commence its engagement on or
before the Third Amendment Effective Date. 
Borrower agrees that it will provide Agent, and any consultants or
professionals retained by Agent, copies of all reports prepared by the Business
Management Consultant within five (5) days of issuance to
Borrower.  In addition Borrower shall
cause the Business Management Consultant to provide written reports to Agent
and Lenders on a weekly basis and to provide Agent, and any consultants or
professionals retained by Agent, with such other information as Agent, Lenders
or such consultants or professionals may reasonably request.  Borrower shall promptly address any inquiries
by Agent and any consultants or professionals retained by Agent and shall
advise Agent of any actions Borrower intends to undertake in light of
information or recommendations provided by the Business Management Consultant.”


 


(i)            The following provision
shall be inserted as Section 7.1.25 [Single Purpose Entity - NewCo] of the
Credit Agreement:


 


“7.1.25  Single
Purpose Entity - NewCo.


 


In the event that the Equity Raise does not occur on
or before March 1, 2011, NewCo shall immediately take all actions
necessary, including without limitation, the amendment of its


 


36

















 


Organizational
Documents, to qualify as a Single Purpose Entity, subject to the ownership of
CastleRock as its wholly-owned subsidiary, and the following provisions shall
apply to NewCo as of March  2, 2011 (the “SPV Date”).


 


(a)           NewCo at all times since its formation has been, and
will continue to be, a duly formed and existing corporation and, since the SPV
Date, a Single Purpose Entity, subject to the ownership of CastleRock as its
wholly-owned subsidiary.  NewCo at all
times since its formation has been, and will continue to be, duly qualified as
a corporation, in each jurisdiction in which such qualification was or may be
necessary for the conduct of its business.


 


(b)           NewCo at all times since its formation has complied
and will continue to comply with the provisions of its organizational documents
and the laws of its jurisdiction of formation relating to corporations.


 


(c)           All formalities regarding the existence
of NewCo as a Single Purpose Entity, subject to the ownership of CastleRock
as its wholly-owned subsidiary, have been observed since the SPV Date and will
continue to be observed.


 


(d)           NewCo has at all times since its formation
accurately maintained, and will continue to accurately maintain its financial
statements, accounting records and corporate documents.  NewCo has maintained and will maintain books,
records, resolutions and agreements separate from those of any other
entity.  NewCo has at all times since its
formation accurately maintained, and will continue to accurately maintain, its
own bank accounts, payroll and separate books of account.  NewCo has not and will not commingle its
funds or assets with those of any other entity, and has held and will hold its
assets in its own name.


 


(e)           NewCo has at all times since the SPV Date, and will
continue to pay, its own liabilities from its own separate assets.


 


(f)            NewCo will not engage in any business unrelated to
acting as the Borrower hereunder which is inconsistent with or in violation of
this Section.


 


(g)           NewCo has not and will not have any assets other
than those related to its Security Alarm Contracts and its ownership
interest in CastleRock.


 


(h)           Alarm Funding has not and will not engage in, seek
or consent to any dissolution, winding up, liquidation, consolidation, merger
(other than as contemplated in this Agreement), asset sale (other


 


37

















 


than
as contemplated in this Agreement), transfer of 
ownership interest of NewCo or amendment of the articles of
incorporation or by laws of NewCo.


 


(i)            Except as expressly permitted herein, Alarm Funding
and SAS are and shall remain the sole economic owner of NewCo.


 


(j)            NewCo shall not, 
and Alarm Funding shall not permit NewCo to, file a bankruptcy or
insolvency petition or otherwise institute insolvency proceedings with respect
to itself or to any other entity in which it has a direct or indirect legal or
beneficial ownership interest, dissolve, liquidate, consolidate, merge, or sell
all or substantially all of its assets or any other entity in which it has a
direct or indirect legal or beneficial ownership interest, engage in any other
business activity, or amend its organizational documents.


 


(k)           NewCo has at all times since  the SPV Date identified itself, and will
continue to identify itself, in all dealings with the public, under NewCo’s own
name and as a separate and distinct entity. 
NewCo has not at any time since the SPV Date identified itself, and will
not identify itself, as being a division or a part of any other entity.  NewCo has not at any time since the SPV Date,
and will not identify, any other Person as being a division or part of
NewCo.  NewCo has not and will not fail
to correct any known misunderstanding regarding the separate identity of such
entity.  NewCo has conducted and will
conduct its business in its own name.


 


(l)            NewCo has at all times since its formation, and will
continue to be, adequately capitalized in light of the nature of its business.


 


(m)          NewCo has not at any time since its formation
assumed or guaranteed, and will not assume or guarantee, the liabilities of any
other Persons except in the ordinary course of acquiring Security Alarm
Contracts.  NewCo has not at any time
since its formation acquired, and will not acquire, obligations or securities
of any other Persons.  NewCo has not at
any time since its formation made, and will not make, loans or advances to any
Person other than the payment or reimbursement of Permitted Expenses after the
Equity Raise and advances of Net Proceeds to Permitted Subsidiaries subject to
the limitations set forth in Section 7.2.9 [Subsidiaries, Partnerships and
Joint Ventures].  NewCo has not and will
not pledge its assets for the benefit of any other Person or entity, except in
favor of the Agent for the benefit of the Lenders.


 


(n)           NewCo has not at any time since its formation
entered into and was not a party to, and, will not enter into or be a party to,
any transaction with any Affiliate, except in the ordinary course of


 


38

















 


business
of NewCo on terms which are no less favorable to NewCo than would be
obtained in a comparable arm’s length transaction with an unrelated third
party.


 


(o)           NewCo has no Indebtedness other than the
Indebtedness to the Agent and the Lenders under the Loan Documents, except as
expressly permitted herein.”


 


(j)            The following provisions
shall be inserted as Section 7.1.27 [CastleRock Lease; Landlord’s Waiver]
of the Credit Agreement:


 


“7.1.27    CastleRock Lease; Landlord’s Waiver.


 


Not later than February 15, 2011, Borrower
shall cause CastleRock  (a) to enter
into a lease for premises to house the central servicing station and (b) to
provide Agent with a landlord’s waiver in form and substance satisfactory to
Agent.”


 


(k)           The following provision
shall be inserted as Section 7.1.28 [Working Capital Funding] of the
Credit Agreement:


 


“7.1.28    Working Capital Funding.


 


(a)           Not later than November 30, 2010, Borrower
shall provide evidence satisfactory to Agent that it has received funding
during the month of November 2010 from Whitecap Advisors, LLC or its
Affiliates  in an amount not less than
$175,000 in the aggregate (the “November Working Capital Payment”),
and Borrower shall use such funds for current working capital, including
addressing trade payable issues. In the event that the November Working
Capital Payment is not made in full, and Agent provided with evidence thereof,
by November 30, 2010, Agent may direct the Escrow Agent to disburse an
amount equal to the deficiency, up to $175,000, in accordance with Section 4.1(a) of
the Escrow Agreement (the “November Deficiency Amount”).  Borrower shall cause Whitecap Advisors, LLC
or its Affiliates to replenish the Escrow Amount by depositing an amount equal
to the November Deficiency Amount into the Escrow Account within ten (10) days
of the disbursement of the November Deficiency Amount, and failure to
replenish the November Deficiency Amount in full within such time period
shall constitute an Event of Default.


 


(b)           Not later than December 31, 2010, Borrower
shall provide evidence satisfactory to Agent that it has received funding
during the month of December 2010 from Whitecap Advisors, LLC or its
Affiliates  in an amount not less than
$175,000 in the aggregate (the “December Working Capital Payment”),
and Borrower shall use such funds for current working capital, including
addressing trade payable


 


39

















 


issues.
In the event that the December Working Capital Payment is not made in
full, and Agent provided with evidence thereof, by December 31, 2010,
Agent may direct the Escrow Agent to disburse an amount up to $175,000, in
accordance with Section 4.1(b) of the Escrow Agreement (the “December Deficiency
Amount”). Borrower shall cause Whitecap Advisors, LLC or its Affiliates to
replenish the Escrow Amount by depositing an amount equal to the December Deficiency
Amount into the Escrow Account within ten (10) days of the disbursement of
the December Deficiency Amount, and failure to replenish the December Deficiency
Amount in full within such time period shall constitute an Event of Default.”


 


(l)            The following provision
shall be inserted as Section 7.1.29 [Amendment of CastleRock Servicing
Agreement] of the Credit Agreement:


 


“7.1.29  Amendment
of CastleRock Servicing Agreement.


 


No later than December 15, 2010, Borrower and
Guarantor shall amend the CastleRock Servicing Agreement to include all
exhibits and schedules currently referenced in the CastleRock Servicing
Agreement but not attached thereto, and shall deliver a complete and fully
executed copy of such amendment to Agent.”


 


(m)          The following provision
shall be inserted as Section 7.1.30 [CastleRock Security Group Trademark]
of  the Credit Agreement:


 


“7.1.29  Amendment
of CastleRock Security Group Trademark.


 


Borrower and Guarantor shall use reasonable efforts
to cause  the “CastleRock Security Group”
trademark to be assigned to Guarantor.”


 


(n)           Section 7.2.1
[Indebtedness] of the Credit Agreement is hereby amended and restated to read
as follows:


 


“7.2.1      Indebtedness.


