Exhibit 4.2


 


RIGHT OF FIRST REFUSAL AGREEMENT


 


THIS RIGHT OF FIRST REFUSAL AGREEMENT (this “Agreement”) is entered into effective as of September 24,
2010, by and among Castlerock Security Holdings, Inc., a
Delaware corporation (the “Company”), and
Alarm Funding, LLC, a Delaware limited liability company, and SA Systems LLC, a
Delaware limited liability company (each a “Holder” and
together the “Holders”).


 


RECITALS


 


WHEREAS, the Company and the Holders are parties to that
certain Contribution Agreement of even date herewith (the “Contribution
Agreement”), pursuant to which the Company has agreed to issue
shares of the Company’s common stock to the Holders (“Common Stock”) in
consideration of certain contributions to the Company by the Holders as further
described in the Contribution Agreement;


 


WHEREAS, as a condition to the issuance of the Common Stock
to the Holders, the Company has requested that each Holder grant a right of
first refusal with respect to such shares and other obligations set forth in
this Agreement; and,


 


WHEREAS, effective as of the date hereof, each Holder is the
beneficial owner of the number of shares of Common Stock of the Company set
forth opposite its name on Schedule A hereto.


 


NOW, THEREFORE, in consideration of the foregoing premises
and certain other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties agree as follows:


 


AGREEMENT


 


1.                                      Definitions.


 


1.1                                 Specific
Definitions.  For
purposes of this Agreement, the following capitalized terms shall have the
meanings set forth below:


 


(a)                                  Affiliate.  “Affiliate”
means, as to a specified Person, a Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by or under common control
with the Person specified.


 


(b)                                 Change of
Control.  “Change of
Control” means the occurrence, in a single transaction or in a
series of related transactions, of any one or more of the following events: (i)
a sale or other disposition of all or substantially all of the consolidated
assets of the Company; (ii) a sale or other disposition of at least ninety
percent (90%) of the outstanding securities of the Company; or (iii) a merger,
consolidation or similar transaction involving (directly or indirectly) the
Company and, immediately after the consummation of such merger, consolidation
or similar transaction, the stockholders of the Company immediately prior
thereto do not own, directly or indirectly, either (A) outstanding voting
securities representing more than 


 

















 


fifty percent (50%) of the combined outstanding
voting power of the surviving entity in such merger, consolidation or similar
transaction or (B) more than fifty percent (50%) of the combined outstanding
voting power of the parent of the surviving entity in such merger,
consolidation or similar transaction, in each case in substantially the same
proportions as their ownership of the outstanding voting securities of the
Company immediately prior to such transaction.


 


(c)                                  Delivery.  “Delivery”
shall have the meaning set forth in Section 6 below.


 


(d)                                 Equity
Securities.  “Equity Securities” shall any securities evidencing an
ownership interest in the Company or any securities convertible into or
exercisable for any shares of the foregoing now or hereafter owned or held by a
Holder (or a transferee in accordance with Section 2.3 herein).


 


(e)                                  Holders.  “Holders”
shall mean Alarm Funding, LLC, SA Systems LLC, and any Persons who have
acquired shares from any of such Persons or their transferees or assignees in
accordance with the provisions of this Agreement.


 


(f)                                    Person.  “Person”
means an individual or entity of any kind, including but not limited to a
partnership, a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).


 


(g)                                 Transfer.  “Transfer”
shall include any sale, assignment, encumbrance, hypothecation, pledge,
conveyance in trust, gift, transfer by bequest, devise or descent, or other
transfer or disposition of any kind, including, but not limited to, transfers
pursuant to divorce or legal separation, transfers to receivers, levying
creditors, trustees or receivers in bankruptcy proceedings or general assignees
for the benefit of creditors, whether voluntary, involuntarily or by operation
of law, directly or indirectly, of any of the Equity Securities.


 


1.2                                 Other Terms.  Other terms may be defined elsewhere in the
text of this Agreement and, unless otherwise indicated, shall have such meaning
as set forth in this Agreement.


