Credit Agreement



 






EXECUTION COPY




 





CREDIT AGREEMENT




Dated November 10, 2005




by and among




DEVCON SECURITY HOLDINGS, INC.,




DEVCON SECURITY SERVICES CORP.




COASTAL SECURITY COMPANY,




COASTAL SECURITY SYSTEMS, INC. and




CENTRAL ONE, INC.




as Borrowers,




and




CAPITALSOURCE FINANCE LLC,




as Agent and Lender




 





 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	1.	 	DEFINITIONS	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	2.	 	AMOUNT AND TERMS OF CREDIT	 	 	29	 
	 
	 	2.1	 	Revolving Credit Facility	 	 	29	 
	 
	 	2.2	 	Prepayments	 	 	30	 
	 
	 	2.3	 	Use of Proceeds	 	 	32	 
	 
	 	2.4	 	Interest and Applicable Margins	 	 	32	 
	 
	 	2.5	 	Cash Management Systems	 	 	34	 
	 
	 	2.6	 	Fees	 	 	36	 
	 
	 	2.7	 	Receipt of Payments	 	 	36	 
	 
	 	2.8	 	Application and Allocation of Payments	 	 	37	 
	 
	 	2.9	 	Loan Account and Accounting	 	 	37	 
	 
	 	2.10	 	Indemnity	 	 	38	 
	 
	 	2.11	 	Access	 	 	39	 
	 
	 	2.12	 	Taxes	 	 	40	 
	 
	 	2.13	 	Capital Adequacy; Increased Costs; Illegality	 	 	42	 
	 
	 	2.14	 	Single Loan	 	 	44	 
	 
	 	2.15	 	Uncommitted Incremental Commitment Increase	 	 	44	 
	 
	 	2.16	 	Borrower Funds Administrator	 	 	45	 
	 
	 	2.17	 	Acknowledgement of Joint and Several Liability	 	 	46	 
	 
	 	 	 	 	 	 	 	 
	3.	 	CONDITIONS PRECEDENT	 	 	49	 
	 
	 	3.1	 	Conditions to the Initial Loans	 	 	49	 
	 
	 	3.2	 	Further Conditions to Each Loan	 	 	54	 
	 
	 	 	 	 	 	 	 	 
	4.	 	REPRESENTATIONS AND WARRANTIES	 	 	55	 
	 
	 	4.1	 	Existence; Compliance with Law	 	 	55	 
	 
	 	4.2	 	Executive Offices, Collateral Locations, FEIN	 	 	55	 
	 
	 	4.3	 	Power, Authorization, Enforceable Obligations	 	 	55	 
	 
	 	4.4	 	Financial Statements and Projections	 	 	56	 
	 
	 	4.5	 	Material Adverse Effect	 	 	57	 
	 
	 	4.6	 	Ownership of Property; Liens	 	 	57	 
	 
	 	4.7	 	Labor Matters	 	 	58	 
	 
	 	4.8	 	Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness	 	 	58	 
	 
	 	4.9	 	Government Regulation	 	 	58	 
	 
	 	4.10	 	Margin Regulations	 	 	59	 
	 
	 	4.11	 	Taxes and Charges	 	 	59	 
	 
	 	4.12	 	ERISA	 	 	60	 
	 
	 	4.13	 	No Litigation	 	 	60	 
	 
	 	4.14	 	Brokers	 	 	61	 
	 
	 	4.15	 	Intellectual Property	 	 	61	 
	 
	 	4.16	 	Full Disclosure	 	 	61	 
	 
	 	4.17	 	Environmental Matters	 	 	62	 






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	 	 	 	 	 	 	Page	 
	 
	 	4.18	 	Insurance	 	 	62	 
	 
	 	4.19	 	Bank Accounts	 	 	63	 
	 
	 	4.20	 	[Intentionally Omitted]	 	 	63	 
	 
	 	4.21	 	Customer and Trade Relations	 	 	63	 
	 
	 	4.22	 	Bonding; Licenses	 	 	63	 
	 
	 	4.23	 	Solvency	 	 	63	 
	 
	 	4.24	 	OFAC	 	 	63	 
	 
	 	4.25	 	Patriot Act	 	 	64	 
	 
	 	4.26	 	Material Contracts	 	 	64	 
	 
	 	4.27	 	Absence of Defaults	 	 	64	 
	 
	 	4.28	 	Alarm Contracts	 	 	64	 
	 
	 	4.29	 	Write-Offs	 	 	64	 
	 
	 	 	 	 	 	 	 	 
	5.	 	FINANCIAL STATEMENTS AND INFORMATION	 	 	64	 
	 
	 	5.1	 	Reports and Notices	 	 	64	 
	 
	 	5.2	 	Communication with Accountants	 	 	68	 
	 
	 	 	 	 	 	 	 	 
	6.	 	AFFIRMATIVE COVENANTS	 	 	68	 
	 
	 	6.1	 	Maintenance of Existence and Conduct of Business	 	 	68	 
	 
	 	6.2	 	Payment of Taxes and Charges	 	 	69	 
	 
	 	6.3	 	Books and Records	 	 	69	 
	 
	 	6.4	 	Insurance; Damage to or Destruction of Collateral	 	 	70	 
	 
	 	6.5	 	Compliance with Laws	 	 	72	 
	 
	 	6.6	 	Supplemental Disclosure	 	 	72	 
	 
	 	6.7	 	Intellectual Property	 	 	73	 
	 
	 	6.8	 	Environmental Matters	 	 	73	 
	 
	 	6.9	 	Agreements Regarding Real Estate	 	 	74	 
	 
	 	6.10	 	Further Assurances	 	 	75	 
	 
	 	6.11	 	Future Borrowers	 	 	75	 
	 
	 	6.12	 	Interest Rate Fluctuations Protection	 	 	75	 
	 
	 	6.13	 	Alarm Contracts	 	 	76	 
	 
	 	6.14	 	Write-Off Policy	 	 	77	 
	 
	 	 	 	 	 	 	 	 
	7.	 	NEGATIVE COVENANTS	 	 	77	 
	 
	 	7.1	 	Mergers, Subsidiaries, Etc	 	 	78	 
	 
	 	7.2	 	Investments; Loans and Advances	 	 	80	 
	 
	 	7.3	 	Indebtedness	 	 	81	 
	 
	 	7.4	 	Employee Loans and Affiliate Transactions	 	 	83	 
	 
	 	7.5	 	Capital Structure and Business	 	 	83	 
	 
	 	7.6	 	Guaranty Obligations	 	 	84	 
	 
	 	7.7	 	Liens	 	 	84	 
	 
	 	7.8	 	Sale of Stock and Assets	 	 	84	 
	 
	 	7.9	 	ERISA	 	 	84	 
	 
	 	7.10	 	Financial Covenants	 	 	85	 
	 
	 	7.11	 	Hazardous Materials	 	 	85	 
	 
	 	7.12	 	Sale-Leasebacks	 	 	85	 
	 
	 	7.13	 	Restricted Payments	 	 	85	 






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	 	 	 	 	 	 	Page	 
	 
	 	7.14	 	Change of Name or Location; Change of Fiscal Year	 	 	85	 
	 
	 	7.15	 	No Impairment of Intercompany Transfers	 	 	86	 
	 
	 	7.16	 	Changes Relating to Material Contracts	 	 	86	 
	 
	 	 	 	 	 	 	 	 
	8.	 	TERM	 	 	86	 
	 
	 	8.1	 	Termination	 	 	86	 
	 
	 	8.2	 	Survival of Obligations Upon Termination of Financing Arrangements	 	 	86	 
	 
	 	 	 	 	 	 	 	 
	9.	 	FINANCIAL COVENANTS	 	 	86	 
	 
	 	9.1	 	Maximum Leverage Ratio	 	 	87	 
	 
	 	9.2	 	Minimum Fixed Charge Coverage Ratio	 	 	87	 
	 
	 	9.3	 	Maximum Capital Expenditures	 	 	87	 
	 
	 	9.4	 	Maximum Attrition Ratio	 	 	87	 
	 
	 	9.5	 	Accounting Changes	 	 	87	 
	 
	 	 	 	 	 	 	 	 
	10.	 	EVENTS OF DEFAULT; RIGHTS AND REMEDIES	 	 	88	 
	 
	 	10.1	 	Events of Default	 	 	88	 
	 
	 	10.2	 	Remedies	 	 	90	 
	 
	 	10.3	 	Waivers by Borrowers	 	 	92	 
	 
	 	10.4	 	Intercreditor Agreements; Lenders Benefit	 	 	92	 
	 
	 	10.5	 	Rights to Appoint Receiver	 	 	93	 
	 
	 	 	 	 	 	 	 	 
	11.	 	ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT	 	 	93	 
	 
	 	11.1	 	Assignment and Participations	 	 	93	 
	 
	 	11.2	 	Appointment of Agent	 	 	95	 
	 
	 	11.3	 	Agent's Reliance, Etc.	 	 	96	 
	 
	 	11.4	 	CapitalSource and Affiliates	 	 	96	 
	 
	 	11.5	 	Lender Credit Decision	 	 	97	 
	 
	 	11.6	 	Indemnification	 	 	97	 
	 
	 	11.7	 	Successor Agent	 	 	97	 
	 
	 	11.8	 	Setoff and Sharing of Payments	 	 	98	 
	 
	 	11.9	 	Advances; Payments; Non-Funding Lenders; Information; Actions in Concert	 	 	99	 
	 
	 	11.10	 	Other Lender Rights	 	 	101	 
	 
	 	 	 	 	 	 	 	 
	12.	 	SUCCESSORS AND ASSIGNS	 	 	101	 
	 
	 	12.1	 	Successors and Assigns	 	 	101	 
	 
	 	 	 	 	 	 	 	 
	13.	 	MISCELLANEOUS	 	 	101	 
	 
	 	13.1	 	Complete Agreement; Modification of Agreement	 	 	101	 
	 
	 	13.2	 	Amendments and Waivers	 	 	102	 
	 
	 	13.3	 	Fees and Expenses	 	 	103	 
	 
	 	13.4	 	No Waiver	 	 	104	 
	 
	 	13.5	 	Remedies	 	 	105	 
	 
	 	13.6	 	Severability	 	 	105	 
	 
	 	13.7	 	Conflict of Terms	 	 	105	 
	 
	 	13.8	 	Confidentiality	 	 	105	 






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	 	 	 	 	 	 	Page	 
	 
	 	13.9	 	GOVERNING LAW	 	 	106	 
	 
	 	13.10	 	Notices	 	 	107	 
	 
	 	13.11	 	Section Titles	 	 	108	 
	 
	 	13.12	 	Counterparts	 	 	109	 
	 
	 	13.13	 	WAIVER OF JURY TRIAL	 	 	109	 
	 
	 	13.14	 	Press Releases and Related Matters	 	 	109	 
	 
	 	13.15	 	Reinstatement	 	 	109	 
	 
	 	13.16	 	Advice of Counsel	 	 	110	 
	 
	 	13.17	 	No Strict Construction	 	 	110	 
	 
	 	13.18	 	Collateral Matters	 	 	110	 
	 
	 	13.19	 	Release	 	 	110	 






INDEX OF APPENDICES




	 	 	 	 	 
	Schedule I

	 	-
	 	Commitments as of Closing Date
	 
	 	 	 	 
	Exhibit 2.4(f)

	 	-
	 	Form of Notice of Conversion/Continuation
	Exhibit 2.5(b)(1)

	 	-
	 	Form of Account Control Agreement
	Exhibit 2.5(b)(2)

	 	-
	 	Form of Lockbox Agreement
	Exhibit 3.1(l)

	 	-
	 	Form of Pledge Agreements
	Exhibit 3.1(y)

	 	-
	 	Form of Assignment and Modification Agreement
	Exhibit 3.1(z)

	 	-
	 	Form of Nonsolicitation and Nondisclosure Agreement
	Exhibit 3.1(ee)

	 	-
	 	Form of Collateral Assignment of Telephone Lines
	Exhibit 3.1(ff)

	 	-
	 	Form of Subordination Agreement
	Exhibit 5.1(a)

	 	-
	 	Form of Compliance Certificate
	Exhibit 5.1(b)

	 	-
	 	Form of Borrowing Base Certificate
	Exhibit 6.11

	 	-
	 	Form of Joinder
	Exhibit 7.3(a)(x)

	 	-
	 	Subordination Terms
	Exhibit 11.1

	 	-
	 	Form of Assignment Agreement
	 
	 	 	 	 
	Disclosure Schedule 2.3

	 	-
	 	Sources and Uses; Funds Flow Memorandum
	Disclosure Schedule 4.1

	 	-
	 	Type of Entity; State of Organization
	Disclosure Schedule 4.2

	 	-
	 	Executive Offices, Collateral Locations, FEIN
	Disclosure Schedule 4.3

	 	-
	 	Government Consents
	Disclosure Schedule 4.4(a)

	 	-
	 	Financial Statements
	Disclosure Schedule 4.4(b)

	 	-
	 	Pro Forma
	Disclosure Schedule 4.4(c)

	 	-
	 	Projections
	Disclosure Schedule 4.6

	 	-
	 	Real Estate and Leases
	Disclosure Schedule 4.7

	 	-
	 	Labor Matters
	Disclosure Schedule 4.8

	 	-
	 	Ventures, Subsidiaries and Affiliates; Outstanding Stock
	Disclosure Schedule 4.11

	 	-
	 	Tax Matters
	Disclosure Schedule 4.12

	 	-
	 	ERISA Plans
	Disclosure Schedule 4.13

	 	-
	 	Litigation
	Disclosure Schedule 4.14

	 	-
	 	Brokers
	Disclosure Schedule 4.15

	 	-
	 	Intellectual Property
	Disclosure Schedule 4.17

	 	-
	 	Hazardous Materials






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	Disclosure Schedule 4.18

	 	-
	 	Insurance
	Disclosure Schedule 4.19

	 	-
	 	Bank Accounts
	Disclosure Schedule 4.21

	 	-
	 	Customer and Trade Relations
	Disclosure Schedule 4.22

	 	-
	 	Bonds; Patent, Trademark Licenses
	Disclosure Schedule 4.26

	 	-
	 	Material Contracts
	Disclosure Schedule 4.29

	 	-
	 	Write-Off Policy
	Disclosure Schedule 6.1

	 	-
	 	Trade Names
	Disclosure Schedule 7.3

	 	-
	 	Indebtedness
	Disclosure Schedule 7.4(a)

	 	-
	 	Transactions with Affiliates






v









 






CREDIT AGREEMENT




          This CREDIT AGREEMENT (this “Agreement”), dated November 10, 2005, is by and among
DEVCON SECURITY HOLDINGS, INC. (f/k/a Devcon Security Services Corp.), a Florida corporation
(“Holdings”), DEVCON SECURITY SERVICES CORP. (f/k/a Security Equipment Company, Inc.), a
Delaware corporation (“Services”), COASTAL SECURITY COMPANY (f/k/a Coastal Acquisition
Company), a Delaware corporation (“Coastal”), COASTAL SECURITY SYSTEMS, INC. (f/k/a Coastal
Acquisition Corporation and Coastal Security Systems (Delaware), Inc.), a Delaware corporation
(“Systems”), CENTRAL ONE, INC., Florida corporation (“Central One” and together
with Holdings, Services, Coastal, and Systems each individually a “Borrower” and
individually and collectively, together with any other Borrower who becomes party hereto from time
to time pursuant to Section 6.11, jointly and severally the “Borrowers”),
CAPITALSOURCE FINANCE LLC, a Delaware limited liability company (in its individual capacity,
“CapitalSource”), for itself, as a Lender, and as Agent for Lenders, and the other Lenders
signatory hereto from time to time.