 


Borrower shall not, and shall not permit Guarantor
or any Subsidiary to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:


 


(a)           Indebtedness under the Credit Documents;


 


(b)           Existing Indebtedness as set forth on Schedule
7.2.1 (including any extensions or renewals thereof), provided there
is no increase in the amount thereof or other significant change in the terms
thereof unless otherwise specified on Schedule 7.2.1;


 


40














 


(c)           Indebtedness, the proceeds of which shall  be
used by NewCo for working capital purposes, provided that such indebtedness is (i) unsecured,
(ii) no payment of principal or interest can be made on such Indebtedness
until six months after the Obligations have been paid in full and the Credit
Agreement has been terminated in accordance with the terms thereof, (iii) the
lender of such indebtedness shall enter into a subordination agreement and
related documentation satisfactory to the Agent and the Lenders in all
respects,  (iv) the exercise of any
equity conversion feature shall in no event result in a violation of Section 8.1.14
[Change of Control: Change of Management];


 


(d)           Capitalized and operating leases as and to the
extent permitted under Section 7.2.15 [Capital Expenditures and Leases];


 


(e)           Indebtedness secured by Purchase Money Security
Interests not exceeding $10,000 in the aggregate; and


 


(f)            Permitted Subsidiary Indebtedness incurred by a
Permitted Subsidiary.”


 


(o)           Section 7.2.2 [Liens]
of the Credit Agreement shall be amended and restated to read as follows:


 


“7.2.2      Liens.


 


“Borrower shall not, and it shall not permit
Guarantor or any Subsidiary to, at any time create, incur, assume or suffer to
exist any Lien on any of its property or assets, tangible or intangible, now
owned or hereafter acquired, or agree or become liable to do so,  except Permitted Liens. 
Borrower shall not, and shall not permit Guarantor or any
Subsidiary to, directly or indirectly, enter into any agreement with any Person
other than Agent or Lenders pursuant to a Credit Document which prohibits or
limits the ability of Borrower, Guarantor or any Subsidiary to create, incur,
assume, or suffer to exist any Lien upon any of its property, assets, or
revenues, whether now owned or hereafter acquired.”


 


(p)           Section 7.2.6
[Liquidation, Mergers, Consolidation, Acquisitions] of the Credit Agreement
shall be amended and restated to read as follows:


 


“7.2.6      Liquidations, Mergers, Consolidations, Acquisitions.


 


Borrower shall not, nor shall it permit
Guarantor or any Subsidiary to, dissolve, liquidate or wind-up its affairs, or
become a party to any merger or consolidation, or acquire by purchase, lease or
otherwise any security alarm contracts or all or substantially all of the assets
or capital stock of any other Person, provided that


 


41

















 


(a)           NewCo may acquire a bulk purchase of Security Alarm
Contracts (each a “Permitted Acquisition”), provided that each of
the following requirements is met:


 


(1)           Such assets shall be acquired for cash
and NewCo shall grant a Prior Security Interest in such assets in favor of
the Agent for the benefit of the Lenders on the date of such Permitted
Acquisition;


 


(2)           the governing bodies of such Person and NewCo
shall have approved such Permitted Acquisition and NewCo shall have
delivered to Agent written evidence of the approval of such governing body
of   NewCo and such Person for such Permitted Acquisition;


 


(3)           no Potential Default or Event of Default shall exist
immediately prior to or after giving effect to such Permitted Acquisition;


 


(4)           Borrower shall be in compliance with the covenants
contained in Section 7.2.15 [Capital Expenditures and Leases], Section 7.2.16
[Minimum Cash Receipts], Section 7.2.17 [Minimum Fixed Charge Coverage
Ratio], Section 7.2.18  [ Senior Funded Debt  to
EBITDA Ratio ] and Section 7.2.20 [Maximum Attrition Rate], in each
case after giving effect to such Permitted Acquisition (including in such
computation  liabilities assumed or incurred (subject to the restriction
that all such assets must be purchased in cash) in connection with such
Permitted Acquisition, but excluding income earned or expenses incurred by the
Person, business or assets to be acquired prior to the date of such Permitted
Acquisition), by delivering at least 5 Business Days prior to such Permitted
Acquisition a certificate in the form of Exhibit 7.2.6 evidencing
such compliance;


 


(5)           Borrower shall deliver to Agent at least 5 Business
Days before such Permitted Acquisition copies of any agreements entered into or
proposed to be entered into by NewCo in connection with such Permitted
Acquisition, including a purchase agreement demonstrating that the purchase
price shall be paid in cash and with other terms customary for the security
alarm industry, including an account guaranty, a purchase price holdback, and
appropriate nonsolicitation provisions, an assignment and bill of sale (in a
form reasonably acceptable to Agent), and a fully-executed Assignment and Modification
Agreement with the Approved Central Station(s) that monitor the customers
included in the Permitted Acquisition, and shall deliver to Agent such other
information about such Person or its assets as any Lender may reasonably
require;


 


42

















 


(6)           if the seller will remain in business and will
provide on-going services to the acquired customers, then NewCo shall enter
into a service agreement with seller on terms customary for the security alarm
industry, including appropriate nonsolicitation provisions, a right of first
refusal, and a consent to collateral assignment to Agent; provided, however
that Borrower shall cause any acquired Security Alarm Contracts to be
transferred to CastleRock for servicing within 60 days of acquisition.


 


(7)           Borrower shall perform reasonable due diligence on
not less than the lesser of (a) 25% or (b) 500 of all security alarm
customer contracts to be acquired;


 


(8)           Each acquired customer evidenced by a Security Alarm
Contract must have an Approved Credit Score greater than 625;


 


(9)           Not more than 10% of any acquired Security Alarm
Contracts shall be Security Alarm Contracts originated through a “Summer
Program”; and


 


(10)         The acquired Security Alarm Contracts must (i) have
a minimum original term of not less than thirty-six (36) months with an
automatic renewal provision providing for a minimum renewal period of 12 months
following the expiration of the then-current term; and (ii) be in full
force and effect, with no defaults or late payments for a period of at least
six (6) consecutive months immediately prior to the acquisition date.


 


(b)           subject to Section 7.2.21 [Dealer Programs],
NewCo may acquire customer accounts through a Dealer Program.  Borrower agrees to perform reasonable due
diligence on not less than of all security alarm customer contracts (or such
lesser amount as may be subject to the acquisition) to be acquired pursuant to
this clause (b).


 


(c)           Subject to Section 7.2.9 [Subsidiaries,
Partnerships and Joint Ventures], Permitted Subsidiaries may acquire Security
Alarm Contracts by bulk purchase.


 


(d) For the avoidance of doubt, in no event
shall Borrower be permitted to make Permitted Acquisitions unless the Equity
Raise has occurred and the Restricted Proceeds and the Remaining Proceeds have
been deposited in accordance with Section 2A.2(c) [Restricted
Proceeds; Updated Appraisals]”


 


(q)           Section 7.2.8
[Affiliate Transactions] of the Credit Agreement is hereby amended and restated
to read as follows:


 


43

















 


“7.2.8      Affiliate Transactions.


 


Except as set forth on Schedule 7.2.8,
Borrower shall not enter into or carry out any transaction (including
purchasing property or services from or selling property or services to any Affiliate
of Borrower or other Person) unless such transaction is: (a) not otherwise
prohibited by this Agreement, (b) entered into in the ordinary course of
business upon fair and reasonable arm’s-length terms and conditions which are
fully disclosed to Agent and (c) in accordance with all applicable
Law.  Notwithstanding the foregoing,
Borrower shall be permitted to reimburse CastleRock for bank fees incurred by
CastleRock in connection with the CastleRock Servicing Agreement, such
reimbursements not to exceed $75,000.00 per month, and NewCo shall be permitted
to reimburse Permitted Expenses after the Equity Raise and sell NewCo Contracts
to Permitted Subsidiaries and  make
advances to Permitted Subsidiaries, to the extent permitted in Section 7.29
[Subsidiaries, Partnerships and Joint Ventures] (collectively, the “Permitted
Affiliate Transactions”).”


 


(r)            Section 7.2.9
[Subsidiaries, Partnerships and Joint Ventures] of the Credit Agreement is
hereby amended and restated to read as follows:


 


“(a)         Except as set forth on Schedule 7.2.9 and
other than Permitted Subsidiaries, neither Alarm Funding, CastleRock nor NewCo
shall own or create directly or indirectly any Subsidiaries.  Except as otherwise permitted under the
Credit Agreement and the other Credit Documents, Alarm Funding shall not, and
shall not permit the Board of Directors of NewCo to, vote for any of the
following actions by NewCo without Agent’s prior written consent:  (a) the incurrence of debt, (b) granting
of Liens, (c) any sale of assets, (d) any transactions between NewCo
and any Affiliate or (e) payment of dividends or distributions.  Alarm Funding shall not, and shall not permit
NewCo to become or agree to become: (i) a general or limited partner in
any general or limited partnership, (ii) a member or manager of, or hold a
limited liability company interest in, a limited liability company, or (iii) a
joint venturer or hold a joint venture interest in any joint venture.  NewCo shall not conduct any business or hold
or own any assets other than the CastleRock Shares and Security Alarm
Contracts.