 


2.                                      Agreement
Among the Company and the Holders.


 


2.1                                 Rights of
Refusal.


 


(a)                                  Transfer Notice.
 If at any time a Holder proposes to Transfer Equity Securities (a “Selling Holder”), then the Selling Holder shall promptly
give the Company and each other Holder written notice of the Selling Holder’s
intention to make the Transfer (the “Transfer Notice”).
The Transfer Notice shall include (i) a description of the Equity Securities to
be transferred (“Offered Shares”), (ii) the
name(s) and address(es) of the prospective transferee(s) and (iii) the
consideration and (iv) the material terms and conditions upon which the
proposed Transfer is to be made. The Transfer Notice shall certify that the
Selling Holder has received a firm offer from the prospective transferee(s) and
in good faith believes a binding agreement for the Transfer is obtainable on
the terms set forth in the Transfer Notice. The Transfer Notice shall also
include a copy of any written proposal, term sheet or letter of intent or other
agreement relating to the proposed Transfer. In the event that the Transfer is
being made 


 


2

















 


pursuant to the provisions of Section 2.3, the
Transfer Notice shall state under which specific subsection the Transfer is
being made.


 


(b)                                 Company’s Right
of First Refusal.  The Company shall have an option for a
period of ten (10) days from Delivery of the Transfer Notice to elect to
purchase all, and not less than all, of the Offered Shares at the same price
and subject to the same material terms and conditions as described in the
Transfer Notice. The Company may exercise such purchase option and purchase the
Offered Shares by notifying the Selling Holder in writing before expiration of
the such ten (10) day period. If the Company gives the Selling Holder notice
that it desires to purchase such shares, then payment for the Offered Shares
shall be by check or wire transfer, against delivery of the Offered Shares to
be purchased at a place agreed upon between the parties and at the time of the
scheduled closing therefor, which shall be no later than forty-five (45) days
after Delivery to the Company of the Transfer Notice, unless the Transfer
Notice contemplated a later closing with the prospective third-party
transferee(s) or unless the value of the purchase price has not yet been
established pursuant to Section 2.1(e). If the Company fails to purchase the
Offered Shares by exercising the option granted in this Section 2.1(b) within
the period provided, the Offered Shares shall be subject to the options granted
to the Holders pursuant to subsection 2.1(d).


 


(c)                                  Additional
Transfer Notice.  Subject to the Company’s option set forth in
Section 2.1(b), if at any time the Selling Holder proposes a Transfer, then,
within five (5) days after the Company has declined to purchase the Offered
Shares or the Company’s option to so purchase the Offered Shares has expired,
the Selling Holder shall give each Holder an “Additional
Transfer Notice” that shall include all of the information and
certifications required in a Transfer Notice and briefly describe the Holders’
rights of first refusal with respect to the proposed Transfer.


 


(d)                                 Holders’ Right
of First Refusal.


 


(i)                                     Each Holder
shall have an option for a period of fifteen (15) days from the Delivery of the
Additional Transfer Notice from the Selling Holder set forth in Section 2.1(c)
to elect to purchase all, and not less than all, of its respective pro rata
share of the Offered Shares at the same price and subject to the same material
terms and conditions as described in the Additional Transfer Notice. Each
Holder may exercise such purchase option and its pro rata share of the Offered
Shares (a “Participating Holder” for the purposes
of Sections 2.1(d) and 2.1(e)), by notifying the Selling Holder and the Company
in writing, before expiration of the fifteen (15) day period as to the number
of such shares that he, she or it wishes to purchase (the “Participating
Holder Notice”). Each Holder’s pro rata share of the Offered Shares
shall be a fraction of the Offered Shares, the numerator of which shall be the
number of shares of Common Stock owned by such Holder on the date of the
Transfer Notice and denominator of which shall be the total number of shares of
Common Stock held by all Holders on the date of the Transfer Notice.