RECITALS




          A. Pursuant to the Coastal Purchase Agreement, as of the date of this Agreement, Holdings is
acquiring all of the capital stock of Coastal, which is the sole owner of record and beneficially
of all of the capital stock of Systems, and Systems is the sole owner of record and beneficially of
all of the capital stock of Central One.




          B. The Borrowers have requested that Lenders make available a revolving credit facility to
the Borrowers in the maximum principal amount of Seventy Million Dollars ($70,000,000) for the
purpose of providing funds for Permitted Acquisitions, to refinance existing Indebtedness, for the
purchase and generation of Alarm Contracts, for the issuance of letters of credit and for any other
lawful purpose not prohibited by this Agreement.




          C. Lenders are willing to make advances to the Borrowers under such revolving credit facility
upon the terms and conditions set forth herein.




          D. The Borrowers have agreed to secure all of their obligations under the Loan Documents by
granting to Agent for the benefit of Agent and Lenders, a security interest in and first priority
perfected lien upon substantially all of their existing and after-acquired personal and real
property.




          E. Devcon International Corp., a Florida corporation (“Parent”), as sole shareholder
of Holdings, is willing to pledge to Agent, for the benefit of Agent and Lenders, all of the Stock
of Holdings as further security for the Borrowers’ obligations under the Loan Documents.




          F. This Background shall be construed as part of the Agreement.




          NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter
contained, and for other good and valuable consideration, the parties hereto agree as follows:




1









 








1. DEFINITIONS




          Capitalized terms used in the Loan Documents shall have (unless otherwise provided elsewhere
in the Loan Documents) the following respective meanings and all references to Sections, Exhibits,
Schedules or Annexes in the following definitions shall refer to Sections, Exhibits, Schedules or
Annexes of or to the Agreement:




          “Account Control Agreement” means a tri-party account control agreement in the form of
Exhibit 2.5(b)(1) hereto among a Borrower, the Agent and a Relationship Bank, or such other
form as is acceptable to Agent in its Permitted Discretion.




          “Account Debtor” means any Person who is obligated to any Borrower under, with respect
to, or on account of, an Account, Chattel Paper or General Intangible (including a payment
intangible).




          “Accounting Changes” has the meaning ascribed thereto in Section 9.5.




          “Accounts” means all “accounts,” as such term is defined in the UCC, now owned
or hereafter acquired by any Borrower, including, without limitation, any Borrower’s accounts,
rental agreements and other contract rights (including, without limitation, the Alarm Contracts and
Material Contracts and all rights to payment thereunder), rights to payment and other forms of
obligation for the payment of money to any Borrower, whether now existing or existing in the
future, whether or not earned by performance, whether secured or unsecured and whether or not
specifically sold or assigned to any Lender hereunder including, without limitation, all (a)
accounts receivable (whether or not specifically listed on schedules furnished to Lenders), all
accounts created by or arising from all of any Borrower’s sales or leases of goods, financial
instruments, documents, permits or other items, or rendition of services, including funds transfer
services, made under any of any Borrower’s trade names or styles, or through any of such Person’s
subsidiaries or divisions, and all accounts acquired by assignment in the ordinary course of
business including, without limitation, credit card receivables, drafts, and acceptances; (b)
unpaid rights (including rescission, replevin, reclamation and stoppage in transit) relating to the
foregoing or arising therefrom; (c) rights to any goods represented by any of the foregoing and all
other supporting obligations therefor, including returned or repossessed goods; (d) reserves and
credit balances held by any Borrower with respect to any such accounts receivable or Account
Debtors; (e) guarantees, obligations of any Borrower to repay a portion of any purchase price or to
replace any Alarm Contracts purchased by any Borrower, or to replace or collateral or any other
supporting obligations for any of the foregoing; (f) insurance policies or rights relating to any
of the foregoing; (g) all healthcare insurance receivables; and (h) all collateral security of any
kind, now or hereafter in existence, given by any Account Debtor or other Person with respect to
any of the foregoing.




          “Acquisition Documents” has the meaning given to such term in Section 7.1(h).




          “Acquisition Report” has the meaning given to such term in Section 7.1(h).




          “Additional Commitment Fee” has the meaning ascribed to it in Section 2.6(c).




          “Advance” has the meaning given to such term in Section 2.1(a).




2









 








          “Affiliate” means, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary,
15% or more of the Stock having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by or is under common control with such Person, (c)
each of such Person’s officers, directors, joint venturers and partners and (d) in the case of an
individual, the immediate family members, spouses and lineal descendants of individuals who are
Affiliates of such individual. For the purposes of this definition, “control” of a Person
shall mean the possession, directly or indirectly, of the power to direct or cause the direction of
its management or policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term “Affiliate” shall specifically
exclude Agent and each Lender.




          “Agent” means CapitalSource in its capacity as Agent for Lenders or its successor
appointed pursuant to Section 11.7.




          “Agreement” means this Credit Agreement, as the same may be amended, supplemented,
restated or otherwise modified from time to time.




          “Alarm Contract” means a written contract or agreement (including any contract or
agreement acquired by any Borrower) between a Borrower and a Subscriber pursuant to which such
Borrower provides regular and on-going electronic monitoring services, closed-circuit television
and access control systems, maintenance, fire and/or other electronic security system related
services to such Subscriber.




          “Appendices” means the schedules, exhibits, disclosure schedules and any other
appendices to the Agreement, as further described herein.




          “Applicable Base Rate Margin” means the per annum interest rate margin from time to
time in effect and payable in addition to the Base Rate applicable to the Advance, as determined by
reference to Section 2.4(b).




          “Applicable LIBOR Margin” means the per annum interest rate from time to time in
effect and payable in addition to the LIBOR Rate applicable to the Advances, as determined by
reference to Section 2.4(b).




          “Applicable Margins” means collectively the Applicable Base Rate Margin and the
Applicable LIBOR Margin.




          “Assignment Agreement” has the meaning ascribed to it in Section 11.1.




          “Assignment and Modification Agreement” has the meaning ascribed to it in Section
3.1(y).




          “Attrition Ratio” shall mean, for any period of determination, the ratio of the
following (x) and (y), each without duplication, expressed as a percentage: (x) the Attrited RMR
for the Measured Time Period, divided by (y) the average BOM RMR for the Measured Time Period. The
resulting percentage shall then be annualized by multiplying it by the quotient of twelve (12)
divided by the number of months in the Measured Time Period.




3









 








          “Attrited RMR” shall mean, without duplication, the sum of: (i) the RMR that was
cancelled during the Measured Time Period; plus (ii) the RMR from all customers who were ninety
(90) days or more past due from the applicable invoice date at the end of the Measured Time Period,
less the RMR from all customers who were ninety (90) days or more past due from the applicable
invoice date at the beginning of the Measured Time Period; provided that RMR that is subject to an
account guarantee pursuant to a Permitted Acquisition as of the end of the Measured Time Period
shall not be included in any such calculation, plus (iii) the RMR attributable to a customer
account that, as of the date of determination, no longer satisfied the definition of Slow Pay RMR;
minus (iv) the RMR of a Qualified Alarm Contract entered into with a Subscriber for the same
premises as was previously covered by a Qualified Alarm Contract with Borrower that had been
cancelled; minus (v) RMR of Qualified Alarm Contracts received as replacement Qualified Alarm
Contracts pursuant to a dealer guaranty or similar agreement.




          “Bank Accounts” has the meaning ascribed to it in Section 2.5.




          “Bankruptcy Code” means the provisions of Title 11 of the United States Code, 11
U.S.C. §§ 101 et seq.




          “Base Rate” means, for any day, a floating rate equal to the higher of (i) the rate
publicly quoted from time to time by The Wall Street Journal as the “prime rate”
(or, if The Wall Street Journal ceases quoting a prime rate, the highest per annum rate of
interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519)
entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent), and (ii)
the Federal Funds Rate plus 50 basis points (0.50%) per annum. Each change in any interest rate
provided for in the Agreement based upon the Base Rate shall take effect at the time of such change
in the Base Rate.




          “Base Rate Loan” means a Loan or portion thereof bearing interest by reference to the
Base Rate.




          “BOM RMR” shall mean the amount equal to the total Qualified RMR, as determined on the
first day of each Fiscal Month.




          “Borrower” and “Borrowers” have the meanings ascribed thereto in the preamble
to the Agreement.




          “Borrower Pledge Agreement” means the Pledge Agreement of even date herewith executed
by the Borrowers in favor of Agent, on behalf of itself and Lenders, pledging all Stock of Services
and any other Subsidiaries of any Borrower, and all Intercompany Notes, if any, owing to or held by
any of them.




          “Borrowing Availability” means, as of any date of determination, (a) the Borrowing
Base, less (b) the principal amount of Loans then outstanding.




          “Borrowing Base” means the lesser of (a) the Total Borrowing Availability, or (b) the
aggregate amount of (i) the product of twenty-six (26) times the Qualified Retail RMR, plus (ii)
the product of ten (10) times the Qualified Wholesale RMR, minus (iii) $500,000.




4









 








          “Borrowing Base Certificate” has the meaning ascribed to it in Section
5.1(b)(ii)(D).




          “Bridge Loan” means that certain loan by CapitalSource to the Borrowers in the amount
of Eight Million Dollars ($8,000,000) pursuant to that certain Bridge Loan Agreement, between
CapitalSource and the Borrowers, dated as of the date hereof.




          “Bridge Loan Documents” means the Bridge Loan Agreement evidencing the Bridge Loan and
all the other agreements, instruments, documents and certificates described in such agreement that
are executed and/or delivered by Borrowers to CapitalSource in connection therewith.




          “Business Day” means any day that is not a Saturday, a Sunday or a day on which banks
are required or permitted to be closed in the State of Maryland and in reference to LIBOR Loans
shall mean any such day that is also a LIBOR Business Day.




          “Capital Expenditures” means, with respect to any Person, all expenditures (by the
expenditure of cash or the incurrence of Indebtedness) by such Person during any measuring period
for any fixed assets or improvements or for replacements, substitutions or additions thereto, that
have a useful life of more than one year and that are required to be capitalized under GAAP but
excluding expenditures for repairs or replacements of fixed assets or improvements thereto, to the
extent paid for with insurance proceeds or other recoveries from third parties in respect thereof,
and excluding the purchase price payable in connection with any Permitted Acquisition.




          “Capital Lease” means, with respect to any Person, any lease of any property (whether
real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required
to be classified and accounted for as a capital lease on a balance sheet of such Person.




          “Capital Lease Obligation” means, with respect to any Capital Lease of any Person, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a
balance sheet of such lessee in respect of such Capital Lease.




          “CapitalSource” means CapitalSource Finance LLC, a Delaware limited liability company,
and its successors and assigns.




          “Cash Management Systems” has the meaning ascribed to it in Section 2.5.




          “Change of Control” means any event, transaction or occurrence as a result of which
(a) Parent ceases to own and control all of the economic and voting rights associated with all of
the outstanding common capital Stock of Holdings, (b) Holdings ceases to own and control all of the
economic and voting rights associated with all of the outstanding common capital Stock of Services
or (c) any Borrower ceases to own and control all of the economic and voting rights associated with
all of the outstanding capital Stock of any of its Subsidiaries other than with respect to an asset
sale or disposition expressly permitted by this Agreement.




5









 








          “Change of Management” means if (a) Stephen Ruzika no longer holds the position of
President of each Borrower, (b) neither John Danneberg nor Keith Godsey holds the position of
Vice-President of each Borrower, or (c) any material diminution occurs in the powers, duties or
responsibilities of either Stephen Ruzika as President of each Borrower, or John Danneberg and
Keith Godsey, as Vice-President of each Borrower, and, in the event of (a), (b) or (c) occurring,
any such individual is not replaced with a suitable individual and in a manner satisfactory to
Agent in its reasonable discretion within one hundred eighty (180) days following the date on which
he ceases to hold such position or such material diminution occurs.




          “Charges” means all federal, state, county, city, municipal, local, foreign or other
governmental levies, assessments, charges, liens, claims or encumbrances (other than Taxes) upon or
relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross
receipts of any Borrower, (d) any Borrower’s ownership or use of any properties or other assets, or
(e) any other aspect of any Borrower’s business.




