Exhibit 10.7


 




 





 


ASSET PURCHASE AND SETTLEMENT AGREEMENT


 


AMONG


 


ALARM FUNDING, LLC 

(“ALARM FUNDING”)


 


CASTLEROCK SECURITY, INC.

(“PURCHASER”)


 


SA SYSTEMS LLC
  (“SAS”)


 


AND


 


CORDELL FUNDING, LLLP 

(“CORDELL”)


 


NOVEMBER 26, 2008




 





 

















 


TABLE OF CONTENTS


 


	
  Article I. EXCHANGE OF ASSETS AND
  NOTES FOR STOCK; CLOSING

  	
  2

  
	
  1.1.

  	
  Purchase and Sale

  	
  2

  
	
  1.2.

  	
  Excluded Assets

  	
  4

  
	
  1.3.

  	
  Assumed Liabilities

  	
  4

  
	
  1.4.

  	
  Purchase Price

  	
  5

  
	
  1.5.

  	
  Distribution of Purchaser Common Stock

  	
  5

  
	
  1.6.

  	
  No Fractional Shares

  	
  5

  
	
  1.7.

  	
  Closing

  	
  5

  
	
  1.8.

  	
  Post-Closing Capitalization Table

  	
  7

  
	
  Article II. REPRESENTATIONS AND
  WARRANTIES

  	
  7

  
	
  2.1.

  	
  Unqualified Representations and Warranties of SAS

  	
  7

  
	
  2.2.

  	
  Knowledge Representations and Warranties of SAS

  	
  9

  
	
  2.3.

  	
  Representations and Warranties of Purchaser

  	
  18

  
	
  2.4.

  	
  Representations and Warranties of Cordell

  	
  20

  
	
  Article III. POST-CLOSING COVENANTS

  	
  22

  
	
  3.1.

  	
  Public Announcements

  	
  22

  
	
  3.2.

  	
  Restrictions

  	
  22

  
	
  3.3.

  	
  Non-Competition

  	
  23

  
	
  3.4.

  	
  Non-Interference with Business Relations

  	
  23

  
	
  3.5.

  	
  Solicitation of Customers and Employees

  	
  23

  
	
  3.6.

  	
  Confidential Information

  	
  23

  
	
  3.7.

  	
  Scope

  	
  24

  
	
  3.8.

  	
  Remedies

  	
  24

  
	
  3.9.

  	
  Purchaser Agreements Concerning the Business

  	
  24

  
	
  3.10.

  	
  SAS and Cordell Agreements Concerning SAS
  and SAI

  	
  25

  
	
  3.11.

  	
  Further Assurances

  	
  25

  
	
  3.12.

  	
  Contribution and Assignment of Claims

  	
  25

  
	
  Article IV. INDEMNIFICATION

  	
  25

  
	
  4.1.

  	
  Survival of Representations, Warranties and Covenants

  	
  25

  
	
  4.2.

  	
  SAS Indemnification

  	
  26

  
	
  4.3.

  	
  Cordell Indemnification

  	
  27

  
	
  4.4.

  	
  Purchaser’s Indemnification

  	
  28

  
	
  4.5.

  	
  Alarm Funding’s Indemnification

  	
  28

  
	
  4.6.

  	
  Indemnification Procedure for Third Party Claims Against
  Indemnified Parties

  	
  28

  
	
  4.7.

  	
  Nature of Other Liabilities

  	
  30

  
	
  4.8.

  	
  Determination of Loss Amount

  	
  30

  
	
  4.9.

  	
  Limitations on Amount of Damages; Manner of Payment

  	
  30

  
	
  4.10.

  	
  No Cordell Claim Against SAS

  	
  30

  
	
  4.11.

  	
  Sole Remedy

  	
  30

  
	
  4.12.

  	
  No Claim Against SAS or Cordell Based on
  Transfer of Cordell Stock or COPS Cash

  	
  31

  
	
  Article V. MISCELLANEOUS

  	
  31

  
	
  5.1.

  	
  Expenses

  	
  31

  
	
  5.2.

  	
  Notices

  	
  31

  
	
  5.3.

  	
  Interpretation

  	
  32

  



 

















 


	
  5.4.

  	
  Rules of Construction

  	
  32

  
	
  5.5.

  	
  Counterparts

  	
  32

  
	
  5.6.

  	
  Entire Agreement

  	
  32

  
	
  5.7.

  	
  Governing Law; Jurisdiction and Venue

  	
  32

  
	
  5.8.

  	
  Severability

  	
  32

  
	
  5.9.

  	
  Assignment; Reliance of Other Parties

  	
  33

  
	
  5.10.

  	
  Specific Performance

  	
  33

  
	
  5.11.

  	
  Disclosure Schedules

  	
  33

  
	
  5.12.

  	
  Definitions

  	
  33

  



 


2

















 


ASSET PURCHASE AND SETTLEMENT AGREEMENT


 


THIS ASSET PURCHASE AND
SETTLEMENT AGREEMENT (this “Agreement”),
dated as of November 26, 2008, is by and among CASTLEROCK SECURITY, INC.,
a Delaware corporation (“Purchaser”);
ALARM FUNDING, LLC, a Delaware limited liability company (“Alarm Funding”), SA SYSTEMS LLC, a Delaware
limited liability company (“SAS”);
and CORDELL FUNDING LLLP, a Florida limited liability limited partnership (“Cordell”). 
All capitalized terms used in this Agreement without definition shall
have the respective meanings ascribed to such terms in Section 6.12
hereof.


 


RECITALS


 


A.            Pursuant to a Sale,
Assignment and Servicing Agreement dated June 30, 2005 (as amended, the “Servicing Agreement”), Alarm Funding
purchased certain security alarm contracts (the “Alarm Contracts”) and Security Associates International, Inc.,
a Delaware corporation (“SAI”),
agreed to provide the necessary and appropriate servicing of the Alarm
Contracts.


 


B.            Pursuant to a Credit
Agreement dated as of May 25, 2004 (as amended, the “Credit Agreement”), Cordell provided senior
secured loans and junior secured loans to SAI.


 


C.            In February 2008,
following the occurrence of events of default under the Credit Agreement,
Cordell acquired voting control of shares of SAI’s capital stock totaling
approximately 66% of SAI’s issued and outstanding capital stock.  Thereafter, Cordell formed SAS and
contributed to SAS junior secured notes evidencing the junior secured loans
under the Credit Agreement in exchange for all of the equity of SAS.


 


D.            On July 7, 2008,
Cordell conducted a foreclosure sale under the Uniform Commercial Code as
adopted as the law in the State of New York then in effect (the “Foreclosure Sale”), of substantially all of
SAI’s assets, other than certain licenses used in connection with its business,
its employees, its leased real and personal property to the extent transfer
required third-party consent, and other assets the transfer of which are
prohibited by law or without third-party consent.  SAS purchased the SAI assets in the
Foreclosure Sale by credit bidding amounts owed under the junior secured
notes.  SAS also acquired the shares of
capital stock for which it had voting control.


 


E.             SAS entered into that
certain Asset Purchase Agreement dated as of July 17, 2008 (the “COPS Asset Purchase Agreement”) with Lydia
Security Monitoring, Inc. d/b/a COPS Monitoring, a New York corporation (“COPS”), pursuant to which SAS agreed to
sell to COPS substantially all of its assets relating to the business of
providing wholesale monitoring services under alarm security contracts (the “Wholesale Monitoring Business”).


 


F.             In connection with the COPS
Asset Purchase Agreement, SAS entered into that certain Transition Services
Agreement dated as of July 18, 2008 (the “COPS Transition Agreement”) pursuant to which SAS agreed to
provide COPS with certain services in connection with the operation of the
Wholesale Monitoring Business.


 

















 


G.            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, among other things, to enforce Alarm Funding’s rights under the
Servicing Agreement (the “Litigation”).


 


H.            Alarm Funding, SAI, SAS and
Cordell entered into a settlement agreement dated September 10, 2008 (the “Settlement Agreement”) in connection with
the Litigation.


 


I.              Pursuant to the Settlement
Agreement, among other things, the parties thereto agreed (A) to prepare (x) an
asset purchase agreement consistent with the terms of the Settlement Agreement
pursuant to which Purchaser shall acquire substantially all of the assets of
SAS relating to the retail monitoring and related services provided with
respect to the Alarm Contracts and certain other alarm servicing contracts and
accounts (the “Business”), and (y) a
service agreement consistent with the terms of the Settlement Agreement
pursuant to which Alarm Funding shall engage Purchaser to provide alarm
monitoring services with respect to the Alarm Contracts and (B) to take
certain actions, including the execution of certain agreements by Purchaser, to
facilitate compliance by SAS with the COPS Asset Purchase Agreement and the
COPS Transition Agreement.


 


J.             Under the Settlement
Agreement, the parties agreed that Purchaser will issue shares of its common
stock to SAS in exchange for the Purchased Assets of SAS, which stock will be
distributed to its sole member, Cordell, and to Cordell in consideration of the
release by Cordell of its security interest in the Purchased Assets.  Upon consummation of the transactions
contemplated by this Agreement, the parties intend that on a fully-diluted
basis, Alarm Funding will own fifty six percent (56.0%) of the common stock,
par value $0.01, of Purchaser on a fully diluted basis (the “Purchaser Common Stock”); SAS and Cordell
will own an aggregate of thirty two percent (32.0%) of the Purchaser Common
Stock (the “Cordell Stock”) on a
fully diluted basis; and twelve percent (12.0%) of the Purchaser Common Stock (“Management Stock”) will be reserved for
issuance to Purchaser’s management after the Closing Date at the discretion of
Purchaser’s Board of Directors.


 


AGREEMENT


 


NOW
THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants, and agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:


 


Article I.


EXCHANGE OF ASSETS AND NOTES FOR STOCK; CLOSING


 


1.1.          Purchase and Sale.  Upon the terms and subject to the conditions
of this Agreement, and in reliance upon the representations and warranties
contained herein, at the Closing, SAS shall sell, transfer, convey, assign and
deliver to Purchaser, and Purchaser shall purchase from SAS, free and clear of
all Liens, other than Permitted Liens, and subject to the exclusions set forth
in Section 1.2, all right, title and interest in and to the assets of SAS
relating to the Business (the “Purchased Assets”) which shall include, without
limitation:


 


2

















 


(a)           all of the property used or
held for use in the Business, including without limitation, all furniture,
fixtures, computers, office equipment, monitoring equipment and miscellaneous
assets of every kind and nature owned by SAS listed on Schedule 1.1(a);


 


(b)           the Communication Paths and
related equipment listed on Schedule
1.1(b);


 


(c)           all contracts (expressly
including executory contracts for services to the extent transferable), agreements,
leases, commitments, arrangements or understandings pertaining to the operation
of the Business;


 


(d)           all patents and patent
rights, trademarks and trademark rights (whether registered or not), including
any goodwill therein, trade names and trade name rights, domain names, service
marks and service mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights
(whether registered or not), trade dress, business and product names, logos,
slogans, trade secrets, industrial models, processes, designs, methodologies,
computer programs, software (whether in source or object code) and related
documentation, technical information, manufacturing, engineering and technical
drawings, know-how and all pending applications for and registrations of
patents, trademarks, service marks and copyrights; the foregoing shall include,
without limitation, all software under development owned by SAS (including the
software development schedule included therein) and all licenses, agreements
and other arrangements under which SAS has the right to use any of the
intangible or proprietary rights of a third party to the extent used or held
for use by SAS in the conduct of the business which may be transferred in
accordance with the terms of such licenses, agreements and other arrangements,
and listed on Schedule 1.1(d);


 


(e)           all prepaid expenses listed
on Schedule 1.1(e);


 


(f)            the present customers of the
Business listed on Schedule 1.1(f) and other customer-related records of
the Business;


 


(g)           all goodwill associated with
the Business or the Purchased Assets;


 


(h)           all books, files and records
of SAS (including, without limitation, all surveys, schematics, flow charts,
permit filings, mailing lists, customer lists, equipment maintenance records,
warranty information, records of operations, payroll history, standard forms of
documents, manuals of operation or business procedures, training manuals and
training aids and other proprietary or confidential information to the extent
the same may be necessary or desirable for the operation of the Business)
relating to the Business, subject to SAS’s right to access such books, files
and records during regular business hours for tax, litigation and other valid
purposes at SAS’s cost;


 


(i)            all of the governmental
permits, licenses (including sales and use tax licenses), franchises,
certificates of inspection, approvals or other authorizations issued to SAS and
used in the Business (collectively, the “Governmental Permits”) listed on
Schedule 1.1(i) (and to the extent any such permits are not assignable or
transferable to Purchaser, SAS will use its best efforts to cooperate with
Purchaser as may be reasonably requested to enable Purchaser 


 


3

















 


to
apply for and obtain the Governmental Permits or to receive the benefits of the
Governmental Permits); and


 


(j)            except as specifically
provided in Section 1.2, all other assets of SAS that exist on the Closing
Date, whether tangible or intangible, real or personal, relating to the
Business.


 


1.2.          Excluded Assets. 
Notwithstanding the provisions of Section 1.1, it is hereby agreed
that the Purchased Assets shall not include, and SAS is not selling to
Purchaser, and Purchaser is not purchasing or acquiring from SAS, the assets
listed on Schedule 1.2
(collectively, the “Excluded Assets”).