 


(b)           CastleRock shall not own or create directly or
indirectly any Subsidiaries.  Except as
otherwise permitted under the Credit Agreement and the other Credit Documents,
NewCo shall not, and shall not permit the Board of Directors of CastleRock to,
vote for any of the following actions by CastleRock without Agent’s prior
written consent:  (a) the incurrence
of debt, (b) granting of Liens, (c) any sale of assets, (d) any
transactions between CastleRock and any Affiliate other than the CastleRock
Servicing Agreement, and (e) payment of dividends or distributions.  NewCo shall not, and shall not permit
CastleRock to, 


 


44

















 


become
or agree to become: (i) a general or limited partner in any general or
limited partnership, (ii) a member or manager of, or hold a limited
liability company interest in, a limited liability company, or (iii) a
joint venturer or hold a joint venture interest in any joint venture.
CastleRock shall not conduct any business other than providing monitoring
services pursuant to the CastleRock Servicer Agreements or similar agreements
for the Permitted Subsidiaries other than conducting business as a full service
alarm company.


 


(c)           After the Deposit Date, NewCo shall be permitted to
own and create one or more wholly-owned subsidiaries which shall each be Single
Purpose Entities (each a “Permitted Subsidiary, and collectively, the “Permitted
Subsidiaries”) for the sole purpose of acquiring Security Alarm
Contracts from third parties or from NewCo as permitted in subsection (d) below
(each a “Permitted Subsidiary Acquisition”), provided that:


 


(i)            NewCo’s Ownership Interest in each Permitted
Subsidiary is pledged to the Agent for the benefit of the Lenders as
Collateral, upon terms and conditions satisfactory to Agent;


 


(ii)           The governing bodies of such Person and the
Permitted Subsidiary shall have approved such Permitted Subsidiary Acquisition
and Permitted Subsidiary shall have delivered to Agent written evidence of
the approval of such governing body of Permitted Subsidiary and such
Person for such Permitted Subsidiary Acquisition;


 


(iii)          No Potential Default or Event of Default shall exist
immediately prior to or after giving effect to such Permitted Subsidiary
Acquisition;


 


(iv)          Borrower shall deliver to Agent at least 5 Business
Days before such Permitted Subsidiary Acquisition copies of any agreements
entered into or proposed to be entered into by Permitted Subsidiary in
connection with such Permitted Subsidiary Acquisition, including a purchase
agreement  and with other terms customary
for the security alarm industry, including an account guaranty, a purchase
price holdback, and appropriate nonsolicitation provisions, an assignment and
bill of sale (in a form reasonably acceptable to Agent), and a fully-executed
Assignment and Modification Agreement with an approved central station(s) that
monitor the customers included in the Permitted Subsidiary Acquisition, and
shall deliver to Agent such other information about such Person or its assets
as any Lender may reasonably require;


 


(v)           If the seller will remain in business and will
provide on-going services to the acquired customers, then Permitted Subsidiary
shall enter into a service agreement with seller on terms customary for the


 


45

















 


security
alarm industry, including appropriate nonsolicitation provisions, a right of
first refusal, and a consent to collateral assignment to Agent; provided,
however that Borrower shall cause any acquired Security Alarm Contracts to be
transferred to CastleRock for servicing within 60 days of acquisition;


 


(vi)          Permitted Subsidiary shall perform reasonable due
diligence on not less than the lesser of (A) 500 or (B) 25% of all
security alarm customer contracts to be acquired;


 


(vii)         Each acquired customer evidenced by a Security Alarm
Contract must have an Approved Credit Score greater than 625;


 


(viii)        Not more than 10% of any acquired Security Alarm
Contracts shall be Security Alarm Contracts originated through a “Summer
Program”;


 


(ix)           The acquired Security Alarm Contracts must (i) have
a minimum original term of not less than thirty-six (36) months with an
automatic renewal provision providing for a minimum renewal period of 12 months
following the expiration of the then-current term; and (ii) be in full
force and effect, with no defaults or late payments for a period of at least
six (6) consecutive months immediately prior to the acquisition date;


 


(x)            The acquired Security Alarm Contracts must be
purchased with Indebtedness of the Permitted Subsidiary from a third party
lender (the “Subsidiary Creditor”) comprising at least 50% of the total
acquisition price (the “Permitted Subsidiary Indebtedness”) and the
Permitted Subsidiary Indebtedness shall be secured only by a first priority
lien granted in favor of the Subsidiary Creditor in the acquired Security Alarm
Contracts; and


 


(xi)           In no event shall any Affiliate of any Permitted
Subsidiary guarantee any Permitted Subsidiary Indebtedness or be liable for any
holdback payment or other liability with respect to any acquired Security Alarm
Contracts.


 


(d)           After the Deposit Date, Permitted Subsidiaries shall
be permitted to purchase Security Alarm Accounts from NewCo which NewCo
acquired after the Deposit Date (the “NewCo Contracts”) upon the
following terms and conditions:


 


(i) the purchase price of the NewCo Contracts
shall be the greater of the purchase price paid by NewCo for such NewCo
Contracts or the valuation of the NewCo Contracts as determined by the same
valuation methodology used to determine if an Over Advance exists at the time
of such purchase of the NewCo Contracts by the Permitted Subsidiary; and shall
be paid in full in cash;


 


46

















 


(ii)           the purchase and sale of the NewCo Contracts shall
be on an AS-IS, WHERE-IS basis, with no account guaranties or contingent
liabilities on the part of NewCo;


 


(iii)          the NewCo Contracts shall not be commingled with any
other Security Alarm Contracts owned by NewCo;


 


(iv)          the NewCo Contracts must be purchased with a
combination of Permitted Subsidiary Indebtedness and cash contributed from
NewCo, and the Permitted Subsidiary Indebtedness shall be secured only by a
first priority lien in the acquired NewCo Contracts;


 


(v)           in no event shall any Affiliate of any Permitted
Subsidiary guarantee any Permitted Subsidiary Indebtedness;


 


(vi)          all proceeds of the purchase and sale of the NewCo
Contracts shall be paid to NewCo upon transfer of the NewCo Contracts to the
Permitted Subsidiary and the Permitted Subsidiary shall bear all of the
customary and reasonable closing costs incurred by NewCo related to the NewCo
Contracts;


 


(vii)         in no event shall Borrower or CastleRock be liable
for any holdback payment or other liability with respect to any acquired
Security Alarm Contracts sold or transferred to a Permitted Subsidiary, and
Permitted Subsidiary shall assume all such obligations and obtain a release of
NewCo from any such obligations relating to the acquired NewCo Contracts; and


 


(viii)        in no event shall any NewCo Contracts be sold to a
Permitted Subsidiary more than 120 days from the date they were originally
purchased by NewCo;


 


(e)           In no event shall NewCo advance an amount more than
thirty-five percent (35%) of the sum of the Net Proceeds less the Over Advance
to the Permitted Subsidiaries in the aggregate for the purpose of acquiring
Security Alarm Contracts and NewCo Contracts.


 


(f)            Each Permitted Subsidiary shall pay for the
monitoring and servicing fees for the Security Alarm Contracts it acquires, and
in no event shall Remaining Proceeds be used to pay for the monitoring or
servicing of any Security Alarm Contracts, including without limitation NewCo
Contracts, acquired by any Permitted Subsidiary.


 


(g)           For the avoidance of doubt, in no event shall
Permitted Subsidiary Acquisitions be permitted unless the Equity Raise has
occurred and the Restricted Proceeds and the Remaining Proceeds have been
deposited in accordance with Section 2A.2(c) [Restricted Proceeds;
Updated Appraisals].


 


47

















 


(s)           Clause (c) of Section 7.2.14
[Changes in Documents] of the Credit Agreement is hereby amended and restated
to read as follows:


 


“(c)         Borrower shall not enter into or permit any renewal
or replacement of, amendment or modification to, or waiver or consent under (or
solicit any such renewal, replacement, amendment, modification, waiver or
consent) the SAI Servicer Agreement or the CastleRock Servicer Agreement, and
Borrower shall not permit CastleRock to amend, modify or supplement any term of
any Restructure Document, in each case without obtaining Agent’s prior written
consent.  Borrower shall not suffer or
permit the Restructure Documents to be amended, modified or supplemented
without the prior written consent of Agent, which consent shall not be
unreasonably withheld.  Alarm Funding
shall not suffer or permit Alarm Funding’s by-laws or limited liability company
agreement to be amended, modified or supplemented without the prior written
consent of Agent, which consent shall not be unreasonably withheld. NewCo shall
not suffer or permit NewCo’s by-laws or articles of incorporation to be
amended, modified or supplemented without the prior written consent of Agent,
which consent shall not be unreasonably withheld.”


 


(t)            Section 7.2.15 [Capital
Expenditures and Leases] of the Credit Agreement is hereby amended and restated
to read as follows:


 


“Borrower shall not make any payments exceeding
$50,000 in the aggregate in any fiscal year on account of the purchase or lease
of any assets which if purchased would constitute fixed assets or which if
leased would constitute a capitalized lease. 
Notwithstanding the foregoing, for the period commencing September 1,
2010 and ending August 31, 2011, Borrower shall be permitted to make
payments of not more than $1,200,000 in the aggregate, and for the period
commencing on September 1, 2011 and ending on May 31, 2012, Borrower
shall be permitted to make payments of not more than $600,000 in the aggregate,
in each case for costs incurred in connection with software upgrades and
associated customer relation upgrades (collectively, the “Permitted Capital
Expenditures”). Borrower shall not make any payments exceeding $50,000 in the
aggregate in any fiscal year on account of the rental or lease of real or
personal property of any other Person which does not constitute a capitalized
lease.  Borrower shall not make any
capital expenditure and lease payments which are not made under usual and
customary terms and in the ordinary course of business.”