          “Chattel Paper” means any “chattel paper,” as such term is defined in the UCC,
including electronic chattel paper, now owned or hereafter acquired by any Borrower, wherever
located.




          “Coastal” means Coastal Security Company, a Delaware corporation.




          “Coastal Purchase Agreement” means that purchase agreement, dated as of the date
hereof, pursuant to which Holdings is acquiring the capital stock of Coastal from the stockholders
of Coastal.




          “Closing Date” means November 10, 2005.




          “Code” means the Internal Revenue Code of 1986, as amended, any successor thereto and
all regulations promulgated thereunder.




          “Collateral” means the property covered by the Security Agreement, the Mortgages and
the other Collateral Documents and any other property, real or personal, tangible or intangible,
now existing or hereafter acquired, that may at any time be or become subject to a security
interest or Lien in favor of Agent, on behalf of itself and Lenders, to secure the Obligations.




          “Collateral Assignment of Life Insurance” means an assignment, in form and substance
satisfactory to Agent, which assigns to Agent for the ratable benefit of the Lenders, the Life
Insurance Policy as Collateral for the Obligations.




          “Collateral Assignment of Telephone Numbers” has the meaning ascribed to it in
Section 3.1(ee).




          “Collateral Documents” means the Security Agreement, the Pledge Agreements, the
Mortgages, any Patent Security Agreement, any Trademark Security Agreement, any Copyright Security
Agreement, the Collateral Assignment of Life Insurance, the Collateral Assignment of Telephone
Numbers, any Account Control Agreement, any Lockbox Agreement, any agreement pursuant to which any
Material Contract or rights thereunder are being assigned




6









 







and all similar agreements entered into guaranteeing payment of, or granting a Lien upon
property as security for payment of, the Obligations.




          “Collateral Reports” has the meaning ascribed to it in Section 5.1(b).




          “Collection Account” means such account as may be specified in writing by Agent to the
Borrowers for payment of any amounts due under any Loan Document.




          “Commitment” means (a) as to any Lender, such Lender’s Commitment as set forth on
Schedule I to the Agreement or in the most recent Assignment Agreement executed by such
Lender and (b) as to all Lenders, the aggregate of all Lenders’ Commitments, which aggregate
commitment shall be Seventy Million ($70,000,000) on the Closing Date, as to each of clauses
(a) and (b), as such Commitment may be increased, reduced, amortized or adjusted from time to
time in accordance with the Agreement. Upon Borrowers’ request and at the approval of the
Requisite Lenders, the Commitment may be increased up to an amount equal to One Hundred Million
Dollars ($100,000,000.00) in accordance with Section 2.15.




          “Commitment Termination Date” means the earliest of (a) November 9, 2008, (b) the date
of termination of Lenders’ obligations to make Advances or permit existing Loans to remain
outstanding pursuant to Section 10.2(b), and (c) the date of prepayment in full by the
Borrowers of the Loans and the permanent reduction of the Commitments to zero dollars ($0).




          “Compliance Certificate” has the meaning ascribed to it in Section 5.1(a)(iv).




          “Concentration Account” has the meaning ascribed to it in Section 2.5 (b).




          “Contracts” means all “contracts,” as such term is defined in the UCC, now
owned or hereafter acquired by any Borrower, in any event, including all contracts, undertakings,
or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under
which any Borrower may now or hereafter have any right, title or interest, including any agreement
relating to the terms of payment or the terms of performance of any Account.




          “Control Letter” means a letter agreement between Agent and, as applicable, (i) the
issuer of uncertificated securities with respect to uncertificated securities in the name of any
Borrower, (ii) a securities intermediary with respect to securities, whether certificated or
uncertificated, securities entitlements and other financial assets held in a securities account in
the name of any Borrower, (iii) a futures commission merchant or clearing house, as applicable,
with respect to commodity accounts and commodity contracts held by any Borrower, whereby, among
other things, the issuer, securities intermediary or futures commission merchant limits any
security interest in the applicable financial assets in a manner reasonably satisfactory to Agent,
acknowledges the Lien of Agent, on behalf of itself and Lenders, on such financial assets, and
agrees to follow the instructions or entitlement orders of Agent without further consent by the
affected Borrower.




          “Copyright License” means any and all rights now owned or hereafter acquired by any
Borrower under any written agreement granting any right to use any Copyright or Copyright
registration.




7









 








          “Copyright Security Agreements” means any Copyright Security Agreements made in favor
of Agent, on behalf of itself and Lenders, by each applicable Borrower.




          “Copyrights” means all of the following now owned or hereafter adopted or acquired by
any Borrower: (a) all copyrights and General Intangibles of like nature (whether registered or
unregistered), all registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the United States Copyright
Office or in any similar office or agency of the United States, any state or territory thereof, or
any other country or any political subdivision thereof, and (b) all reissues, extensions or
renewals thereof.




          “Debt Service” means, with respect to Holdings and its consolidated Subsidiaries, for
any fiscal period, an amount equal to the sum of (a) Interest Expense for such period which is
required to be paid in cash, and (b) the regularly scheduled principal payments of any outstanding
Indebtedness during such period.




          “Default” means any event that, with the passage of time or notice or both, would,
unless cured or waived, become an Event of Default.




          “Default Rate” has the meaning ascribed to it in Section 2.4(e).




          “Deposit Accounts” means all “deposit accounts,” as such term is defined in
the UCC, now or hereafter held in the name of any Borrower.




          “Disclosure Schedules” means the Disclosure Schedules prepared by the Borrowers and
referenced herein as Disclosure Schedules to this Agreement, as delivered to Agent on or before the
Closing Date (as may be amended from time to time with the consent of the Agent).




          “Documents” means any “documents,” as such term is defined in the UCC, now
owned or hereafter acquired by any Borrower, wherever located.




          “Dollars” or “$” means lawful currency of the United States of America.




          “EBITDA” means, with respect to Holdings and its consolidated Subsidiaries, for any
applicable period, without duplication, an amount equal to (a) consolidated net income for such
period, determined in accordance with GAAP, minus (b) the sum of (i) income tax credits,
(ii) interest income, (iii) income or gain from extraordinary items for such period, (iv) any
aggregate net gain (or net loss) during such period arising from the sale, exchange or other
disposition of capital assets (including any fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed assets and all securities), (v)
Restricted Payments, and (vi) any other non-cash gains that have been added in determining
consolidated net income, in each case to the extent included in the calculation of consolidated net
income for such period in accordance with GAAP, but without duplication, plus (c) the sum
of (i) any provision for income taxes, (ii) Interest Expense, including fees in respect of any
Indebtedness, (iii) loss from extraordinary items for such period, (iv) depreciation and
amortization for such period, and (v) any other adjustments agreed to by Agent in its sole
discretion; provided that, for covenant compliance purposes, EBITDA shall be calculated to




8









 







include (or exclude), on a pro forma basis, cash flow relating to the acquisition (or
disposition/cancellation) of Alarm Contracts during such reporting period (the “Pro Forma Cash
Flow Adjustment”). Subject to the review and consent of the Agent, such Pro Forma Cash Flow
Adjustment shall be determined by multiplying (a) the combined RMR of such Alarm Contracts over the
applicable period by (b) the actual EBITDA Margin for such period (calculated without reference to
this proviso).




          “EBITDA Margin” means (A) EBITDA divided by (B) Total Revenue.




          “Environmental Laws” means all applicable federal, state, local and foreign laws,
statutes, ordinances, codes, rules, standards and regulations, now or hereafter in effect, and any
applicable judicial or administrative interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing liability or standards of conduct
for or relating to the regulation and protection of the environment, natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation), and human health and safety to the extent affected by any
Hazardous Material. Environmental Laws include the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”); the Hazardous
Materials Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act
(42 U.S.C. §§ 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean
Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et
seq.); the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.) to the extent relating to
exposure to any Hazardous Material; and the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.),
and any and all regulations promulgated thereunder, and all analogous state, local and foreign
counterparts or equivalents and any transfer of ownership notification or approval statutes
relating to the foregoing.




          “Environmental Liabilities” means, with respect to any Borrower, all material
liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and
feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive
damages, property damages, natural resource damages, consequential damages, treble damages, costs
and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and
consultants), fines, penalties, sanctions and interest incurred as a result of or related to any
claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute or common law, that
arise under or relate to any Environmental Laws, Environmental Permits, or in connection with any
Release or presence of a Hazardous Material whether on, at, in, under, from or about or in the
vicinity of any real or personal property.




          “Environmental Permits” means all material permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority under any
Environmental Laws.




          “Equipment” means all “equipment,” as such term is defined in the UCC, now
owned or hereafter acquired by any Borrower, wherever located and, in any event, including all any
Borrower’s machinery and equipment, including processing equipment, conveyors, machine




9









 







tools, data processing and computer equipment, including embedded software and peripheral
equipment and all engineering, processing and manufacturing equipment, office machinery, furniture,
materials handling equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other equipment of every
kind and nature, trade fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all substitutes for
any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights
with respect thereto, and all products and proceeds thereof and condemnation awards and insurance
proceeds with respect thereto.




          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time, and any regulations promulgated thereunder.




          “ERISA Affiliate” means, with respect to any Borrower, any trade or business (whether
or not incorporated) that, together with such Borrower, are treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the Code.




          “ERISA Event” means, with respect to any Borrower or any ERISA Affiliate, (a) any
event described in Section 4043(c) of ERISA with respect to a Title IV Plan for which the
PBGC has not waived the thirty day notice requirement; (b) the withdrawal of any Borrower or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete
or partial withdrawal of any Borrower or any ERISA Affiliate from any Multiemployer Plan; (d) the
filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Borrower or ERISA Affiliate
to make when due required contributions to a Multiemployer Plan or Title IV Plan unless such
failure is cured within thirty (30) days; (g) any other event or condition that could reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the termination
of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of
a Multiemployer Plan under Section 4241 or 4245 of ERISA; or (i) the loss of a
Qualified Plan’s qualification or tax exempt status; or (j) the termination of a Plan described in
Section 4064 of ERISA.




          “ESOP” means a Plan that is intended to satisfy the requirements of Section
4975(e)(7) of the Code.




          “Event of Default” has the meaning ascribed to it in Section 10.1.




          “Excluded Taxes” means with respect to Agent, any Lender or any other recipient of any
payment to be made by or on account of any obligation of any Borrower hereunder or any other Loan
Document:




          (a) taxes imposed on or measured by its overall net income by the United States;




10









 








          (b) taxes imposed on or measured by its overall net income or profits (however denominated)
and franchise taxes imposed on or measured by its income, earnings or retained earnings by (i) the
state or foreign jurisdiction (or any political subdivision thereof) in or under the laws of which
it is organized or any political subdivision thereof, or (ii) the state or foreign jurisdiction (or
any political subdivision thereof) of its principal office, applicable lending office or in which
it is “doing business” or any political subdivision thereof;




          (c) any branch profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which its principal office or applicable lending office is located or in
which it is “doing business,” or any political subdivision thereof; and




          (d) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to
such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new
lending office) or is attributable to such Foreign Lender’s failure or inability (other than as a
result of a change in law) to comply with Section 2.12(c), except to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from any Borrower with respect to such
withholding tax pursuant to Section 2.12(a).




          “Existing Increase Lender” has the meaning ascribed to it in Section 2.15(b).




          “Fair Labor Standards Act” means the Fair Labor Standards Act, 29 U.S.C. §201 et seq.




          “Federal Funds Rate” means, for any day, a floating rate equal to the weighted average
of the rates on overnight federal funds transactions among members of the Federal Reserve System,
as determined by Agent, which determination shall be final, binding and conclusive (absent manifest
error).




          “Federal Reserve Board” means the Board of Governors of the Federal Reserve System.




          “Fee Letter” means that certain Fee Letter, dated the date hereof, between
CapitalSource and Borrowers, as amended in writing from time to time.




          “Fees” means any and all fees of any nature payable to Agent or any Lender pursuant to
the Fee Letter, this Agreement or any of the other Loan Documents.




          “Financial Covenants” means the financial covenants set forth in Section 9.




          “Financial Statements” means the consolidated income statements, statements of cash
flows and balance sheets of Holdings delivered in accordance with Section 4.4 and
Section 5.1.




          “Fiscal Month” means any of the monthly accounting periods of the Borrowers.




          “Fiscal Quarter” means any of the quarterly accounting periods of the Borrowers,
ending on March 31, June 30, September 30 and December 31 of each year.




11









 








          “Fiscal Year” means any of the annual accounting periods of the Borrowers ending on
December 31 of each year.




          “Fixed Charge Coverage Ratio” means, for any fiscal period, the ratio of (a) EBITDA in
such period, to (b) Fixed Charges for such period.




          “Fixed Charges” means, for any fiscal period, the sum, for Holdings and its
consolidated Subsidiaries for such period, of: (a) income taxes required to be paid in such
period; (b) Capital Expenditures to the extent paid during such period (excluding the financed
portion thereof); and (c) Debt Service paid.




          “Fixtures” means all “fixtures,” as such term is defined in the UCC, now owned
or hereafter acquired by any Borrower.




          “Foreign Lender” means any Lender that is not a “United States person” (as
such term is defined in Code Section 7701(a)(30)).




          “GAAP” means generally accepted accounting principles in the United States of America,
consistently applied, as such term is further defined in Section 9 of the Agreement.




          “General Intangibles” means “general intangibles,” as such term is defined in
the UCC, now owned or hereafter acquired by any Borrower, including all right, title and interest
that such Borrower may now or hereafter have in or under any Contract, all payment intangibles,
Subscriber lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor and
reissues, extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade
secrets, proprietary or confidential information, inventions (whether or not patented or
patentable), technical information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill
(including the goodwill associated with any Trademark or Trademark License), all rights and claims
in or under insurance policies (including insurance for fire, damage, loss and casualty, whether
covering personal property, real property, tangible rights or intangible rights, all liability,
life, key man and business interruption insurance, and all unearned premiums), uncertificated
securities, choses in action, deposit, checking and other bank accounts, rights to receive tax
refunds and other payments, rights to receive dividends, distributions, cash, Instruments and other
property in respect of or in exchange for pledged Stock and Investment Property, rights of
indemnification, all books and records, correspondence, credit files, invoices and other papers,
including without limitation all tapes, cards, computer runs and other papers and documents in the
possession or under the control of such Borrower or any computer bureau or service company from
time to time acting for such Borrower.




