Exhibit 10.24


 


SERVICING
AGREEMENT


 


between


 


CASTLEROCK
SECURITY, INC.


(“Servicer”)


 


and


 


ALARM
FUNDING, LLC


(“Owner”)


 


Dated
as of November 26, 2008


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  2

  
	
  Section 1.1

  	
  Definitions

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  7

  
	
  Section 2.1

  	
  Representations and Warranties of the Servicer. The Servicer hereby
  represents and warrants to Owner, as of the Closing Date, that:

  	
  7

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Existence
  and Power

  	
  7

  
	
   

  	
  (b)

  	
  No
  Conflict

  	
  7

  
	
   

  	
  (c)

  	
  Governmental
  Authorization

  	
  7

  
	
   

  	
  (d)

  	
  Binding
  Effect

  	
  7

  
	
   

  	
  (e)

  	
  Accuracy
  of Information

  	
  7

  
	
   

  	
  (f)

  	
  Location(s) of
  Records

  	
  8

  
	
   

  	
  (g)

  	
  Collection
  Procedures

  	
  8

  
	
   

  	
  (h)

  	
  Actions;
  Suits

  	
  8

  
	
   

  	
  (i)

  	
  Not
  a Holding Company or an Investment Company

  	
  8

  
	
   

  	
  (j)

  	
  Compliance
  with Law

  	
  8

  
	
  Section 2.2

  	
  Representations and Warranties of Owner

  	
  8

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Existence
  and Power

  	
  8

  
	
   

  	
  (b)

  	
  No
  Conflict

  	
  8

  
	
   

  	
  (c)

  	
  Governmental
  Authorization

  	
  9

  
	
   

  	
  (d)

  	
  Binding
  Effect

  	
  9

  
	
   

  	
  (e)

  	
  Accuracy
  of Information

  	
  9

  
	
   

  	
  (f)

  	
  Good
  Title

  	
  9

  
	
   

  	
  (g)

  	
  Jurisdiction
  of Organization: Principal Place of Business: Owner Identification Numbers

  	
  9

  
	
   

  	
  (h)

  	
  Names

  	
  9

  
	
   

  	
  (i)

  	
  Actions;
  Suits

  	
  9

  
	
   

  	
  (j)

  	
  Compliance
  with Law

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  COVENANTS

  	
  10

  
	
  Section 3.1

  	
  Affirmative Covenants of Servicer

  	
  10

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Financial
  Reporting. Servicer shall furnish to Owner:

  	
  10

  
	
   

  	
  (b)

  	
  Notices

  	
  10

  
	
   

  	
  (c)

  	
  Compliance
  with Laws

  	
  11

  
	
   

  	
  (d)

  	
  Audits

  	
  11

  
	
   

  	
  (e)

  	
  Keeping
  and Marking of Books and Records

  	
  11

  
	
   

  	
  (f)

  	
  Compliance
  with Authorized Dealer Agreements

  	
  11

  
	
   

  	
  (g)

  	
  Operation
  in Ordinary Course

  	
  12

  
	
   

  	
  (h)

  	
  Licenses

  	
  12

  
	
   

  	
  (i)

  	
  Insurance

  	
  12

  
	
   

  	
  (j)

  	
  Financial
  Covenants

  	
  12

  
	
  Section 3.2

  	
  Negative Covenants of Servicer

  	
  12

  



 


i

















 


	
   

  	
  (a)

  	
  Change
  in Jurisdiction of Organization, Name, Principal Place of Business or
  Location of Records

  	
  12

  
	
   

  	
  (b)

  	
  Change
  in Collection Procedures

  	
  12

  
	
   

  	
  (c)

  	
  Modifications
  to Alarm Accounts

  	
  13

  
	
   

  	
  (d)

  	
  Sales;
  Adverse Claims

  	
  13

  
	
   

  	
  (e)

  	
  Operational
  Standards. In any calendar week, the Servicer shall not, and shall not allow:

  	
  13

  
	
  Section 3.3

  	
  The Accounts

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  ADMINISTRATION
  AND COLLECTION

  	
  13

  
	
  Section 4.1

  	
  Designation of Servicer

  	
  13

  
	
  Section 4.2

  	
  Duties of Servicer

  	
  14

  
	
  Section 4.3

  	
  Responsibilities of Servicer

  	
  15

  
	
  Section 4.4

  	
  Reports / Reviews

  	
  15

  
	
  Section 4.5

  	
  Servicing Fees

  	
  15

  
	
  Section 4.6

  	
  Distribution of Collections

  	
  15

  
	
  Section 4.7

  	
  Subscriber Payments

  	
  16

  
	
  Section 4.8

  	
  Intellectual Property

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  SERVICER
  DEFAULTS

  	
  16

  
	
  Section 5.1

  	
  Servicer Defaults

  	
  16

  
	
  Section 5.2

  	
  Remedies for Servicer Defaults

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  INDEMNIFICATION
  AND ADDITIONAL REMEDIES

  	
  18

  
	
  Section 6.1

  	
  Indemnities

  	
  18

  
	
  Section 6.2

  	
  Other Costs and Expenses

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  MISCELLANEOUS

  	
  19

  
	
  Section 7.1

  	
  Waivers and Amendments

  	
  19

  
	
  Section 7.2

  	
  Notices

  	
  19

  
	
  Section 7.3

  	
  Protection of Owner’s Interests

  	
  19

  
	
  Section 7.4

  	
  Confidentiality

  	
  20

  
	
  Section 7.5

  	
  Limitation of Liability

  	
  20

  
	
  Section 7.6

  	
  Injunctive Relief

  	
  20

  
	
  Section 7.7

  	
  CHOICE OF LAW

  	
  20

  
	
  Section 7.8

  	
  CONSENT TO JURISDICTION

  	
  20

  
	
  Section 7.9

  	
  WAIVER OF JURY TRIAL

  	
  21

  
	
  Section 7.10

  	
  Survival of Terms

  	
  21

  
	
  Section 7.11

  	
  Counterparts; Severability;
  Section References

  	
  21

  



 


ii

















 


 


EXHIBITS
AND SCHEDULES


 


	
  Exhibit A

  	
  Jurisdiction of
  Organization; Principal Place of Business; Location(s) of Records;
  Identification Numbers

  
	
  Exhibit B

  	
  Compliance Certificate

  
	
  Exhibit C

  	
  Payment Plans

  
	
  Schedule 1.1

  	
  Alarm Accounts

  
	
  Schedule 1.2

  	
  Alarm Accounts Advance
  Payments

  
	
  Schedule 1.3

  	
  Bank Information; Owner
  Account Information

  
	
  Schedule 4.1(a)

  	
  Administration and
  Collection of Alarm Accounts

  
	
  Schedule 4.2 (a)

  	
  Customary Account
  Management

  
	
  Schedule 4.5

  	
  Servicing Fees

  
	
  Schedule 5.1(e)

  	
  Attrition Rate

  



 


iii

















 


SERVICING
AGREEMENT


 


THIS SERVICING AGREEMENT,
dated as of November 26, 2008 (this “Agreement”), is among CastleRock
Security, Inc., a Delaware corporation (“CastleRock” or when acting in such
capacity, the “Servicer”), and ALARM FUNDING, LLC, a Delaware limited liability
company (“Owner”).


 


PRELIMINARY
STATEMENTS


 


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


 


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


 


C.                                     On
August 25, 2008, Owner filed a complaint and sought a temporary
restraining order against SAl, Cordell and others in the Circuit Court of Cook
County, Illinois, seeking to enforce Owner’s rights under the SAl
Servicing Agreement (the “Litigation”).