 


(u)           Section 7.2.18 [Maximum
Funded Debt to Tangible Net Worth Ratio; Senior Funded Debt] of the Credit
Agreement is hereby amended and restated to read as follows:


 


48

















 


“7.2.18 Senior Funded Debt to Tangible Net Worth
Ratio; Senior Funded Debt to EBITDA Ratio.


 


(a)           Borrower shall not at any time permit the ratio of
Senior Funded Debt to Tangible Net Worth of NewCo and its consolidated
Subsidiaries (but in no event including any Permitted Subsidiary) to exceed (i) 5.0
to 1 for the period commencing on the Third Amendment Effective Date and
continuing until the Deposit Date, and (ii) 2.25 for the period commencing
on the Deposit Date and continuing thereafter.


 


(b)           Borrower shall not at any time permit the ratio of
Senior Funded Debt to EBITDA of NewCo and its consolidated Subsidiaries (but in
no event including any Permitted Subsidiary) to exceed (i) 5.0 to 1 for
the period commencing November 1, 2010 and continuing through September 30,
2011, and (ii) 4.25 for the period commencing on October 1, 2011 and
continuing thereafter.”


 


(v)           Section 7.2.19 [Minimum
Tangible Net Worth] of the Credit Agreement is hereby amended and restated to
read as follows:


 


“Section 7.2.19   Reserved.”


 


(w)          Section 7.2.20 [Maximum
Attrition Rate] of the Credit Agreement is hereby amended and restated to read
as follows:


 


“7.2.20  Maximum
Attrition Rate.


 


Borrower shall not permit the Quarterly Attrition
Rate of NewCo and its consolidated Subsidiaries (but in no event including any
Permitted Subsidiary)  to exceed (i) 85%
for the period ending August 31, 2010, (ii) 65% for the period ending
September 30, 2010, (iii) 42% for the period ending October 31,
2010, (iv) 25% for the period ending November 30, 2010, (v) 22%
for the period ending December 31, 2010, 
or (vi) 20% for the period commencing January 1, 2011 and all
other dates of determination thereafter. 
Borrower shall not permit the Annual Attrition Rate of NewCo and its consolidated
Subsidiaries (but in no event including any Permitted Subsidiary) to exceed (i) 44%
for the period from August 31, 2010 to April 30, 2011, (ii) 38%
for the period from May 1, 2011 to May 31, 2011, (iii) 32% for
the period from June 1, 2011 to June 30, 2011, (iv) 26% for the
period from July 1, 2011 to July 31, 2011, (v) 22% for the
period from August 1, 2011 to August 31, 2011 or (vi) 20% for
the period commencing September 1, 2011 and for all other dates of
determination thereafter.”


 


(x)            The following provisions
shall be inserted as Section 7.2.27 [Subsidiaries Bound by Covenants] of
the Credit Agreement:


 


“7.2.27                    Subsidiaries Bound by
Covenants.


 


(a)           Borrowers shall cause the Permitted Subsidiaries to
comply with and be bound by the 
following covenants contained in the Credit 


 


49

















 


Agreement,
mutatis mutandis: Section 7.1.1[Preservation
of Existence, Etc.], Section 7.1.2 [Payment of Liabilities Including
Taxes, Etc.],  Section 7.1.7
[Keeping of Records and Books of Account], 
Section 7.1.9 [Compliance with Laws], Section 7.1.13 [Anti-
Terrorism Laws],  Section 7.2.1
[Indebtedness], Section 7.2.2 [Liens], Section 7.2.3 [Guaranties], Section 7.2.4
[Loans and Investments], Section 7.2.6 [Liquidations, Mergers,
Consolidations, Acquisitions], Section 7.2.7 [Disposition of  Assets], Section 7.2.8 [Affiliate
Transactions], Section 7.2.9 [Subsidiaries, Partnerships and Joint
Ventures], Section 7.2.10 [Continuation of or Change in Business], Section 7.2.12
[Fiscal Year], Section 7.2.13 [Issuance of Ownership Interests], Section 7.2.14
[Changes in Documents], Section 7.2.15 [Capital Expenditures and Leases], Section 7.2.21
[Dealer Programs], and  Section 7.2.25
[Sale-Leasebacks; Real Property].


 


(b)           Borrowers shall cause CastleRock to comply with and
be bound by the following covenants contained in the Credit Agreement, mutatis mutandis: Section 7.1.1[Preservation of
Existence, Etc.], Section 7.1.2 [Payment of Liabilities Including
Taxes, Etc.], Section 7.1.3 [Maintenance of Insurance]; Section 7.1.4
[Maintenance of Properties and Leases]; Section 7.1.5 [Maintenance of
Patents, Trademarks, Etc.], Section 7.1.6 [Visitation Rights], Section 7.1.7
[Keeping of Records and Books of Account], Section 7.1.8 [Customer Service],
Section 7.1.9 [Compliance with Laws], Section 7.1.11 [Further
Assurances], Section 7.1.13 [Anti- Terrorism Laws], Section 7.1.14
[Trade Payables], Section 7.1.15 [Storage of Security Alarm Contract
Documents], Section 7.1.16 [Account Control Agreements], Section 7.1.17
[Establishment of a Lockbox Account, Dominion Account], Section 7.2.1
[Indebtedness], Section 7.2.2 [Liens], Section 7.2.3 [Guaranties], Section 7.2.4
[Loans and Investments], Section 7.2.6 [Liquidations, Mergers,
Consolidations, Acquisitions], Section 7.2.7 [Disposition of  Assets], Section 7.2.8 [Affiliate
Transactions], Section 7.2.9 [Subsidiaries, Partnerships and Joint
Ventures], Section 7.2.10 [Continuation of or Change in Business], Section 7.2.12
[Fiscal Year], Section 7.2.13 [Issuance of Ownership Interests], Section 7.2.14
[Changes in Documents], Section 7.2.15 [Capital Expenditures and Leases], Section 7.2.21
[Dealer Programs], Section 7.2.22 [Underwriting Guidelines], Section 7.2.23
[Alarm Licenses], Section 7.2.24 [Compensation; Employees], Section 7.2.25
[Sale-Leasebacks; Real Property] and Section 7.2.26 [Cancellation of
Indebtedness].


 


(y)           Sections 7.3.1 [Monthly
Financial Statements] and 7.3.3 [Annual Financial Statements] of the Credit
Agreement are each hereby amended to insert following the last sentence thereof
the following:


 


“Prior to the Third Amendment Effective Date, the
unaudited financial statements of Alarm Funding and its Subsidiaries may be
prepared by CastleRock, as long as all other requirements of this Section


 


50














 


are
met (including the certification of the Managing Director of Alarm Funding) and
CastleRock provides Agent with a certified copy of the monthly journals within
20 days after the end of each calendar month.”


 


(z)                                   Section 7.3.4
[Certificate of Alarm Funding] of the Credit Agreement is hereby amended and
restated to read as follows:


 


“Concurrently with the financial statements of
Borrower furnished to Agent and to Lenders pursuant to Sections 7.3.1 [Monthly
Financial Statements] and 7.3.3 [Annual Financial Statements], a certificate
(each a “Compliance Certificate”) of the Borrowers signed by the
Managing Director of Alarm Funding and the President of NewCo, and including
certifications of the Whitecap Principals and the CastleRock Principal, in the
form of Exhibit 7.3.4, to the effect that, except as described
pursuant to Section 7.3.7 [Notice of Default], (a) the
representations and warranties of Borrower contained in Section 5
[Representations and Warranties] and in the other Credit Documents are true on and
as of the date of such certificate with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which expressly relate solely to an earlier date
or time) and Borrower and CastleRock have performed and complied with all
covenants and conditions hereof and thereof, (b) no Event of Default or
Potential Default exists and is continuing on the date of such certificate and
(c) containing calculations in sufficient detail to demonstrate compliance
as of the date of such financial statements with all financial covenants
contained in Section 7.2 [Negative Covenants].”


 


(aa)                            The “Reserved”
heading of Section 7.3.6 of the Credit Agreement is hereby replaced with
the following Section 7.3.6 [Monthly Operating Metrics Reports; Business
Plan] and the following is hereby inserted:


 


“7.3.6                  Monthly Operating Metrics
Reports; Business Plan.


 


(a)                                  As soon as available and in
any event no later than the fifth (5th) day after the end of each month,
Borrower shall deliver or cause to be delivered weekly operating metrics
reports of NewCo and its consolidated Subsidiaries (but in no event including
any Permitted Subsidiary), in form and substance reasonably satisfactory to
Agent, including such information as Agent may reasonably request and which
shall include a report of the service fees collected by CastleRock.


 


(b)                                 No later than thirty (30)
days following the Third Amendment Effective Date, Borrower shall deliver a
written report to Agent that outlines a detailed plan of action that the
Borrower will implement in the event the Equity Raise does not occur by March 1,
2011 (the “Business Plan”).”


 


51

















 


10.                                 Amendment of Section 8
[Default] of the Credit Agreement.


 


(a)                                  Section 8.1.2  [Breach of Warranty] is hereby amended and
restated to read as follows:


 


“Any representation or warranty made at any time by
Alarm Funding, CastleRock, NewCo or any Pledgor in any Credit Document, or in
any Certificate, other instrument or statement furnished pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading in
any material respect as of the time it was made or furnished;”


 


(b)                                 Section 8.1.3
[Breach of Negative Covenants or Visitation Rights, Trade Payables, Account
Control Agreements or Working Capital Funding] is hereby amended and restated
to read as follows:


 


“Borrower shall default in the observance or
performance of any covenant set forth or contained in Section 7.1.6
[Visitation Rights], Section 7.1.14 [Trade Payables], Section 7.1.16
[Account Control Agreements], Section 7.1.28 [Working Capital Funding] or Section 7.2
[Negative Covenants].”