          “Goods” means any “goods” as defined in the UCC, now owned or hereafter
acquired by any Borrower, wherever located, including embedded software to the extent included in
“goods” as defined in the UCC, manufactured homes, standing timber that is cut and removed
for sale and unborn young of animals.




          “Governmental Approvals” means any and all licenses, approvals, consents,
qualifications and authorizations from any Governmental Authority.




12









 








          “Governmental Authority” means any nation or government, any state or any political
subdivision thereof (including, without limitation, any district, city, township, municipality or
similar jurisdiction and any quasi governmental association or institution), and any agency,
department or other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.




          “Guaranty Obligations” means, as to any Person, any obligation of such Person
guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease, dividend, or other
obligation (“primary obligation”) of any other Person (the “primary obligor”) in
any manner, including any obligation or arrangement of such Person to (a) purchase or repurchase
any such primary obligation, (b) advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, (d) protect the beneficiary of such arrangement from loss
(other than product warranties given in the ordinary course of business) or (e) indemnify the owner
of such primary obligation against loss in respect thereof. The amount of any Guaranty Obligations
at any time shall be deemed to be an amount equal to the lesser at such time of (x) the stated or
determinable amount of the primary obligation in respect of which such Guaranty Obligations are
incurred and (y) the maximum amount for which such Person may be liable pursuant to the terms of
the instrument embodying such Guaranty Obligations, or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in respect thereof.




          “Hazardous Material” means any substance, material or waste that is regulated by, or
forms the basis of liability now or hereafter under, any Environmental Laws, including any material
or substance that is (a) defined as a “solid waste,” “hazardous waste,”
“hazardous material,” “hazardous substance,” “extremely hazardous waste,”
“restricted hazardous waste,” “pollutant,” “contaminant,” “hazardous
constituent,” “special waste,” “toxic substance” or other similar term or
phrase under any Environmental Laws, or (b) petroleum or any fraction or by-product thereof,
asbestos, polychlorinated biphenyls (PCB’s), or any radioactive substance.




          “Holdback Liabilities” means any obligations required to be paid by any Borrower in
connection with a Permitted Acquisition which are reserved for a period of time following closing
in connection with Alarm Contracts purchased in such Permitted Acquisition which are cancelled,
terminated or otherwise determined not to comply with the terms of the related acquisition
agreement.




          “Indebtedness” means, with respect to any Person, without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase price of property
payment for which is deferred ninety (90) days or more, but excluding obligations to trade
creditors incurred in the ordinary course of business that are unsecured and not overdue by more
than ninety (90) days, (b) all reimbursement and other obligations with respect to letters of
credit, bankers’ acceptances and performance, surety and appeal bonds, whether or not matured, (c)
all obligations evidenced by notes, bonds, debentures or similar instruments, (d) all indebtedness
created or arising under any conditional sale or other title retention agreement with




13









 







respect to property acquired by such Person (even though the rights and remedies of the seller
or lender under such agreement in the event of default are limited to repossession or sale of such
property), (e) all Capital Lease Obligations and the present value (discounted at the Base Rate as
in effect on the date of determination) of future rental payments under all synthetic leases, (f)
all net obligations of such Person under commodity purchase or option agreements or other commodity
price hedging arrangements, in each case whether contingent or matured, (g) all net obligations of
such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap
or collar agreement or other similar agreement or arrangement designed to alter the risks of that
Person arising from fluctuations in currency values or interest rates, in each case whether
contingent or matured, (h) all Indebtedness referred to above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien
upon or in property or other assets (including accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of such Indebtedness, (i)
the Obligations, and (j) any Holdback Liabilities.




          “Indemnified Liabilities” has the meaning ascribed to it in Section 2.10(a).




          “Indemnified Person” has the meaning ascribed to it in Section 2.10(a).




          “Indemnified Taxes” means Taxes other than Excluded Taxes and Other Taxes.




          “Initial Advance” has the meaning ascribed to it in Section 3.1(g).




          “Instruments” means all “instruments,” as such term is defined in the UCC, now
owned or hereafter acquired by any Borrower, wherever located, and, in any event, including all
certificated securities, all certificates of deposit, and all promissory notes and other evidences
of indebtedness, other than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.




          “Intellectual Property” means any and all Licenses, Patents, Copyrights, Trademarks,
and the goodwill associated with such Trademarks.




          “Intercompany Notes” has the meaning ascribed to it in Section 7.3(a)(iv).




          “Interest Expense” means, for any fiscal period, interest expense (whether cash or
non-cash) and fees of Holdings and its consolidated Subsidiaries in respect of Indebtedness
determined in accordance with GAAP for the relevant period, including interest expense and fees
with respect to any Total Debt and interest expense for the relevant period that has been
capitalized on the balance sheet of Holdings and its consolidated Subsidiaries; provided that,
Interest Expense is not intended to include any of the up-front fees required to be paid pursuant
to the Fee Letter on or prior to the Closing Date that might otherwise be treated as interest
expense in accordance with GAAP.




          “Interest Payment Date” means (a) as to any Base Rate Loan, the first Business Day of
each calendar month to occur while such Loan is outstanding, and (b) as to any LIBOR Loan, the last
day of the applicable LIBOR Period; provided, that in the case of any LIBOR Period greater
than three months in duration, interest shall be payable at three month intervals and on the last
day of such LIBOR Period; and provided further that, in addition to the foregoing,




14









 







each of (x) the date upon which all of the Commitments have been terminated and the Loans have
been paid in full and (y) the Termination Date shall be deemed to be an “Interest Payment
Date” with respect to any interest that has then accrued under the Agreement.




          “Inventory” means any “inventory,” as such term is defined in the UCC, now
owned or hereafter acquired by any Borrower, wherever located, and in any event including
inventory, merchandise, goods and other personal property that are held by or on behalf of any
Borrower for sale or lease or are furnished or are to be furnished under a contract of service, or
that constitute raw materials, work in process, finished goods, returned goods, supplies or
materials of any kind, nature or description used or consumed or to be used or consumed in any
Borrower’s business or in the processing, production, packaging, promotion, delivery or shipping of
the same, including all supplies and embedded software.




          “Investment Property” means all “investment property” as such term is defined
in the UCC now owned or hereafter acquired by any Borrower, wherever located, including (i) all
securities, whether certificated or uncertificated, including stocks, bonds, interests in limited
liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund
shares; (ii) all securities entitlements of any Borrower, including the rights of such Borrower to
any securities account and the financial assets held by a securities intermediary in such
securities account and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts of any Borrower; (iv) all commodity
contracts of any Borrower; and (v) all commodity accounts held by any Borrower.




          “IRS” means the Internal Revenue Service.




          “Lenders” means CapitalSource Finance, the other Lenders named on the signature pages
of the Agreement, and, if any such Lender shall decide to assign all or any portion of the
Obligations, such term shall include any assignee of such Lender, so long as any such Person holds
any Commitment or Loans pursuant to the terms of this Agreement.




          “Letter-of Credit Rights” means “letter-of-credit rights” as such term is
defined in the UCC, now owned or hereafter acquired by any Borrower, including rights to payment or
performance under a letter of credit, whether or not such Borrower, as beneficiary, has demanded or
is entitled to demand payment or performance.




          “LIBOR Business Day” means a Business Day on which banks in the City of London are
generally open for interbank or foreign exchange transactions.




          “LIBOR Loan” means a Loan or any portion thereof bearing interest by reference to the
LIBOR Rate.




          “LIBOR Period” means, with respect to any LIBOR Loan, each period commencing on a
LIBOR Business Day selected by the Borrowers pursuant to this Agreement and ending thirty, sixty or
ninety days thereafter, as selected by the Borrowers’ irrevocable notice to Agent as set forth in
Section 2.4(f); provided, that the foregoing provision relating to LIBOR Periods is
subject to the following:




15









 









     (a) if any LIBOR Period would otherwise end on a day that is not a LIBOR Business Day,
such LIBOR Period shall be extended to the next succeeding LIBOR Business Day unless the
result of such extension would be to carry such LIBOR Period into another calendar month in
which event such LIBOR Period shall end on the immediately preceding LIBOR Business Day;




     (b) any LIBOR Period that would otherwise extend beyond the Maturity Date shall end on
such date;




     (c) any LIBOR Period that begins on the last LIBOR Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the calendar month at the
end of such LIBOR Period) shall end on the last LIBOR Business Day of a calendar month;




     (d) the Borrowers shall select LIBOR Periods so as not to require a payment or
prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and




     (e) the Borrowers shall select LIBOR Periods so that there shall be no more than 8
separate LIBOR Loans in existence at any one time.



          “LIBOR Rate” means for each LIBOR Period, a rate of interest determined by Agent equal
to:





     (a) the offered rate for deposits in United States Dollars for the applicable LIBOR
Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time), on the second full
LIBOR Business Day next preceding the first day of such LIBOR Period (unless such date is
not a Business Day, in which event the next succeeding Business Day will be used); divided
by




     (b) a number equal to 1.0 minus the aggregate (but without duplication) of the
rates (expressed as a decimal fraction) of reserve requirements in effect on the day that is
two (2) LIBOR Business Days prior to the beginning of such LIBOR Period (including basic,
supplemental, marginal and emergency reserves under any regulations of the Federal Reserve
Board or other Governmental Authority having jurisdiction with respect thereto, as now and
from time to time in effect) for Eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of the Federal Reserve Board) that are
required to be maintained by a member bank of the Federal Reserve System.




     If such interest rates shall cease to be available from Telerate News Service, the
LIBOR Rate shall be determined from such financial reporting service or other information as
shall be mutually acceptable to Agent and the Borrowers.



          “License” means any Copyright License, Patent License, Trademark License or other
license of rights or interests now held or hereafter acquired by any Borrower.




          “Lien” means any mortgage or deed of trust, pledge, hypothecation, collateral
assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance,
or preference, priority or other security agreement or preferential arrangement of




16









 







any kind or nature whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement perfecting a security interest under the UCC or
comparable law of any jurisdiction).




          “Life Insurance Policy” means a current, valid and fully paid key man life insurance
policy in the amount of at least $2,500,000 that insures the life of Stephen Ruzika and that (i)
names Borrowers as the sole beneficiaries, (ii) is issued by a carrier and otherwise is in form and
substance acceptable to Agent in its Permitted Discretion, and (iii) is collaterally assigned to
Agent for the ratable benefit of Lenders and as such expressly provides that it cannot be altered,
amended, modified or canceled without thirty (30) Business Days prior written notice to Agent and
that it inures to the benefit of Agents and Lenders notwithstanding any action or omission or
negligence of or by any Borrower or any insured thereunder.




          “Litigation” has the meaning ascribed to it in Section 4.13.




          “Loan” means, at any time, the aggregate amount of Advances outstanding to Borrowers
from a Lender or all Lenders, as applicable.




          “Loan Account” has the meaning ascribed to it in Section 2.9.




          “Loan Documents” means the Agreement, any Notes, the Collateral Documents and all
other agreements, instruments, documents and certificates identified in Section 3.1
executed and delivered to, or in favor of, Agent or any Lender and including all other pledges,
powers of attorney, consents, assignments, contracts, notices, letter of credit agreements and all
other written matter whether heretofore, now or hereafter executed by or on behalf of any Borrower,
or any employee of any Borrower, and delivered to Agent or any Lender in connection with the
Agreement or the transactions contemplated thereby. Any reference in the Agreement or any other
Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and
all amendments, restatements, supplements or other modifications thereto, and shall refer to the
Agreement or such Loan Document as the same may be in effect at any and all times such reference
becomes operative.




          “Lockbox Account” has the meaning ascribed to it in Section 2.5(b).




          “Lockbox Agreement” means a tri-party lockbox agreement in the form of Exhibit
2.5(b)(2) hereto among a Borrower, the Agent and a Lockbox Bank or such other form as is
acceptable to Agent in its Permitted Discretion.




          “Lockbox Bank” has the meaning ascribed to it in Section 2.5(b).




          “Margin Stock” has the meaning ascribed to it in Section 4.10.




          “Material Adverse Effect” means a material adverse effect on (a) the business, assets,
operations or financial or other condition of the Borrowers considered as a whole, (b) the
Borrowers’ ability to pay any of the Loans or to pay or perform any of the other Obligations in
accordance with the terms of this Agreement or the other Loan Documents, (c) the Collateral (taken
as a whole) or Agent’s Liens, on behalf of itself and Lenders, on the Collateral or the




17









 







priority of such Liens, or (d) Agent’s or any Lender’s rights and remedies under this
Agreement and the other Loan Documents or their ability to enforce the same.




          “Material Contract” means: (a) any agreement relating to the acquisition of Alarm
Contracts; (b) any Monitoring Contract; (c) any Off Site Storage Agreement; (d) all licensing or
other use agreements relating to computer software of any Borrower; (e) all agreements and
contracts of any Borrower for the use of telephone lines; and (f) such other agreements, documents
and contracts as Agent may reasonably designate as “material” from time to time by written
notice to the Borrowers; all of the foregoing, as amended, supplemented, restated or replaced from
time to time.




          “Maturity Date” means November 9, 2008.




          “Maximum Amount” means, as of any date of determination, an amount equal to the
aggregate of all Lenders’ Commitments, as of such date.




          “Measured Time Period” shall mean, for the first six (6) months after the Closing
Date, the number of months then ended since the Closing Date beginning with November 2005; and
thereafter it shall mean the immediately preceding six (6) months.




          “Monitoring Contract” means an agreement between any Borrower and a third party
pursuant to which such Borrower subcontracts the electronic monitoring of alarm systems provided
for under Alarm Contracts.