 


1.3.          Assumed Liabilities.


 


In further consideration of
the transfers contemplated hereby, Purchaser shall assume, effective as of the
Closing Date, and shall satisfy or perform as they come due, the liabilities
and obligations of SAS set forth on Schedule
1.3 (collectively, the “Assumed
Liabilities”).  Any and all
Liens relating to the Assumed Liabilities are set forth on Schedule 1.3.  Except for the Assumed Liabilities, Purchaser
will not assume or become liable for, and shall not be deemed to have assumed
or have become liable for, any debts, liabilities or obligations of SAS, or
have any responsibility of any nature whatsoever of SAS relating to its business
(including the Business) or properties, whether accrued or contingent, known or
unknown, disclosed or undisclosed, due or to become due, liquidated or
unliquidated, arising by operation of law or otherwise.  For illustration, but not in limitation, the
following liabilities shall not be Assumed Liabilities:


 


(a)           any obligation of SAS, SAI
or their respective Affiliates to its or their officers or employees for
compensation, bonuses, severance, termination or WARN or similar benefits;


 


(b)           any obligation arising under
or related to any pension, retirement, vacation, insurance including, without
limitation, COBRA, option or other form of benefit plan of SAS, SAI or their
respective Affiliates or relating to SAS’s, SAI’s or their respective
Affiliates’ employees;


 


(c)           any obligation of SAS, SAI
or their respective Affiliates with respect to any taxes due, accrued or
relating to a time on or prior to the Closing Date or resulting from this
Agreement or the transactions contemplated by this Agreement;


 


(d)           any obligation of SAS, SAI
or their respective Affiliates arising under any arbitration, litigation, or
administrative or other Action, whether or not disclosed in this Agreement;


 


(e)           any obligation due to any
shareholder, member, director, manager or officer of SAS, SAI or their
respective Affiliates;


 


(f)            any obligations of SAS, SAI
or their respective Affiliates arising under any employment agreements;


 


(g)           any obligations of SAS, SAI
or their respective Affiliates as a licensee under any license that will not be
assigned to Purchaser pursuant to this Agreement;


 


4

















 


(h)           any liability of SAS, SAI or
their respective Affiliates created by this Agreement or with respect to any
profit or gain of SAS or its Affiliates derived or resulting from the
transactions contemplated by this Agreement;


 


(i)            any liability or obligation
related to the Wholesale Monitoring Business, except as provided under the
Transition Services Agreement; and


 


(j)            any and all other
liabilities and obligations, other than the Assumed Liabilities, of SAS, SAI or
their respective Affiliates.


 


1.4.          Purchase Price.


 


(a)           In consideration of the
sale, transfer, assignment, conveyance, and delivery by SAS of the Purchased
Assets to Purchaser and of the other agreements of SAS stated herein, Purchaser
shall issue 1,200 shares of Purchaser Common Stock to SAS.


 


(b)           In consideration of the
release by Cordell of its Liens on the Purchased Assets (the “Cordell Liens”) and the other agreements of
Cordell stated herein, Purchaser shall issue 2,000 shares of Purchaser Common
Stock to Cordell.


 


1.5.          Distribution of Purchaser Common Stock.


 


SAS hereby covenants and
agrees that, as soon as practicable after the Closing Date and no later than
forty-five (45) days following the Closing Date, SAS shall distribute the
Purchaser Common Stock received by it pursuant to Section 1.4(a) to
Cordell as the sole member of SAS.


 


1.6.          No Fractional Shares.  No fractional share of
Purchaser Common Stock will be issued to SAS or Cordell.  In lieu thereof, Purchaser shall round down
any fractional shares to the nearest whole number of shares of Purchaser Common
Stock; provided, however, that in no event shall the failure
to issue a fractional share result in SAS or Cordell receiving shares of
Purchaser Common Stock equal to less than twelve percent (12%) and twenty
percent (20%), respectively, calculated on a fully-diluted basis giving effect
to the issuance of the Management Stock.


 


1.7.          Closing.


 


The closing of the
transactions contemplated by this Agreement (the “Closing”) shall take place at 10:00 A.M., local time, on
the date hereof (the “Closing Date”),
at the offices of Sonnenschein Nath & Rosenthal LLP, 7800 Sears Tower,
Chicago, Illinois 60606.  The
Closing shall be deemed effective at the end of business on the Closing
Date.  At the Closing, the following
deliveries shall be made by and to the applicable parties:


 


(a)           a bill of sale and
assignment of contracts for the Purchased Assets in the form of Exhibit 1.7(a) hereto (the “Bill of Sale and Assignment of Contracts”),
executed by SAS in favor of Purchaser;


 


(b)           an assignment and assumption
of the Assumed Liabilities in the form of Exhibit 1.7(b) hereto
(the “Assignment and Assumption Agreement”),
executed by Purchaser and SAS;


 


5

















 


(c)           an assignment of copyrights
in the form of Exhibit 1.7(c) hereto
(“Assignment of Copyrights”),
executed by Purchaser and SAS;


 


(d)           an assignment of service
marks and trademarks in the form of Exhibit 1.7(d) hereto
(“Assignment of Service Marks and Trademarks”),
executed by Purchaser and SAS;


 


(e)           an assignment of patents in
the form of Exhibit 1.7(e) hereto
(“Assignment of Patents”),
executed by Purchaser and SAS;


 


(f)            a list, certified as true,
correct and complete by an officer of SAS of all of the holders of equity
interests in SAS (the “SAS Interests”)
as of the Closing Date and the number and class of securities owned by each
such holder on the Closing Date;


 


(g)           a list, certified as true,
correct and complete by an officer of Purchaser of all of the stockholders of
Purchaser as of the Closing Date and the number and class of securities owned
by each such stockholder on the Closing Date;


 


(h)           a certificate of the
secretary of SAS, certifying (i) that the resolutions attached to such
certificate authorizing and approving the execution and delivery of this
Agreement and the Transaction Documents to which SAS is a party and the
consummation of the transactions contemplated hereby and thereby were duly adopted
by SAS, (ii) that such resolutions have not been amended and remain in
full force and effect, (iii) as to the incumbency of each signatory to
this Agreement and each Transaction Document to which SAS is a party, and (iv) attaching
certificates, dated not more than five (5) days prior to the Closing Date,
of the relevant Governmental Authority or other appropriate official in each
state in which SAS is organized as to SAS’ legal existence and good standing in
such state;


 


(i)            a certificate of the secretary
of Purchaser, certifying (i) that the resolutions attached to such
certificate authorizing and approving the execution and delivery of this
Agreement and the Transaction Documents to which Purchaser is a party and the
consummation of the transactions contemplated hereby and thereby were duly
adopted by Purchaser, (ii) that such resolutions have not been amended and
remain in full force and effect, (iii) as to the incumbency of each
signatory to this Agreement and each Transaction Document to which Purchaser is
a party and (iv) attaching certificates, dated not more than five (5) days
prior to the Closing Date, of the relevant Governmental Authority or other
appropriate official in each state in which Purchaser is organized as to
Purchaser’s legal existence and good standing in such state;


 


(j)            certificates representing
the shares of Cordell Stock to be issued to SAS and Cordell, respectively;


 


(k)           a Transition Services
Agreement between Purchaser, SAI and SAS (the “SAI Transition Agreement”) in the form attached hereto as Exhibit 1.7(k);


 


(l)            an opinion of counsel to SAS
and Cordell in the form attached hereto as Exhibit 1.7(l);


 


6

















 


(m)          an opinion of counsel to
Purchaser and Alarm Funding in the form attached hereto as Exhibit 1.7(m);


 


(n)           a mutual release of claims
(the “Mutual Release”) in the form
attached hereto as Exhibit 1.7(n),
executed by the parties thereto;


 


(o)           a voluntary dismissal of the
Litigation with prejudice in the form attached hereto as Exhibit 1.7(o) hereto (“Voluntary Dismissal”);


 


(p)           a stockholders agreement in
the form attached as Exhibit 1.7 (p) hereto (“Stockholders Agreement”), executed by Purchaser, Alarm Funding
and Cordell relating to the governance and management of Purchaser and the
ownership and transfer of Purchaser Common Stock;


 


(q)           a three year servicing
agreement in the form attached hereto as Exhibit 1.7(q) hereto
(“New  Servicing Agreement”), executed by Alarm Funding and Purchaser
relating to the Alarm Contracts;


 


(r)           a consent and release in the
form attached hereto as Exhibit 1.7(r) hereto
(“Consent and Release”), executed
by Cordell relating to the release of the Cordell Liens on the Purchased
Assets;


 


(s)           UCC termination statements
satisfactory to Purchaser relating to the release of the Cordell Liens and any
other Liens of other Persons on the Purchase Assets; and


 


(t)            Nonsolicitation and
Confidentiality Agreements for the SAI Executives in the form attached hereto
as Exhibit 1.7(t).


 


1.8.          Post-Closing Capitalization Table.  Attached hereto as Schedule 1.8 is a post-closing capitalization table of
Purchaser after giving effect to the transactions contemplated by this
Agreement and including the shares of Management Stock reserved for issuance.


 


Article II.


REPRESENTATIONS AND WARRANTIES


 


2.1.          Unqualified Representations and Warranties of SAS.  Except as set forth under the corresponding
section of the disclosure schedules delivered to Purchaser concurrently
herewith (the “Disclosure Schedules”),
SAS hereby represents and warrants to Purchaser that as of the date hereof :


 


(a)           Subsidiaries.  Except as set forth on Schedule 2.2(w), SAS has no subsidiaries,
joint ventures, partnerships or other Affiliates (other than Cordell and Robin
Rodriguez).


 


(b)           Organization
and Qualification.  SAS
is duly organized, validly existing and in good standing under the laws of the
state of Delaware,  and has all requisite
power and authority as a limited liability company to own and use its
properties and assets and to carry on its business as currently conducted.  SAS is not in violation or default of any of
the provisions of its certificate of formation or operating agreement.  SAS is duly qualified to conduct business and
is in good standing as a foreign entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be


 


7














 


expected
to result in a Material Adverse Effect and no proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.


 


(c)           Authorization;
Enforcement.  SAS has the
requisite power and authority as a limited liability company to enter into and
to consummate the transactions contemplated by each of the Transaction
Documents to which it is a party and otherwise to carry out its obligations
hereunder and thereunder.  The execution
and delivery of each of the Transaction Documents to which it is a party by SAS
and the consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action as a limited liability
company on the part of SAS and no further action is required by SAS, its
manager or its member in connection therewith, other than in connection with
the SAS Required Approvals (as defined in Section 2.2(a) hereof).  Each Transaction Document to which it is a
party has been (or upon delivery will have been) duly executed by SAS and, when
delivered in accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of SAS enforceable against SAS in accordance with
its terms except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.


 


(d)           No
Conflicts.  The
execution, delivery and performance of the Transaction Documents to which it is
a party by SAS and the consummation by SAS of the transactions contemplated
hereby and thereby do not and will not: 
(i) conflict with or violate any provision of SAS’s certificate of
formation or operating agreement, or, (ii) subject to the receipt of the SAS
Required Approvals, conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, result in
the creation of any Lien upon any of the properties or assets of SAS, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument or other understanding to which SAS is a
party or by which any property or asset of SAS is bound or affected, or, (iii)
subject to receipt of the SAS Required Approvals, conflict with or result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or Governmental Authority to which SAS is
subject (including federal and state securities laws and regulations), or by
which any property or asset of SAS is bound or affected (except in the case of
each of clauses (ii) and (iii)), such as could not have, or reasonably be
expected to result in, a Material Adverse Effect.


 


(e)           Capitalization.  The capitalization of SAS is as set forth on Schedule 2.1(e).  Except as set forth on Schedule 2.1(e), there are no
outstanding options, warrants, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any SAS Interests, or any contracts,
commitments, understandings or arrangements by which SAS is or may become bound
to issue additional SAS Interests or equivalents thereof. All of the
outstanding SAS Interests are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws, and
none of such outstanding SAS Interests were issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities.  Except as set forth on Schedule 2.1(e), 


 


8

















 


there
are no member agreements, voting agreements or other similar agreements with
respect to SAS Interests to which SAS is a party or, to Rodriguez’s Knowledge,
between or among any of SAS’s members.


 


(f)            Financial Statements.  SAS has no available
financial statements.


 


(g)           Title to
Assets.  SAS owns no
real property.  SAS acquired the
Purchased Assets pursuant to the Foreclosure Sale and has such good and
marketable title to all personal property owned by it that is material to the
Business as would be obtained in a valid foreclosure sale conducted in
compliance with the requirements of the Uniform Commercial Code as adopted and
in effect in the State of New York on the date of the Foreclosure Sale. The
Purchased Assets are free and clear of all Liens, except for Permitted Liens
and the Cordell Liens which are being released concurrent with the consummation
of the transactions contemplated by this Agreement, each of which such Liens
are as set forth on Schedule 2.1(g)
hereto.


 


(h)           Foreclosure
Sale.  The
Foreclosure Sale was conducted on a commercially reasonable basis and in
accordance with the requirements of the Uniform Commercial Code as adopted in
the State of New York and in effect on the date of the Foreclosure Sale as well
as other applicable law.  True and
correct copies of all notices and advertisements provided with respect to the
Foreclosure Sale and a transcript of the Foreclosure Sale have been provided to
Purchaser.  There were no challenges or
objections recorded or received with respect to the Foreclosure Sale.


 


(i)            Certain Fees.  No
brokerage or finder’s fees or commissions are or will be payable by SAS to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents or the Foreclosure Sale, other than the fees paid to
TJM Capital Partners in connection with the Foreclosure Sale.


 


(j)            Tax Status.  SAS has not
filed, and was not required to file, on or before the date hereof any Tax
Returns with any taxing authority with respect to Taxes owed or which may be
owed by SAS following the completion of a tax reporting period.  There are no Taxes due and payable by SAS on
or before the Closing Date.  All Taxes
that SAS is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
governmental entity. SAS is not a party to any tax allocation or sharing
arrangement or tax indemnity agreement.