 


(ii)                                  In the event
any Holder elects not to purchase its pro rata share of the Offered Shares
available pursuant to its option under subsection 2.1(d)(i) within the time
period set forth therein, then the Selling Holder shall promptly give written
notice (the “Overallotment Notice”) to each
Participating Holder that has elected to purchase its pro rata 


 


3

















 


share of the Offered Shares (each a “Fully Participating Holder”), which notice shall set forth
the number of Offered Shares not purchased by the other Holders, and shall
offer the Participating Holders the right to acquire the unsubscribed shares.
Each Participating Holder shall have five (5) days after Delivery of the
Overallotment Notice to deliver a written notice to the Selling Holder (the “Participating Holders Overallotment Notice”) of its election
to purchase its pro rata share of the unsubscribed shares on the same terms and
conditions as set forth in the Additional Transfer Notice and indicating the
maximum number of the unsubscribed shares that it will purchase in the event
that any other Fully Participating Holder elects not to purchase its pro rata
share of the unsubscribed shares.  The
numerator shall be the same as that used in Section 2.1(d)(i) above and the
denominator described in clause (i) of this subsection 2.1(d) shall be the
total number of shares of Common Stock owned by all Participating Holders on
the date of the Transfer Notice.  Each
Participating Holder shall be entitled to apportion Offered Shares to be
purchased among its Affiliates, provided that such Participating Holder
notifies the Selling Holder of such allocation.


 


(e)                                  Payment.


 


(i)                                     The
Participating Holders shall effect the purchase of the Offered Shares with
payment by check or wire transfer, against delivery of the Offered Shares to be
purchased at a place agreed upon between the parties and at the time of the
scheduled closing therefor, which shall be no later than forty-five (45) days
after Delivery to the Company of the Transfer Notice, unless the Transfer
Notice contemplated a later closing with the prospective third-party
transferee(s) or unless the value of the purchase price has not yet been
established pursuant to Section 2.1(e).


 


(ii)                                  Should the
purchase price specified in the Transfer Notice or Additional Transfer Notice
be payable in property other than cash or evidences of indebtedness, the
Company (and the Participating Holders) shall have the right to pay the
purchase price in the form of cash equal in amount to the fair market value of
such property. If the Selling Holder and the Company (or the Participating
Holders) cannot agree on such cash value within ten (10) days after Delivery to
the Company of the Transfer Notice (or the Delivery of the Additional Transfer
Notice to the Holders), the valuation shall be made by an appraiser of
recognized standing selected by the Selling Holder and the Company (or the
Participating Holders) or, if they cannot agree on an appraiser within twenty
(20) days after Delivery to the Company of the Transfer Notice (or the Delivery
of the Additional Transfer Notice to the Holders), each shall select an
appraiser of recognized standing and those appraisers shall designate a third
appraiser of recognized standing, whose appraisal shall be determinative of
such value. The cost of such appraisal shall be shared equally by the Selling
Holder and the Company (and the Participating Holders), with half of the cost
borne by the Company and the Participating Holders pro rata by each, based on
the number of shares such parties have expressed an interest in purchasing
pursuant to this Section 2. If the time for the closing of the Company’s
purchase or the Participating Holders’ purchase has expired but the
determination of the value of the purchase price offered by the prospective
transferee(s) has not been finalized, then such closing shall be held on or
prior to the fifth (5th) business day
after such valuation shall have been made pursuant to this subsection.


 


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2.2                                 Non-Exercise of
Rights.  To the extent that the Company and the
Holders have not exercised their rights to purchase the Offered Shares within
the time periods specified in Section 2.1, the Selling Holder shall have a
period of thirty (30) days from the expiration of such rights in which to sell
the Offered Shares, upon terms and conditions (including the purchase price) no
more favorable than those specified in the Transfer Notice, to the third-party
transferee(s) identified in the Transfer Notice. The third-party transferee(s)
shall acquire the Offered Shares free and clear of subsequent rights of first
refusal under this Agreement. In the event the Selling Holder does not
consummate the sale or disposition of the Offered Shares within the thirty (30)
day period from the expiration of these rights, the Company’s and the Holders’
first refusal rights shall continue to be applicable to any subsequent
disposition of the Offered Shares by the Selling Holder until such right lapses
in accordance with the terms of this Agreement. Furthermore, the exercise or
non-exercise of the rights of the Company and the Holders under this Section 2
to purchase Equity Securities from the Selling Holder or participate in sales
of Equity Securities by the Selling Holder shall not adversely affect their
rights to make subsequent purchases from the Selling Holder of Equity
Securities or subsequently participate in sales of Equity Securities by the
Selling Holder.