          “Mortgages” means each of the mortgages, deeds of trust, leasehold mortgages,
leasehold deeds of trust, collateral assignments of leases or other real estate security documents
delivered by any Borrower to Agent, on behalf of itself and Lenders, from time to time, with
respect to any Real Estate, all in form and substance reasonably satisfactory to Agent.




          “Multiemployer Plan” means a “multiemployer plan” as defined in Section
4001(a)(3) of ERISA, and to which any Borrower or ERISA Affiliate is making, is obligated to
make or has made or been obligated to make within the last six years, contributions on behalf of
participants who are or were employed by any of them.




          “Non-Corporate Domestic Lender” means any Lender that is a “United States
person” but is not a “domestic” corporation (as such terms are defined in Code
Section 7701(a)).




          “Non-Funding Lender” has the meaning ascribed to it in Section 11.9(a)(ii).




          “Nonsolicitation and Disclosure Agreements” has the meaning ascribed to it in
Section 3.1(z).




          “Note” and “Notes” mean any notes issued pursuant to Section 2.1(b).




          “Notice of Advance” has the meaning ascribed to it in Section 2.1(a).




          “Notice of Conversion/Continuation” has the meaning ascribed to it in Section
2.4(f).




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          “Notice of Termination” has the meaning ascribed to it in Section 2.2(a).




          “Obligations” means all loans, advances, debts, liabilities and obligations, for the
performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such
performance is then required or contingent, or such amounts are liquidated or determinable) owing
by any Borrower to Agent or any Lender, and all covenants and duties regarding such amounts, of any
kind or nature, present or future, whether or not evidenced by any note, agreement, letter of
credit agreement or other instrument, arising under the Agreement or any of the other Loan
Documents. This term includes all principal, interest (including all interest that accrues after
the commencement of any case or proceeding by or against any Borrower in bankruptcy, whether or not
allowed in such case or proceeding), Fees, hedging obligations under swaps, caps and collar
arrangements provided by any Lender, expenses, in-house and external attorneys’ fees and any other
sum chargeable to any Borrower under the Agreement or any of the other Loan Documents.




          “Off Site Storage Agreement” means any agreement between any Borrower and a storage
company, bailee or other third party, regarding the bailment, holding or storage or Alarm Contracts
or other assets or property of such Borrower.




          “Other Taxes” means present or future stamp or documentary taxes and any other excise,
property or similar taxes, charges or levies that arise from or in connection with any payment made
hereunder or under any other Loan Document or from the execution, delivery or registration of,
performance under, or otherwise with respect to, this Agreement or any other Loan Document.




          “Parent” has the meaning ascribed thereto in the Recitals to the Agreement.




          “Parent Pledge Agreement” means the Pledge Agreement of even date herewith executed by
Parent in favor of Agent, on behalf of itself and Lenders, pledging all Stock of Holdings.




          “Patent License” means rights under any written agreement now owned or hereafter
acquired by any Borrower granting any right with respect to any invention on which a Patent is in
existence.




          “Patent Security Agreements” means the Patent Security Agreements made in favor of
Agent, on behalf of itself and Lenders, by each applicable Borrower.




          “Patents” means all of the following in which any Borrower now holds or hereafter
acquires any interest: (a) all letters patent of the United States or any other country, all
registrations and recordings thereof, and all applications for letters patent of the United States
or of any other country, including registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United States, any state or
any other country, and (b) all reissues, continuations, continuations-in-part or extensions
thereof.




          “PBGC” means the Pension Benefit Guaranty Corporation.




          “Pension Plan” means a Plan described in Section 3(2) of ERISA.




19









 








          “Permitted Acquisition” has the meaning ascribed to it in Section 7.1.




          “Permitted Discretion” means a determination or judgment made by Agent in good faith
in the exercise of reasonable (from the perspective of a secured lender making loans of the type
evidenced hereby) business judgment.




          “Permitted Encumbrances” means the following Liens and encumbrances: (a) Liens for
Taxes and Charges due but not yet delinquent or which are being contested in accordance with
Section 6.2(b); (b) pledges or deposits of money securing statutory obligations under
workers’ compensation, unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA) provided in aggregate amount of outstanding of contingent
liabilities of the Borrowers at any one time outstanding thereunder does not exceed $500,000; (c)
pledges or deposits of money securing bids, tenders, contracts (other than contracts for the
payment of money) or leases to which any Borrower is a party as lessee made in the ordinary course
of business provided in aggregate amount of outstanding or contingent liabilities of the Borrowers
at any one time outstanding thereunder does not exceed $500,000; (d) deposits securing, or in lieu
of, surety, performance, appeal or customs bonds in proceedings to which any Borrower is a party
and securing liabilities in the ordinary course of business provided in aggregate amount of
outstanding or contingent liabilities of the Borrowers at any one time outstanding thereunder does
not exceed $500,000; (e) any attachment or judgment lien not constituting an Event of Default under
Section 10.1(i); (f) zoning restrictions, easements, right-of-ways, licenses, or other
restrictions on the use of any Real Estate or other minor irregularities in title (including
leasehold title) thereto, so long as the same do not, individually or in the aggregate, materially
impair the use, value, or marketability of such Real Estate; (g) presently existing or hereafter
created Liens in favor of Agent, on behalf of Lenders; (h) Liens expressly permitted under
Section 7.7 of the Agreement, (i) with respect to any Real Estate, matters disclosed on the
title commitment with respect thereto so long as such matters do not, individually or in the
aggregate, materially affect the marketability or have a material impact on the value or quality of
such title; (j) landlord’s liens so long such liens are subordinated in right of payment to the
Obligations in accordance with a landlord’s agreement to the extent required pursuant to
Section 6.9; and (k) Liens arising from UCC financing statement filings regarding operating
leases entered into by any Borrower in the ordinary course of business, limited to the assets so
leased; provided, however, that such Liens are not created, incurred or assumed in connection with,
or in contemplation of, any Person becoming a Subsidiary of any Borrower; provided further,
however, that any such Lien may not extend to any other property owned by any Borrower.




          “Person” means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability company, institution,
public benefit corporation, other entity or government (whether federal, state, county, city,
municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or
department thereof).




          “Plan” means, at any time, an “employee benefit plan,” as defined in
Section 3(3) of ERISA, that any Borrower or ERISA Affiliate maintains, contributes to or
has an obligation to contribute to on behalf of participants who are or were employed by any
Borrower.




20









 








          “Pledge Agreements” means the Borrower Pledge Agreement, the Parent Pledge Agreement,
and any other pledge agreement entered into after the Closing Date by any other Person (as required
by this Agreement or any other Loan Document).




          “Post Closing Agreement” has the meaning ascribed to it in Section 6.10.




          “Pro Rata Share” means with respect to all matters relating to any Lender (a) prior to
the Commitment Termination Date, the percentage obtained by dividing (i) the Commitment of that
Lender by (ii) the aggregate Commitments of all Lenders, as any such Commitments and percentages
may be adjusted by assignments permitted pursuant to Section 11.1, and (b) on and after the
Commitment Termination Date, the percentage obtained by dividing (i) the aggregate outstanding
principal balance of the Loans held by that Lender, by (ii) the outstanding principal balance of
the Loans held by all Lenders.




          “Proceeds” means “proceeds,” as such term is defined in the UCC, including (a)
any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Borrower from
time to time with respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to any Borrower from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral
by any Governmental Authority (or any Person acting under color of governmental authority), (c) any
claim of any Borrower against third parties (i) for past, present or future infringement of any
Patent or Patent License, or (ii) for past, present or future infringement or dilution of any
Copyright, Copyright License, Trademark or Trademark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (d) any recoveries by any Borrower against
third parties with respect to any litigation or dispute concerning any of the Collateral including
claims arising out of the loss or nonconformity of, interference with the use of, defects in, or
infringement of rights in, or damage to, Collateral, (e) all amounts collected on, or distributed
on account of, other Collateral, including dividends, interest, distributions and Instruments with
respect to Investment Property and pledged Stock, and (f) any and all other amounts, rights to
payment or other property acquired upon the sale, lease, license, exchange or other disposition of
Collateral and all rights arising out of Collateral.




          “Projections” means Holdings’ forecasted consolidated: (a) balance sheets; (b) income
statements; and (c) cash flow statements and otherwise consistent with the books and records from
the previous period in all material respects, except as noted therein with reasonable explanatory
comments, together with appropriate supporting details and a statement of underlying assumptions.




          “Qualified Alarm Contract” means an Alarm Contract payable in the lawful currency of
the United States of America:




          (a) as to which a Borrower (i) owns all right, title and interest, free and clear of all
Liens, other than Permitted Encumbrances, (ii) no later than the date of acquisition or
replacement, (A) in connection with any Alarm Contract acquired through a Permitted Acquisition
after the Closing Date, has filed either a blanket or precautionary UCC-1 financing statements
against the related dealer, in the appropriate jurisdiction, covering all of the dealers Alarm
Contracts or listing such Alarm Contract, as applicable, and (B) has obtained




21









 







acknowledgement from the related dealer that all future Alarm Contracts with the Subscribers
listed in the existing acquisition agreement have been transferred to such Borrower under the
applicable acquisition agreement and (iii) no later than the date of filing of any UCC-1 financing
statements required by the preceding clause (A), has obtained authorization from the related dealer
to file such UCC-1 financing statements;




          (b) which is fully executed and in full force and effect, enforceable in accordance with its
terms;




          (c) which (i) is fully assignable (or consent to assignment has been provided in form and
substance reasonably satisfactory to Agent), (ii) includes limitation of liability and third party
indemnification provisions acceptable to Agent, (iii) complies with applicable Law including
without limitation all federal and state consumer credit laws, and (iv) is otherwise in form and
substance reasonably satisfactory to Agent;




          (d) as to which the alarm system related to such Alarm Contract (i) is installed in (A) New
York or Florida or (B) any other state consented to in writing by Agent, (ii) is in good working
order and condition, and (iii) has been installed and maintained in accordance with good and
workmanlike practices prevailing in the alarm industry in the jurisdiction in which the applicable
alarm system is installed;




          (e) as to which all parties related to such Alarm Contract have performed all obligations
under or with respect to such Alarm Contract or the related alarm system and no such party is in
default thereunder (except as permitted under the definition of Qualified RMR), and neither any
Borrower nor the related dealer has received any notice of a default or breach (or anticipated
default or breach) under such Alarm Contract or terminated, cancelled or written off such Alarm
Contract;




          (f) in connection with any Alarm Contract acquired through a Permitted Acquisition after the
Closing Date, to the best of any Borrower’s knowledge after due inquiry, as to which the related
dealer and seller, if any, has all licenses and permits necessary and material to the
enforceability of such Alarm Contract, including, without limitation, having filed and maintained
an effective and current notice of business activities report or similar evidence of qualification
to transact business in each state in which such dealer (and seller) enters into, services or
acquires Alarm Contracts;




          (g) as to which no notice of cancellation or termination has been received by any Borrower or
the related dealer or subcontractor;




          (h) as to which all of the representations, warranties and covenants made under this Agreement
relating to such Alarm Contract are true and correct (as of any date made), including, without
limitation, the covenants set forth in Section 6.13 hereof;




          (i) as to which there exists only one original executed copy (for purposes hereof and
elsewhere in this Agreement, carbon copies not to be considered originals);




22









 








          (j) as to which the alarm system related to such Alarm Contract and its installation and
monitoring conform in all material respects to the terms of such Alarm Contract and applicable Law;




          (k) as to which the applicable Subscriber is not (i) a Subsidiary, Affiliate or employee of
Parent, any Borrower or the related dealer, or (ii) paying pursuant to a negotiated payment plan as
a result of non-payment, insolvent or the subject of any bankruptcy or insolvency proceedings of
any kind or any other proceeding or action which might have a material adverse effect on such
Subscriber; and




          (l) is otherwise satisfactory to the Agent in its reasonable discretion.




          “Qualified Assignee” means (a) any Lender, any Affiliate of any Lender and, with
respect to any Lender that is an investment fund that invests in commercial loans, any other
investment fund that invests in commercial loans and that is managed or advised by the same
investment advisor as such Lender or by an Affiliate of such investment advisor, and (b) any
commercial bank, savings and loan association or savings bank or any other entity which is an
“accredited investor” (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease
financing companies and commercial finance companies, in each case, which has a rating of BBB or
higher from S&P and a rating of Baa2 or higher from Moody’s at the date that it becomes a Lender
and which, through its applicable lending office, is capable of lending to Borrower without the
imposition of any withholding or similar taxes; provided that, no Person proposed to become a
Lender after the Closing Date who (i) is determined by Agent to be acting in the capacity of a
vulture fund or distressed debt purchaser or (ii) holds Subordinated Debt or Stock issued by any
Borrower, shall be a Qualified Assignee.




          “Qualified Plan” means a Pension Plan that is intended to be tax-qualified under
Section 401(a) of the Code.




          “Qualified Retail RMR” means RMR which meets each of the following criteria: (a) such
RMR is (i) not more than ninety (90) days past due (except for the Slow Pay RMR, which is deemed to
be Qualified Retail RMR for purposes of this definition) and (ii) such RMR has not been terminated,
cancelled or written off, nor has the Subscriber provided notice of termination; (b) not more than
22% of such RMR are from Qualified Alarm Contracts which are more than thirty (30) days past due;
(c) no such RMR is from a Qualified Alarm Contract entered into after March 31, 2001 with a
residential Subscriber whose “Beacon” credit score, at the time such Qualified Alarm
Contract was entered into, was less than 600; (d) not more than $75,000 of such RMR is from
Qualified Alarm Contracts which are Governmental Authorities subject to the Federal Assignment of
Claims Act of 1940, as amended, or any similar state or local law (unless the Agent has been
delivered evidence reasonably satisfactory to it that the Agent has a properly perfected first
priority security interest in the related Qualified Alarm Contract and has received all consents
from any Government Authority necessary to enable Lender to fully protect its interest in such
Qualified Alarm Contract); (e) such RMR is not attributable to Wholesale RMR; and (f) such RMR is
otherwise satisfactory to the Agent in its reasonable discretion. In addition, the Borrowers
acknowledge and agree that the RMR attributable to Boca Pointe HOA shall be excluded from the
calculation of Qualifying Retail RMR.