 


2.2.          Knowledge Representations and Warranties of SAS.  Except as set forth under the corresponding
section of the Disclosure Schedules, SAS represents and warrants to Purchaser
that to SAS’s Knowledge as of the date hereof:


 


(a)           Filings, Consents
and Approvals.  SAS is not
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other Governmental Authority or other Person in connection with
the execution, delivery and performance by SAS of the Transaction Documents to
which it is a party, other than the delivery of the notices and the receipt of
the approvals set forth on Schedule 2.2(a)
hereto (collectively, the “SAS Required Approvals”).


 


9

















 


(b)           Financial
Statements.  The most
recently available financial statements of SAI have been delivered to Purchaser
(the “SAI Financial Statements”).  The SAI Financial Statements have been prepared
in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis during
the periods involved, except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of SAI as of and for the dates thereof
and the results of operations and cash flows for the periods then ended, subject,
in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.


 


(c)           Material
Adverse Changes.  Except as
set forth in Schedule 2.2(c),
since January 1, 2008, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect on SAS or SAI; (ii) neither SAS nor SAI has incurred any
material Liabilities (contingent or otherwise), other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent
with past practice, and (B) Liabilities not required to be reflected in SAS’s
or SAI’s financial statements pursuant to GAAP; (iii) neither SAS nor SAI has
materially altered its method of accounting; (iv) neither SAS nor SAI has
declared or made any dividend or distribution of cash or other property to its
member or purchased, redeemed or made any agreements to purchase or redeem any
of its member interests; and (v) neither SAS nor SAI has issued any equity
securities to any officer, director or Affiliate of SAS or SAI.


 


(d)           Litigation.  Except as set forth on Schedule 2.2(d), there is no action,
suit, inquiry, claim, lien, notice of violation, proceeding or investigation
(collectively, an “Action”)
pending or threatened against or affecting SAS or SAI or their properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse
Effect.  There are no pending Actions
involving customer complaints with any Governmental Authority, including states’
attorney generals, which, if there were unfavorable outcomes to SAI, could
individually or in the aggregate have or reasonably be expected to result in a
Material Adverse Effect.


 


(e)           Labor
Relations.  SAS has no
employees other than the SAI Executives. 
Except as set forth on Schedule
2.2(e) hereto, no material labor dispute exists or is imminent
with respect to any of the employees of SAI which could be reasonably expected
to result in a Material Adverse Effect. 
No employee of SAI is a member of a union that relates to such employee’s
employment relationship with SAI. SAI is not a party to a collective bargaining
agreement. SAS believes that SAI’s relationship with its employees is
good.  Except as set forth on Schedule 2.2(e) hereto, no employee of
SAI, including its executive officers is, or is expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject SAI to any liability with
respect to any of the foregoing matters. 
SAI is in compliance with all U.S. federal, state, local, and foreign
laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and 


 


10

















 


hours,
except where the failure to be in compliance could not, individually or in the
aggregate, have a Material Adverse Effect.


 


(f)            Compliance.  Except as
set forth on Schedule 2.2(f)
hereto, and except for any default or violation which could not reasonably be
expected to result in a Material Adverse Effect, neither of SAS nor SAI is (i)
in material default under or in violation of (and no event has occurred that
has not been waived that, with notice or lapse of time or both, would result in
a default under), nor has SAS or SAI received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has been
waived), (ii) in violation of any order of any arbitrator or Governmental
Authority, or (iii) in violation of any statute, rule or regulation of any
Governmental Authority.


 


(g)           Regulatory
Permits.  SAS does
not posses any Material Permits. SAI possesses all Material Permits necessary
to conduct the Business, except where the failure to possess such permits could
not be expected to result in a Material Adverse Effect, and neither SAS nor SAI
has received any notice of proceedings relating to the revocation or modification
of any Material Permit.  Schedule
2.2(g) lists all of the Material Permits held by SAI.


 


(h)           Condition
of Purchased Assets.  All
of the tangible Purchased Assets are in good operating condition and repair,
subject to normal wear and tear, and are free from all material defects and
damage and are useable in the ordinary and usual course of business consistent
with past practice of the Business, and none of the Purchased Assets which are
material tangible assets require any immediate or imminent repair or
replacement.


 


(i)            Warranty of Merchantability. Except as set forth in Schedule
2.2(i) hereto, all material, goods, equipment and services supplied, sold,
leased or performed by SAS or SAI to or for its customers were of merchantable
quality at the time of sale, lease or performance and neither SAS nor SAI has
breached or violated any express or implied warranties in any material respect
in connection with such sales, leases or services.


 


(j)            Patents and Trademarks.  Except as set forth in Schedule 2.2(j)
hereto, SAS has, or has rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property rights and
similar rights necessary or material for use in connection with the Business
and which the failure to so have could have a Material Adverse Effect
(collectively, the “Intellectual Property Rights”).  SAS has not received a notice (written or
otherwise) that the Intellectual Property Rights used by SAS violates or
infringes upon the rights of any Person unless such notice has been resolved
without a Material Adverse Effect.  All
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.  SAS has taken all commercially reasonable
security measures to protect the secrecy, confidentiality, and value of all of
their Intellectual Property rights, except where failure to do so could not,
individually or in the aggregate, reasonably be expect to have a Material
Adverse Effect.


 


11

















 


(k)           Insurance.  Schedule 2.2(k) hereto sets forth each
of the insurance policies and the scope of coverage thereunder maintained by
SAS or SAI with respect to the Business. 
SAS and SAI are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary for the Business.  SAI has
no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue the Business without a
significant increase in cost.


 


(l)            Transactions With Affiliates and Employees.  Except as set forth in Schedule 2.2(l)
hereto, none of the officers, directors, managers or other Affiliates of SAS or
SAI, and none of the employees of SAI is presently a party to any transaction
with SAS or SAI (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or any entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee or
partner.


 


(m)          Tax Status.  SAI has timely filed all Tax Returns and/or
extensions required by law to be filed with or supplied to any taxing authority
with respect to the Taxes owed by SAI. 
All such Tax Returns are true, correct, and complete in all material
respects.  Except as set forth on Schedule
2.2(m) hereto, all Taxes due and payable by SAI on or before the Closing
Date have been paid or will be paid prior to the time they become
delinquent.  All Taxes that SAI is or was
required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper governmental
entity.  SAI has not been advised (i)
that any of its Tax Returns have been or are being examined or audited as of
the Closing Date, (ii) that any such examination or audit is currently
threatened or contemplated, or (iii) of any deficiency in assessment or
proposed judgment with to its Taxes.  SAI
has no liability for any Taxes to be imposed upon its properties or assets as
of the date of this Agreement that are not adequately provided for in the
financial statements delivered to Purchaser. 
SAI has delivered or made available to Purchaser true and complete
copies of all federal and state income Tax Returns, examination reports, and
statements of deficiencies filed by, assessed against, or agreed to by SAI in
the past three years.  Except as set
forth in Schedule 2.2(m) hereto, SAI has not been a member of a
consolidated or affiliated group of corporations filing a consolidated or
combined income Tax Return, nor does SAI have any liability for Taxes of any
other Person or entity.  SAI is not a
party to any tax allocation or sharing arrangement or tax indemnity agreement.


 


(n)           Foreign
Corrupt Practices. 
Neither SAS nor SAI, nor any agent or other Person acting on behalf of
SAS or SAI, has, (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by (or made by any Person acting on its
behalf of which SAS is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended.


 


12

















 


(o)           Material
Contracts.  Schedule
2.2(o) sets forth a true and complete list of all material agreements,
understandings, instruments, and contracts, proposed transactions (including a
description of those currently being negotiated), judgments, orders, writs, or
decrees to which SAS or SAI is a party or by which either SAS or SAI is bound
that may involve: (i) the sale of SAS’s or SAI’s products or services to any
customer, vendor or provider; (ii) obligations (contingent or otherwise) of, or
payments to, SAS or SAI; (iii) the license of any proprietary rights to or from
SAS or SAI (other than licenses arising from the purchase of “off the shelf” or
other standard products); (iv) the development, administration, or distribution
of SAS’s or SAI’s products or services, including without limitation, any that
involve any brokers or dealers; (v) provisions restricting or affecting the
development, manufacture, or distribution of SAS’s or SAI’s products or
services or SAS’s or SAI’s freedom to compete in any line of business; (vi) any
joint venture or similar arrangement; (vii) any restriction or limitation on
the ability of SAS to pay dividends or make any other distributions or to
repurchase, redeem, or otherwise acquire any of its equity securities; or
(viii) indemnification by SAS or SAI of any other Person or entity (except as
may be provided in the Transaction Documents) (each, a “Material Contract”).  SAS has delivered or made available to
Purchaser true and complete copies of each Material Contract.  Except as disclosed on Schedule 2.2(o),
each Material Contract is in full force and effect and is binding and
enforceable against the parties thereto in accordance with its terms, and SAS
or SAI as the case may be has performed in all material respects all
obligations required to be performed by it under each Material Contract, and no
condition exists or events have occurred that, with or without the passage of
time or giving of notice, would constitute a default by SAS or SAI under any
Material Contract.


 


(p)           Employee
Benefits.  As used
herein, the term “Employee Plan” includes any pension, retirement, savings,
disability, medical, dental, health, life, death benefit, group insurance,
profit sharing, deferred compensation, stock option, bonus, incentive, vacation
pay, tuition reimbursement, severance pay, or other employee benefit plan,
trust, agreement, contract, policy or commitment (including, without limitation,
any pension plan, as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended and the rules and regulations promulgated
thereunder (“ERISA”) (“Pension Plan”), and any welfare plan as defined in
Section 3(1) of ERISA (“Welfare Plan”), whether any of the foregoing is funded,
insured or self-funded, written or oral, (i) sponsored or maintained by SAI, or
any of their Affiliates, to the extent any such Affiliate is described in Code
Section 414(b), (c) or (m) and corresponding Treasury Regulations (each a “Controlled
Group Member”) and covering any Controlled Group Member’s active or former
employees (or their beneficiaries), (ii) to which any Controlled Group Member
is a party or by which any Controlled Group Member (or any of the rights,
properties or assets thereof) is bound, or (iii) with respect to which any
Controlled Group Member has made any payments, contributions or commitments or
may otherwise have any liability (whether or not such Controlled Group Member still
maintains such Employee Plan).  Each
Employee Plan of SAI is listed on Schedule 2.2(p) hereto. Except as
disclosed on Schedule 2.2(p),  SAS has no
employees other than the SAI Executives and has no employment agreements or
Employee Plans including any with the SAI Executives.


 


(i)            No Controlled
Group Member sponsors, maintains or otherwise contributes to or has any
liability with respect to any “employee pension benefit plan” (as defined in
Section 3(2) of ERISA) which is or was subject to Title IV of ERISA, including
any 


 


13

















 


“multi-employer
plan” (as defined in Section 4001(a)(3) of ERISA), or subject to Section 412 of
the Code.


 


(ii)           No Controlled
Group Member sponsors, maintains or has established any Welfare Plan which
provides for continuing benefits or coverage for any participant or any
beneficiary of a participant after such participant’s termination of
employment, except as may be required by Code section 4980B or Section 601 (et
seq.) of ERISA (“COBRA”),
or under any applicable state law, and at the expense of the participant or the
beneficiary of the participant.


 


(iii)          Each Employee
Plan complies in all material respects with the applicable requirements of
ERISA, the Code and any other applicable law governing such Employee Plan, and
each Employee Plan has at all times been properly administered in all material
respects in accordance with all such requirements of law, and in accordance
with its terms and the terms of any applicable collective bargaining agreement
to the extent consistent with all such requirements of law.  Each Employee Plan which is intended to be
qualified is qualified under Code section 401(a), has received a favorable
determination letter from the Internal Revenue Service (“IRS”) stating that such Employee Plan meets
the requirements of Code section 401(a) and that the trust associated with such
Employee Plan is tax-exempt under Code section 501(a) and no event has occurred
which would jeopardize the qualified status of any such plan or the tax exempt
status of any such trust under sections 401(a) and 501(a) of the Code,
respectively.  All contributions and
payments (including salary deferral contributions elected by employees) with
respect to Employee Plans that are due and owing or required to be made by a
Controlled Group Member with respect to periods ending on or before the Closing
Date (including periods from the first day of the current plan year or policy
year to the Closing Date) have been, or will be, made before the Closing Date
in accordance with applicable law and the appropriate plan document, actuarial
report, collective bargaining agreements or insurance contracts or arrangements
or as otherwise required by ERISA or the Code. 
Each Employee Plan that is a “group health plan” (as defined in ERISA
section 607(1) or Code section 5001(b)(1) has been operated at all times in
compliance with COBRA and the Health Insurance Portability and Accountability
Act of 1996 and any related regulation or applicable similar state law. No
lawsuits, claims or complaints to, or audits to, or by, any Person or
governmental entity have been filed or are pending and there are no facts or
contemplated events which could be expected to give rise to any such lawsuit,
claim (other than routine claims for benefits) or complaint with respect to any
Employee Plan.


 


(iv)          With respect to
each Employee Plan, there has not occurred, and no Person or entity is
contractually bound to enter into, any “prohibited transaction” within the
meaning of Section 4975(c) of the Code or Section 406 of ERISA, which
transaction is not exempt under Section 4975(d) of the Code or Section 408 of
ERISA.


 


(v)           No assets of,
and no assets managed by, SAS or SAI constitute “plan assets” as defined in 29
C.F.R. Section 2510.3-101, and none of the transactions contemplated by this
Agreement (including those transactions occurring after the Closing) will
constitute a “prohibited transaction” within the meaning of Section 4975(c) of
the Code or Section 406 of ERISA, which transaction is not exempt under Section
4975(d) of the Code or Section 408 of ERISA.