 


2.3                                 Exempt
Transfers.  Notwithstanding
the provisions of Section 2.1 of this Agreement, the first refusal rights of
the Company and the Holders shall not apply to the Transfer of any Equity
Securities (i) by a Holder to its Affiliates, stockholders, members, partners
or other equity holders, (ii) pursuant to the Pledge Agreements of even date
herewith executed by the Holders in connection with the Consent, Limited Waiver
and Third Amendment to Credit Agreement and Credit Documents of even date
herewith, (iii) to the public pursuant to a registration statement filed with,
and declared effective by, the Securities and Exchange Commission under the
Securities Act of 1933, as amended (other than a registration statement
relating either to sale of securities to employees of the Company pursuant to
its stock option, stock purchase or similar plan or a SEC Rule 145
transaction), (iv) upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Company, and (v) upon a Change of Control of the Company; provided
that in the case of clause (i) above, the Selling Holder shall deliver prior
written notice to the other Holders of such Transfer and such Equity Securities
shall at all times remain subject to the terms and restrictions set forth in
this Agreement and such transferee shall, as a condition to such issuance,
deliver a counterpart signature page to this Agreement as confirmation that
such transferee shall be bound by all the terms and conditions of this
Agreement as a Holder; and provided, further, in the case of
clause (i) above, that such Transfer is made pursuant to a transaction in which
there is no consideration actually paid for such Transfer.


 


2.4                                 Prohibited
Transfers; Equitable Relief.  Except as otherwise provided in
this Agreement, no Holder will Transfer all or any part of or any interest in
the Equity Securities. Any Transfer of Equity Securities not made in
conformance with this Agreement shall be null and void, shall not be recorded
on the books of the Company and shall not be recognized by the Company.  Each party hereto acknowledges and agrees
that any breach of this Agreement would result in substantial harm to the other
parties hereto for which monetary damages alone could not adequately
compensate.  Therefore, the parties
hereto unconditionally and irrevocably agree that any non-breaching party
hereto shall be entitled to seek protective orders, injunctive relief and other
remedies available at law or in equity (including, without limitation, seeking
specific 


 


5

















 


performance or the rescission of Transfers of Equity
Securities not made in strict compliance with this Agreement).


 


3.                                      Assignments
and Transfers; No Third-Party Beneficiaries.  This
Agreement and the rights and obligations of the parties hereunder shall inure
to the benefit of, and be binding upon, their respective successors, assigns
and legal representatives, but shall not otherwise be for the benefit of any
third party. The rights of the Holders hereunder are only assignable (i) to any
other Holder, (ii) to an Affiliate of such Holder.


 


4.                                      Legend.  Each existing or replacement certificate for shares
now owned or hereafter acquired by a Holder shall bear the following legend
upon its face:


 


“THE
SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN RIGHT OF FIRST REFUSAL BY AND BETWEEN THE STOCKHOLDER, THE CORPORATION
AND CERTAIN OTHER STOCKHOLDERS OF THE CORPORATION, A COPY OF WHICH MAY BE
OBTAINED AT THE CORPORATION’S PRINCIPAL OFFICE.”


 


5.                                      Effect
of Change in Company’s Capital Structure.  If,
from time to time, the Company pays a stock dividend or effects a stock split
or other change in the character or amount of any of the outstanding stock of
the Company, then in such event any and all new, substituted or additional
securities to which a Holder is entitled by reason of such Holder’s ownership
of Equity Securities shall be immediately subject to the rights and obligations
set forth in this Agreement with the same force and effect as the stock subject
to such rights immediately before such event.


 


6.                                      Notices.  All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified, (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day, (iii) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (iv) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. The occurrence of the events set forth in subsections (i) through (iv)
above shall constitute “Delivery” of
notice. All communications shall be sent to the respective parties at the
addresses set forth on the signature pages attached hereto (or at such other
addresses as shall be specified by notice given in accordance with this Section
6).


 


7.                                      Further
Instruments and Actions.  The
parties agree to execute such further instruments and to take such further
action as may reasonably be necessary to carry out the intent of this
Agreement. Each Holder agrees to cooperate affirmatively with the Company to
enforce its rights and obligations pursuant hereto.