 


D.                                    On
September 10, 2008, Owner, SAl, SAS and Cordell entered into a settlement
agreement (the “Settlement Agreement”) in connection with the Litigation.


 


E.                                      As part of the
Settlement Agreement and pursuant to that certain Asset Purchase Agreement of
even date herewith (the “Asset Purchase Agreement”), the Owner, SAl and Cordell
have agreed that CastleRock shall acquire all of the assets of SAS relating to
the retail monitoring and related services provided with respect to all of the
alarm accounts for which SAS provides services.


 


F.                                      As part of the
Settlement Agreement and in accordance with the Asset Purchase Agreement, Owner
has agreed to enter into this Agreement pursuant to which Owner has agreed to
engage CastleRock to provide alarm monitoring services with respect to the
alarm monitoring contracts owned by Owner.


 


G.                                     Owner desires
that Servicer service the alarm accounts owned by Owner and Servicer agrees to
service such alarm accounts on the terms and subject to the conditions set
forth in this Agreement.


 


NOW, THEREFORE, in consideration
of the foregoing premises and the mutual agreements of the parties contained
herein, and other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, each party intending to be legally bound
agrees as follows:


 

















 


ARTICLE I

DEFINITIONS


 


Section 1.1                                      Definitions. For the
purposes of this Agreement and the Guidelines, which are incorporated herein by
reference, the following terms have the meanings set forth below:


 


“Adverse Claim” means
a lien, security interest, charge, encumbrance or other right or claim in, of
or on any Person’s assets· or properties in favor of any other Person other
than the ordinary course rights to performance of services (in no event to
exceed two times RMR without prior written notice provided to Owner by
Servicer) of an Obligor or the applicable Authorized Dealer created by an Alarm
Account and any related agreements.


 


“Affiliate” means,
with respect to any Person, any other Person directly ·or indirectly
controlling, controlled by or under direct or indirect common control with such
Person or any Subsidiary of such Person; provided, however, that
a Person shall be deemed to control another Person if the controlling Person
owns 51 % or more of any class of voting securities of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the direction
of the management or policies of the controlled Person, whether through
ownership of stock, by contract or otherwise.


 


“Alarm Accounts”
shall mean all customer accounts with respect to which Detection Services
Agreements have been executed between customers and an Authorized Dealer and
includes all information and rights relating to such customers including,
without limitation, all files and related agreements and all limitations of
liability and rights to receive all revenues and payments as provided in the
agreements. The Alarm Accounts are set forth on Schedule 1.1 hereto.


 


“Alarm Assets” means
all right, title and interest of Owner in, to and under the following property,
whether now existing or hereafter created or acquired:


 


(i)                                     the Alarm
Accounts;


 


(ii)                                  all amounts
(including the Reimbursable Expenses) earned under the Alarm Accounts and all
Collections received with· respect to such amounts, together with the amounts
(including the Reimbursable Expenses) set forth on Schedule 1.2 as
advance payments of RMR from Obligors on such Alarm Accounts (collectively,
“Prepaid RMR”);


 


(iii)                               all Records
related to the Alarm Accounts;


 


(iv)                              all rights
against any Authorized Dealer or Obligor under any assignment related to the
Alarm Accounts (including the rights to collect or enforce the payment of
Reimbursable Expenses), and all amounts received with respect to the Alarm
Accounts as a result of the exercise of any such rights (including the than
Reimbursable Expenses);


 


(v)                                 all other
guaranties, collateral assignments or other contracts or arrangements securing
or supporting payment or Event Detection Services of the Alarm Accounts
(including the Reimbursable Expenses) and all amounts received with respect 


 


2

















 


to the Alarm Accounts
(including the Reimbursable Expenses) under any such contract or arrangement;
and


 


(vi)                              all proceeds of
the foregoing (including the Reimbursable Expenses).


 


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


 


(i)                                     (A) all
RMR that cancelled or failed to renew, minus


 


(B) that
portion of such RMR that is reinstated and have prepaid at least one month in
advance at the time of such reinstatement, minus


 


(C) all new RMR added
to replace previously cancelled RMR, plus


 


(D) all
RMR with balances more than 90 days past due, minus the previous month’s RMR
with balances more than 90 days past due, plus


 


(E) all RMR rate
decreases, divided by


 


(ii)                                  all RMR with
balances 90 days or less past due at the beginning of the period.


 


The Attrition Rate shall be
calculated as an annualized average as of the last day of each calendar month
for the trailing 3 months then ended (“Quarterly Attrition Rate”) and
for the trailing 12 months then ended (“Annual Attrition Rate”)
calculated based on an annualized monthly average; provided, however, that the
initial Annual Attrition Rate shall be calculated as of the last day of each
month in 2008 shall be for the number of months that have transpired since
May 1,2008 through the last day of the month immediately preceding the
date of determination. For example, the Annual Attrition Rate for November 2008
shall be calculated based on the monthly average for of the monthly Attrition
Rates for the 7 months then ended; and the Attrition Rate for
December 2008 shall be calculated based on the monthly average for the 8
months then ended, and so on.


 


“Authorized Dealer”
shall mean an, Event Detection Service provider subject to a Servicer
Authorized Dealer Agreement which is in full force and effect.


 


“Authorized Dealer
Agreement” shall mean an Authorized Dealer Agreement between Servicer and
one of its Authorized Dealers.


 


“Authorized Dealer
Guidelines” or “Guidelines” shall mean those policies and procedures
relating to the Authorized Dealer Program published by Servicer, as revised
from time to time, and which are incorporated into a Authorized Dealer
Agreement by reference.


 


“Authorized Dealer
Program” shall mean the network of Event Detection Service providers which
have, executed Authorized Dealer Agreements and related agreements and are
subject to the Guidelines, and are recognized as “Servicer Authorized Dealers.”


 


3














 


“Bank” means the bank
set forth on Schedule 1, and its successors and assigns, or such other
bank or other financial institution as may be appointed as the Bank with the
prior written consent of Owner and Servicer.


 


“Bank Account Procedure”
has the meaning set forth in Section 4.7.


 


“Base Alarm Account Fee”
shall mean the amount paid to an Authorized Dealer by Servicer or Owner, as its
assignee, for the purchase of Qualified Alarm Accounts in accordance with the
terms of such Authorized Dealer’s Authorized Dealer Agreement.


 


“Business Day” means
any day on which banks are not authorized or required to close in Chicago, Illinois
or New York, New York.


 


“Closing Date” means
November 26, 2008.


 


“Collections” means
all cash collections and other cash proceeds received with respect to the Alarm
Accounts.


 


“Detection Services
Agreement” shall mean the standard form customer service or subscriber
agreements designated, from time to time, by Servicer for use by Authorized
Dealers in connection with the provision of Event Detection Services.


 


“Event Detection Devices”
shall mean all equipment, devices, boxes, wires and other material installed at
customers’ premises, specifically excluding biometric and card access devices,
by an Authorized Dealer for the purpose of allowing such customers to receive
Event Detection Services.


 


“Event Detection Services”
shall mean the provision of electronic monitoring and other services with
respect to events and/or occurrences that are subject to detection by Event
Detection Devices.