 


14

















 


(vi)          Except as set
forth in Schedule 2.2(p)(vi)
attached hereto, the consummation of the transactions contemplated by this Agreement
will not: (i) entitle any current or former employee of SAI to severance pay,
unemployment compensation or any similar payment; (ii) accelerate the time of
payment or vesting, or increase the amount of any compensation due to, or in
respect of, any current or former employee of SAI; or (iii) result in or
satisfy a condition to the payment of compensation that would, in combination
with any other payment, result in an “excess parachute payment” within the
meaning of Code section 280(G).


 


(q)           Communication
Paths. 
Schedule 1.1(b) attached hereto lists (A) all of the
telephone lines, telephone circuits and telephone numbers (collectively, “Telephone Lines”), internet addresses,
radio, cellemetry and all other technologies and communication paths utilized
to provide monitoring and related services to or for the Business including,
without limitation or example, to transmit and receive (a) voice to and from
the Arlington Heights Office in connection with the conduct of the Business,
and (b) data to and from each end-user customers electronic security alarm
systems (“Systems”) and SAS’s or
SAI’s monitoring facility (collectively, the “Communication
Paths”), and (B) the line cards interfacing the Telephone Lines
coming from customers with the System.


 


(r)           Underwriters Laboratories,
Inc. (“U.L.”) Standards and U.L. Certification.


 


(1)           All of SAS’s or
SAI’s central station operations and equipment at the Arlington Heights Office
including, without limitation, all computer hardware, software and peripheral
equipment and systems are in reliance upon the most recent U.L. inspection in
May 2008, and the most recent UL Certificate of Compliance, in compliance in
all material respects with all current U.L. standards effective as of the
Closing Date pursuant to all applicable U.L. protective signaling numbers.


 


(2)           Schedule 2.2(r)(ii) attached hereto sets forth
all certifications by U.L. required to authorize the operation of a U.L.
central station for burglary and fire operations at SAI’s Arlington Heights
office (the “Central Station”).
All of the certifications listed on Schedule
2.2(r)(ii) are currently issued by U.L. for the Central Station
and are in good standing and full force and effect for the Central Station and
there are no open deficiencies asserted by U.L. in connection with the Central
Station.


 


(3)           SAS hereby
authorizes Purchaser to direct U.L. to provide (a) copies of all documents
concerning the Central Station that are in the possession, care, custody or
control of U.L. and (b) all other information within the knowledge of U.L.
concerning the Business, provided that the SAS receives a copy of such
direction at the same time that such direction is given to U.L.


 


(4)           SAS hereby
authorizes Purchaser to direct U.L. to transfer its file concerning the Central
Station to Purchaser at the Closing and as of the Closing Date.


 


(5)           If U.L.
requires a separate document(s) confirming SAS’s authorizations and directions,
SAS shall deliver such document(s), in the form reasonably requested, to U.L.
and Purchaser within three (3) Business Days after the receipt of such request
from U.L. or Purchaser.


 


15

















 


(s)           Environmental
Matters. With respect to the real estate leased by SAI at
the Arlington Heights office: (i) all Material Permits, licenses and approvals
reasonably necessary for the lawful occupancy and operation of such real estate
by tenant required by any federal, state, country, regional or local
authorities whose jurisdiction includes, in whole or in part, environmental
protection or matters pertaining to health, safety and welfare have been
obtained. Neither SAS nor SAI has ever generated, transported or disposed of
any waste or other substance classified as hazardous, radioactive or toxic
under Environmental Laws (as hereinafter defined) (“Hazardous Material”) at or to any other site in violation of
Environmental Laws. There are no past, pending or threatened environmental
claims against SAI regarding the Arlington Heights office that individually or
in the aggregate are likely to have a Material Adverse Effect on SAS, SAI, the
Business or the Purchased Assets. There is no circumstance with respect to the
Arlington Heights office, either currently or in the past during SAI’s tenancy
thereof, that would reasonably be expected to (A) form the basis for an
environmental claim against SAS, SAI, Purchaser or the Arlington Heights office
or (B) cause the Arlington Heights office to be subject to any restrictions on
ownership, occupancy, use or transferability under any applicable Environmental
Law. Neither SAS nor SAI has ever stored gasoline, other petroleum products or
Hazardous Materials on the premises of the Arlington Heights office in
violation of Environmental Laws. As used herein, the term “Environmental Laws” means all applicable
Laws relating to human health and safety, pollution, protection of the
environment and natural resources.


 


(t)            Sufficiency of Assets. Except as set forth on Scheduled 2.2(t) attached hereto, SAS
and SAI collectively own or have a valid leasehold interest in, or a valid
license to use, all the assets, properties and rights, whether tangible or
intangible, necessary for the conduct of the Business as currently conducted
and as conducted during the prior twelve month period.  All such assets are in good working condition
and repair, ordinary wear, tear and maintenance excepted.


 


(u)           Accounts
Receivable.  Schedule 2.2(u) sets forth all of the
accounts, notes and other receivables, billed and unbilled, and all negotiable
instruments, or other instruments and chattel paper, as are payable to SAS or
SAI as of the date hereof (the “Accounts
Receivable”).  Except as set
forth on Schedule 2.2(u),
all outstanding Accounts Receivable (i) have arisen in bona fide transactions
and (ii) are due and valid claims against account debtors for goods or services
delivered or rendered, subject, as of the Closing, to no defenses, offsets or
counterclaims, except to the extent reserved against (the “Reserves”). 
Schedule 2.2(u) sets
forth the current amount of the Reserves. 
Except as set forth on Schedule
2.2(u), all Accounts Receivable arose in the ordinary course of
business, none of the obligors of such receivables has given written notice
that it refuses to pay the full amount thereof. 
No receivables are subject to prior assignment, claim, security interest
or other Lien other than Permitted Liens. 
Except as set forth on Schedule
2.2(u), neither SAS nor SAI has any liability for any refunds,
allowances, returns or discounts in respect of Accounts Receivable, except to
the extent of the Reserves.


 


(v)            Accounts Payable.  Schedule
2.2(v) sets forth as of the date hereof the all of the trade
accounts payable of SAS and SAI and accrued and unpaid compensation to
employees (including paid time off) and consultants arising in the ordinary
course of business.


 


16

















 


(w)           SAI
Subsidiaries.  Except as
listed on Schedule 2.2(w),
SAI has no subsidiaries, joint ventures, partnerships or other Affiliates
(other than SAS, Cordell and Robin Rodriguez).


 


(x)           Equipment.  Schedule
1.1(a) contains a complete and accurate list of all Equipment
transferred by SAI to SAS in the Foreclosure Sale.  Schedule
1.1(a) also sets forth the historic cost basis and book value,
net of accumulated depreciation, as of the date hereof, for such
Equipment.  Schedule 2.2(y) contains a complete and accurate list of
all Equipment leased by SAI where the annual payments under such leases exceed
$10,000 individually or in the aggregate or where any such lease has a remaining
term after the Closing Date equal to or greater than two years.  Except as disclosed on Schedule 2.2(y), none of the Equipment
is subject to any Liens, except for Permitted Liens.  Except as set forth in Schedule 2.2(y), (i) the SAS does not
hold any material piece of Equipment of any other Person pursuant to any
consignment or similar arrangement and no other Person has any right, title or
interest in such Equipment except as lessor or licensor and (ii) no other
Person holds any material piece of Equipment of SAI pursuant to any lease,
consignment or similar arrangement and no other Person has any right, title or
interest in such equipment.


 


(y)           Personal
Property Leases.  Set forth
in Schedule 2.2(y) is a
true and complete list of all leases of personal property of SAI where the
annual payments under such leases exceed $10,000 individually or in the
aggregate or where any such lease has a remaining term after the Closing Date
equal to or greater than two years (collectively, the “Personal Property Leases”).  SAI has been and is in peaceable possession
of the property covered by each Personal Property Lease since the commencement
thereof.  Except as set forth on Schedule 2.2(y), SAI is not in material
default with respect to any Personal Property Lease, and no event has occurred
which constitutes, or with due notice or lapse of time or both may constitute,
a default by SAI under any such Personal Property Lease.  SAS has delivered to Purchaser a true and
complete copy of each Personal Property Lease listed on Schedule 2.2(y).


 


(i)            Bank Accounts, Etc.  Schedule
2.2(z) sets forth a true and complete list of each bank, trust
company, savings and loan association and other financial institution in or
with which SAI has a credit line, deposit, safety deposit box, lock box or
other loan facility relationship or accounts of any nature and a brief
description thereof including the name of the financial institution and the
names of all Persons currently authorized to draw thereon, make withdrawals
therefrom or having access thereto.


 


(ii)           Real Property. 
Neither SAS nor SAI owns any real property.  SAS does not lease any real property.  Schedule
2.2(aa) sets forth a true and complete list of all real property
used in the Business which is leased or subleased by SAI (the “Leased Real Property”), including
identification of the lease or sublease, affecting such real estate or any
interest therein to which SAI is a party or by which any of its interests in
real property are bound (the “Real Property
Leases”).  SAI has been and is
in peaceable possession of the Leased Real Property covered by each Real
Property Lease since the commencement of the original term of such lease and
has performed all material obligations required to be performed under such Real
Property Lease.  No event or condition
exists which constitutes or, with the giving of notice or passage of time or
both, would constitute a material default by SAI under any Real Property
Lease.  None of such Leased Real Property
is subject to any easements, rights of way, licenses,


 


17














 


grants,
building or use restrictions, exceptions, reservations, limitations or other
impediments which materially and adversely affect the value to SAI of the
leasehold interest therein or which materially interfere with or impair the
present and continued use thereof in the usual and normal conduct of the
Business as presently conducted. Except as set forth in Schedule 2.2 (aa), there are no
subleases or other agreements to which SAI is a party granting any Person the
right of occupancy or use of any part of the Leased Real Property, and no
Person (other than SAI) is in possession of any such properties. No real
property other than the Leased Real Property is used in the Business.  There are no structural or other material
physical defects or deficiencies in the condition of any Real Property or
improvements thereon.  The buildings,
structures and improvements situated on each such parcel of Real Property, and
appurtenances thereto are in good condition (subject to normal wear and tear),
and as such are adequate to conduct the Business as presently conducted.


 


(iii)          Accuracy of Information.  None of the representations or warranties of
SAS contained in this Agreement or in the Disclosure Schedules hereto contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make any of such representations or warranties, in the
context in which made, not misleading.


 


2.3.          Representations and Warranties of Purchaser.


 


Purchaser makes the
representations and warranties set forth below to Cordell:


 


(a)           No
Operations.  Purchaser
has not conducted any business or operations since its date of organization
except for the negotiation of the Transaction Documents.


 


(b)           Organization
and Qualification. 
Purchaser is duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted.  Purchaser is not
in violation or default of any of the provisions of its certificate of
incorporation or bylaws.


 


(c)           Authorization;
Enforcement.  Purchaser
has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by each of the Transaction Documents to which it
is a party and otherwise to carry out its obligations hereunder and
thereunder.  The execution and delivery
of each of the Transaction Documents to which it is a party by Purchaser and
the consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of Purchaser
and no further action is required by Purchaser, its Board of Directors or its
stockholders in connection therewith. 
Each Transaction Document to which it is a party has been (or upon
delivery will have been) duly executed by Purchaser and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and
binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.


 


18

















 


(d)           No
Conflicts.  The
execution, delivery and performance of the Transaction Documents to which it is
a party by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby and thereby do not and will not:  (i) conflict with or violate any
provision of Purchaser’s certificate of incorporation or bylaws, or (ii) subject
to the Purchaser Required Approvals, conflict with, or constitute a default (or
an event that with notice or lapse of time or both would become a default) under,
result in the creation of any Lien upon any of the properties or assets of
Purchaser, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument or other understanding to
which Purchaser is a party or by which any property or asset of Purchaser is
bound or affected, or (iii) subject to the Purchaser Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or Governmental
Authority to which Purchaser is subject (including federal and state securities
laws and regulations), or by which any property or asset of Purchaser is bound
or affected.


 


(e)           Filings,
Consents and Approvals.  Purchaser is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
Governmental Authority or other Person in connection with the execution,
delivery and performance by Purchaser of the Transaction Documents to which it
is a party, other than the delivery of the notices and the receipt of the
approvals set forth on Schedule 2.3(e) attached
hereto (collectively, the “Purchaser Required
Approvals”).


 


(f)            Capitalization.  The
capitalization of Purchaser is as set forth on Schedule 2.3(f) attached hereto.  Except as set forth on Schedule 2.3(f) and as
contemplated by this Agreement, there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe
for or acquire, any shares of Purchaser Common Stock, or contracts,
commitments, understandings or arrangements by which Purchaser is or may become
bound to issue additional shares of Purchaser Common Stock or Common Stock
Equivalents. All of the outstanding shares of capital stock of Purchaser are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  Except as
set forth on Schedule 2.3(f),
there are no stockholders agreements, voting agreements or other similar
agreements with respect to Purchaser’s capital stock to which Purchaser is a
party or, to the knowledge of Purchaser, between or among any of Purchaser’s
stockholders.  The Purchaser Common
Stock, when issued in compliance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable, will have been issued in
compliance with all applicable laws concerning the laws relating to the
issuance of securities, and will be free and clear of any encumbrances (except
any restrictions on transfer under applicable securities laws).


 


19

















 


2.4.          Representations and Warranties of Cordell.


 


Cordell hereby makes the
representations and warranties set forth below to Purchaser:


 


(a)           Organization
and Qualification. 
Cordell is duly organized, validly existing and in good standing under
the laws of the State of Florida, with the requisite power and authority as a
limited liability limited partnership to own and use its properties and assets
and to carry on its business as currently conducted.  Cordell is not in violation or default of any
of the provisions of its certificate of limited partnership. Cordell does not
have a limited partnership agreement.