 


8.                                      Term.  This Agreement shall terminate and be of no further
force or effect upon the earlier of: (a) any sale of the Company’s equity
securities to the public pursuant to a registration statement filed with, and
declared effective by, the Securities and Exchange Commission under the
Securities Act of 1933, as amended (other than a registration statement
relating either to sale 


 


6

















 


of securities to employees of the Company pursuant
to its stock option, stock purchase or similar plan or a SEC Rule 145
transaction); (b) any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, and (c) a Change of Control of the Company.


 


9.                                      Entire
Agreement; Governing Law.  This
Agreement contains the entire understanding of the parties hereto with respect
to the subject matter hereof and supersedes all other agreements between or
among any of the parties with respect to the subject matter hereof. This
Agreement shall be interpreted under the laws of the State of Delaware without
reference to Delaware conflicts of law provisions.


 


10.                               Amendments
and Waivers.  Any term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only with the written consent of (i) the
Company, (ii) the Holders holding at least a majority of the Common Stock of
the Company then held by the Holders. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon all Holders and their
respective successors and assigns.


 


11.                               Severability.  If one or more provisions of this Agreement is held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.


 


12.                               Attorney’s
Fees.  In the event that any dispute
among the parties to this Agreement should result in litigation, the prevailing
party in such dispute shall be entitled to recover from the losing party all
fees, costs and expenses of enforcing any right of such prevailing party under
or with respect to this Agreement, including without limitation, such
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.


 


13.                               Counterparts;
Electronic Copies.  This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which shall constitute the same instrument.  Delivery of a copy of this Agreement, notice
or such other document bearing an original signature by facsimile transmission,
by electronic mail in “portable document format” (document extension .PDF), or
by any other electronic means intended to preserve the original graphic and
pictorial appearance of a document, will have the same effect as physical
delivery of the paper document bearing the original signature.


 


(Signature page follows)


 


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IN WITNESS WHEREOF, the parties hereto have executed this
Right of First Refusal Agreement as of the date first written above.


 


 


	
  COMPANY:

  	
   

  	
  HOLDERS:

  
	
   

  	
   

  	
   

  
	
  CastleRock Security
  Holdings, Inc.,

  	
   

  	
  Alarm Funding, LLC,

  
	
  a Delaware corporation

  	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /
  s / Brian E. Johnson

  	
   

  	
  By:

  	
  /
  s / Westin Lovy

  
	
   

  	
  Brian
  E. Johnson, President and CEO

  	
   

  	
   

  	
  Westin
  Lovy, Managing Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  Address:

  
	
  2101 S. Arlington Heights Road, Suite 150

  	
   

  	
  c/o
  Whitecap Advisors LLC

  
	
  Arlington Heights, Illinois 60005

  	
   

  	
  800
  Connecticut Avenue, Suite 403E

  
	
  Attention: Brian E. Johnson, President

  	
   

  	
  Norwalk,
  CT 06854

  
	
  Fax: 847.890.6688 

  	
   

  	
  Attention:
  Westin Lovy, Managing Director

  
	
   

  	
   

  	
  Fax:
  203.656.1994

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SA Systems LLC

  
	
   

  	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /
  s / Robin Rodriguez

  
	
   

  	
   

  	
   

  	
  Robin
  Rodriguez, Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
  3333
  Poinciana Ave.

  
	
   

  	
   

  	
  Coconut
  Grove, FL  33133

  
	
   

  	
   

  	
  Attention:
  Robin Rodriguez, Manager

  
	
   

  	
   

  	
  Fax:
  305.443.4282

  



 


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SCHEDULE A


 


CASTLEROCK SECURITY HOLDINGS, INC. STOCKHOLDERS


 


	
  Certificate

  No.

  	
   

  	
  Issue Date

  	
   

  	
  Name

  	
   

  	
  Number of Shares

  	
   

  
	
  1

  	
   

  	
  09/24/10

  	
   

  	
  Alarm
  Funding, LLC

  	
   

  	
  2,262,000

  	
   

  
	
  2

  	
   

  	
  09/24/10

  	
   

  	
  SA
  Systems LLC

  	
   

  	
  138,000

  	
   

  
	
  TOTAL

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  2,400,000

  	
   

  



 


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