 


“Material Adverse Effect”
(a) means when used with respect to Servicer, any event which has, or may
reasonably be expected to have, a material adverse effect on (i) the
financial condition or operations, business, assets or properties of either
Servicer, separately or taken as a whole, (ii) the ability of Servicer to
perform its obligations under this Agreement or any other Transaction Document,
(iii) the legality, validity or enforceability of this Agreement or any
other Transaction Document against Servicer, (iv) the· interest of Owner
in the Alarm Accounts or the other Alarm Assets, including perfection and
priority, (v) the collectability of the Alarm Accounts, or (vi) the
material rights and remedies of Owner under any Transaction Document and (b) when
used with respect to Owner, any event which has, or may reasonably be expected
to have, a material adverse effect on (i) the financial condition or
operations, assets or properties of either Owner, separately or taken as a
whole, such that the ability of Owner to perform its obligations under this
Agreement or any other Transaction Document is materially impaired, or (ii) the
legality, validity or enforceability of this Agreement or any Transaction
Document against Owner.


 


“Non-Producing Alarm Account” shall mean
any Alarm Account (i) for which the total accounts receivable balance is
equal to or greater than three (3) times the RMR, (ii) for which at
least one (1) RMR is ninety (90) or more days past due, (iii) that
has not been billed in the last 30


 


4

















 


days or (iv) for which
current billing information is unavailable or (v) for which the first
payment pursuant to such Alarm Account has not been received when due.


 


“Owner Account” means
the account at the Bank set forth on Schedule 1.3 maintained by Owner or
such other account as may be established and maintained as the Owner Account by
Owner upon notice to Servicer.


 


“Obligor” means a
customer or other Person obligated to make payments under an Event Detection
Agreement.


 


“Operating Bank Account”
means the account with the Bank established by Owner pursuant to Section 3.3
and designated on Schedule 1.3, or such other account as may be
designated by Owner to Servicer and including bank lock boxes established by
Owner and assigned to such account(s).


 


“Person” means an
individual, partnership, corporation (including a business trust), joint stock
company, trust, unincorporated association, limited liability company, joint
venture or other entity, or a government or any political subdivision or agency
thereof.


 


“Potential Servicer
Default” means an event which, with the passage of time or the giving of
notice, or both, would constitute a Servicer Default.


 


“Records” means, with
respect to any Alarm Account, all documents, books, records and other
information (including, without limitation, computer programs, tapes, disks,
punch cards, data processing software and related property and rights) relating
to such Alarm Account or the related Obligor.


 


“Recovered Account”
means any Non-Producing Alarm Account for which (i) past due payments have
been received in full, or (ii) current month RMR was received after a
write-off of past due charges.


 


“Recurring Monthly
Revenue” or “RMR” shall mean the total recurring regular monthly
amounts due from Subscribers pursuant to their respective Detection Services
Agreements.


 


RMR shall not include any
amounts derived from (such amounts, “Reimbursable Expenses”):


 


(i)                                     Reimbursement
for, or payment of, telephone line or other utility company charges associated
with the installation, monitoring, maintaining or furnishing of the Event
Detection Services;


 


(ii)                                  Reimbursement
for, or payment of, any false alarm or governmental assessments;


 


(iii)                               Reimbursement
for, or payment of, any amounts for taxes, fees or other charges imposed by any
governmental authority or utility relating to the furnishing of such Event
Detection Services;


 


(iv)                              Provision for,
or payment of, time and material or other charges incurred, or reasonably
expected to be incurred by SAl in connection with the maintenance of Event
Detection Devices located at Subscriber’s premises;


 


5

















 


(v)                                 Amounts charged
by an Authorized Dealer pursuant to an Installation Agreement between an
Authorized Dealer and a customer;


 


(vi)                              Amounts paid by
Subscribers or customers for services, other than certain Event Detection
Services, which may be subject to discounts when computing the Base Alarm
Account Fee, as set forth in the Guidelines; and


 


(vii)                           Any
miscellaneous charges other than “monitoring fees” (as defined in Detection
Services Agreements).


 


“Reimbursable Expenses”
shall have the meaning set forth in the definition of ‘‘Recurring Monthly
Revenues.”


 


“Remittance Date”
means the date each month the primary lender of Alarm Funding authorizes
payment of the Service Fees.


 


“Reporting Date”
shall have the meaning set forth in Section 4.4(a).


 


“Scheduled Termination
Date” means November 26, 2011 (if not otherwise renewed, amended or
extended by the parties hereto).


 


“Servicer” means, at
any time, the Person (which may be Owner) then authorized pursuant to Article VI
to service, administer and collect any and all fees related to the Alarm
Accounts.


 


“Servicer Default”
has  the meaning specified in Section 7.1.


 


“Servicing Agreement”
shall mean an agreement, whereby an Authorized Dealer shall perform maintenance
and repair services on a Subscriber’s Event Detection Devices for Servicer on a
subcontractor basis.


 


“Servicing Fees” has
the meaning set forth in Section 4.5.


 


“Subscriber” shall
mean an individual or entity that has executed a Detection Services Agreement
which has been purchased by Servicer or Owner as an Alarm Account or is
otherwise a customer of Servicer or its Affiliates.


 


“Subsidiary” means,
with respect to any Person, (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
(ii) any partnership, association, limited liability company, joint
venture or similar business organization more than 50% of the ownership
interests having ordinary voting power of which shall at the time be so owned
or controlled and (iii) any other Person that is required to be
consolidated with such Person under generally accepted accounting principles.


 


“Transaction Documents”
means, collectively, this Agreement, the Detection Services Agreements with
respect to the Alarm Accounts, each account agreement relating to the Alarm


 


6

















 


Accounts and all other
instruments, documents and agreements executed and delivered by the parties in
connection with this Agreement.


 


‘‘UCC’’ means the
Uniform Commercial Code as in effect from time to time in the State of
Illinois; provided, however, that if, by reason of mandatory
provisions of law, the perfection, the effect of perfection or non-perfection
or the priority of a security interest is governed by the Uniform Commercial
Code as in effect in any other jurisdiction, UCC shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection, the effect of such perfection or
non-perfection or such priority.


 


ARTICLE II

REPRESENTATIONS AND WARRANTIES


 


Section 2.1                                      Representations
and Warranties of the Servicer. The Servicer hereby represents and warrants to
Owner, as of the Closing Date, that:


 


(a)                                  Existence and
Power. The Servicer is duly organized, validly existing and in good standing
under the laws of its state of organization, and has all organizational power
and all governmental licenses” authorizations, consents and approvals required
to carry on its business in each jurisdiction in which its business is
conducted, except where the failure to obtain such governmental license,
authorization, consent or approval could not reasonably be expected to have a
Material Adverse Effect.


 


(b)                                 No Conflict. The
execution, delivery and performance by the Servicer of this Agreement and each
other Transaction Document to which the Servicer is a party are within its
organizational powers, have been duly authorized by all necessary action, do
not contravene or violate (i) its charter, by-laws or other organizational
documents, (ii) any law, rule or regulation applicable to it, (iii) any
restrictions under any agreement, contract or instrument to which it is a party
or by which it or any of its property is bound, or (iv) any order, writ,
judgment, award, injunction or decree binding on or affecting it or its
property, and do not result in the creation or imposition of any Adverse Claim
on assets of the Servicer or its Subsidiaries (except as created hereunder or
under any other Transaction Document), and no transaction contemplated hereby
requires compliance with any bulk sales act or similar law. This Agreement and
each other Transaction Document to which the Servicer is a party have been duly
executed and delivered by the Servicer.


 


(c)                                  Governmental
Authorization. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance  by the Servicer of this Agreement or any other
Transaction Document to which the Servicer is a party.


 


(d)                                 Binding Effect. This
Agreement and each other Transaction Document to which the Servicer is a party
constitute the legal, valid and binding obligations of the Servicer enforceable
against the Servicer in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or other similar laws relating to or limiting creditors’ rights generally.