 


(c)                                  Section 8.1.4
[Breach of Other Covenants] of the Credit Agreement is hereby amended and
restated to read as follows:


 


“Alarm Funding, NewCo, CastleRock or any Pledgor
shall default in the observance or performance of any other covenant, condition
or provision of any Credit Document and such default shall continue unremedied
for a period of 10 Business Days after any officer of Alarm Funding, NewCo,
CastleRock or any Pledgor becomes aware of the occurrence thereof (such grace
period to be applicable only in the event such default can be remedied by
corrective action of Alarm Funding, NewCo, CastleRock or any Pledgor, as the
case may be, as determined by Agent in its sole discretion). The
representations and warranties set forth in Section 5 [Representations and
Warranties] shall not be subject to any grace period set forth in Section 8.1.4
[Breach of Other Covenants] of the Credit Agreement.”


 


(d)                                 Section 8.1.5
[Defaults in Other Agreements or Indebtedness] of the Credit Agreement is
hereby amended and restated to read as follows:


 


“(a)                            A default or event of
default shall occur and be declared at any time under the terms of any other
agreement involving borrowed money or the extension of credit or any other
Indebtedness under which Alarm Funding, NewCo, CastleRock or any Pledgor may be
obligated as a borrower or guarantor in excess of $50,000  in
the aggregate, and such breach, default or event of default consists of the
failure to pay (beyond any period of grace permitted with respect thereto,
whether waived or not) any Indebtedness when due (whether at stated maturity,
by acceleration or 


 


52

















 


otherwise)
or if such breach or default permits or causes the acceleration of any
Indebtedness (whether or not such right shall have been waived) or the
termination of any commitment to lend, or (b) a default or event of
default shall occur at any time under the CastleRock Servicer Agreement, the
CastleRock Transaction Documents or the Restructure Documents.”


 


(e)                                  Section 8.1.6
[Final Documents or Order] of the Credit Agreement is hereby amended and
restated to read as follows:


 


“Any final judgments or orders (after the expiration
of all times to appeal therefrom) shall be entered against Alarm Funding, NewCo
or CastleRock by a court having jurisdiction in the premises:  (a) for the payment of money in excess
of $100,000  in the aggregate which is not
insured or for the payment of money in excess of $250,000  which
is insured, or (b) which judgment or order would constitute a Material
Adverse Change, in each instance which judgment is not discharged, vacated, bonded
or stayed pending appeal within a period of 30 days from the date of entry.”


 


(f)                                    Section 8.1.10
[Insolvency] of the Credit Agreement is hereby amended and restated to read as
follows:


 


“Alarm Funding, CastleRock,  NewCo, or, 
prior to the Equity Raise, 
Whitecap Advisors, LLC,  ceases to
be solvent or admits in writing its inability to pay its debts as they mature.”


 


(g)                                 Section 8.1.13
[Cessation of Business] of the Credit Agreement is hereby amended and restated
to read as follows:


 


“Alarm Funding, NewCo or CastleRock ceases to
conduct its business as contemplated, except as expressly permitted under Section 7.2.6 
[Liquidations, Mergers, Etc.] or 7.2.7 [Dispositions of Assets], or Alarm
Funding, NewCo or CastleRock is enjoined, restrained or in any way prevented by
court order from conducting all or any material part of its business, and such
injunction, restraint or other preventive order is not dismissed within 30 days
after the entry thereof;”


 


(h)                                 Section 8.1.14
[Change of Control; Change of Management] of the Credit Agreement is hereby
amended and restated to read as follows:


 


“(a)                            Except as a result of the
Equity Raise and the Incentive Equity Issuance, Alarm Funding ceases to own at
least 94% of the NewCo Shares; (b) NewCo ceases to own 100%  of the CastleRock Shares; (b) prior to the Equity
Raise, Whitecap Advisors, LLC ceases to serve as the General Partner and
advisor for Whitecap; (c) any member of the Senior Management Team ceases to hold the office and title held by such
member of the Senior Management Team as of the Third Amendment Effective Date
and to be substantially involved in the day-to-day management of 


 


53

















 


Borrower
or CastleRock, as the case may be, and, in
either case, Borrower has not hired
or appointed an individual reasonably acceptable to Required Lenders within 3
months of such occurrence to replace such Person;  (d) Whitecap, Offshore I, Offshore II
and Full Circle cease to own 100% of the Membership Interests of Alarm Funding.”


 


(i)                                     Section 8.1.15
[Involuntary Proceedings] of the Credit Agreement is hereby amended and
restated to read as follows:


 


“A proceeding shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for relief in
respect of Alarm Funding, NewCo, CastleRock or, prior to the Equity Raise,  Whitecap Advisors, LLC, in an involuntary
case under any applicable bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator, conservator or similar
official of Alarm Funding, or NewCo, CastleRock or, prior to the Equity Raise,
Whitecap Advisors, LLC,  for any
substantial part of its property, or for the winding-up or liquidation of its
affairs, and such proceeding shall remain undismissed or unstayed and in effect
for a period of 30 consecutive days or such court shall enter a decree or order
granting any of the relief sought in such proceeding.”


 


(j)                                     Section 8.1.16
[Voluntary Proceedings] of the Credit Agreement is hereby amended and restated
to read as follows:


 


“Alarm Funding, CastleRock, NewCo or, prior to the
Equity Raise, Whitecap Advisors, LLC, shall: (a) commence a voluntary case
under any applicable bankruptcy, insolvency, reorganization or other similar
law now or hereafter in effect, (b) consent to the entry of an order for
relief in an involuntary case under any such law, (c) consent to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator or other similar official of
itself or for any substantial part of its property, (d) make a general
assignment for the benefit of creditors, (e) fail generally to pay its
debts as they become due, or (f) take any action in furtherance of any of
the foregoing.  The orderly winding up or
liquidation of Whitecap, Offshore I or Offshore II shall not be construed as an
Event of Default under this Section 8.1.16.”


 


(k)                                  The following
provision shall be inserted in the Credit Agreement as Section 8.1.17
[Evidence of Equity Raise Commitment]:


 


“8.1.17            Evidence of Equity Raise
Commitment.


 


Borrower shall fail to deliver to Agent either (x) executed
commitment letters with respect to a private Equity Raise (including from
Whitecap or any of its Affiliates) or (y) evidence of the filing of an S-1


 


54

















 


with
respect to a public Equity Raise no later than two weeks following the Third
Amendment Effective Date.”


 


(l)                                     The following
provision shall be inserted in the Credit Agreement as Section 8.1.18
[Pledge of Restricted Proceeds; Payment of Over Advance]:


 


“8.1.18            Pledge of Restricted Proceeds and Remaining
Proceeds; Payment of Over Advance.


 


(a)                                  Borrower shall fail to (a) deposit
the Restricted Proceeds in the Cash Collateral Account in accordance with Section 2A.2(c)(ii) by
March 1, 2011, (b) execute and deliver the Cash Collateral Pledge
Agreement in accordance with Section 2A.2(c)(ii) by December 15,
2010, (c) cause the corresponding account control agreement to be executed
and delivered in accordance with Section 2A.2(c)(ii) by December 15,
2010, (d) deposit additional funds in the Cash Collateral Account in
accordance with Section 2A.2(c)(ii) or (e) make a prepayment of
the Over Advance on June 1, 2011 to the extent required under Section 2A.2(c)(vi).


 


(b)                                 Borrower shall fail to (a) deposit
the Remaining Proceeds in the Remaining Proceeds Collateral Account in
accordance with Section 2A.2(c)(iv) by March 1, 2011, (b) execute
and deliver the Remaining Proceeds Pledge Agreement in accordance with Section 2A.2(c)(iv) by
December 15, 2010, or (c) cause the corresponding account control
agreement to be executed and delivered in accordance with Section 2A.2(c)(iv) by
December 15, 2010.”


 


(m)                               The following
provision shall be inserted in the Credit Agreement as Section 8.1.19
[CastleRock]:


 


“8.1.19            CastleRock.


 


(a)                                  A default or event of
default shall occur under any CastleRock Servicer Agreement;


 


(b)                                 CastleRock fails to pay its
Obligations as and when they become due, resulting in third parties cancelling
contracts or leases or failing to provide services; or


 


(c)                                  CastleRock ceases to conduct
business as contemplated.”


 


(n)                                 The following
provision shall be inserted in the Credit Agreement as Section 8.1.20
[Equity Raise Termination Notice]:


 


“8.1.20            Equity Raise Termination
Notice.


 


An
Equity Raise Termination Notice shall be delivered pursuant to the Escrow
Agreement.”


 


55

















 


(o)                                 The following
provision shall be inserted in the Credit Agreement as Section 8.1.21
[Initial Working Capital Payment]:


 


“8.1.21            Failure to Timely Pay the
Initial Working Capital Payment.


 


The
Initial Working Capital Payment is not transferred from the HB Client Trust
Account to CastleRock  by the end of
business on the Business Day following the Third Amendment Effective Date.”