 


(b)           Authorization;
Enforcement.  Cordell has
the requisite power and authority as a limited liability limited partnership to
enter into and to consummate the transactions contemplated by each of the
Transaction Documents to which it is a party and otherwise to carry out its
obligations hereunder and thereunder. 
The execution and delivery of each of the Transaction Documents to which
it is a party by Cordell and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
limited liability limited partnership action on the part of Cordell and its
holders of voting equity securities and no further action is required by
Cordell, its general partner or its limited partners in connection
therewith.  Each Transaction Document to
which it is a party has been (or upon delivery will have been) duly executed by
Cordell and, when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligation of Cordell enforceable against
Cordell in accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions
may be limited by applicable law.


 


(c)           No
Conflicts.  The
execution, delivery and performance of the Transaction Documents to which it is
a party by Cordell and the consummation by Cordell of the transactions contemplated
hereby and thereby do not and will not: (i) conflict with or violate any
provision of Cordell’s certificate of limited partnership or agreement of
limited partnership, or (ii) subject to Cordell Required Approvals,
conflict with, or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, result in the creation of any
Lien upon any of the properties or assets of Cordell, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other instrument or other understanding to which Cordell is a party or by which
any property or asset of Cordell is bound or affected, or (iii) subject to
Cordell Required Approvals, conflict with or result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or Governmental Authority to which Cordell is subject (including
federal and state securities laws and regulations), or by which any property or
asset of Cordell is bound or affected (except in the case of each of clauses (ii) and
(iii)), such as could not have or reasonably be expected to result in a
Material Adverse Effect.


 


(d)           Filings,
Consents and Approvals.  Cordell is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
Governmental Authority or other Person in connection with the execution,
delivery and performance by Cordell of the Transaction 


 


20

















 


Documents
to which it is a party, other than the delivery of the notices and the receipt
of the approvals set forth on Schedule 2.4(d) attached
hereto (collectively, the “Cordell Required
Approvals”).


 


(e)           Investment
Representations.


 


(i)            Cordell
understands that the shares of Purchaser Common Stock comprising Cordell Stock
have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and the Purchaser Common
Stock is being offered and sold under an exemption from registration provided
by the Securities Act and the rules and regulations thereunder in
reliance, in good faith, upon the representations and warranties of Cordell
contained herein;


 


(ii)           Cordell is able
(i) to bear the economic risk of Cordell’s investment in the Purchaser
Common Stock, (ii) to hold the Purchaser Common Stock for an indefinite
period of time, and (iii) currently, based on existing conditions,
hereafter will be able to afford a complete loss of such investment;


 


(iii)          Cordell
understands the business in which Purchaser is engaged and has such knowledge
and experience in financial and business matters that Cordell is capable of
evaluating the merits and risks of Cordell’s investment in the Purchaser Common
Stock and of making an informed investment decision with respect thereto.  Cordell has obtained sufficient information
to evaluate the merits and risks of Cordell’s investment and to make such a
decision;


 


(iv)          In making
Cordell’s decision to invest in the Purchaser Common Stock, Cordell has relied
upon independent investigations made by Cordell;


 


(v)           Cordell
confirms that neither the Purchaser nor any of the Purchaser’s Affiliates or
agents have made any representations or warranties (oral or written),
concerning Cordell’s investment in the Purchaser Common Stock, the Purchaser,
its business, prospects or anticipated financial results, or other matters;


 


(vi)          Except for the
indirect interests in the Purchaser Common Stock of the participants in the
loans made by Cordell to SAI pursuant to the Credit Agreement, the Purchaser
Common Stock are being purchased solely for Cordell’s own account, as principal,
for investment and not for the interest of any other entity and not with a view
to, or in connection with, any resale or distribution of such Purchaser Common
Stock.  Cordell has no agreement or other
arrangement with any Person to sell, transfer or pledge any part of the
Purchaser Common Stock subscribed for or any agreement or arrangement which
would guarantee Cordell any profit or against any loss with respect to such
Purchaser Common Stock, and Cordell has no plans to enter into any such agreement
or arrangement;


 


(vii)         Cordell
understands that:


 


(1)           Cordell must
bear the economic risk of the investment for an indefinite period of time
because the Purchaser Common Stock cannot be resold unless subsequently
registered under the Securities Act or unless an exemption from such
registration is available, as established by an opinion of counsel satisfactory
to the Purchaser;


 


21

















 


(2)           The exemption
provided by Rule 144 promulgated pursuant to the Securities Act (“Rule 144”) generally will not be
available because of the conditions and limitations of Rule 144.  In the absence of the availability of Rule 144
any disposition by Cordell of any portion of the Purchaser Common Stock may
require compliance with some other exemption under the Securities Act, and
Purchaser is under no obligation and does not plan to take any action in
furtherance of making Rule 144 or any exemption so available;


 


(3)           All
certificates evidencing the Purchaser Common Stock will bear a legend
substantially as follows:


 


THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES OR “BLUE SKY” LAWS, AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND BLUE SKY LAWS OR PURSUANT
TO AN EXEMPTION THEREOF.


 


(4)           No federal or
state agency has passed on or made any recommendations or endorsements of the
investment in the Purchaser Common Stock.


 


Article III.


POST-CLOSING COVENANTS


 


3.1.          Public Announcements.  Neither SAS nor Cordell shall issue or make
any press release or other public statements with respect to this Agreement or
the transactions described herein to employees, customers, distributors,
suppliers or other Persons except and unless such release, statement or
announcement has been approved by Purchaser. 
Purchaser may issue any such releases of information without the consent
of the SAS or Cordell; provided, however, that prior to making any such release
Purchaser shall reasonably consult with Cordell regarding the content thereof
if practicable.  If either of SAS or
Cordell are so required to issue or make a press release, public statement or
other announcement within the scope of this Section 3.1, such party shall
inform the Purchaser prior to issuing or making any such press release, public
statement or announcement and shall reasonably consult with the Purchaser
regarding the content thereof if practicable.


 


3.2.          Restrictions.  Each
of SAS and Cordell acknowledges that Purchaser has paid valuable consideration
for the Purchased Assets, particularly the customer and supplier lists,
distribution records, know-how, goodwill and other proprietary business
information and trade secrets of relating to the Business.  The use by SAS or Cordell of these
relationships and such confidential information in a business or activity which
competes with Purchaser or the Business would provide the competing business
with an unfair advantage over the Purchaser. 
Accordingly, Purchaser wishes to restrict SAS’s and Cordell’s use of
such information and their ability to compete with Purchaser.  Each of SAS and Cordell agrees, for the
purchase price described in Article I, to comply, and cause its Affiliates
(other than SAI Executives as to whom Purchaser acknowledges that SAS and
Cordell have no responsibility) to comply, with the terms of this Agreement,
all of which are reasonable and necessary to protect the confidential business 


 


22

















 


information
and trade secrets and the value of the Business being acquired by Purchaser and
to prevent any unfair advantage from being conferred upon a competing business
of SAS or Cordell, as set forth below.


 


3.3.          Non-Competition.


 


For a period of five years
from the Closing Date, each of SAS and Cordell shall not, and shall not permit
any of their Affiliates (other than SAI Executives as to whom Purchaser
acknowledges that SAS and Cordell have no responsibility) to, directly or
indirectly, either alone or as a stockholder, partner, employee, officer,
director, associate, consultant, owner, agent, creditor, coventurer of any
other Person, or in any other capacity, directly or indirectly, engage in the
security alarm monitoring business (“Prohibited
Business”) or render material services of a competitive nature to
any other Person engaged in the Prohibited Business anywhere in the world.


 


3.4.          Non-Interference with Business Relations.


 


For a period of five years
from the Closing Date, each of SAS and Cordell shall not, and shall not permit
any of SAS or Cordell’s Affiliates (other than the SAI Executives as to whom
Purchaser acknowledges that SAS and Cordell have no responsibility) to,
directly or indirectly, solicit, induce or attempt to solicit or induce any
supplier, licensee or other business relation of Purchaser or its Affiliates to
cease doing business with Purchaser or its Affiliates, or in any way interfere
with the relationship between any customer or business relation of Purchaser or
its Affiliates.


 


3.5.          Solicitation of Customers and Employees.


 


For a period of five years
from the Closing Date, each of SAS and Cordell shall not, and shall not permit
any of SAS or Cordell’s Affiliates (other than the SAI Executives as to whom
Purchaser acknowledges that SAS and Cordell have no responsibility) to,
directly or indirectly, either alone or as a partner, consultant, adviser,
owner, associate, agent, creditor, coventurer of any other Person, or in any
other capacity, (i) sell to or solicit sales of products or services which
compete with the Business from any customer or account which was a customer or
account of SAS or SAI as of the Closing Date, within one year prior thereto, or
(ii) solicit, hire, attempt to solicit or hire, or participate in any
attempt to solicit or hire any employee of SAS or SAI, or any Person who was an
employee of SAS or SAI within the six month period prior to the Closing Date or
encourage any such employee to leave such employee’s employment; provided,
however, that such limitations contained in this Section 3.5
regarding solicitation or hiring shall not apply to any Person who responds to
an advertisement which is placed in general circulation and which is not
targeted at a Person to whom the preceding otherwise would apply and provided
that SAS or Cordell otherwise complies with the provisions of this Section 3.5(a).


 


3.6.          Confidential Information.  Each of SAS and Cordell recognize that
Purchaser’s business interests require the fullest practical protection and
confidential treatment of all information relating to the Business not
generally known within the relevant trade group or by the public, including all
documents, writings, memoranda, business plans, illustrations, designs, plans,
know-how, technology, financial information, personnel data, processes,
formulas, programs, inventions, computer software, reports, sources of supply,
customer lists, supplier lists, pricing policies, operational methods,
marketing plans or strategies, product development 


 


23

















 


techniques,
business acquisition plans, methods of manufacture, trade secrets and all other
valuable or unique information and techniques acquired, developed or used by
Purchaser relating to its businesses, operations, employees or customers
(hereinafter collectively termed “Protected
Information”).  Each of SAS
and Cordell expressly acknowledge and agree that Protected Information
constitutes trade secrets and confidential and proprietary business information
of Purchaser.  Protected Information
shall not include information which (i) is or becomes part of the public
domain through no breach of this Agreement by SAS or Cordell, (ii) is
independently developed or otherwise created without the use of any Protected
Information,  (iii) is received on a
non-confidential basis from a source other than Purchaser that is entitled to
disclose the same or (iv) prior to the date hereof has been disclosed to
COPS in connection with the COPS Agreement or the COPS Transition
Agreement.  Each of SAS and Cordell
acknowledge that Protected Information is essential to the success of the
Business, and it is the policy of Purchaser to maintain as secret and confidential
Protected Information, which gives Purchaser a competitive advantage over those
who do not know the Protected Information and is expressly and implicitly
protected by Purchaser from unauthorized disclosure.  Accordingly each of SAS and Cordell shall, and
shall cause its Affiliates (other than SAI Executives as to whom Purchaser
acknowledges that SAS and Cordell have no responsibility) to, keep secret and
treat confidentially and not directly or indirectly, appropriate, divulge,
disclose or otherwise disseminate to any other Person nor use in any manner
benefit any Protected Information, for the benefit of SAS or Cordell or any
other Person and not to use or aid others in using any such Protected
Information except to the extent that disclosure is required by law; provided,
however, that SAS and Cordell shall provide Purchaser with notice as far in
advance of any required disclosure as is practicable in order for Purchaser to
obtain an order (at Purchaser’s sole cost) or other assurance that any
information required to be disclosed will be treated as Protected Information
and SAS or Cordell shall use all commercially reasonable efforts to cooperate
with Purchaser in connection therewith and in furtherance thereof.  This obligation of non-disclosure of information
shall continue to exist for so long as such information remains Protected
Information.  Without limiting the
generality of the foregoing, each of SAS and Cordell acknowledge and agree that
the Protected Information consists of trade secrets and confidential and
proprietary information and is subject to the protection of any applicable
trade secrets act.


 


3.7.          Scope.  If, at the
time of enforcement of this Article III, a court shall hold that the
duration, scope or area restrictions stated herein are unreasonable under
circumstances then existing, the parties agree that the maximum duration, scope
or area reasonable under such circumstances shall be substituted for the stated
duration, scope or area.


 


3.8.          Remedies.  Each of SAS
and Cordell agree that if SAS or Cordell shall commit or threaten to commit a
breach of any of the covenants and agreements contained in this Article III,
then, in any such case, Purchaser shall have the right to seek all appropriate
injunctive and other equitable remedies therefor, in addition to any other
rights and remedies that may be available at law, it being acknowledged and
agreed that any such breach would cause irreparable injury to Purchaser and
that money damages would not provide an adequate remedy therefor.  If either of SAS or SAI violates any of the
terms of this Article III, the running of the periods of limitation
referred to in this Agreement shall be tolled until such violation shall cease
and shall begin to run again only when SAS or Cordell is in compliance with the
terms hereof, whether voluntarily or pursuant to an order of a court.


 


3.9.          Purchaser
Agreements Concerning the Business.


 


(a)           Employment.  After the Closing, the Board of Directors of
Purchaser shall select the management group to operate the Business, which
management group may include one or more of the SAI Executives.  Purchaser shall also provide a substantial
number of employees of SAI the opportunity to become employed with Purchaser 


 


24

















 


following
the Closing on substantially the same or similar terms and conditions of
employment as provided by SAI. 
Notwithstanding the foregoing, nothing contained herein or in any of the
Transaction Documents shall be deemed or construed to be an offer or agreement
of employment with any Person, including but not limited to the SAI Executives.