 


(e)                                  Accuracy of
Information. All information heretofore furnished by the
Servicer to Owner for purposes of or in connection with this Agreement, any of
the other 


 


7

















 


Transaction Documents or any transaction contemplated
hereby or thereby is, and all such information hereafter furnished by the
Servicer to Owner will be, true and accurate in all material respects on the
date such information is stated or certified and does not and will not contain
any material misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not misleading.


 


(f)                                    Location(s) of
Records. The offices where the Servicer keeps all its Records are located at
the address(es) listed on Exhibit A or such other locations
notified to Owner in accordance with Section 3.2(a) in
jurisdictions where all action required by Section 3.2(a) has
been taken and completed.


 


(g)                                 Collection
Procedures. The Servicer has instructed all Obligors under the
applicable Detection Services Agreement to pay all Collections directly to, or
has obtained the authority from such Obligors to charge their credit cards or
bank accounts with an ACH funds transfer for such Collections for deposit
directly to, the Operating Bank Account, and such instructions remain in full
force and effect. The name and address of the Bank and the designation and
account number of the Operating Bank Account are set forth on Schedule 1.3.


 


(h)                                 Actions; Suits. There are no
actions, suits, proceedings or investigations pending, or, to the best of the
Servicer’s knowledge after due inquiry, threatened, against or affecting the
Servicer or any of its properties before any court, regulatory body,
administrative agency, arbitrator or other tribunal or governmental authority
that could reasonably be expected to have a Material Adverse Effect.


 


(i)                                     Not a Holding
Company or an Investment Company. The Servicer is not a
“holding company” or a “subsidiary holding company” of a “holding company”
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or any successor statute. The Servicer is not an “investment company”
within the meaning of the Investment Company Act of 1940, as amended, or any
successor statute.


 


(j)                                     Compliance with
Law. The Servicer has complied in all material respects with all
applicable laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject.


 


Section 2.2                                      Representations
and Warranties of Owner. Owner hereby represents and warrants to
Servicer, as of the Closing Date, that:


 


(a)                                  Existence and
Power. Owner is duly organized, validly existing and in good standing under
the laws of its state of organization and has all power and all governmental
licenses, authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is conducted, except where
the failure to obtain such governmental license, authorization, consent or
approval could not reasonably be expected to have a Material Adverse Effect.


 


(b)                                 No Conflict. The
execution, delivery and performance by Owner of this Agreement and each other
Transaction Document are within its limited liability company powers, have been
duly authorized by all necessary limited liability company action, do not
contravene or violate (i) its operating agreement or charter documents,
(ii) any law, rule or regulation applicable to it, (iii) any
restrictions under any agreement, contract or instrument to which it is a party
or by which it or any of its property is bound, or (iv) any order, writ, 


 


8

















 


judgment, award, injunction or decree binding on or
affecting it or its property, and do not result in the creation or imposition
of any Adverse Claim on assets of Owner except as created hereunder. This
Agreement and each other Transaction Document have been duly executed and
delivered by Owner.


 


(c)                                  Governmental
Authorization. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by Owner of this
Agreement or any other Transaction Document.


 


(d)                                 Binding Effect. This
Agreement and each other Transaction Document constitute the legal, valid and
binding obligations of Owner enforceable against Owner in accordance with their
respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating to or
limiting creditors’ rights generally.


 


(e)                                  Accuracy of
Information. All information heretofore furnished by the Owner
to Servicer for purposes of or in connection with this Agreement, any of the
other Transaction Documents or any transaction contemplated hereby or thereby
is, and all such information hereafter furnished by Owner to Servicer will be,
true and accurate in all material respects on the date such information is
stated or certified and does not and will not contain any material misstatement
of fact or omit to state a material fact or any fact necessary to make the
statements contained therein not misleading.


 


(f)                                    Good Title. Owner is the
legal and beneficial owner of the Alarm Accounts and Alarm Assets.


 


(g)                                 Jurisdiction of
Organization: Principal Place of Business: Owner Identification Numbers. The
jurisdiction of organization of Owner is correctly set forth on Exhibit A.
The principal place of business and chief executive office of Owner are located
at the addresses) listed on Exhibit A.


 


(h)                                 Names. The exact
legal name of Owner is as set forth on the signature page of this
Agreement.


 


(i)                                     Actions; Suits. There are no
actions, suits proceedings or investigations pending, or, to the best of
Owner’s knowledge after due inquiry, threatened, against or affecting Owner or
any of its properties before any court, regulatory body, administrative agency,
arbitrator or other tribunal or governmental authority that could reasonably be
expected to have a Material Adverse Effect.


 


(j)                                     Compliance with
Law. Owner has complied in all material respects with all applicable laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it might be subject, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect.


 


9

















 


ARTICLE III

COVENANTS


 


Section 3.1                                      Affirmative
Covenants of Servicer.


 


(a)                                  Financial
Reporting. Servicer shall furnish to Owner:


 


(i)                                     Annual
Reporting. As soon as available and in any event within 120
days after the close of each Fiscal Year, commencing with the Fiscal Year ended
December 31,2008, audited annual financial statements of Servicer and its
consolidated Subsidiaries as of the end of such Fiscal Year, prepared in accordance
with generally accepted accounting principles, accompanied by an opinion
thereon by its independent public accountants.


 


(ii)                                  Quarterly
Reporting. As soon as available and in any event within 60
days after the close of each of the first three Fiscal Quarters of each Fiscal
Year, commencing with the Fiscal Quarter ended March 30, 2009, unaudited
financial statements of Servicer and its consolidated Subsidiaries as of the
end of such Fiscal Quarter, prepared in accordance with generally accepted
accounting principles (except for the absence of footnotes), all certified
(subject to normal year-end adjustments) as to fairness of presentation,
generally accepted accounting principles and consistency by Servicer.


 


(iii)                               Monthly
Reporting. As soon as available and in any event within 20
days after the last day of the previous month, commencing with January 2009,
unaudited financial statements of Servicer including but not limited to cash
flow statements with 90 day cash flow projections, balance sheet, and income
statement.


 


(iv)                              Projections. No later than
60 days after the close of each Fiscal Quarter of each Fiscal Year, commencing
with the Fiscal Quarter ended March 30, 2009, financial projections for
the next four Fiscal Quarters (including a projected balance sheet, income
statement and funds flow statement);


 


(v)                                 Compliance
Certificate. Concurrently with any delivery of the financial
statements under clause (a)(ii) and the financial projections under clause
(a) (iv) for each Fiscal Quarter, a certificate of the chief
executive officer and chief financial officer of the Servicer in such form as
provided as Exhibit B (a “Compliance Certificate”) (i) certifying
as to whether a Servicer Default has occurred and, if a Servicer Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Section 3.1(j), and (iii) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in clause (a)(i) and,
if any such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate.


 


(b)                                 Notices. Except as described
in the last sentence of this Section 3.1 (b), the Servicer shall notify
Owner in writing of any of the following within five days after it has
knowledge of the occurrence thereof, describing the same and, if applicable,
the steps being taken with respect thereto: (i) the occurrence of any
Servicer Default or Potential Servicer Default; (ii) the entry against
Servicer of any judgment or decree for amount in excess of $10,000 or the
institution against Servicer of any lawsuit or other proceeding which has, or
could reasonably be expected to have, a Material Adverse Effect; (iii) the
name of the payee and amount owed on any outstanding account payable of
Servicer that exceeds ninety (90) days; (iv) 


 


10

















 


any write-offs of past due charges on any Alarm
Accounts; (v) any Alarm Accounts that have not been billed in the previous
30 days; (vi) existence of any event of default under any Servicing
Agreement or any other agreement between Servicer and any Person; (vii) details
of Alarm Accounts where services are provided by a third party on behalf of
Servicer (except field service); or (viii) the occurrence of any other
event or condition with respect to Servicer which has, or would reasonably be
expected to have, a Material Adverse Effect. With respect to the items
described in clauses (iii) through (v) above, Servicer shall provide
Owner with notice of any occurrence described in such clauses on the first
Business Day and the tenth Business Day of each month.