23









 








          “Qualified Retail RMR Leverage Ratio” means, as of any date of determination, the
ratio of (a) the amount of the Loan, less the product of ten (10) times the amount of Qualified
Wholesale RMR, to (b) Qualified Retail RMR.




          “Qualified RMR” means the aggregate amount of the Qualified Retail RMR and the
Qualified Wholesale RMR.




          “Qualified Wholesale RMR” means that portion of the RMR that is attributable to
Wholesale RMR and which meets each of the following criteria: (a) such RMR is (i) not more than
ninety (90) days past due; and (ii) such RMR has not been terminated, cancelled or written off, nor
has the alarm dealer provided notice of termination; (b) not more than 22% of such RMR are from
Qualified Alarm Contracts which are more than thirty (30) days past due; and (c) such RMR is
otherwise satisfactory to Lender in its reasonable discretion.




          “Real Estate” has the meaning ascribed to it in Section 4.6.




          “Relationship Bank” has the meaning ascribed to it in Section 2.5(a).




          “Release” means any release, threatened release, spill, emission, leaking, pumping,
pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dumping, or leaching
of Hazardous Material in the indoor or outdoor environment.




          “Requisite Lenders” means Lenders having (a) more than 66 and 2/3% of the Commitments
of all Lenders, or (b) if the Commitments have been terminated, more than 66 and 2/3% of the
aggregate outstanding amount of the Loans.




          “Restricted Payment” means, with respect to any Borrower (a) the declaration or
payment of any dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of Stock; (b) any payment on account of
the purchase, redemption, defeasance, sinking fund or other retirement of such Borrower’s Stock or
any other payment or distribution made in respect thereof, either directly or indirectly; (c) any
payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or
with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar
payment and any claim for rescission with respect to, any Subordinated Debt; (d) any payment made
to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire Stock of such Borrower now or hereafter outstanding; (e) any
payment of a claim for the rescission of the purchase or sale of, or for material damages arising
from the purchase or sale of, any shares of such Borrower’s Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for damages or
rescission; (f) any payment, loan, contribution, or other transfer of funds or other property to
any Stockholder of such Borrower other than (i) payment of compensation or reimbursement of
business related expenses in the ordinary course of business to Stockholders who are employees of
such Borrower and (ii) the reimbursement of out-of-pocket expenses of the directors of any Borrower
for such director’s attendance of board meetings not to exceed $25,000 in any Fiscal Year; (g) any
payment of management fees (or other fees of a similar nature) by such Borrower to the Parent or
any Affiliate of the Parent or any Borrower; and (h) any payment on account of working capital
adjustments or earn-out payments made pursuant




24









 







to any acquisition agreement; provided that, this is not intended to restrict the payment of
any Holdback Liabilities required to be paid pursuant to the related acquisition agreement.




          “Retiree Welfare Plan” means, at any time, a Welfare Plan that provides for continuing
coverage or benefits for any participant or any beneficiary of a participant after such
participant’s termination of employment, other than continuation coverage provided pursuant to
Section 4980B of the Code and at the sole expense of the participant or the beneficiary of the
participant.




          “RMR” means, for any calendar month, the aggregate recurring regular monthly amount
paid by Subscribers, including other alarm dealers, under Qualified Alarm Contracts for a one-month
period as payment for regular and on-going electronic monitoring services, closed-circuit
television and access control systems, maintenance, fire and/or other electronic security system
related services (but excluding any non-recurring, special or one-time charges (including, without
limitation, amounts billed for installation charges and/or repairs), taxes, fees and other
assessments or amounts imposed by Governmental Authorities or fire or law enforcement institutions
related to such Qualified Alarm Contracts, charges or costs associated with equipment purchases,
lease financing revenue, charges related to telephone transmission of alarm signals and other
utility charges, antenna rental charges, panel use, franchise and license fees, false alarm charges
and similar charges).




          “Security Agreement” means the Security Agreement of even date herewith entered into
by and among Agent, on behalf of itself and Lenders, and each Borrower that is a signatory thereto.




          “Slow Pay RMR” means RMR (other than Wholesale RMR) that is due from a commercial
Subscriber under a Qualified Alarm Contract of which at least a portion is more than ninety (90)
days past due, but no portion is more than one hundred twenty (120) days past due; and provided
that such Subscriber has made one or more payments during the ninety (90) days immediately prior to
the date of determination in an aggregate amount of not less than one month’s RMR under such
Qualified Alarm Contract.




          “Software” means all “software” as such term is defined in the UCC, now owned
or hereafter acquired by any Borrower, other than software embedded in any category of Goods,
including all computer programs and all supporting information provided in connection with a
transaction related to any program.




          “Solvent” means, with respect to any Person on a particular date, that on such date
(a) the fair value of the property of such Person is greater than the total amount of liabilities,
including contingent liabilities, of such Person; (b) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured; and (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to
pay as such debts and liabilities mature. The amount of contingent liabilities (such as
litigation, guaranties and pension plan liabilities) at any time shall be computed as the amount
that, in light of all the facts and circumstances existing at the time, represents the amount that
can reasonably be expected to become an actual or matured liability.




25









 








          “Stock” means all shares, options, warrants, general or limited partnership interests,
membership or limited liability company interests or other equivalents (regardless of how
designated) of or in a corporation, partnership, limited liability company or equivalent entity
whether voting or nonvoting, including common stock, preferred stock or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934);
provided that any earn-out or similar obligation incurred pursuant to a Permitted Acquisition shall
be deemed not to constitute Stock.




          “Stockholder” means, with respect to any Person, each holder of Stock of such Person.




          “Subscriber” means an individual or other Person obligated under an Alarm Contract,
who receives regular and on-going electronic monitoring services, closed-circuit television and
access control systems, maintenance, fire and/or other electronic security system related services
from a Borrower.




          “Subordinated Debt” means any Indebtedness of any Borrower fully subordinated to the
Obligations in a manner and form satisfactory to Agent as to right and time of payment and as to
any other rights and remedies thereunder.




          “Subsidiary” means, with respect to any Person, (a) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, Stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person or one or more Subsidiaries of such Person, or with respect to which
any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability
company in which such Person and/or one or more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or capital contribution) of more than
50% or of which any such Person is a general partner or may exercise the powers of a general
partner. Unless the context otherwise requires, each reference to a Subsidiary shall be a
reference to a Subsidiary of any Borrower.




          “Supporting Obligations” means all “supporting obligations” as such term is
defined in the UCC, including letters of credit and guaranties issued in support of Accounts,
Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property.




          “Taxes” means taxes, levies, imposts, deductions, or withholdings, and all liabilities
with respect thereto, imposed by any Governmental Authority.




          “Termination Date” means the date on which (a) the Loans have been indefeasibly repaid
in full, (b) all other Obligations, other than residual indemnity that survive payment in full of
the Loans, under the Agreement and the other Loan Documents have been completely discharged, and
(c) the Borrowers shall not have any further right to borrow any monies under the Agreement.




26









 








          “Termination Fee” has the meaning ascribed to it in the Fee Letter.




          “Third Party Consent Form” means a form signed by any Person, other than any Borrower,
that is a party to a Material Contract, consenting to the assignment of a Material Contract to such
Borrower.




          “Title IV Plan” means a Pension Plan (other than a Multiemployer Plan), that is
covered by Title IV of ERISA, and that any Borrower or ERISA Affiliate maintains, contributes to or
has an obligation to contribute to on behalf of participants who are or were employed by any of
them.




          “Total Borrowing Availability” means, as of any date, the Maximum Amount minus
$500,000.




          “Total Debt” means, with respect to Holdings and its consolidated Subsidiaries,
without duplication, the principal portion of all Indebtedness for borrowed money evidenced by
notes, bonds, debentures, or similar evidences of Indebtedness and that by its terms matures more
than one year from, or is directly or indirectly renewable or extendible at any such Person’s
option under a revolving credit or similar agreement obligating the lender or lenders to extend
credit over a period of more than one year from the date of creation thereof, and specifically
including Capital Lease Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one year at the option of the debtor, and also including, in the
case of the Borrowers, the Obligations and, without duplication, Guaranty Obligations consisting of
guaranties of Total Debt of other Persons; provided that, the aggregate amount of performance,
surety and appeal bonds, to the extent not in excess, at any time of measurement, of $500,000,
shall be excluded from any calculation of Total Debt to the extent that such amount would otherwise
be included therein.




          “Total Revenue” means, for any fiscal period, all revenue of Holdings on a
consolidated basis, as calculated for such period in accordance with GAAP.




          “Trademark License” means rights under any written agreement now owned or hereafter
acquired by any Borrower granting any right to use any Trademark.




          “Trademark Security Agreements” means the Trademark Security Agreements made in favor
of Agent, on behalf of Lenders, by each applicable Borrower.




          “Trademarks” means all of the following now owned or hereafter adopted or acquired by
any Borrower: (a) all trademarks, trade names, corporate names, business names, trade styles,
service marks, service name, logos, other source or business identifiers, prints and labels on
which any of the foregoing have appeared or appear, designs and general intangibles of like nature
(whether registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of the United States,
any state or territory thereof, or any other country or any political subdivision thereof; (b) all
reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any
of the foregoing.




27









 








          “UCC” means the Uniform Commercial Code as the same may, from time to time, be enacted
and in effect in the State of Maryland; provided, that to the extent that the UCC is used
to define any term herein or in any Loan Document and such term is defined differently in different
Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory provisions
of law, any or all of the attachment, perfection or priority of, or remedies with respect to,
Agent’s or any Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as
enacted and in effect in a jurisdiction other than the State of Maryland, the term “UCC”
shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely
for purposes of the provisions thereof relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions.




          “Unfunded Pension Liability” means, at any time, the aggregate amount, if any, of the
sum of the amount by which the present value of all accrued benefits under each Title IV Plan
exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent valuation date for each
such Title IV Plan using the actuarial assumptions for funding purposes as if the Plan terminated
in effect under such Title IV Plan.




          “Unused Line Fee” has the meaning ascribed to it in Section 2.6(b).




          “Welfare Plan” means a Plan described in Section 3(1) of ERISA.




          “Wholesale RMR” means RMR paid by other alarm dealers that subcontract with Borrower
for the provision of alarm monitoring services to the customers of such dealers.




          “Write-Off Policy” has the meaning ascribed to it in Section 4.29.




          Rules of construction with respect to accounting terms used in the Agreement or the other Loan
Documents shall be as set forth in Section 9. All other undefined terms contained in any
of the Loan Documents shall, unless the context indicates otherwise, have the meanings provided for
by the UCC to the extent the same are used or defined therein. Unless otherwise specified,
references in the Agreement or any of the Appendices relating to a Section, subsection or clause
refer to such Section, subsection or clause as contained in the Agreement. The words
“herein,” “hereof” and “hereunder” and other words of similar import refer
to the Agreement as a whole, including all schedules, exhibits and disclosure schedules, as the
same may from time to time be amended, restated, modified or supplemented, and not to any
particular section, subsection or clause contained in the Agreement or any such schedule, exhibit
or disclosure schedule.




          Wherever from the context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in any gender shall include
all genders. The words “including,” “includes” and “include” shall be
deemed to be followed by the words “without limitation”; the word “or” is not
exclusive; references to Persons include their respective successors and assigns (to the extent and
only to the extent permitted by the Loan Documents) or, in the case of governmental Persons,
Persons succeeding to the relevant functions of such Persons; and all references to statutes and
related regulations shall include any




28









 







amendments of the same and any successor statutes and regulations. Whenever any provision in
any Loan Document refers to the knowledge (or an analogous phrase) of any Borrower, such words are
intended to signify that such Borrower has actual knowledge or awareness of a particular fact or
circumstance or that such Borrower, if it had exercised reasonable diligence, would have known or
been aware of such fact or circumstance.




2. AMOUNT AND TERMS OF CREDIT




     2.1 Revolving Credit Facility. 



          (a) Subject to the terms and conditions hereof, each Lender shall make available to the
Borrowers from time to time until the Commitment Termination Date its Pro Rata Share of advances
(each, an “Advance”). The Pro Rata Share of the Loan of any Lender shall not at any time
exceed its separate Commitment. The obligations of each Lender hereunder shall be several and not
joint. Until the Commitment Termination Date, the Borrowers may from time to time borrow, repay
and reborrow under this Section 2.1(a); provided, that the amount of any Advance to be made
at any time shall be at least equal to or greater than $250,000 and not exceed Borrowing
Availability at such time and at no time shall the total amount of Advances outstanding exceed the
Total Borrowing Availability. Each Advance shall be made on notice by the Borrowers to the Agent
at the address specified in Section 13.10 or as otherwise specified by Agent to Borrowers
in writing. Any such notice (other than the notice for the Initial Advance) must be given no later
than (1) noon (New York time) on the date which is one (1) Business Day prior to the proposed
Advance, in the case of a Base Rate Loan, or (2) noon (New York time) on the date which is three
(3) Business Days prior to the proposed Advance, in the case of a LIBOR Loan. Each such notice (a
“Notice of Advance”) must be given in writing (by telecopy or overnight courier) in the
form of a Borrowing Base Certificate as set forth in Exhibit 5.1(b). If the Borrowers
desire to have the Advances bear interest by reference to a LIBOR Rate, it must comply with
Section 2.4(f). Agent may charge Borrowers a wire fee for each Advance.




          (b) (i) Agent shall maintain, in accordance with its usual practice, electronic or written
records evidencing the indebtedness and obligations to the Lenders resulting from any Advance made
by a Lender from time to time, including without limitation, the amounts of principal and interest
payable and paid to such Lender from time to time under this Agreement.