 


(b)           Management
Equity.  After the
Closing, the Board of Directors of Purchaser in its sole discretion may make
available to Purchaser’s management group up to an aggregate of twelve percent
(12%) of the Purchaser Common Shares on a fully-diluted basis as of Closing
through purchase or as incentive compensation. 
Notwithstanding the foregoing, nothing contained herein or in any of the
Transaction Documents shall be deemed or construed to be an offer to sell or the
solicitation of an offer to purchase any Management Stock or a grant or award
of an option or other right to purchase any Purchaser Common Shares to any
Person.


 


(c)           Vendors.  At Closing, Alarm Funding will have
contributed $500,000 in cash to Purchaser. 
In accordance with the Transition Services Agreement, Purchaser shall
make such funds available for the payment of vendors critical to the
Business.  Except as provided in the
Transition Services Agreement, neither Alarm Funding, on the one hand, nor Cordell
and SAS on the other hand, is under any obligation to provide funds for use by
SAI or SAS for operations, to pay vendors, defend lawsuits or for any other
purpose.


 


3.10.        SAS and Cordell Agreements Concerning SAS and SAI.  Neither SAS nor SAI shall dissolve,
liquidate, wind-up or abandon SAI or SAS prior to the expiration of the
Indemnification Period.


 


3.11.        Further Assurances.  Each party to this Agreement, at the request
of any other party, shall execute and deliver such other agreements, instruments
and other documents and do and perform such other acts and things as may be
reasonably necessary or desirable for effecting completely the consummation of
this Agreement and the Transaction Documents and the transactions contemplated
hereby and thereby.


 


3.12.        Contribution and Assignment of Claims.  Each of Alarm Funding, Cordell and SAS does
hereby contribute, transfer, assign and convey to Purchaser all of their
respective rights, title and interest in or to any and all claims, causes of
actions, rights to seek indemnity, entitlements to damages, and other rights
that they or their Affiliates (including in the case of Cordell and SAS, SAI)
may have against any Person, including dealers of alarm security contracts, as
of the date hereof relating to the Business, the Purchased Assets, any rights
under the Servicing Agreement or the Credit Agreement, and all related
agreements, instruments and other documents, other than those released pursuant
to the Mutual Release.


 


Article IV.


INDEMNIFICATION


 


4.1.          Survival of Representations, Warranties and Covenants.  The respective representations, warranties
and covenants of each of the parties hereto contained in this Agreement and
each other Transaction Document shall survive the Closing and the consummation
of the transactions contemplated hereby. 
The rights of each Person entitled to indemnification under this Article IV
to seek indemnification with respect to a breach of any representation or
warranty in Article II of this Agreement shall terminate on the date which
is two years after the Closing, except (i) insofar as any party or other
Person entitled to indemnification under this Article IV shall have
asserted a Claim in writing, setting forth in 


 


25

















 


reasonable
detail the nature of the Claim (and if then known, the amount thereof), prior
to the expiration of such two year period, in which event the representations
or warranties shall continue in effect and remain a basis for indemnity solely
with respect to each such asserted Claim until such Claim is finally resolved
(pursuant to a non-appealable order by a court of competent jurisdiction or
agreement of Alarm Funding and Cordell) (such period ending thirty days (30)
after the two (2) year anniversary of the Closing hereby being called the “Indemnification Period”), (ii) any
Claim for indemnification relating to Sections 2.1(b) [Organization and
Qualification], 2.1(c) [Authorization; Enforcement], 2.2(b) [Organization
and Qualification], 2.2(c) [Authorization; Enforcement], 2.3(a) [Organization
and Qualification] or 2.3(b) [Authorization; Enforcement], it being agreed
that the representations and warranties of those Sections shall continue
indefinitely beyond the two year anniversary of the Closing Date (regardless of
whether the facts giving rise to such claim are also the subject of any expired
representation or warranty), (iv) any Claims relating to Sections 2.1(m) [Title
to Assets], 2.1(t) [Certain Fees], 2.1(u) [Tax Status],  2.1(x) [Employee Benefits] or 2.1(aa)
[Environmental Matters], it being agreed that the representations and
warranties of those Sections shall continue until the applicable statute of
limitations thereto including any extensions thereof (regardless of whether the
facts giving rise to such Claim are also the subject of any expired
representation and warranty), and (v) any Claim for indemnification based
on allegations of common law fraud to the extent that a court of law with
competent jurisdiction over the Claim holds in a final decision (for which the
period for appeal has expired) that common law fraud was committed by the
pertinent party (“Fraud”) shall
continue indefinitely beyond the two year anniversary of the Closing Date
(regardless of whether the facts giving rise to such Claim are also the subject
of any expired representation and warranty) and (vi) any agreement or
covenant to be performed by any party after the Closing (“Post-Closing Covenant”) shall survive the
Closing in accordance with its terms. 
The rights and remedies of any Person based upon, arising out of or
otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant or agreement contained in this Agreement, shall in no way be
limited by the fact that the act, omission, occurrence or other state of facts
upon which any claim of any such inaccuracy, breach or indemnity is based may
also be the subject matter of any representation, warranty, covenant or
agreement contained in this Agreement or any Transaction Document as to which
there is no inaccuracy or breach or as to which the Indemnification Period has
expired.  Claims based upon a breach of
any representation, warranty or covenant may be brought without regard or
reference to any investigation made by or on behalf of, or disclosure to any
party to whom such representation, warranty or covenant have been made;
provided, however, that no Claim based upon a breach of any representation or
warranty may be made by (i) any party that knew or should have reasonably
known of the inaccuracy of such representation or warranty as of the Closing
Date, or (ii) Purchaser against Cordell based upon any information
contained in or reasonably inferred from the Delivered Documents, or relating
to any time period prior to February 22, 2008.


 


4.2.          SAS Indemnification.  SAS shall indemnify and hold harmless
Purchaser and its Affiliates and their respective officers, directors,
stockholders and agents, successors and assigns (collectively, “Purchaser Indemnified Parties”), from and
against and in respect of any and all demands, claims, causes of action,
administrative orders and notices, losses, costs, fines, Liabilities,
penalties, damages (direct or indirect) and expenses (including reasonable
out-of-pocket legal, paralegal, accounting and consultant fees, amounts paid in
settlement, judgments and other expenses incurred in the investigation and
defense of claims and actions) (hereinafter collectively called “Losses”) to the extent such Losses result
from, are in connection with or 


 


26

















 


arise
out of:


 


(a)           any breach of any
representation or warranty made by SAS in this Agreement or in any Transaction
Document;


 


(b)           any breach by SAS of any of
SAS’s covenants made in this Agreement or any Transaction Document;


 


(c)           any Fraud by SAS; and


 


(d)           subject to the limitations
set forth in Section 4.8(b), any claims made with respect to any
Liabilities of SAS or SAI or otherwise made by any creditors of SAS or SAI,
including any third party claims based on violation of the bulk transfer
provisions of the Uniform Commercial Code or premised on a fraudulent
conveyance of the Purchased Assets or otherwise relating to the consummation of
the transactions contemplated by this Agreement.


 


The parties expressly agree
that the Purchaser Indemnified Parties may seek indemnification for Losses
under Section 4.2(a),(b) or (c) only to the extent that the net
proceeds paid under any insurance policies maintained by SAS are available for
payment of Losses and shall not seek indemnification for Losses from any of the
escrowed cash proceeds held pursuant to the COPS Asset Purchase Agreement;
provided, however, that it is understood that SAS shall have no obligation to
pay as Losses the deductible due with respect to any Claim covered by insurance;
and provided, further that the parties agree that there shall be no limitation
on the right of the Purchaser Indemnified Parties to seek indemnification of
Losses under Section 4.2(c) based solely on the Fraud of Robin
Rodriguez.  SAS and Cordell expressly
agree that the Purchaser Indemnified Parties shall be subrogated to any and all
of the rights and interests of SAS and Cordell in connection with any Claim
based upon the Fraud of the SAI Executives; provided, however,  that nothing in this Section 4.2 shall
be construed to alter or expand the substantive legal duties and obligations
owed by SAI Executives to SAS, SAI or any other person.


 


4.3.          Cordell Indemnification.  Cordell shall indemnify and hold harmless the
Purchaser Indemnified Parties from and against and in respect of any and all
Losses to the extent such Losses result from, are in connection with or arise
out of:


 


(a)           any breach of a
representation or warranty in Sections 2.1 and 2.4;


 


(b)           any breach of a
representation or warranty in Section 2.2 if, and only if, to Rodriguez’s
Knowledge such representations and warranties were not in fact true;


 


(c)           any representation or
warranty made by Cordell in this Agreement or in any Transaction Document;


 


(d)           any breach by Cordell of any
of Cordell’s covenants made in this Agreement or any Transaction Document;


 


(e)           any Fraud by Cordell; and


 


(f)            the COPS Asset Purchase
Agreement unless it relates to any action or inaction otherwise required by
Purchaser under the Transition Services Agreement.


 


27














 


4.4.          Purchaser’s Indemnification.  Purchaser shall indemnify and hold harmless
Cordell and its respective officers, directors, members, agents, successors and
assigns (collectively, the “Cordell
Indemnified Parties”), from and against and in respect of any and
all Losses to the extent such Losses result from, are in connection with or
arise out of:


 


(a)           any breach of a
representation or warranty made by Purchaser in this Agreement or in any
Transaction Document;


 


(b)           the breach by Purchaser of
any of Purchaser’s covenants made in this Agreement or any Transactional
Document; and


 


(c)           any Fraud by Purchaser.


 


4.5.          Alarm Funding’s Indemnification.  Alarm Funding shall indemnify and hold
harmless the Cordell Indemnified Parties from and against and in respect of any
and all Losses to the extent such Losses result from, are in connection with or
arise out of:


 


(a)           any breach of a
representation or warranty made by Purchaser or Alarm Funding in this Agreement
or in any Transaction Document;


 


(b)           the breach by Alarm Funding
of any of Alarm Funding’s covenants made in this Agreement or any Transactional
Document; and


 


(c)           any Fraud by Alarm Funding.


 


4.6.          Indemnification Procedure for Third Party Claims Against Indemnified
Parties.


 


(a)           In the event that subsequent
to the Closing Date any party or parties entitled to indemnification hereunder
(“Indemnified Party”) asserts a
claim for indemnification under this Article IV, on account of or in
connection with any claim or the commencement of any action or proceeding against
such Indemnified Party by any Person who is not a party to this Agreement
(including any Governmental Authority) (a “Third
Party Claim”), the Indemnified Party shall give written notice
thereof together with a statement of any available information regarding such
claim (the “Notice of Third Party Claim”)
to the party against whom a claim for indemnification has been asserted (“Indemnifying Party”) as soon as reasonably
practicable after learning of such Third Party Claim.  Failure by an Indemnified Party to provide
notice on a timely basis of a Third Party Claim shall not relieve the
Indemnifying Party of its obligations hereunder, except that the foregoing
shall not constitute a waiver by the Indemnifying Party of any claim against
the Indemnified Party for losses caused by such delay.


 


(b)           With respect to the defense
of any Third Party Claim against or involving an Indemnified Party, an
Indemnifying Party may at its option within 30 days after receipt of a Notice
of Claim appoint as lead counsel of such defense any legal counsel selected by
the Indemnifying Party and reasonably acceptable to the Indemnified Party;
provided that the Indemnifying Party acknowledges the right of the Indemnified
Party to indemnity pursuant hereto (with a reservation of rights with respect
to all limitations set forth in this Agreement).


 


(c)           Without the prior written
consent of the Indemnified Party(which shall not be unreasonably withheld,
conditioned or delayed), the Indemnifying Party (and any insurance carrier
defending such Third Party Claim on the Indemnified Party’s behalf) will not
enter into any settlement of any Third Party Claim with respect to which the
Indemnifying Party controls 


 


28

















 


the
defense pursuant to Section 4.6(b) hereof unless the terms of such
settlement discharge and release the Indemnified Party from all Liabilities and
obligations thereunder and do not involve a remedy other than the payment of
money by the Indemnifying Party.


 


(d)           In the event that the
Indemnifying Party does assume the defense pursuant to Section 4.6(b), the
Indemnified Party will, at its own expense, cooperate with and make available
to the Indemnifying Party such assistance, personnel, witnesses and materials
as the Indemnifying Party may reasonably request.


 


(e)           Notwithstanding Section 4.6(b),
the Indemnified Party will be entitled to participate in the defense of any
Third Party Claim and to employ counsel of its choice for such purpose at its
own expense; provided that the Indemnifying Party will bear the reasonable fees
and expenses of such separate counsel incurred prior to the date upon which the
Indemnifying Party effectively assumes control of such defense.  Notwithstanding Section 4.6(b), the
Indemnified Party shall have the sole right to conduct the defense of a Third
Party Claim at the expense of the Indemnifying Party with legal counsel
retained by the Indemnified Party, if:


 


(i)            the
Indemnifying Party fails to assume the defense of such claim within 30 days
after receipt of a Notice of Claim in accordance with Section 4.6(b);


 


(ii)           the Indemnified
Party reasonably believes that there exists a conflict of interest which, under
applicable principles of legal ethics, could prohibit a single legal counsel
from representing both the Indemnified Party and the Indemnifying Party in such
Third Party Claim;


 


(iii)          the claim
involves injunctive or other equitable relief; or


 


(iv)          the
Indemnifying Party has failed or is failing to vigorously prosecute or defend
such claim.


 


In such event, the
Indemnifying Party shall, at its own expense, cooperate with and make available
to the Indemnified Party such assistance, personnel, witnesses and materials as
the Indemnified Party may reasonably request.


 


(f)            In the event of any Third
Party Claim, the defense of which is conducted by the Indemnified Party, the
Indemnifying Party will not be bound by any determination of such Third Party
Claim so defended for purposes of this Agreement or any compromise or
settlement effected unless the Indemnified Party has obtained the written
consent of the Indemnifying Party (which consent may not be unreasonably
withheld, conditioned or delayed).