 


(c)                                  Compliance with
Laws. Servicer shall comply in all material respects with all applicable
laws, rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject, except where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect.


 


(d)                                 Audits. Servicer
shall furnish to Owner from time to time such information with respect to it
and the Alarm Accounts and any other Alarm Assets it may possess as Owner may
reasonably request. Servicer shall, from time to time during regular business
hours as requested by Owner upon reasonable notice, permit Owner, or its agents
or representatives, (i) to examine and make copies of and abstracts from
all Records in the possession or under the control of Servicer, as applicable,
relating to the Alarm Accounts, including, without limitation, the Alarm
Accounts, and (ii) to visit the offices and properties of Servicer, as
applicable, for the purpose of examining such materials described in clause (i) above
and to discuss matters relating to the financial condition of Servicer, as
applicable, or the Alarm Assets or the performance by Servicer, as applicable,
under this Agreement or under the Alarm Accounts with any of the officers or
management of Servicer having knowledge of such matters. All costs and expenses
incurred in connection with the actions described in clauses (i) and (ii) above
shall be payable by Owner unless a Servicer Default has occurred and is
continuing (in which case such costs and expenses shall be payable by
Servicer).


 


(e)                                  Keeping and
Marking of Books and Records.


 


(i)                                     The Servicer
shall maintain and implement administrative and operating procedures (including
system’s architecture and deployment to support Disaster Recovery and, Business
Continence (“DRBC”) in accordance with Servicer’s DCBC), and keep and maintain
all Records and other information reasonably necessary for the collection of
the Alarm Accounts (including, without limitation, records adequate to permit
the immediate identification of each amount due under the Alarm Accounts and
all collections of and adjustments to each such amount.


 


(ii)                                  Servicer shall
use the features of the existing applications to identify records relating to
the Alarm Accounts, indicating that the Alarm Accounts and the Alarm Assets are
owned by Owner. If a Servicer Default has occurred and is continuing, Servicer
shall, at the request of Owner, deliver to Owner or such other Person as may be
designated by Owner each contract or agreement comprising an Alarm Account and
all other Records with respect to the Alarm Accounts.


 


(f)                                    Compliance with
Authorized Dealer Agreements. Servicer shall timely and
fully perform and comply with all material obligations to provide security
alarm monitoring 


 


11

















 


and other administrative services under the
Authorized Dealer Agreements and related contracts and agreements pursuant to
which Alarm Accounts have been originated and related contracts and agreements.


 


(g)                                 Operation in
Ordinary Course. Servicer shall operate its business in all
material respects in the ordinary course of business.


 


(h)                                 Licenses. Servicer
(which for this purpose expressly includes SAl during the term of the SAl
Transition Agreement) shall secure, obtain and maintain in full force and
effect throughout the term of this Agreement all required and necessary
authorizations, registrations, licenses, permission, permits and/or approvals,
from any local, state, federal, or governmental authorities enabling Company to
service and monitor Alarm Accounts, except where the failure to do so would not
have a Material Adverse Effect.


 


(i)                                     Insurance. Servicer
shall name, and will continue to name, Owner and its designated lender as
additional insureds on Servicer’s general liability and errors and omissions
insurance policies with coverage in an amount not less than $2,000,000 and an
umbrella policy with coverage in an amount not less than $5,000,000.


 


(j)                                     Financial
Covenants.


 


(i)                                     Liquidity. Servicer
shall maintain at all times cash and cash equivalents of at least $250,000.


 


(ii)                                  Working Capital. Servicer
shall maintain at all times a ratio of cash and cash equivalents to current
liabilities of at least 1.1 to 1.0.


 


(iii)                               Cash Flow. Servicer
shall maintain an EBITDA greater than 80.0% of the most recently projected
EBITDA for each Fiscal Quarter. “EBITDA” shall mean net income, less income or
plus loss from discontinued operations and extraordinary items, plus income
taxes, plus interest expense, plus depreciation, depletion  and amortization.


 


Section 3.2                                      Negative
Covenants of Servicer.


 


(a)                                  Change in
Jurisdiction of Organization, Name, Principal Place of Business or Location of
Records. Servicer shall not change its jurisdiction of organization, name,
identity or corporate structure or relocate its principal place of business or
chief executive office, and the Servicer shall not change any office where
Records are kept, unless, in each case, it shall have (i) given Owner at
least 30 days prior notice thereof and (ii) delivered to Owner all
financing statements, instruments and other documents requested by Owner in
connection with such change or relocation.


 


(b)                                 Change in
Collection Procedures. Servicer, as applicable, shall not, without
the prior written consent of Owner, (i) withdraw or make any changes in
its instructions to Obligors regarding the payment of Collections except
pursuant to Obligor requests or otherwise in the ordinary course of its
business or (ii) make any other change in the procedures by which
Collections are paid or received, except pursuant to Obligor requests or
otherwise in the ordinary course of its business, in each case that could
reasonably be expected to have a Material Adverse Effect. Servicer shall not,
without the prior written consent of Owner, amend, restate, supplement or
otherwise modify the Alarm Funding Account.


 


12














 


(c)                                  Modifications
to Alarm Accounts. Servicer, as applicable, shall not extend the
payment terms of, amend or otherwise modify the terms of any Alarm Accounts
without the prior written consent of Owner.


 


(d)                                 Sales; Adverse
Claims. Servicer shall not sell, assign, transfer or convey (by operation of
law or otherwise), or create or suffer to exist any Adverse Claim created by it
upon or with respect to (including, without limitation, through the filing of
any financing statement), any Purchased Asset or the Accounts, or assign any
right to receive income in respect of any Account Asset or the Alarm Accounts
(other than, in each case, as provided in this Agreement).


 


(e)                                  Operational
Standards. In any calendar week, the Servicer shall not, and
shall not allow:


 


(i)                                     Greater than
20% of incoming customer relations, collection, billing and payment calls to be
served in greater than 60 seconds, or greater than 15% of incoming customer
relations calls not to be served;


 


(ii)                                  Greater than
20% of incoming technical service calls to be served in greater than 60
seconds, or greater than 20% of incoming technical service calls not to be
resolved to the satisfaction of Owner, CastleRock and the applicable customer
in over 72 hours;


 


(iii)                               Greater than
15% of all scheduled field service appointments not to be completed on schedule
and the satisfaction of Owner CastleRock and the applicable customer.


 


Section 3.3                                      The Accounts. Owner agrees
to establish the Operating Bank Account and the Owner Account with Bank on the
Closing Date. Servicer shall have no authority to withdraw funds from the
Operating Bank Account, the Owner Account or any other bank account of Owner,
except as otherwise expressly directed and consented to in writing by Owner.
Until the occurrence of a Servicer Default, Servicer is hereby authorized and
directed to pursue all reasonable efforts to collect Reimbursable Expenses on
behalf of the Owner and Owner agrees to remit all Reimbursable Expenses
received in the Operating Bank Account or otherwise to or as directed by
Servicer.


 


ARTICLE IV

ADMINISTRATION AND COLLECTION


 


Section 4.1                                      Designation of
Servicer.