 


(p)                                 Section 8.2.1
[Events of Default Other Than Bankruptcy, Insolvency or Reorganization
Proceedings] is hereby amended and restated to read as follows:


 


“If an Event of Default specified under
Sections 8.1.1 through 8.1.14 or under Sections 8.1.17 through 8.1.21
shall occur and be continuing, Lenders and Agent shall be under no further
obligation to make Loans and Agent may, and upon the request of Required
Lenders, shall, by written notice to Borrower, declare the unpaid principal
amount of the Loans then outstanding and all interest accrued thereon, any
unpaid fees and all other Indebtedness of Borrower to Lenders hereunder to be
forthwith due and payable, and the same shall thereupon become and be
immediately due and payable to Agent for the benefit of each Lender without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived; and”


 


(q)                                 Subsection (a) [Application
of Proceeds] of Section 8.2.5 [Application of Proceeds] is hereby amended
and restated to read as follows:


 


“(a)                            Application of Proceeds.  From and after the date on which Agent has
taken any action pursuant to this Section 8.2.5 and until all Obligations
of Borrower have been indefeasibly paid in full, any and all proceeds received
by Agent from any sale or other disposition of the Collateral, or any part
thereof, or the exercise of any other remedy by Agent, shall be applied as follows:


 


(i)                                     first, to reimburse Agent
and Lenders for out-of-pocket costs, expenses and disbursements, including
reasonable attorneys’ and paralegals’ fees and legal expenses, incurred by
Agent or Lenders in connection with realizing on the Collateral or collection
of any Obligations of Borrower under any of the Credit Documents, including
advances made by Lenders or any one of them or Agent for the reasonable
maintenance, preservation, protection or enforcement of, or realization upon,
the Collateral, including advances for taxes, insurance, repairs and the like
and reasonable expenses incurred to sell or otherwise realize on, or prepare
for sale or other realization on, any of the Collateral;


 


56

















 


(ii)                                  second, to past due fees and
past due interest with respect to the Term Loans pro rata according to the
aggregate amount of such fees and interest due to each Lender;


 


(iii)                               third, to past due principal
of the Term Loans pro rata according to the aggregate amount of such principal
due to each Lender;


 


(iv)                              fourth, to other fees and
interest with respect to the Term Loans pro rata according to the aggregate
amount of such fees and interest payable to each Lender;


 


(v)                                 fifth, to other principal of
the Term Loans pro rata according to the aggregate amount of such principal
payable to each Lender;


 


(vi)                              sixth to past due fees and
past due interest with respect to the Retention Advance pro rata according to
the aggregate amount of such fees and interest due to each Lender;


 


(vii)                           seventh, to past due
principal of the Retention Advance pro rata according to the aggregate amount
of such principal due to each Lender;


 


(viii)                        eighth, to other fees and
interest with respect to the Retention Advance pro rata according to the aggregate
amount of such fees and interest payable to each Lender;


 


(ix)                                ninth, to other principal of
the Retention Advance pro rata according to the aggregate amount of such
principal payable to each Lender;


 


(x)                                   tenth, to other Obligations
due to Lenders hereunder or under the other Credit Documents pro rata according
to the amounts of such other Obligations payable to each Lender; and


 


(xi)                                eleventh, the balance, if
any, as required by Law.”


 


11.                                 Amendment of Section 10
[Miscellaneous] of the Credit Agreement.


 


(a)                                  Section 10.1.3
[Release of Collateral or Guarantor of the Credit Agreement is hereby amended
and restated to read as follows:


 


“10.1.3            Release of Collateral or Guarantor.


 


Except for sales of assets permitted by
Section 7.2.7 [Dispositions of Assets], release any Collateral consisting
of Membership Interests of Alarm Funding, release any CastleRock Shares,
release any


 


57

















 


NewCo
Shares or release substantially all of the assets of Borrower or CastleRock, or
release CastleRock from its Obligations under the Guaranty Agreement, in each
case, without the prior written consent of all Lenders; or”


 


(b)                                 Section 10.18
[Related Entities] of the Credit Agreement is hereby amended and restated to
read as follows:


 


“Nothing in this Agreement shall be deemed to
prohibit Whitecap from creating an additional entity for the purpose of
entering the security alarm business and purchasing security alarm accounts, so
long as such entity is separate from NewCo, Alarm Funding, CastleRock, and the
Permitted Subsidiaries, operates under a different name, and is not a party to
the CastleRock Servicer Agreements, and no customers or contracts are
transferred from Borrower, CastleRock or any Permitted Subsidiary to such new
entity.”


 


12.                                 Amendment of
Schedules and Exhibits.


 


(a)                                  Exhibit 1.1(A)(2) [Assignment
and Modification Agreement], Exhibit 1.1(A)(3) [Assignment of
Communication Paths], Exhibit 1.1(B) [Borrower Joinder], Exhibit 1.1(C)(1)-(3) [Collateral
Assignment of Contracts], Exhibit  1.1(G) [Guaranty
Agreement], Exhibit 1.1(N)(1)-(4) [Nonsolicitation
Agreements],  Exhibit 1.1(P)(1)-(3) [Pledge
Agreements],  Exhibit 1.1(R)(1),[Restricted
Proceeds Pledge Agreement], Exhibit 1.1(R)(2) [Remaining
Proceeds Pledge Agreement,  Exhibit 1.1(S)(1)-
(3) [Security Agreement],  Exhibit 7.2.6
[Borrower’s Certificate of Compliance with Capital Expenditures], Exhibit 7.3.4
[Compliance Certificate], and Exhibit 7.3.5 [Maximum Term Loan
Certificate] to the Credit Agreement are hereby amended and restated in their
entirety and are replaced, or are inserted as new exhibits, as the case may be,
with the exhibits attached hereto bearing such names and numerical references.


 


(b)                                 The following
schedules to the Credit Agreement: Schedule 1.1(B) [Commitments of
Lenders and Addresses for Notices], Schedule 1.1(P) [Lien],   Schedule 5.1.1 [Organization and
Qualification], Schedule 5.1.2 [Membership Interests], Schedule
5.1.2B [Operating Agreement], Schedule 5.1.3. [Subsidiaries], Schedule
5.1.3A [CastleRock Stockholder Agreement], Schedule 5.1.7
[Litigation], Schedule 5.1.9(c) [Material Adverse Change],  Schedule 5.1.18 [Status of Pledged
Collateral], Schedule 5.1.33 [List of Agreements Evidencing the
Restructure], Schedule 7.2.1 [Existing Indebtedness],  Schedule 7.2.8 [Affiliate
Transactions], and Schedule 7.2.9 [Subsidiaries, Partnerships and Joint
Ventures] are hereby amended and restated in their entirety and are replaced,
or are inserted as new exhibits, as the case may be, with the exhibits attached
hereto bearing such names and numerical references.  Upon the occurrence of an Equity Raise and/or
an Incentive Equity Issuance, Borrower shall be permitted to amend Schedule
5.1.3 to reflect the ownership of the NewCo Shares resulting from the
Equity Raise or the Incentive Equity Issuance, as applicable.


 


58

















 


13.                                 Amendment of
Other Credit Documents.


 


(a)                                  All references
in each and every Credit Document, other than the Credit Agreement, to “Revolving
Credit Loans” or a “Revolving Credit Loan” shall be replaced with references to
“Loans” or “Loan”, respectively.


 


(b)                                 All references
in each and every Credit Document, other than the Credit Agreement, to “Revolving
Credit Notes” or a “Revolving Credit Note” shall be replaced with references to
“Notes” or “Note”, respectively.


 


(c)                                  All references
in each and every Credit Document, other than the Credit Agreement, to “Credit
Agreement” shall mean the Credit Agreement, as amended, restated, modified, or
supplemented from time to time.


 


(d)                                 As of the Third
Amendment Effective Date, the financial reports to be delivered by Borrower
pursuant to Section 7.3 [Reporting Requirements] shall be consolidated and
consolidating.


 


(e)                                  As of the Third
Amendment Effective Date, all references to the term “Borrower” shall mean
NewCo and Alarm Funding, jointly and severally.


 


14.                                 Additional
Covenants.  Alarm
Funding hereby covenants and agrees as follows:


 


(a)                                  Borrower shall
have delivered to Agent its reviewed financial statements for the fiscal year
ended December 31, 2007 and audited financial statements for the fiscal
year ended December 31, 2008 and December 31, 2009, all in form and
substance as required pursuant to Section 7.3.3 [Annual Financial
Statements] of the Credit Agreement no later than December 31, 2010.


 


15.                                 Release.  In further consideration of the execution by
Agent and Lenders of this Amendment, Alarm Funding, NewCo, CastleRock, Full
Circle and Whitecap Advisors, LLC, each individually and on behalf of their
respective successors (including any trustees acting on behalf of Alarm
Funding, NewCo, CastleRock, Full Circle or Whitecap Advisors, LLC, and any
debtor-in-possession with respect to Alarm Funding, NewCo, CastleRock, Full
Circle or Whitecap Advisors, LLC,), assigns, subsidiaries and affiliates
(collectively, the “Releasors”), hereby forever release Agent, Lenders,
their respective  successors, assigns,
parents, subsidiaries, and affiliates and their respective officers, employees,
directors, agents and attorneys (collectively, the “Releasees”) from any
and all debts, claims, demands, liabilities, responsibilities, disputes,
causes, damages, actions and causes of actions (whether at law or in equity),
and obligations of every nature whatsoever, whether liquidated or unliquidated,
whether matured or unmatured, whether fixed or contingent that the Releasors,
or any of them, have or may have against the Releasees, or any of them, which
arise from or relate to any actions which the Releasees, or any of them, have
or may have taken or omitted to take in connection with the negotiation,
preparation, execution, delivery, performance, administration and enforcement
of this Amendment or any other document executed in connection with the Credit
Agreement or the other Credit Documents, the Equity Raise, the Incentive Equity



 


59

















 


Issuance or any other matter, in each case prior to
the Third Amendment Effective Date (including with respect to the Obligations,
any Collateral, the Credit Agreement, any other Credit Document and any third
parties liable in whole or in part for the Obligations) (collectively, the “Released
Claims”).  This provision shall
survive and continue in full force and effect whether or not Alarm Funding,
NewCo or CastleRock shall satisfy all other provisions of this Amendment or the
other Credit Documents.