               (ii) The Borrowers agree that:



                    (A) upon written notice by Agent to the Borrowers that a promissory note or other evidence of
indebtedness is requested by Agent or any Lender to evidence the Loan and other Obligations owing
or payable to, or to be made by, such Lender, the Borrowers shall promptly (and in any event within
five (5) Business Days of any such request) execute and deliver to Agent an appropriate promissory
note or notes in form and substance reasonably acceptable to Agent and Borrower, payable to the
order of such Lender or in a principal amount equal to the amount of the Loans owing or payable to
Lender;



                    (B) all references to Notes in the Loan Documents shall mean Notes, if any, to the extent
issued (and not returned to the Borrowers for cancellation) hereunder,



29









 




as the same may be amended, modified, divided, supplemented and/or restated from time to time;
and




                    (C) upon a Lender’s written request, and in any event within five (5) Business Days of any
such request, Borrowers shall execute and deliver to such Lender new Notes and/or divide the Notes
in exchange for then existing Notes in such smaller amounts or denominations as such Lender shall
specify in its sole and absolute discretion; provided, that the aggregate principal amount
of such new Notes shall not exceed the aggregate principal amount of the Notes outstanding at the
time such request is made; and provided, further, that such Notes that are to be replaced shall
then be deemed no longer outstanding hereunder and replaced by such new Notes and returned to the
Borrowers within a reasonable period of time after Lender’s receipt of the replacement Notes.



          (c) The entire unpaid balance of the Loan and all other non-contingent Obligations shall be
immediately due and payable in full in immediately available funds on the Maturity Date.




     2.2 Prepayments.



          (a) Voluntary Prepayments of Loans; Reductions in Commitments. The Borrowers may at
any time on at least five (5) Five Business Days’ prior written notice to Agent (i) voluntarily
prepay all or part of the Loans and/or (ii) permanently reduce (but not terminate) the Commitment;
provided that (A) any such prepayments or reductions shall be in a minimum amount of
$100,000 and integral multiples of $100,000 in excess of such amount, (B) the Commitment shall not
be reduced to an amount less than the aggregate amount of the outstanding Loan at such time and (C)
after giving effect to such reductions, the Borrowers shall be in compliance with Section
2.2(b)(i). The Borrowers may at any time on at least three (3) days’ prior written notice to
Agent terminate the Commitments (“Notice of Termination”). If the Borrowers terminate the
Commitments prior to the Commitment Termination Date, the Borrowers shall pay to Agent, solely for
Agent’s benefit (in addition to the then outstanding principal, accrued interest and Obligations
owing pursuant to the terms of this Agreement and any other Loan Document), as yield maintenance
for the loss of bargain and not as a penalty, an amount equal to the applicable Termination Fee.
Any voluntary prepayment and any reduction or termination of the Commitments must be accompanied by
payment of any LIBOR funding breakage costs in accordance with Section 2.10(b). Upon any
such reduction or termination of the Commitments, the Borrowers’ right to request Advances shall
simultaneously be permanently reduced or terminated.




          (b) Mandatory Prepayments.




               (i) If at any time the outstanding balance of the Loan exceeds the Borrowing Base, including,
as a result of any reduction in the amounts of the Commitments as set forth on Schedule I
hereto, the Borrowers shall promptly (but in no event later than the second Business Day
thereafter) repay the aggregate outstanding Advances to the extent required to eliminate such
excess. Such prepayment will not, in and of itself, reduce any Commitment.



30









 





               (ii) Upon receipt by any Borrower of any cash proceeds of any asset disposition (other than
Inventory disposed of in the ordinary course of business), such Borrower shall promptly (but in no
event later than the second Business Day thereafter) prepay the Loan in an amount equal to all such
proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and
expenses properly attributable to such transaction and payable by such Borrower in connection
therewith to an unrelated third party, (B) sales, use and transfer taxes, (C) amounts payable to
holders of senior Liens on such asset (to the extent such Liens constitute Permitted Encumbrances
hereunder), if any, and, so long as no Event of Default has occurred and is continuing, and (D) an
appropriate reserve for income taxes in accordance with GAAP in connection therewith. In the event
of any escrow or holdback arrangement with respect to any such disposition, the receipt of any
deferred proceeds as a result thereof shall be deemed to occur when and as such proceeds are
actually received by any Borrower. Notwithstanding the foregoing, the following shall not be
subject to mandatory prepayment under this clause (ii): (1) asset disposition proceeds
that are reinvested in similar assets within one hundred eighty (180) days following receipt
thereof; provided that (x) if such proceeds exceed $500,000 for any one disposition, such Borrower
notifies Agent of its intent to reinvest at the time such proceeds are received and when such
reinvestment occurs, (y) no Event of Default exists from and including the date of such disposition
through and including the date of such reinvestment (and upon the occurrence of such Event of
Default, Agent may automatically, or Borrowers shall at the instruction of the Agent, apply any
such proceeds to prepayment of the Loans) and (z) at all times prior to such reinvestment such
proceeds shall be deposited in a Bank Account (except to the extent the Agent, in its discretion,
requires such Borrower to deposit such amounts in a blocked account); and (2) asset disposition
proceeds invested in a Borrower and used to pay off such Borrower’s obligations arising under the
terms of the Bridge Loan and to terminate any commitments arising thereunder. To the extent such
funds are placed in a blocked account, they shall be made available to such Borrower to reinvest in
similar assets upon any written request by such Borrower for the release of funds necessary for
such reinvestment, so long as no Event of Default has occurred and is continuing at the time of
such request. To the extent (x) not used to reinvest in similar assets, or (y) if any Event of
Default has occurred or is continuing, such asset disposition proceeds shall be applied in
accordance with Section 2.2(c).



               (iii) If any Borrower issues Stock after the Closing Date or Indebtedness for borrowed money
(whether or not permitted pursuant to this Agreement), such Borrower shall promptly (but in no
event later than the second Business Day following the date of receipt of the proceeds thereof)
prepay the Loans in an amount equal to all such proceeds, net of underwriting discounts and
commissions and other reasonable costs, fees and expenses paid in connection therewith. Any such
prepayment shall be applied in accordance with Section 2.2(c). Notwithstanding the
foregoing, the following shall not be subject to prepayment under this clause (iii): (1)
proceeds of Stock used to fund Permitted Acquisitions; (2) proceeds of the issuance of additional
Indebtedness under this Agreement; (3) proceeds of any Indebtedness permitted pursuant to
Section 7.3(a); and (4) proceeds of Stock issued for the purpose of paying off the
Borrowers’ obligations arising under the terms of the Bridge Loan, provided that, as to any of the
above, (x) Borrower notifies Agent of its intent to issue any such Stock, if applicable, and (y) no
Event of Default exists at the time of receipt of such proceeds (and at all times prior to such
permitted use, such proceeds shall be deposited into a Bank Account) and, upon the occurrence of
any Event of Default, Agent may automatically, or Borrowers shall at the instruction of the Agent,
apply any such proceeds to prepayment of the Loans).



31









 





          (c) Application of Prepayments. Any prepayment made on the Loan shall be applied as
follows: first, to Fees and reimbursable expenses (previously documented for the
Borrowers) of Agent then due and payable pursuant to any of the Loan Documents; second, to
interest then due and payable on the Loan, ratably; and third, to the outstanding principal
balance of the Loan until the same has been paid in full. The Commitments shall be permanently
reduced by the amount of any such prepayments (other than such payments under clause (b)(i) above).
Agent may charge Borrowers a wire fee for any prepayment hereunder.




          (d) No Implied Consent. Nothing in this Section 2.2 shall be construed to
constitute Agent’s or any Lender’s consent to any transaction that is not permitted by other
provisions of this Agreement or the other Loan Documents.




     2.3 Use of Proceeds.



          The Borrowers shall utilize the proceeds of the Loans as set forth in Recital A.
Disclosure Schedule (2.3) contains a description of the Borrowers’ sources and uses of
funds as of the Closing Date, including the Advance to be made or incurred on that date, and a
funds flow memorandum detailing how funds from each source are to be transferred to particular
uses.




     2.4 Interest and Applicable Margins.



          (a) The Borrowers shall pay interest to Agent, for the ratable benefit of Lenders in
accordance with the various Loans being made by each Lender, in arrears on each applicable Interest
Payment Date, at the following rates: (i) the Base Rate plus the Applicable Margin per annum, or
(ii) at the election of the Borrowers, the applicable LIBOR Rate plus the Applicable Margin per
annum.




          (b) The Applicable Margins shall be established by reference to the following Levels of
Applicable Margins set forth below:




	 	 	 
	If Qualified Retail RMR	 	 
	Leverage Ratio is:	 	Level of Applicable Margins:
	£ 18.0x

	 	Level I
	> 18.0x but £ 20.0x

	 	Level II
	> 20.0x but £ 22.0x

	 	Level III
	> 22.0x but £ 24.0x

	 	Level IV
	> 24.0x but £ 25.0x

	 	Level V
	> 25.0x but £ 26.0x

	 	Level VI






          The Applicable Margins shall be as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Level I	 	Level II	 	Level III	 	Level IV	 	Level V	 	Level VI
	Applicable Base Rate Margin
	 	 	1.50	%	 	 	2.00	%	 	 	2.50	%	 	 	3.00	%	 	 	3.75	%	 	 	4.25	%
	Applicable LIBOR Margin
	 	 	3.25	%	 	 	3.25	%	 	 	3.75	%	 	 	4.25	%	 	 	5.25	%	 	 	5.75	%






32









 






          From the Closing Date until the first adjustment as described below, the Applicable Margins
shall be set at Level VI. The Applicable Margins shall be adjusted monthly and retroactively
effective as of the first day of a calendar month based upon the information set forth in the
Borrowing Base Certificate for the prior month. If an Event of Default has occurred and is
continuing at the time any reduction in the Applicable Margins is to be implemented, that reduction
shall be deferred until the first day following the date on which such Event of Default is waived
or cured.




          (c) If any payment on any Loan becomes due and payable on a day other than a Business Day, the
maturity thereof will be extended to the next succeeding Business Day (except as set forth in the
definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. The foregoing shall not be given
effect, however, in respect of the calculation of Financial Covenants relating to scheduled
principal payments.




          (d) All computations of Fees calculated on a per annum basis and interest based on the LIBOR
Rate shall be made by Agent on the basis of a 360-day year, in each case for the actual number of
days occurring in the period for which such interest and Fees are payable. All computations of
interest based on the Base Rate shall be made by Agent on the basis of a 365/366-day year, in each
case for the actual number of days occurring in the period for which such interest and Fees are
payable. The Base Rate is a floating rate determined for each day. Each determination by Agent of
interest rates and Fees hereunder shall, absent manifest error, be presumptive evidence of the
correctness of such rates and Fees.




          (e) So long as an Event of Default has occurred and is continuing under Section 10.1(a),
(h) or (i), the interest rates applicable to the Loans shall be increased by four percentage
points (4%) per annum, and so long as any other Event of Default (except under Section
10.1(a) to the extent the following sentence shall apply) has occurred and is continuing and at
the election of Requisite Lenders confirmed by written notice from Agent to the Borrowers, the
interest rates applicable to the Loans shall be increased by two percentage points (2%) per annum,
above the rates of interest otherwise applicable hereunder unless Agent or Requisite Lenders elect
to impose a smaller increase (the “Default Rate”), and all outstanding Obligations shall
bear interest at the Default Rate applicable to such Obligations. Interest at the Default Rate
shall accrue from the initial date of the applicable Event of Default until that Event of Default
is cured or waived and shall be payable upon demand.




          (f) Subject to the conditions precedent set forth in Section 2.2, the Borrowers shall
have the option to (i) request that any Advance be made as a LIBOR Loan, (ii) convert at any time
all or any part of outstanding Loans from Base Rate Loans to LIBOR Loans, (iii) convert any LIBOR
Loan to a Base Rate Loan, subject to payment of LIBOR breakage costs in accordance with Section
2.10(b) if such conversion is made prior to the expiration of the LIBOR Period applicable
thereto, or (iv) continue all or any portion of any Loan as a LIBOR Loan upon the expiration of the
applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan shall commence on
the first day after the last day of the LIBOR Period of the Loan to be continued. Any Loan or
group of Loans having the same proposed LIBOR Period to be made or continued as, or converted into,
a LIBOR Loan must be in a minimum amount of $100,000 and integral multiples of $100,000 in excess
of such amount. Any such election must




33









 







be made by noon (New York time) on the third Business Day prior to (1) the date of any
proposed Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with
respect to any LIBOR Loans to be continued as such, or (3) the date on which the Borrowers wish to
convert any Base Rate Loan to a LIBOR Loan for a LIBOR Period designated by the Borrowers in such
election. If no election is received with respect to a LIBOR Loan by noon (New York time) on the
third Business Day prior to the end of the LIBOR Period with respect thereto (or if an Event of
Default has occurred and is continuing or the additional conditions precedent set forth in
Section 3.2 shall not have been satisfied), that LIBOR Loan shall be converted to a Base
Rate Loan at the end of its LIBOR Period. The Borrowers must make such election by notice to Agent
in writing, by telecopy or overnight courier. In the case of any conversion or continuation, such
election must be made pursuant to a written notice (a “Notice of Conversion/Continuation”)
in the form of Exhibit 2.4(f).




          (g) Notwithstanding anything to the contrary set forth in this Section 2.4, if a court
of competent jurisdiction determines in a final order that the rate of interest payable hereunder
exceeds the highest rate of interest permissible under law (the “Maximum Lawful Rate”),
then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the Maximum Lawful Rate. In no event shall the total interest received
by any Lender pursuant to the terms hereof exceed the amount that such Lender could lawfully have
received had the interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. If, due to any circumstance whatsoever, fulfillment of any provision hereof, at the
time performance of such provision shall be due, shall exceed any such Maximum Lawful Rate, then,
the obligation to be so fulfilled shall be reduced to such lawful limit, and, if Borrowers shall
have paid interest or any other charges of any kind which might be deemed to be interest under
applicable law in excess of the Maximum Lawful Rate, then such excess shall be applied first to any
unpaid fees and charges hereunder, then to unpaid principal balance owed by Borrowers hereunder,
and if the then remaining excess interest is greater than the previously unpaid principal balance,
Agent shall promptly refund such excess amount to Borrowers and the provisions hereof shall be
deemed amended to provide for such permissible rate. The terms and provisions of this Section
2.4(g) shall control to the extent any other provision of any Loan Document is inconsistent
herewith.