 


(a)                                  The servicing,
administration and collection of the Alarm Accounts shall be conducted by
Servicer or such other Person as may be designated by Owner in accordance with Schedule
4.1(a). Servicer hereby agrees to perform its duties and responsibilities
pursuant to the terms of this Agreement until the earlier of (a) the
Scheduled Termination Date and (b) the date of termination pursuant to a
Servicer Default in accordance with Section 5.2. If a Servicer
Default has occurred and is continuing, Owner may terminate Servicer as
servicer and designate itself or any other Person as successor servicer in
accordance with Section 5.2.


 


(b)                                 Servicer may
not delegate any of its duties or responsibilities as Servicer (including those
relating to collection, billing, outsourcing of software and hardware, and
website hosting) to any Person who is not providing services to the Servicer as
of the date hereof 


 


13

















 


without the prior written consent of Owner. If
Servicer shall delegate any of such duties Of responsibilities in accordance
with this Section 4.1(b), (i) Servicer shall be and remain
primarily liable to Owner for the full and prompt performance of all duties and
responsibilities of the Servicer hereunder and (ii) Owner shall be
entitled to deal exclusively with Servicer in matters relating to the discharge
by the Servicer of its duties and responsibilities hereunder. Owner need not
give notice, demand or other communication to any Person other than Servicer in
order for communication to the Servicer or to any sub-servicer or other
delegate of the Servicer, to be accomplished. Servicer, at all times that it is
the Servicer, shall be responsible for providing any sub-servicer or other
delegate of the Servicer with any notice given to the Servicer under this
Agreement.


 


Section 4.2                                      Duties of
Servicer.


 


(a)                                  The Servicer
shall at all times apply the same standard of care to the Alarm Accounts as it
would applies to Alarm Accounts which are held and owned solely by Servicer.
The Servicer shall take or cause to be taken, all in accordance with applicable
laws, rules and regulations, with care and diligence no less than for assets
held for its own account in accordance with its usual and customary collection
policies and procedures as described in Schedule 4.2(a), consistent with
customary practices in the relevant industry, all such actions as may be
necessary or advisable to collect amounts due under the Alarm Accounts.


 


(b)                                 The Servicer
will instruct all Obligors under the Alarm Accounts to pay all Collections
therefrom directly to, or will obtain the authority from such Obligors to
charge their credit cards or bank accounts pursuant to an ACH funds transfer
with Collections for deposit directly to, the Operating Bank Account.


 


(c)                                  The Owner or
its designee shall instruct the Bank to transfer all Collections or other
proceeds of the Alarm Assets received in the Accounts from the Accounts in
accordance with Section 4.6. If the Servicer determines that any
payments received in the Accounts do not constitute Collections or other
proceeds of the Alarm Assets, the Owner or its designee shall instruct the Bank
to remit such items to the owner of such payments. The Servicer shall segregate
and hold in trust for Owner all Collections received directly from the Obligors
under the Alarm Accounts and shall deposit such Collections, duly endorsed or
with duly executed instruments of transfer, in the Operating Bank Account, as
the case may be, on or before the Business Day following receipt. Owner shall
promptly notify the Servicer of any change in the location of the Accounts or
the Alarm Funding Account.


 


(d)                                 The Servicer
shall not extend the maturity of any amount due or to become due under an Alarm
Accounts or otherwise modify, amend or waive any provision of an Alarm Account
(other than with respect to Reimbursable Expenses and rights related thereto)
without the prior written consent of Owner, other than payment plans extended
to customers in the ordinary course of business and consistent with the policy
attached as Exhibit C hereto, consent to which may be revoked by Owner
upon 30 days written notice for any or no reason.


 


(e)                                  The Servicer
shall hold in trust for Servicer and Owner all Records that evidence or relate
to the Alarm Assets or that are otherwise necessary or desirable to collect
amounts due under the Alarm Accounts and shall, if a Servicer Default has
occurred and is continuing, deliver to Owner or to such other Person as may be
designated by Owner all such Records, in each case at a location designated by
Owner.


 


14

















 


Section 4.3                                      Responsibilities
of Servicer. The exercise by Owner of its rights hereunder
shall not release Servicer from any of its duties or responsibilities with
respect to the Alarm Accounts. Owner shall have no obligation or liability
(except to pay the Servicing Fees) with respect to the Alarm Accounts and shall
not be obligated to perform the obligations of Servicer with respect to the
Alarm Accounts.


 


Section 4.4                                      Reports /
Reviews.


 


(a)                                  On the fifth
Business Day of each month (each, a “Reporting Date”) the Servicer shall
prepare and deliver to Owner, in readable, digital electronic form (compatible
with Microsoft Excel), with paper copies if so requested by Owner, a report
listing such information and data with respect to the Alarm Accounts and in
such electronic or other format as Owner shall request from time to time. Such
reports shall include, but not be limited to, updated Subscriber information
via a full download of the Servicer’s account database, gross Collections
received reported separately on an RMR, pass-through, and non-RMR basis, any
disbursements or expenses paid during the prior month and the Attrition Rate
with respect to all Alarm Accounts with the detail supporting the calculation.


 


(b)                                 Servicer shall
maintain complete, accurate and up-to-date files and records of all
communications and correspondence with Subscribers and shall prepare such
reports with respect to such matters as Owner may from time to time request.


 


(c)                                  Servicer shall
maintain and preserve and make available to Owner at Owner request all reports
and Alarm Account information and data received from Authorized Dealers under
Servicing Agreements.


 


(d)                                 Servicer shall
permit an independent third party deemed acceptable by Owner to conduct an
annual quality control review of the servicing of the Alarm Assets. Servicer
shall reasonably cooperate with such review and reimburse Owner for reasonable
costs and expenses of such review, not to exceed $10,000 in the absence of a
Servicer Default. Servicer shall also provide Owner with online, real time
access to its Records concerning dealer program account data and the status of
the Alarm Accounts.


 


Section 4.5                                      Servicing Fees. Owner shall
pay Servicer on a monthly basis from the Operating Bank Account as compensation
for its servicing activities under this Agreement, servicing fees set forth on Schedule
4.5 (the “Servicing Fees”). The Servicing Fees shall be paid monthly
from the Operating Bank Account, on the Remittance Date of each month, for all
Alarm Accounts as of the last Business Day of the immediately preceding month.


 


Section 4.6                                      Distribution of
Collections. Owner or its designee shall instruct the Bank to
distribute all payments received as Collections from each Alarm Account on each
Remittance Date as follows:


 


(i)                                     first, to Owner to
reimburse Owner for reasonable costs and expenses, including, without
limitations, reasonable attorneys’ fees and expenses, incurred in enforcing
Owner’s efforts to enforce, collect, foreclose upon or otherwise realize upon
such Alarm Accounts or the related Alarm Assets;


 


(ii)                                  second, to Servicer
until Servicer has received the Servicing Fees from the monthly Collections
from such Alarm Accounts including any monthly Servicing Fees 


 


15

















 


not paid in a prior month because monthly
Collections were insufficient to permit payment of such fees for such month
(unless and to the extent such insufficiency is due to a material Servicer
Default, including without limitation, as defined in Section 5.1(e)); and


 


(iii)                               third, all remaining
Collections to Owner.


 


Section 4.7                                      Subscriber
Payments. The collections received and payments required
pursuant to Section 4.6 shall be processed as described in this
Article IV and as may be amended or supplemented from time to time upon
written agreement of the parties (the “Bank Account Procedure”).