 


16.                                 Indemnification.  Each of Alarm Funding, NewCo and CastleRock,
each individually and on behalf of their respective successors (including any
trustees acting on behalf of Alarm Funding, NewCo and CastleRock , and any
debtor-in-possession with respect to Alarm Funding, NewCo or CastleRock),
assigns, subsidiaries and affiliates (collectively, the “Indemnitors”),  hereby agrees that its release of the
Releasees set forth in Section 15 [Release] shall include an obligation to
indemnify and hold the Releasees, or any of them, harmless with respect to any
and all liabilities, obligations, losses, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever incurred by
the Releasees, or any of them, whether direct, indirect or consequential, as a
result of or arising from or relating to any proceeding by, or on behalf of any
Person, including, officers, directors, agents, trustees, creditors, partners
or shareholders of the Indemnitors, or any parent, subsidiary or affiliate of
the Releasors, whether threatened or initiated, asserting any claim for legal
or equitable remedy under any statutes, regulation, common law principle or
otherwise arising from or in connection with the Released Claims; provided,
that the Indemnitors shall not be liable for any indemnification to a Releasee
to the extent that any such liability, obligation, loss, penalty, action,
judgment, suit, cost, expense or disbursement results from the applicable
Releasee’s gross negligence or willful misconduct, as finally determined by a
court of competent jurisdiction.  The
foregoing indemnity shall survive the payment in full of the Obligations and
the termination of the Credit Agreement and the other Credit Documents.


 


17.                                 Conditions of
Effectiveness of this Amendment.  The effectiveness of this Amendment is
expressly conditioned upon satisfaction of each of the following conditions
precedent:


 


(a)                                  Credit Documents.  Borrower shall or shall have caused to be
delivered to Agent:


 


(i)                                     the fully
executed Borrower Joinder;


 


(ii)                                  the fully
executed Term Notes and Retention Advance Notes;


 


(iii)                               the fully
executed Pledge Agreements of Alarm Funding in the NewCo Shares, together with
Share Certificates for NewCo and stock powers separate from the Share
Certificates executed in blank;


 


(iv)                              the fully
executed Pledge Agreement of NewCo in the CastleRock Shares, together with
share and membership interest certificates and blank stock powers;


 


60














 


(v)                                 the fully
executed Pledge Agreements of:


 


(A)                              Whitecap


 


(B)                                Full Circle


 


(C)                                Offshore I


 


(D)                               Offshore II


 


in
the Membership Interests of Alarm Funding, together membership certificates;


 


(vi)                              the fully
executed Guaranty of CastleRock;


 


(vii)                           the fully
executed Assignment and Modification Agreement of CastleRock;


 


(viii)                        the fully
executed Non-Solicitation Agreement of CastleRock and NewCo and the Senior
Management Team;


 


(ix)                                the fully
executed Collateral Assignment of Contracts of CastleRock and NewCo, together
with the consents of Alarm Funding;


 


(x)                                   the fully
executed Security Agreements of NewCo and CastleRock;


 


(xi)                                the fully
executed Escrow Agreement of Borrower;


 


(xii)                             no later than
December 15, 2010, the fully executed Assignments of Deposit Accounts of each
of CastleRock and NewCo and the fully executed account control agreements with
the depository banks and each of CastleRock and NewCo;


 


(xiii)                          no later than
December 15, 2010, the fully executed Cash Collateral Pledge Agreement  and Remaining Proceeds Pledge Agreement of
Borrower and the fully executed account control agreements with the depository
banks and Borrower; and


 


(xiv)                         this Amendment,
fully executed, and all schedules and exhibits hereto.


 


(b)                                 Evidence
of  Initial Working Capital Funding.  Agent shall have received evidence
satisfactory to Agent that Whitecap Advisors, LLC or it Affiliates have
provided funding in an amount not less than $600,000 in immediately available
funds to Borrower (the “Initial Working Capital Payment”), which funds
shall initially be funded into the client trust account of Borrower’s legal
counsel, Hanson Bridgett LLP (the “HB Client Trust Account”) on or
before 


 


61

















 


the Third Amendment
Effective Date and shall be subsequently funded to Borrower by the end of
business on the next Business Day following the Third Amendment Effective
Date.  The Initial Working Capital
Payment shall  be used for current
working capital purposes, including addressing trade payables.


 


(c)                                  Funding of
Escrow Account. Agent shall have received evidence satisfactory to
Agent that not less than $400,000 in immediately available funds has been
deposited into the Escrow Account.


 


(d)                                 Lien Searches
and Filings; Termination of All Liens Securing Subordinated Debt. Agent shall
have received reports of Lien searches satisfactory to Agent with respect to
Alarm Funding, CastleRock, NewCo, Whitecap, Cordell, Full Circle and SAS.  Borrower shall have delivered to Agent copies
of filed UCC-3 termination statements evidencing that all liens securing the
Subordinated Debt have been terminated.


 


(e)                                  Officer’s
Certificate and Organizational Documents.  There shall be delivered to Agent for the
benefit of each Lender a certificate dated as of the date hereof and signed by
an Authorized Officer, certifying as appropriate as to:


 


(i)                                     all action
taken by Alarm Funding, NewCo, CastleRock and any Pledgor in connection with
this Amendment and the other Credit Documents, the Restructure Documents and
the CastleRock Transaction Documents;


 


(ii)                                  the names of
the officers  authorized to sign this Amendment
and the other documents executed and delivered in connection herewith and the
Credit Documents and the true signatures of such officers and specifying the
Authorized Officers permitted to act on behalf of such entity for purposes of
the Credit Documents and the true signatures of such Authorized Officers, on
which Agent and each Lender may conclusively rely;


 


(iii)                               copies of the
Organizational Documents of Alarm Funding, CastleRock and NewCo in effect on
the date hereof certified by the appropriate state official where such
documents are filed in a state office together with recent certificates from
the appropriate state officials as to the continued existence and good standing
of such entity in each state where organized or qualified to do business; and


 


(iv)                              a certification
of each of Alarm Funding, CastleRock and NewCo certifying and confirming that
as of the date hereof and after giving effect to this Amendment: (A) the
execution, delivery and performance of this Amendment and any and all other
documents executed and/or delivered in connection herewith will not contravene,
conflict with, violate or result in the breach of any law, operating agreement
or certificate of formation, (B) other than the Outstanding Defaults, no Event
of Default or Potential Default has otherwise occurred or would result from the
execution, delivery and performance of this Amendment which will not be cured
by the execution and effectiveness of this Amendment, (C) the representations
and warranties of Alarm Funding, CastleRock and NewCo, as the case may be,
contained in the Credit Agreement 


 


62

















 


and the other Credit Documents are true and correct
on and as of the date hereof with the same force and effect as though made by
Alarm Funding, CastleRock or NewCo, as the case may be, on such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein), and (D) the Credit Agreement (as
amended by this Amendment) and all other Credit Documents (as amended by this
Amendment) are and remain legal, valid, binding and enforceable obligations in
accordance with the terms thereof.


 


(f)                                    CastleRock
Transaction Documents, CastleRock Servicing Agreement and Organizational
Documents.  Borrower
shall have delivered to Agent a true, correct, and complete copy of the final
executed CastleRock Transaction Documents, CastleRock Servicing Agreement, the
Restructure Documents, the Organizational Documents of CastleRock and the
Organizational Documents of NewCo, the Organizational Documents of Alarm
Funding, certified by the Managing Director of Borrower as being true, correct,
and complete and in full force and effect, and all of which shall be in form
and substance satisfactory to Agent.


 


(g)                                 Opinions of
Counsel.  There shall be delivered to
Agent for the benefit of each Lender a written opinion of Hanson Bridgett, LLP,
counsel for Alarm Funding, CastleRock, NewCo, Whitecap, Offshore I and Offshore
II, dated as of the Third Amendment Effective Date, and in form and substance
satisfactory to Agent and its counsel.


 


(h)                                 Fees and
Expenses.  Borrower
shall pay or cause to be paid to Agent for itself the reasonable costs and
expenses of Agent, including reasonable fees of Agent’s counsel in connection
with this Amendment.


 


(i)                                     No Violation of
Laws, No Actions or Proceedings. The  execution
of this Amendment shall not contravene any Law applicable to Borrower, any
Guarantor, any Pledgor, Agent or any of the Lenders.  No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed before
any court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of this Amendment or the consummation
of the transactions contemplated hereby, which, in Agent’s sole discretion,
would make it inadvisable to consummate the transactions contemplated by this
Amendment or any of the other Credit Documents.