 


(g)           Any judgment entered or
settlement agreed upon in the manner provided herein shall be binding upon the
Indemnifying Party, and shall be conclusively deemed to be an obligation with
respect to which the Indemnified Party is entitled to prompt indemnification
hereunder, subject to any applicable limitations set forth in this Agreement.


 


(h)           With respect to any Third
Party Claim subject to indemnification under this Article IV, the
Indemnified Party and the Indemnifying Party, as the case may be, shall keep 


 


29

















 


the
other Person fully informed of the status of such Third Party Claim and any
related proceedings at all stages thereof where such Person is not represented
by its own counsel.


 


4.7.          Nature of Other Liabilities.  In the event any Indemnified Party should
have a claim against any Indemnifying Party hereunder which does not involve a
Third Party Claim, the Indemnified Party shall transmit to the Indemnifying
Party a written notice (the “Indemnity Notice”)
describing in reasonable detail the nature of the claim (and the amount
thereof, if then known), and the basis of the Indemnified Party’s request for
indemnification under this Agreement.


 


4.8.          Determination of Loss Amount.


 


(a)           The amount of any Loss
subject to indemnification under Sections 4.2, 4.3, 4.4 or 4.5 shall be
calculated net of any insurance proceeds or any indemnity, contribution or
other similar payment received by the Indemnified Party from any third party
with respect thereto after deducting any collection expenses relating to any
such payment and the reasonably estimated amount of any increase in insurance
premiums and Losses directly  relating to
any impact on available insurance coverage as a direct result of making any
such claim for insurance proceeds (collectively, “Insurance Recovery Expenses”). 
The Indemnified Party shall seek full recovery under all insurance
policies covering any Loss to the same extent as they would if such Loss were
not subject to indemnification hereunder. 
In the event that an insurance or other recovery is made by any Indemnified
Party with respect to any Loss for which any such Person has been indemnified
hereunder, then a refund equal to the aggregate amount of the recovery less any
applicable Insurance Recovery Expenses shall be made promptly to the
Indemnifying Party.  The Indemnified
Party shall be subrogated to all rights of the Indemnifying Party and their
Affiliates in respect of any Losses indemnified by the Indemnified Party.


 


(b)           In connection with any claim
made by Purchaser Indemnified Parties pursuant to Section 4.2(d), a
Purchaser Indemnified Party shall be indemnified first, from any available
assets of SAI, including any insurance proceeds payable in connection with such
claim, and second, from any available assets of SAS, including any insurance
proceeds payable in connection with such claim. 
Except to the extent permitted under the applicable insurance policies
of SAI and SAS, no Purchaser Indemnified Party shall be advanced funds for the
defense of such claims.  Purchaser agrees
that in any event its claim for payment of Losses pursuant to Section 4.2(d) shall
be limited to the aggregate amount of the available assets of SAI and SAS,
including any insurance proceeds, and in no event shall be a monetary
obligation of Cordell.


 


4.9.          Limitations on Amount of Damages; Manner of Payment.  Any amounts owing pursuant to this Article IV
from Cordell for Losses under Section 4.3(b) shall be paid by
canceling that number of shares of Cordell Stock equal to 3200 multiplied by
the fraction obtained by dividing the amount of Losses by Five Million Dollars
($5,000,000).  The cancellation of the
Cordell Stock shall be used solely for purposes of payment of indemnification
pursuant to this Article IV by Cordell for Losses under Section 4.3(b) and
for no other purposes.  The cancellation
of the Cordell Stock shall be the sole and exclusive remedy for Losses under Section 4.3(b) and
Purchaser waives any other rights that it may have in law or inequity for such
Losses.


 


4.10.        No Cordell Claim Against SAS.  Cordell shall not assert any claim against
SAS with respect to any breach by SAS of any representation, warranty or
covenant in this Agreement.


 


4.11.        Sole Remedy. 
Except for (i) the rights of Purchaser to specific performance and
injunctive or other 


 


30

















 


equitable
relief in connection with the obligations of SAS and Cordell under Article III
hereof, and (ii) claims between the parties based upon Fraud, from and
after the Closing, the provisions of this Article IV shall represent the
sole and exclusive remedy available to any Indemnified Party for any Losses for
any breach of any representation, warranty, obligation, covenant or agreement
required to be performed, and each party hereby unconditionally waives any
other rights that it may have in law or in equity for such breach.


 


4.12.        No Claim Against SAS or Cordell Based on Transfer of Cordell Stock or
COPS Cash.  Neither
Alarm Funding nor Purchaser shall assert any claim against SAS or Cordell based
on the distribution of the Cordell Stock or any of the cash proceeds received
by SAS under the COPS Asset Purchase Agreement by SAS to Cordell or by Cordell
to the participants in the loans made by Cordell to SAI.


 


Article V.


MISCELLANEOUS


 


5.1.          Expenses.  Except as
otherwise agreed to in writing by the parties, all legal and other costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.


 


5.2.          Notices.  All notices
or other communications hereunder shall be in writing and shall be deemed given
if delivered personally, sent by nationally recognized overnight courier
(providing proof of delivery), mailed by prepaid registered or certified mail
(return receipt requested), or by facsimile transmission (providing
confirmation of transmission) addressed as follows:


 


(a)           If to Purchaser, to:


 


CastleRock Security, Inc.


c/o Whitecap Advisors LLC


800 Connecticut Avenue


Norwalk, Connecticut 06854


203.656.4848


Attn: Westin Lovy


Email:
westin@whitecapadvisors.com


 


with a copy to:


 


Steven J. Gray, Esq.


Sonnenschein Nath &
Rosenthal LLP


7800 Sears Tower


233 South Wacker Drive


Chicago, IL  60606


312.876.8004


Email:
sgray@sonnenschein.com


 


If to SAS or Cordell, to:


 


Cordell Funding, LLLP


333 Poinciana Drive


Miami, FL 33160


Attn:  Robin Rodriguez, Manager


Email:  robinrodriguez@anglofinancial.com


 


31

















 


with a copy to:


 


Ruden McClosky Smith
Schuster & Russell, P.A.


200 East Broward Boulevard


Fort Lauderdale, Florida
33301


Attn: Robert C. Brighton, Jr., Esq.


Email:  Robert.Brighton@Ruden.com


 


or such other address as
shall be furnished in writing by any party, and any such notice or
communication shall be deemed to have been given as of the date so delivered
(if delivered personally) or on the date of confirmation of receipt; provided that any notice received at the
addressee’s location on any Business Day after 5:00 p.m. (addressee’s
local time) shall be deemed to have been received at 9:00 a.m. (addressee’s
local time) on the next Business Day.


 


5.3.          Interpretation.  When
a reference is made in this Agreement to sections, Exhibits or Disclosure
Schedules, such reference shall be to a section of, or Exhibit or Schedule
to this Agreement unless otherwise indicated. 
No provision of this Agreement shall be construed to require any party
or any of their respective subsidiaries or Affiliates to take any action that
would violate applicable law, rule, or regulation.


 


5.4.          Rules of Construction.  The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding, or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.


 


5.5.          Counterparts.  This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. 
Facsimile and PDF signatures shall be deemed legally sufficient for all
purposes of this Agreement and the Transaction Documents.


 


5.6.          Entire Agreement.  This Agreement, together with the Exhibits
and Schedules hereto, and any documents delivered by the parties in connection
herewith constitutes the entire agreement and supersede all prior agreements
and understandings, both written and oral, among the parties hereto, or any of
them, with respect to the subject matter hereof.


 


5.7.          Governing Law; Jurisdiction and Venue.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to its rules of conflict of laws. 
Each party hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of Illinois and of the
United States of America located in Cook County, Illinois (the “Illinois Courts”) for any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any such
litigation in the Illinois Courts, and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in any
inconvenient forum. Each of the parties hereto agrees, (a) to the extent
such party is not otherwise subject to service of process in the State of
Illinois, to appoint and maintain an agent in the State of Illinois as such
party’s agent for acceptance of legal process, and (b) that service of
process may also be made on such party by prepaid certified mail with a proof
of mailing receipt validated by United States Postal Service constituting
evidence of valid service.  Service made
pursuant to (a) or (b) above shall have the same legal force and
effect as if served upon such party personally with the State of Illinois.


 


5.8.          Severability.  In
the event that any one or more provisions of this Agreement 


 


32

















 


shall
for any reason be held invalid, illegal, or unenforceable in any respect by any
court of competent jurisdiction, such invalidity, illegality, or
unenforceability shall not affect any other provisions of this Agreement and
the parties shall use their reasonable best efforts to substitute a valid,
legal, and enforceable provision which, insofar as practicable, implements the
original purposes and intents of this Agreement.


 


5.9.          Assignment; Reliance of Other Parties.  Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any of the parties
hereto in whole or in part (whether by operation of law or otherwise) without
the prior written consent of the other parties and any attempt to make any such
assignment without such consent shall be null and void.  Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by the
parties and their respective successors and assigns.  This Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any Person other
than the parties hereto any rights or remedies under or by reason of this
Agreement.


 


5.10.        Specific Performance.  The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in this Agreement
were not performed in accordance with its specific terms or were otherwise
breached.  It is accordingly agreed that
the parties shall be entitled to seek an injunction or injunctions, without the
posting of any bond, to prevent breaches of this Agreement and to enforce specifically
the terms and provisions thereof in the Illinois Courts, this being in addition
to any other remedy to which they are entitled at law or in equity.


 


5.11.        Disclosure Schedules.  Any information disclosed in any Disclosure
Schedule shall be deemed to be disclosed and incorporated in any other
Disclosure Schedule where such disclosure would be appropriate and reasonably
apparent on the face of such Disclosure Schedule.


 


5.12.        Definitions. 
Except as otherwise provided herein or as otherwise clearly required by
the context, the following terms shall have the respective meanings indicated
when used in this Agreement:


 


(a)           “Action” has the meaning set forth in Section 2.2(d).


 


(b)           “Affiliate” means any Person that, directly or indirectly
through one (1) or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and construed
under Rule 144 under the Securities Act.


 


(c)           “Agreement” means this Asset Purchase and Settlement Agreement.


 


(d)           “Alarm Contracts” has the meaning set forth in Recital A
hereto.


 


(e)           “Alarm Funding” has the meaning set forth in the preamble to
this Agreement.


 


(f)            “Assignment and Assumption Agreement” has the meaning set forth
in Section 1.7(b).


 


(g)           “Assignment of Copyrights” has the meaning set forth in Section 1.7(c).


 


(h)           “Assignment of Patents” has the meaning set forth in Section 1.7(e).


 


(i)            “Assignment of Service Marks and Trademarks” has the meaning
set forth in Section 1.7(d).


 


(j)            “Assumed Liabilities” has the meaning set forth in Section 1.3.


 


33

















 


(k)           “Bill of Sale and Assignment of Contracts” has the meaning set
forth in Section 1.7(a).


 


(l)            “Business” has the meaning set forth in Recital I hereto.


 


(m)          “Business Day” means any day except Saturday, Sunday, or any
day which shall be a federal legal holiday in the United States.


 


(n)           “Central Station” has the meaning set forth in Section 2.2(r)(ii).


 


(o)           “Closing” has the meaning as set forth in Section 1.7.


 


(p)           “Closing Date” has the meaning as set forth in Section 1.7.


 


(q)           “COBRA” has the meaning set forth in Section 2.2(p)(iii).


 


(r)           “Code” means the Internal Revenue Code of 1986, as amended.


 


(s)           “Common Stock Equivalents” means any securities of the parties
which would entitle the holder thereof to acquire at any time Purchaser Common
Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, common stock.


 


(t)            “Controlled Group Member” has the meaning set forth in Section 2.2(p)(i).


 


(u)           “COPS” has the meaning set forth in Recital E to this
Agreement.


 


(v)            “COPS Asset
Purchase Agreement” has the meaning set forth in Recital E to this
Agreement.


 


(w)           “COPS
Transition Agreement” has the meaning set forth in Recital E to
this Agreement.


 


(x)           “Cordell” has the meaning set forth in the preamble to this
Agreement.


 


(y)           “Cordell Indemnified Parties” has the meaning set forth in Section 4.4.


 


(z)           “Cordell Liens” has the meaning set forth in Section 1.4(b).


 


(aa)         “Cordell Required Approvals” has the meaning set forth in Section 2.4(d).


 


(bb)         “Cordell Stock” has the meaning set forth in Recital J to this
Agreement.


 


(cc)         “Credit Agreement” has the meaning set forth in Recital B to
this Agreement.


 


34

















 


(dd)         “Communication Paths” has the meaning set forth in Section 2.2(q).


 


(ee)         “Consent and Release” has the meaning set forth in Section 1.7(r).


 


(ff)           “Delivered
Documents” means those documents listed on Schedule 5.12(ff) hereto, formerly in
the possession of Robin Rodriguez and delivered to Purchaser no later than
three (3) Business Days prior to the Effective Date. For this purpose,
delivery shall include electronic delivery and documents shall include any
attachments to e-mails delivered to Purchaser.


 


(gg)         “Disclosure Schedules” has the meaning set forth in Section 2.1.


 


(hh)         “Employee Plan” has the meaning set forth in Section 2.2(p)(i).


 


(ii)           “Environmental Laws” has the meaning set forth in Section 2.2(s).


 


(jj)           “Equipment” means the
tangible personal property used in the Business, including but not limited to
computer hardware, furniture, supplies and office equipment and all related
improvements and parts.


 


(kk)        “ERISA” has the meaning set forth in Section 2.2(9)(i).


 


(ll)           “Excluded Assets” has the meaning set forth in Section 1.2.