 


Section 4.8                                      Intellectual
Property. Without further consideration and until terminated
as set forth below, Servicer hereby grants to Owner a non-exclusive and
non-revocable license to use Servicer’s trade names, trade marks and service
marks in the Alarm Assets, yard signs, decals, equipment logos and other items
identifying Servicer at the customers’ premises). In the event that Servicer is
terminated in accordance with Section 5.2(b) hereof as a result of a
Servicer Default which has not been timely cured, the license granted herein
shall terminate six months after the effective date of the termination of the
Servicer.


 


ARTICLE V

SERVICER DEFAULTS


 


Section 5.1                                      Servicer
Defaults. The occurrence of anyone or more of the following
events shall constitute a Servicer Default:


 


(a)                                  The Servicer
shall fail to instruct the Bank and Owner to make any payment, transfer or
deposit on or before the date occurring three (3) Business Days after the
date such instruction is required to be made by the Servicer under this
Agreement or shall fail duly to observe any covenant of the Servicer set forth
in Section 3.2 or Section 4.2.


 


(b)                                 The Servicer
shall fail duly to observe or perform any other covenant or agreement of the
Servicer set forth in this Agreement or in any other Transaction Document and
such failure shall continue unremedied for fifteen (15) days after the earlier
of the date on which the Servicer receives notice of such failure and the date
on which the Servicer becomes aware of such failure, or should have become
aware pursuant to usual and customary policies and procedures normally applied
by Servicer in accordance with Section 4.2(a).


 


(c)                                  Any
representation, warranty or certification made by the Servicer in this
Agreement or in any other Transaction Document shall prove to have been
incorrect in any material respect when made or deemed made and such
representation, warranty or certification shall continue to be incorrect in any
material respect for fifteen (15) days after the earlier of the date on which
the Servicer receives notice of such incorrectness and the date on which the
Servicer becomes aware of such incorrectness, or should have become aware
pursuant to usual and customary policies and procedures normally applied by·
Servicer in accordance with Section 4.2(a).


 


(d)                                 The Servicer
shall consent to the appointment of a conservator or receiver or liquidator in
any insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or relating to all or
substantially all of its 


 


16

















 


property, or a decree or order of a court or agency
or supervisory authority having jurisdiction in the premises for the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Servicer and such decree or order shall have remained
in force undischarged or unstayed for a period of ninety (90) days, or the
Servicer shall admit in writing its inability to pay its debts generally as
they become due, file a petition to take advantage of any applicable insolvency
or reorganization statute, make an assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations.


 


(e)                                  The Annual
Attrition Rate equals or exceeds 15.0% or the Quarterly Attrition Rate equals
or exceeds 17.0%, except as disclosed on Schedule 5.1(e) hereto.


 


(f)                                    There occurs
and is continuing a material Event of Default under that certain Credit
Agreement by and between Owner and FCC, LLC (“FCC”) as agent and the
lenders thereto (as the same may be amended, modified or restated, the “Senior
Credit Agreement”) under Section 8.1.1, 8.1.12, 8.1.13 or 8.1.3
(but with respect to Section 8.1.3, only with respect to an Event of
Default thereunder caused by a breach of Section 7.2.16 or 7.2.20) of the
Senior Credit Agreement or such Event of Default under the Senior Credit
Agreement which materially adversely effects the Alarm Accounts as collateral
or the ability of Owner to service the Senior Funded Debt (as currently defined
in the Senior Credit Agreement) in both cases, as reasonably determined by FCC
as agent, beyond the date notice thereof is delivered to CastleRock by FCC or
Owner, plus application of any cure period. Owner shall promptly provide
CastleRock with a copy of any notice of default under the Senior Credit
Agreement which it receives; provided however this Section 5.1(f) shall
apply only to such Events of Default which arise under the terms of the Senior
Credit Agreement as executed by the parties as of May 25, 2007, a true and
correct copy of which has been provided to CastleRock by Owner.


 


Section 5.2                                      Remedies for
Servicer Defaults.


 


(a)                                  If a Servicer
Default has occurred and is continuing, Owner may take any of the following
actions: (i) replace the Person then acting as Servicer or (ii) deliver
notices of assignment to the Obligors under the Alarm Accounts or otherwise
notify such Obligors of Owner’s interest in the Alarm Accounts and direct such
Obligors to remit all Collections to an account designated by Owner. To the
extent permitted by applicable law, Servicer hereby grants to Owner an
irrevocable power of attorney to take all such actions in the name and on
behalf of Servicer as may be necessary or advisable, in the reasonable
determination of Owner, to collect all Alarm Assets, including, without
limitation, endorsing Servicer’s name on checks and other instruments
representing Collections and communicating with the Obligors under the Alarm
Accounts in Servicer’s name. The aforementioned rights and remedies shall be in
addition to all other rights and remedies of Owner available under this
Agreement, by operation of law, at equity or otherwise, all of which are hereby
expressly preserved, including, without limitation, all rights and remedies
provided under the UCC, all of which rights shall be cumulative. If any
authorized signatory of the Servicer or Servicer whose signature appears on the
Collection Notice or any notice of assignment shall cease to have such
authority before the delivery of such notice, such notice shall nevertheless be
valid as if such authority had remained in force.


 


(b)                                 In addition,
Owner may elect to terminate Servicer as Servicer and act as servicer hereunder
or appoint another servicer to act as servicer hereunder. In the event the
Servicer is terminated, Servicer shall (i) execute such documents and instruments
as may be 


 


17

















 


required to effect such termination and replacement;
(ii) deliver and/or provide access to such of Servicer’s servicing and
collection facilities as are necessary for the transition of servicing to any
replacement servicer designated by Owner upon Owner’s request; (iii) remit
to Owner all Collections then in Servicer’s possession or control; and (iv) cooperate
with and assist Owner and any replacement servicer designated by CastleRock in
the orderly, efficient and expeditious transfer function of servicing,
administering, accounting for and collections the customer accounts. During
such transition period, Servicer shall be entitled to fees pursuant to Section 4.5
provided Servicer continues to provide the level and content of service
required as prescribed in Article IV.


 


(c)                                  Owner agrees to
indemnify and hold harmless Servicer for damages to Servicer directly and
solely caused by the gross negligence or willful misconduct of any replacement
servicer during the transition period; and Owner shall employ reasonable
efforts to obtain an indemnity from any replacement servicer for any losses
caused by the negligence or misconduct of such replacement servicer during the
transition period.


 


ARTICLE VI

INDEMNIFICATION AND ADDITIONAL REMEDIES


 


Section 6.1                                      Indemnities.


 


Without limiting any other
rights which Owner may have hereunder or under applicable law, Servicer shall
indemnify Owner and their officers, directors, agents and employees (each, a “Owner
Indemnified Party”) from and against any and all damages, losses, claims,
taxes, liabilities, costs, expenses and other amounts payable, including
reasonable attorneys’ fees and disbursements (all of the foregoing being
collectively referred to as “Owner Indemnified Amounts”) awarded against
or incurred by any Owner Indemnified Party arising out of or as a result of (i) any
breach by Servicer of any representation or warranty made or deemed made by
Servicer (or any of its officers or employees) in this Agreement or any other
Transaction Document, (ii) any breach by Servicer of any covenant made or
deemed made by Servicer in this Agreement or any other Transaction
Document,  (iii) any commingling of
payments with respect to any Alarm Accounts at any time with other funds of
Servicer or any Affiliate of Servicer or (iv) any action, proceeding or
claim (actual or threatened) related to this Agreement or any other Transaction
Document or to any Alarm Asset arising from the gross negligence or willful
misconduct of Servicer, including, without limitation, any judgment, award,
settlement, reasonable attorneys’ fees and other costs or expenses incurred in
connection with any such action, proceeding or claim. The foregoing
notwithstanding, Servicer shall have
no indemnification obligation under this Section 6.1(a) for
Owner Indemnified Amounts to the extent that a final judgment of a court of
competent jurisdiction holds that such Owner Indemnified Amounts resulted from
gross negligence or willful misconduct on the part of the Owner Indemnified
Party seeking indemnification.