 


(j)                                     Legal Details;
Counterparts.  All legal
details and proceedings in connection with the transactions contemplated by
this Amendment shall be in form and substance satisfactory to Agent; Agent
shall have received from Alarm Funding, CastleRock,  NewCo, the Releasors and the Lenders a fully
executed original of this Amendment; and Agent shall have received all such
other counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions; in each case, in form and
substance satisfactory to Agent.


 


63

















 


18.                                 Acquisition by
CastleRock.  Borrower
hereby represents and warrants that: (a) pursuant to the Asset Purchase
Agreement, CastleRock has acquired certain of the assets of SAS relating to retail monitoring and related services
provided with respect to certain alarm contracts and other retail alarm servicing
contracts and accounts; and (b) the CastleRock Servicing Agreement provides for
CastleRock to be the servicer of Borrower’s accounts.  Borrower shall deliver or shall cause to be
delivered to Agent such documents, agreements, certificates, instruments or
other information related to such acquisition as Agent reasonably may request.


 


19.                                 Joinder of CastleRock.  CastleRock acknowledges and agrees that it
shall execute and deliver a Guaranty and Suretyship Agreement and such other
Credit Documents as requested by Agent in favor of Agent for the benefit of the
Lenders in connection with this Amendment. 
CastleRock joins in this Amendment to evidence its consent to the Credit
Agreement and the amendment of the Credit Agreement pursuant to this Amendment.


 


20.                                 Joinder of
Whitecap Advisors, LLC and Full Circle.  Each of Whitecap Advisors, LLC, and Full
Circle hereby joins in this Third Amendment for the purpose of agreeing to and
being bound by the terms of Section 15 [Release].


 


21.                                 Force and
Effect. The Credit Agreement and each of the other Credit Documents, as
amended through and including this Amendment, are hereby ratified and confirmed
and are and shall remain in full force and effect on and after the date of this
Amendment in accordance with their respective terms.  The parties hereto do not amend any
provisions of the Credit Agreement or the other Credit Documents except for the
amendments as expressly set forth herein. 
No novation to any Credit Document is intended or shall occur by or as a
result of this Amendment.


 


22.                                 Governing Law.  This Amendment shall be deemed to be a
contract under the Laws of the State of New York and shall, pursuant to New
York General Obligations Law Section 5-1401, for all purposes be governed by,
and construed and enforced in accordance with, the Laws of the State of New
York.


 


23.                                 Counterparts.  This Amendment may be executed in separate
counterparts, each of which when executed and delivered shall be an original,
but all of which when taken together shall constitute one and the same
instrument.  Delivery by facsimile or
other electronic transmission of executed signature pages hereof from one party
hereto to another party hereto shall be deemed to constitute due execution and
delivery by such party.  Any party that
delivers its original counterpart signature to this Amendment by facsimile or
other electronic transmission hereby covenants to personally deliver five (5)
original counterpart signatures promptly thereafter to Agent.


 


[SIGNATURE
PAGES FOLLOW]


 


64

















 


[SIGNATURE PAGE TO CONSENT, LIMITED WAIVER AND THIRD

AMENDMENT TO CREDIT AGREEMENT AND CREDIT DOCUMENTS]


 


IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
and delivered by their respective officers hereunto duly authorized, as of the
date first above written.


 


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  
	
   

  	
  ALARM
  FUNDING, LLC,

  
	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /
  s / Westin Lovy

  
	
   

  	
   

  	
  Westin
  Lovy, Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CASTLEROCK
  SECURITY HOLDINGS, INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /
  s / Brian E. Johnson

  
	
   

  	
   

  	
  Brian E. Johnson,
  President

  



 

















 


[SIGNATURE PAGE TO CONSENT, LIMITED WAIVER AND THIRD

AMENDMENT TO CREDIT AGREEMENT AND CREDIT DOCUMENTS]


 


 


	
   

  	
  GUARANTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
  CASTLEROCK
  SECURITY, INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /
  s / Brian E. Johnson

  
	
   

  	
   

  	
  Brian
  E. Johnson, President

  



 

















 


[SIGNATURE PAGE TO JOINDER]


 


 


	
   

  	
  WHITECAP
  ADVISORS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /
  s / Westin Lovy

  
	
   

  	
   

  	
  Westin
  Lovy, Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FULL
  CIRCLE PARTNERS, LP,

  
	
   

  	
  a
  Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  FULL CIRCLE INVESTMENTS, LLC

  
	
   

  	
  Its
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /
  s / Robert A. Blum

  
	
   

  	
   

  	
  Robert
  A. Blum, Managing Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /
  s / John E. Stuart

  
	
   

  	
   

  	
  John
  E. Stuart, Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /
  s / Edward Agabs

  
	
   

  	
   

  	
  Edward
  Agabs, Chief Financial Officer

  



 

















 


[SIGNATURE PAGE TO CONSENT, LIMITED WAIVER AND THIRD

AMENDMENT TO CREDIT AGREEMENT AND CREDIT DOCUMENTS]


 


 


	
   

  	
  SIEMENS
  FIRST CAPITAL

  
	
   

  	
  COMMERCIAL
  FINANCE, LLC, as

  
	
   

  	
  Agent
  and a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /
  s / Anthony Casciano

  
	
   

  	
  Name:

  	
  Anthony
  Casciano

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  and

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /
  s / Matthew R. Begley

  
	
   

  	
  Name:

  	
  Matthew
  R. Begley

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FCC,
  LLC, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /
  s / Lee Elmore

  
	
   

  	
  Name:

  	
  Lee
  Elmore

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  



 

















 


EXHIBITS AND SCHEDULES


 


Exhibit
1.1(A)(3) [Assignment and Modification Agreement]


Exhibit
1.1(B) [Borrower Joinder]


Exhibit
1.1(C)(1)-(3) [Collateral Assignment of Contracts]


Exhibit  1.1(G) [Guaranty Agreement]


Exhibit
1.1(N)(1)-(4) [Nonsolicitation Agreements]


Exhibit
1.1(P)(1)-(3) [Pledge Agreements]


Exhibit
1.1(R)(1),[Restricted Proceeds Pledge Agreement]


Exhibit
1.1(R)(2) [Remaining Proceeds Pledge Agreement]


Exhibit
1.1(S)(1)- (3) [Security Agreement]


Exhibit
7.2.6 [Borrower’s Certificate of Compliance with Capital Expenditures]


Exhibit
7.3.4 [Compliance Certificate]


Exhibit
7.3.5 [Maximum Term Loan Certificate]


 


Schedule
1.1(B) [Commitments of Lenders and Addresses for Notices],


Schedule
1.1(P) [Lien],


Schedule
5.1.1 [Organization and Qualification],


Schedule
5.1.2 [Membership Interests],


Schedule
5.1.2B [Operating Agreement],


Schedule
5.1.3. [Subsidiaries],


Schedule
5.1.3A [CastleRock Stockholder Agreement],


Schedule
5.1.7 [Litigation],


Schedule
5.1.9(c) [Material Adverse Change],


Schedule
5.1.18 [Status of Pledged Collateral],


Schedule
5.1.33 [List of Agreements Evidencing the Restructure],


Schedule
7.2.1 [Existing Indebtedness],


Schedule
7.2.8 [Affiliate Transactions]


Schedule
7.2.9 [Subsidiaries, Partnerships and Joint Ventures]


 

















 


SCHEDULE 1.1(B)


 


COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES


 


Part 1
- Commitments of Lenders and Addresses for Notices to Lenders


 


	
  Lender

  	
   

  	
  Amount of

  Commitment for

  Term Loans

  	
   

  	
  Amount of

  Commitment for

  Retention Advance

  	
   

  	
  Aggregate

  Ratable Share

  	
   

  
	
  Name:
  FCC, LLC 

  Address: 3520 N.W. 58th Street

  Oklahoma City, OK 73112

  Attention: Lee Elmore, Senior Vice President

  Telephone:   405-917-1135

  Telecopy:     405-917-9660

  	
   

  	
  $

  	
  10,018,805.09

  	
   

  	
  $

  	
  175,000.00

  	
   

  	
  25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:
  Siemens First Capital Commercial Finance,
  LLC

  Address: 3520 N.W. 58th Street

  Oklahoma City, OK 73112

  Attn: Mark Meccariello

  Telephone No.: 405-917-9600

  Telecopier No.: 405-917-9696

  	
   

  	
  $

  	
  30,056,415.26

  	
   

  	
  $

  	
  525,000.00

  	
   

  	
  75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  40,075,220.35

  	
   

  	
  $

  	
  700,000.00

  	
   

  	
  100

  	
  %

  



 

















 


SCHEDULE 1.1(B)


 


COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES


 


Part 2
- Addresses for Notices to Agent and Borrower:


 


AGENT:


 


	
  Name: Siemens
  First Capital Commercial Finance, LLC

  
	
  Address: 3520 N.W. 58th Street

  
	
  Oklahoma City, OK 73112

  
	
  Attention: Lee Elmore, Senior Vice President

  
	
  Telephone:

  	
  405-917-1135

  
	
  Telecopy:

  	
  405-917-9660

  
	
   

  	
   

  
	
  BORROWER:

  
	
   

  	
   

  
	
  Name: Alarm Funding, LLC

  
	
  Address: 800 Connecticut Ave., Suite E-403

  
	
  Norwalk, CT 06854

  
	
  Attention: Westin H. Lovy

  
	
  Telephone:

  	
  203-656-4848

  
	
  Telecopy:

  	
  203-656-1994