 


(mm)       “Foreclosure Sale” has the meaning set forth in Recital C to
this Agreement.


 


(nn)         “Fraud” has the meaning set forth in Section 4.1.


 


(oo)         “GAAP” means United States generally accepted accounting
principles.


 


(pp)         “Governmental Authority” means any United States or foreign,
federal, state, or local governmental commission, board, body, bureau, or other
regulatory authority, agency, including courts and other judicial bodies, or
any self-regulatory body or authority, including any instrumentality or entity
designed to act for or on behalf of the foregoing.


 


(qq)         “Governmental Permits” has the meaning set forth in Section 1.1(i).


 


(rr)         “Hazardous Material” has the meaning set forth in Section 2.2(s).


 


(ss)         “Illinois Courts” has the meaning set forth in Section 5.7.


 


(tt)           “Indemnification Period” shall have the meaning set forth in Section 4.1.


 


(uu)         “Indemnified Party” shall have the meaning set forth in Section 4.6(a).


 


(vv)          “Indemnifying Party” shall have the meaning set forth in Section 4.6(a).


 


(ww)        “Indemnity Notice” shall have the meaning set forth in Section 4.7.


 


35

















 


(xx)         “Insurance Recovery Expenses” has the meaning set forth in Section 4.8.


 


(yy)         “Intellectual Property Rights” has the meaning set forth in Section 2.2(j).


 


(zz)         “IRS” means the Internal Revenue Service.


 


(aaa)       “Liabilities” means all debts, obligations and other
liabilities of any kind or nature (whether known, unknown, accrued, or not
accrued, absolute or contingent, liquidated or unliquidated, due or to become
due, asserted or unasserted or otherwise).


 


(bbb)       “Liens” means a lien, security interest, encumbrance, mortgage,
deed of trust, pledge, attachment, hypothecation or a financing statement
filing under the Uniform Commercial Code or similar statute (except for those
of the foregoing which arise by operation of law and do not materially interfere
with the ownership or operation of the assets to which they relate) and with
respect to capital stock, “Liens” shall mean, in addition to the foregoing, any
charge, preemptive right or right of first refusal.


 


(ccc)       “Litigation” has the meaning set forth in Recital G hereto.


 


(ddd)       “Losses” has the meaning set forth in Section 4.2.


 


(eee)       “Management Stock” has the meaning set forth in Recital J
hereto.


 


(fff)         “Material Adverse Effect” means (i) a material adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the results of operations, assets,
business, prospects or condition (financial or otherwise) of any party and its
subsidiaries, taken as a whole, or (iii) a material adverse effect on any
party’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii)).


 


(ggg)      “Material Contract” has the meaning set forth in Section 2.2(o).


 


(hhh)      “Material Permits” means all certificates, authorizations,
permits and licenses issued by the appropriate federal, state, local or foreign
regulatory authority necessary to conduct the Business.


 


(iii)         “Mutual Release” has the meaning set forth in Section 1.7(n).


 


(jjj)         “New Servicing Agreement” has the meaning set forth in Section 1.7(q).


 


(kkk)     “Notice of Third Party Claim” shall have the meaning set forth
in Section 4.6(a).


 


(lll)         “Pension Plan” shall have the meaning set forth in Section 2.1(x)(i).


 


(mmm)   “Permitted Liens” means Liens for Taxes which are not yet due
and payable and the Liens relating to Assumed Liabilities listed on Schedule 1.3.


 


36

















 


(nnn)      “Person” means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.


 


(ooo)       “Post-Closing Covenant” has the meaning set forth in Section 4.1.


 


(ppp)       “Prohibited Business” has the meaning set forth in Section 3.3(a).


 


(qqq)       “Protected Information” has the meaning set forth in Section 3.6.


 


(rrr)       “Purchased Assets” has the meaning set forth in Section 1.1.


 


(sss)       “Purchaser” has the meaning set forth in the preamble to this
Agreement.


 


(ttt)         “Purchaser Common Stock” has the meaning set forth in Recital J
hereto.


 


(uuu)      “Purchaser Indemnified Parties” has the meaning set forth in Section 4.2.


 


(vvv)        “Purchaser Required Approvals” has the meaning set forth in Section 2.3(e).


 


(www)     “Rodriguez’s
Knowledge” means the actual knowledge of Robin Rodriguez
without investigation


 


(xxx)       “Rule 144” has the
meaning set forth in Section 2.4(e)(vii)(2).


 


(yyy)       “SAI” has the meaning set forth in Recital A hereto.


 


(zzz)       “SAI Executives” means, collectively, Ray Gross, Paul Lucking
and Brian Johnson.


 


(aaaa)     “SAI Financial Statements” has the meaning set forth in Section 2.2(b).


 


(bbbb)     “SAI Senior Notes” has the meaning set forth in Section 1.4(b).


 


(cccc)     “SAS” has the meaning set forth in the preamble to this
Agreement.


 


(dddd)     “SAS Interests” has the meaning set forth in Section 1.7(f).


 


(eeee)     “SAS Required Approvals” has the meaning set forth in Section 2.2(a).


 


(ffff)        “Securities Act” has the meaning set forth in Section 2.4(e)(i).


 


(gggg)    “SAS’s
Knowledge” means Rodriguez’s Knowledge and/or the actual
knowledge of Ray Gross, Paul Lucking or Brian Johnson after due investigation,
as the case may be.


 


37














 


(hhhh)    “Servicing Agreement” has the meaning set
forth in Recital A hereto.


 


(iiii)        “Stockholders Agreement” has the meaning set
forth in Section 1.7(p).


 


(jjjj)        “Systems” has the meaning set forth in Section 2.2(q).


 


(kkkk)    “Tax” means any and all taxes, customs,
duties, tariffs, deficiencies, assessments, levies, or other like governmental
charges, including, without limitation, income, gross receipts, excise, real or
personal property, ad valorem, value added, estimated, alternative minimum,
stamp, sales, withholding, social security, occupation, use, service, service
use, license, net worth, payroll, franchise, transfer and recording taxes and
charges, imposed by the Internal Revenue Service or any other taxing authority
(whether domestic or foreign including, without limitation, any state, county,
local, or foreign government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on a separate,
consolidated, unitary, combined, or any other basis; and such term shall
include any interest, fines, penalties, or additional amounts attributable to,
or imposed upon, or with respect to, any such amounts.


 


(llll)        “Tax Return” means any report, return,
document, declaration, election, schedule or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes, including, without limitation, information
returns and any documents with respect to or accompanying payments of estimated
Taxes or requests for the extension of time in which to file any such report,
return, document, declaration, or other information.


 


(mmmm)               “Telephone Lines” has the meaning set forth
in Section 2.1(q).


 


(nnnn)    “Third Party Claim” has the meaning set
forth in Section 4.6(a).


 


(oooo)    “Transaction Documents” means this
Agreement, the Bill of Sale and Assignment of Contracts, the Assignment and
Assumption Agreement, the Assignment of Copyrights, the Assignment of Service
Marks and Trademarks, the Assignment of Patents, the SAI Transition Agreement,
the Mutual Release, the Voluntary Dismissal, the Stockholders Agreement, the
New Servicing Agreement, the Consent and Release and any other documents or
agreements executed in connection with the transactions contemplated hereunder.


 


(pppp)    “U.L.” has the meaning set forth in Section 2.2(r).


 


(qqqq)    “WARN” means the Worker Adjustment and
Retraining Notification Act.


 


(rrrr)     “Welfare Plan” has the meaning set forth in Section 2.2(p)(i).


 


(ssss)       “Wholesale Monitoring Business” has the meaning
set forth in Recital E hereto.


 


[Signature Page To Follow]


 


38

















 


[Signature Page to Asset Purchase and Settlement
Agreement]


 


Dated: November 26,
2008


 




	
  CASTLEROCK
  SECURITY, INC.

  	
   

  	
  ALARM FUNDING LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  / s / Mark Klipsch

  	
   

  	
  By:

  	
  / s / Westin Lovy

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Mark Klipsch

  	
   

  	
  Name:

  	
  Westin Lovy

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SA
  SYSTEMS LLC

  	
   

  	
  CORDELL FUNDING, LLLP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  / s / Brian E. Johnson

  	
   

  	
  By:

  	
  / s / Robin Rodriguez

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Brian E. Johnson

  	
   

  	
  Name:

  	
  Robin Rodriguez

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  CFO, Secretary and
  Treasurer

  	
   

  	
  Title:

  	
  Managing Partner

  






 

















 


EXHIBIT LIST


 


	
  Exhibit 1.7(a)

  	
  Form of Bill of Sale
  and Assignment of Contracts

  
	
   

  	
   

  
	
  Exhibit 1.7(b)

  	
  Form of Assignment
  and Assumption Agreement

  
	
   

  	
   

  
	
  Exhibit 1.7(c)

  	
  Form of Assignment of
  Copyrights

  
	
   

  	
   

  
	
  Exhibit 1.7(d)

  	
  Form of Assignment of
  Service Marks and Trademarks

  
	
   

  	
   

  
	
  Exhibit 1.7(e)

  	
  Form of Assignment of
  Patents

  
	
   

  	
   

  
	
  Exhibit 1.7(k)

  	
  SAI Transition Agreement

  
	
   

  	
   

  
	
  Exhibit 1.7(l)

  	
  Form of Opinion of
  Counsel to SAS and Cordell

  
	
   

  	
   

  
	
  Exhibit 1.7(m)

  	
  Form of Opinion of
  Counsel to Purchaser and Alarm Funding

  
	
   

  	
   

  
	
  Exhibit 1.7(n)

  	
  Form of Mutual
  Release

  
	
   

  	
   

  
	
  Exhibit 1.7(o)

  	
  Form of Voluntary
  Dismissal

  
	
   

  	
   

  
	
  Exhibit 1.7(p)

  	
  Form of Stockholders
  Agreement

  
	
   

  	
   

  
	
  Exhibit 1.7(q)

  	
  Form of New Servicing
  Agreement

  
	
   

  	
   

  
	
  Exhibit 1.7(r)

  	
  Form of Consent and
  Release

  
	
   

  	
   

  
	
  Exhibit 1.7(t)

  	
  Form of
  Nonsolicitation and Confidentiality Agreements

  



 

















 


SCHEDULES


 


	
  1.

  	
  Schedule 1.1 (a)

  	
  Purchased Assets

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Schedule 1.1(b)

  	
  Communication Paths and
  Related Equipment

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Schedule 1.1 (d)

  	
  Patents and Patents
  Rights, Trademarks and Trademarks rights

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Schedule 1.1(e)

  	
  Prepaid Expenses

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Schedule 1.1(f)

  	
  Customer Lists

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Schedule 1.1(i)

  	
  Governmental Permits

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Schedule 1.2

  	
  Excluded Assets

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Schedule 1.3

  	
  Assumed Liabilities

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Schedule 1.8

  	
  Post-Closing
  Capitalization Table

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Schedule 2.1(e)

  	
  Capitalization of SAS

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Schedule 2.1(g)

  	
  Liens

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Schedule 2.2(a)

  	
  SAS Required Approvals

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Schedule 2.2 (c)

  	
  Material Adverse Changes

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Schedule 2.2(d)

  	
  Litigation

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Schedule 2.2(e)

  	
  Labor Relations

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Schedule 2.2(f)

  	
  Non-Compliance

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Schedule 2.2(g)

  	
  Material Permits

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Schedule 2.2 (i)

  	
  Warranty of Merchantability

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Schedule 2.2 (j)

  	
  Intellectual Property
  Rights

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Schedule 2.2(k)

  	
  Insurance

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Schedule 2.2(l)

  	
  Transactions with
  Affiliates and Employees

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Schedule 2.2(m)

  	
  Taxes

  
	
   

  	
   

  	
   

  
	
  23.

  	
  Schedule 2.2(o)

  	
  Material Contracts

  
	
   

  	
   

  	
   

  
	
  24.

  	
  Schedule 2.2(p)

  	
  Employee Plans

  
	
   

  	
   

  	
   

  
	
  25.

  	
  Schedule 2.2(p)(vi)

  	
  Change of Control Benefits

  



 

















 


	
  26.

  	
  Schedule 2.2(r)(ii)

  	
  U.L. Certifications

  
	
   

  	
   

  	
   

  
	
  27.

  	
  Schedule 2.2 (t)

  	
  Sufficiency of Assets

  
	
   

  	
   

  	
   

  
	
  28.

  	
  Schedule 2.2(u)

  	
  Accounts Receivable

  
	
   

  	
   

  	
   

  
	
  29.

  	
  Schedule 2.2(v)

  	
  Accounts Payable

  
	
   

  	
   

  	
   

  
	
  30.

  	
  Schedule 2.2(w)

  	
  SAI Subsidiaries

  
	
   

  	
   

  	
   

  
	
  31.

  	
  Schedule 2.2(x)

  	
  Equipment

  
	
   

  	
   

  	
   

  
	
  32.

  	
  Schedule 2.2(y)

  	
  Personal Property Leases

  
	
   

  	
   

  	
   

  
	
  33.

  	
  Schedule 2.2(z)

  	
  Bank Accounts, Etc.

  
	
   

  	
   

  	
   

  
	
  34.

  	
  Schedule 2.2(aa)

  	
  Leased Real Property

  
	
   

  	
   

  	
   

  
	
  35.

  	
  Schedule 2.3(e)

  	
  Purchaser Required
  Approvals

  
	
   

  	
   

  	
   

  
	
  36.

  	
  Schedule 2.3(f)

  	
  Capitalization of
  Purchaser

  
	
   

  	
   

  	
   

  
	
  37.

  	
  Schedule 2.4(d)

  	
  Cordell Required Approvals

  
	
   

  	
   

  	
   

  
	
  38.

  	
  Schedule 5.12(ff)

  	
  Delivered Documents