 


Section 6.2                                      Other Costs and
Expenses. Servicer shall pay to Owner on demand any and all
costs and expenses of Owner, if any, including, without limitation, the
reasonable fees and out-of-pocket expenses of legal counsel for Owner, in
connection with the enforcement of this Agreement and the other Transaction
Documents or any restructuring or workout of this Agreement or the other
Transaction Documents.


 


18

















 


ARTICLE VII

MISCELLANEOUS


 


Section 7.1                                      Waivers and
Amendments.


 


(a)                                  No failure or
delay on the part of any party in exercising any power, right or remedy under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or remedy preclude any other further
exercise thereof or the exercise of any other power, right or remedy. The
rights and remedies herein provided shall be cumulative and nonexclusive of any
rights or remedies provided by law. Any waiver of this Agreement shall be
effective only in the Specific instance and for the specific purpose for which
given.


 


(b)                                 No provision of
this Agreement may be amended, supplemented or modified except in writing
signed by Servicer, the Servicer and Owner. No provision of this Agreement may
be waived except in Writing signed by the parties from whom such waiver is
sought.


 


Section 7.2                                      Notices. All
communications and notices provided for hereunder shall be in writing
(including bank wire, telecopy or electronic mail transmission or similar
writing) and shall be given to the other parties hereto at their respective
addresses or telecopy numbers set forth on the signature pages hereof or
at such other address or telecopy number as such Person may hereafter specify  for the purpose of notice to each of the other
parties hereto. Each such notice or other communication shall be effective (i) if
given by telecopy or electronic mail, upon the receipt thereof, (ii) if
given by mail, three (3) Business Days after the time such communication
is deposited in the mail with first class postage prepaid or (iii) if
given by any other means, when received at the address specified in this Section 7.2.


 


Section 7.3                                      Protection of
Owner’s Interests.


 


(a)                                  Servicer shall,
from time to time at its expense, promptly take all necessary action to vest
legal and equitable title to the Alarm Assets irrevocably in Owner free and
clear of any Adverse Claims (including, without limitation, the filing of all
financing statements or other similar instruments or documents necessary under
the UCC (or any comparable law) to perfect Owner’s interest in the Alarm
Assets) and shall take such other action to perfect, protect or more fully
evidence Owner’s interest in the Alarm Assets or to enable Owner to exercise
and enforce its rights and remedies under this Agreement and the other
Transaction Documents as Owner may reasonably request. Servicer shall defend
the interest of Owner in, to and under the Alarm Assets against all claims of
third parties claiming through or under Servicer or any of its Affiliates.


 


(b)                                 If Servicer
fails to perform any of its obligations hereunder, Owner may (but shall not be
required to) perform, or cause the performance of, such obligation, and Owner’s
costs and expenses incurred in connection therewith shall be payable by
Servicer. Without limiting the foregoing, if Servicer fails to perform any of
its obligations hereunder with respect to the filing of financing statements,
Servicer irrevocably authorizes Owner, in the sole discretion of Owner; and
appoints Owner as its attorney-in-fact, to act on its behalf (i) to file
financing statements necessary in Owner’s sole discretion to perfect and to
maintain the perfection and priority of the interest of Owner in the Alarm
Assets and (ii) to file a carbon, photographic or 


 


19

















 


other reproduction of this Agreement or any
financing statement with respect to the Alarm Assets as a financing statement
in such offices as Owner in its sole discretion deems necessary to perfect and
to maintain the perfection and priority of the interest of Owner in the Alarm
Assets. This appointment is coupled with an interest and is irrevocable.


 


Section 7.4                                      Confidentiality.


 


(a)                                  Servicer shall
not disclose to any Person any confidential information with respect to Owner
or the business of Owner, except that Servicer may disclose such information
(i) to its officers, directors, employees and agents, including
accountants, legal counsel and other advisors and employees of Servicer (it
being understood that the Persons to· whom such disclosure is made will be
informed of the confidential nature of such information and instructed to keep
such information confidential) and (ii) as required by any law, rule or
regulation or by any subpoena or similar legal process.


 


(b)                                 Owner shall not
disclose to any Person any confidential information with respect to Servicer or
the business of Servicer, except that Owner may disclose such information (i) to
its officers, directors, employees and agents, including accountants, legal
counsel and other advisors and employees of Owner (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such information and instructed to keep such information
confidential) and (ii) as required by any law, rule or regulation or
by any subpoena or similar legal process.


 


Section 7.5                                      Limitation of
Liability. Except with respect to any claim arising out of
the fraud, willful misconduct or gross negligence of Owner, no claim may be
made by Servicer against Owner or its Affiliates, directors, officers,
employees, attorneys or agents for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this Agreement.


 


Section 7.6                                      Injunctive
Relief. Servicer acknowledges that the services provided by Servicer
hereunder are essential to maintaining the value of the Alarm Accounts and
other Alarm Assets being serviced. Each party recognizes that irreparable
injury may result to the other party in the event of a breach of the
obligations contained in this Agreement and agrees that in the event of such a
breach or threat of such a breach, the non-breaching party shall be entitled,
in addition to other remedies and damages available, to seek an injunction to
restrain the violations thereof by the other party and all persons acting for
and/or with the other party, plus recovery of attorneys’ fees and court costs.


 


Section 7.7                                      CHOICE OF LAW. THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE
LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.


 


Section 7.8                                      CONSENT TO
JURISDICTION. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT
SITTING IN COOK COUNTY, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY ANY PARTY PURSUANT
TO THIS AGREEMENT. EACH PARTY HERETO HEREBY IRREVOCABLY AGREES THAT 


 


20

















 


ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.


 


Section 7.9                                      WAIVER OF JURY
TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY SUCH PARTY PURSUANT TO
THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.


 


Section 7.10                                Survival of
Terms. All representations and warranties made by any party in this
Agreement or any other Transaction Document shall survive the execution and
delivery of this Agreement or such other Transaction Document regardless of any
investigation made by Owner or such other party and notwithstanding that or
such other party may have had notice or knowledge that any such representation
or warranty was incorrect. The provisions of Article VIII shall survive
any termination of this Agreement.


 


Section 7.11                                Counterparts;
Severability; Section References. This Agreement may be
Executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition ,or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. Unless otherwise specified, references herein to
“Article,” “ Section,” “ Exhibit,” “Schedule,” and “Annex” shall mean a
reference to articles and sections of, and exhibits, schedules and annexes to,
this Agreement.


 


[SIGNATURE
PAGE FOLLOWS]


 


21

















 


[Signature
Page to Servicing Agreement]


 


IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed and delivered by their
respective duly authorized officers as of the date hereof.


 


	
   

  	
  CASTLEROCK
  SECURITY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  / s / Mark Klipsch

  
	
   

  	
  Name: Mark Klipsch

  
	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address: 2501 South
  Arlington Heights Road, #150

  
	
   

  	
   

  	
  Arlington Heights, IL
  60005

  
	
   

  	
   

  	
  Attention:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone: (847) 956-8560

  
	
   

  	
   

  	
  Facsimile: (847) 890-6688

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ALARM FUNDING, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  / s/ Westin Lovy

  
	
   

  	
  Name: Westin Lovy

  
	
   

  	
  Title: Managing Director

  



 


22