     2.5 Cash Management Systems.



          Each Borrower will maintain until the Termination Date, the cash management systems described
below (the “Cash Management Systems”).




          (a) Each Borrower shall (i) maintain all of it deposit and other bank accounts (“Bank
Accounts”) at the banks set forth in Disclosure Schedule (4.19), and (ii) deposit and
cause all of its Subsidiaries to deposit or cause to be deposited promptly, and in any event no
later than the third Business Day after the date of receipt thereof, all cash, checks, drafts or
other similar items of payment relating to or constituting payments made in respect of any and all
Collateral into one or more such Bank Accounts in a Borrower’s name or any such Subsidiary’s name
and at a bank identified in Disclosure Schedule (4.19) (each, a “Relationship
Bank”).




          (b) As of the Closing Date, each Relationship Bank shall have entered into an Account Control
Agreement with Agent, for the benefit of itself and Lenders, and the applicable




34









 







Borrower, governing all Bank Accounts with such Relationship Bank. As of the Closing Date,
the Borrowers shall maintain one or more lockbox accounts (individually and collectively, the
“Lockbox Account”) with one or more banks acceptable to Agent (each, a “Lockbox
Bank”), and shall execute with each Lockbox Bank one or more agreements acceptable to Agent
(individually and collectively, the “Lockbox Agreement”), and such other agreements related
thereto as Agent may require. Borrowers shall ensure that all collections of Borrowers’ Accounts
and all other cash payments received by Borrowers are paid and delivered directly from Account
Debtors and other Persons into the appropriate Lockbox Account. The Lockbox Agreements shall
provide that upon receipt of written notice from Agent the Lockbox Banks immediately will transfer
all funds paid into the Lockbox Accounts into a depository account or accounts (specified in the
Lockbox Agreement or to be specified in such written notice) maintained by Agent or an Affiliate of
Agent at such bank as Agent may communicate to Borrower from time to time (the “Concentration
Account”). Notwithstanding and without limiting any other provision of any Loan Document,
Agent shall apply, on a daily basis, all funds transferred into the Concentration Account pursuant
to the Lockbox Agreement and this Section 2.5(b) in such order and manner as determined by
Agent. Except to the extent applied to reduce the obligations under the Bridge Loan and related
Bridge Loan Documents, all funds transferred to the Concentration Account for application to the
Obligations under this Agreement shall be applied to reduce the Obligations under this Agreement.
If as the result of collections of Accounts and/or any other cash payments received by any Borrower
pursuant to this Section 2.5(b) a credit balance exists with respect to the Concentration
Account, such credit balance shall not accrue interest in favor of a Borrower, but shall be
available to Borrowers upon Borrowers’ written request. If applicable, at any time prior to the
execution of all or any of the Lockbox Agreements and operation of all or any of the Lockbox
Accounts, Borrowers and each Affiliate of a Borrower shall direct all collections or proceeds it
receives on Accounts or from other Collateral to the account(s) and in the manner specified by
Agent in its sole discretion.




          (c) So long as no Event of Default has occurred and is continuing, Borrower may amend
Disclosure Schedule (4.19) to add or replace a Relationship Bank or Bank Account;
provided, that prior to the time of the opening of such account, any Borrower or its
Subsidiaries, as applicable, and such bank shall have executed and delivered to Agent an Account
Control Agreement and a Lockbox Agreement. Each Borrower shall close any of its accounts (and
establish replacement accounts in accordance with the foregoing sentence) promptly and in any event
within sixty (60) days following notice from Agent that the creditworthiness of any bank holding an
account is no longer acceptable in Agent’s reasonable judgment, or as promptly as practicable and
in any event within ninety (90) days following notice from Agent that the operating performance,
funds transfer or availability procedures or performance with respect to accounts of the bank
holding such accounts or Agent’s liability under any Account Control Agreement with such bank is no
longer acceptable in Agent’s reasonable judgment.




          (d) The Bank Accounts shall be cash collateral accounts, with all cash, checks and other
similar items of payment in such accounts securing payment of the Loans and all other Obligations,
and in which each Borrower and each Subsidiary thereof shall have granted a Lien to Agent, on
behalf of itself and Lenders, pursuant to the Security Agreement.




          (e) Each Borrower shall and shall cause its Affiliates, officers, employees, agents, directors
or other Persons acting for or in concert with Borrower (each a “Related 




35









 








          Person”) to (i) hold in trust for Agent, for the benefit of itself and Lenders all
checks, cash and other items of payment received by such Borrower or any such Related Person in
respect of such Borrower or any of the Collateral, and (ii) within five (5) Business Day after
receipt by such Borrower or any such Related Person of any such checks, cash or other items of
payment, deposit the same into a Lockbox Account. Each Borrower on behalf of itself and each
Related Person acknowledges and agrees that all cash, checks or other items of payment constituting
proceeds of Collateral are part of the Collateral. All proceeds of the sale or other disposition
of any Collateral not paid directly to the Agent shall be deposited directly into a Lockbox
Account.




          (f) Each Bank Account shall at all times be subject to an Account Control Agreement and each
Lockbox Account shall at all times be subject to a Lockbox Agreement.




     2.6 Fees.



          (a) On the Closing Date, as additional compensation, the Borrowers shall pay to Agent solely
for Agent’s benefit a commitment fee in the amount set forth in the Fee Letter.




          (b) As additional compensation for the Lenders, the Borrowers shall pay to Agent, for the
ratable (as may be adjusted to reflect the revision of Commitments during any Fiscal Quarter as a
result of a Commitment Increase pursuant to Section 2.15 hereof) benefit of Lenders, in
arrears, on the first Business Day of each month prior to the Commitment Termination Date for the
immediately preceding month, commencing with the month ending on November 30, 2005 (which first
payment shall cover the period from the Closing Date to such date), and on the Commitment
Termination Date, an unused commitment fee in the amount set forth in the Fee Letter (the
“Unused Line Fee”) for the Borrowers’ non-use of available funds.




          (c) In the event the Agent and the Requisite Lenders approve a Commitment Increase, the
Borrowers agree to pay to Agent solely for Agent’s benefit, as additional compensation, an
additional commitment fee in the amount set forth in the Fee Letter (the “Additional Commitment
Fee”), which additional fee shall be due and payable at the time Agent notifies the Borrowers
in writing that sufficient Increase Lenders have committed to funding such Commitment Increase.




          (d) In the event Borrowers terminate the Commitments prior to the Commitment Termination Date,
Borrowers shall pay the applicable Termination Fee in accordance with Section 2.2(a).




     2.7 Receipt of Payments.



          The Borrowers shall make each payment under this Agreement not later than 2:00 p.m. (New York
time) on the day when due in immediately available funds in Dollars to the Collection Account. For
purposes of computing interest and Fees and determining Borrowing Availability as of any date, all
payments shall be deemed received on the Business Day on which immediately available funds therefor
are received in the Collection Account prior to 2:00 p.m. New York time. Payments received after
2:00 p.m. New York time on any Business Day or on a day that is not a Business Day shall for such
purposes be deemed to have been received on the following Business Day.




36









 








     2.8 Application and Allocation of Payments.



          (a) So long as no Event of Default has occurred and is continuing, (i) payments matching
specific scheduled payments then due shall be applied to those scheduled payments; (ii) voluntary
prepayments shall be applied in accordance with the provisions of Section 2.2(a); and (iii)
mandatory prepayments shall be applied as set forth in Sections 2.2(b) and 2.2(c), as
applicable. All payments and prepayments applied to a particular Loan shall be applied ratably to
the portion thereof held by each Lender as determined by its Pro Rata Share. As to any other
payment, and as to all payments made when an Event of Default has occurred and is continuing or
following the Termination Date, each Borrower hereby irrevocably waives the right to direct the
application of any and all payments received from or on behalf of any Borrower, and each Borrower
hereby irrevocably agrees that Agent shall have the continuing exclusive right to apply any and all
such payments against the Obligations as Agent may deem advisable notwithstanding any previous
entry by Agent in the Loan Account or any other books and records or anything in this Agreement to
the contrary. In the absence of a specific determination by Agent with respect thereto, payments
shall be applied to amounts then due and payable in the following order: (1) to Agent’s and any
Lender’s expenses reimbursable hereunder (including, without limitation, to the extent reimbursable
under Section 13.3); (2) to any outstanding Fees; (3) to interest on Base Rate Loans; (4)
to interest on LIBOR Loans, ratably in the order of maturity; (5) to all then outstanding
obligations under any interest rate cap, swap or collar agreements, or other agreements or
arrangements secured by the Loan Documents designed to provide protection against fluctuations in
interest rates permitted hereunder, to the extent the amount owed corresponds to interest on the
notional amount thereof; (6) to the principal amount of the Loan and all other outstanding
Obligations; and (7) to all other outstanding obligations under any interest rate cap, swap or
collar agreements, or other agreements or arrangements secured by the Loan Documents designed to
provide protection against fluctuations in interest rates permitted hereunder.




          (b) Agent is authorized to, and at its sole election may, charge to the Loan balance on behalf
of the Borrowers and cause to be paid all Fees, expenses, Taxes, Charges, costs (including
insurance premiums in accordance with Section 6.4(a)) and interest and principal, other
than principal of the Loan, owing by the Borrowers under this Agreement or any of the other Loan
Documents if and to the extent the Borrowers fail to pay promptly any such amounts as and when due,
after receipt of notice from Agent, even if the amount of such charges would exceed Borrowing
Availability at such time. At Agent’s option and to the extent permitted by law, any charges so
made shall constitute part of the Loan hereunder.




     2.9 Loan Account and Accounting.



          Agent shall maintain a loan account (the “Loan Account”) on its books to record: all
Advances, all payments made by or on behalf of the Borrowers, and all other debits and credits as
provided in this Agreement with respect to the Loans or any other Obligations. All entries in the
Loan Account shall be made in accordance with Agent’s customary accounting practices as in effect
from time to time. The balance in the Loan Account, as recorded on Agent’s most recent printout or
other written statement, shall, absent manifest error, be presumptive evidence of the amounts due
and owing to Agent and Lenders by the Borrowers; provided that any failure to so record or
any error in so recording shall not limit or otherwise




37









 







affect the Borrowers’ duty to pay the Obligations. Upon request (but not more frequently than
monthly), Agent shall render to the Borrowers a monthly accounting of transactions with respect to
the Loans setting forth the balance of the Loan Account for the immediately preceding month.
Unless the Borrowers notify Agent in writing of any objection to any such accounting (specifically
describing the basis for such objection), within fifteen (15) days after the date thereof, each and
every such accounting shall be presumptive evidence of all matters reflected therein. Only those
items expressly objected to in such notice shall be deemed to be disputed by the Borrowers.
Notwithstanding any provision herein contained to the contrary, any Lender may elect (which
election may be revoked) to dispense with the issuance of any Notes to that Lender and may rely on
the Loan Account as evidence of the amount of Obligations from time to time owing to it.




     2.10 Indemnity.



          (a) Each Borrower shall jointly and severally indemnify and hold harmless each of Agent,
Lenders and their respective Affiliates, and each such Person’s respective officers, directors,
employees, attorneys, agents and representatives (each, an “Indemnified Person”), from and
against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses
(including reasonable in-house and external attorneys’ fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal) that may be instituted or
asserted against or incurred by any such Indemnified Person as the result of the execution,
delivery and/or performance of the Loan Documents, credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and the administration of such credit,
and in connection with or arising out of the transactions contemplated hereunder and thereunder and
any actions or failures to act in connection therewith, including any and all Environmental
Liabilities and legal costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (collectively, “Indemnified
Liabilities”); provided, that no such Borrower shall be liable for any indemnification
to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from that Indemnified Person’s gross negligence or willful misconduct
as finally determined by a court of competent jurisdiction. NO INDEMNIFIED PERSON SHALL BE
RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD
PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH
PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT
OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF
ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.




          (b) To induce Lenders to provide the LIBOR Rate option on the terms provided herein, if (i)
any LIBOR Loans are repaid in whole or in part prior to the last day of any applicable LIBOR Period
(whether that repayment is made pursuant to any provision of this Agreement or any other Loan
Document or occurs as a result of acceleration, by operation of law or otherwise); (ii) the
Borrowers shall default in payment when due of the principal amount of or interest on any LIBOR
Loan; (iii) the Borrowers shall refuse to accept any borrowing of, or shall request a termination
of any borrowing, conversion into or continuation of LIBOR Loans after




38









 







the Borrowers have given notice requesting the same in accordance herewith; or (iv) the
Borrowers shall fail to make any prepayment of a LIBOR Loan after the Borrowers have given a notice
thereof in accordance herewith, then the Borrowers shall indemnify and hold harmless the Agent and
each Lender from and against all losses, costs and expenses resulting from or arising from any of
the foregoing. Such indemnification shall include any loss (including loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to terminate deposits
from which such funds were obtained. For the purpose of calculating amounts payable to a Lender
under this subsection, each Lender shall be deemed to have actually funded its relevant LIBOR Loan
through the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to the
amount of that LIBOR Loan and having a maturity comparable to the relevant LIBOR Period;
provided, that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and
the foregoing assumption shall be utilized only for the calculation of amounts payable under this
subsection. This covenant shall survive the termination of this Agreement and the payment of the
any Notes and all other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide the Borrowers with its written calculation in reasonable
detail of all amounts payable pursuant to this Section 2.10(b), and such calculation shall
be binding on the parties hereto unless the Borrowers shall object in writing within fifteen (15)
Business Days of receipt thereof, specifying the basis for such objection in detail.




     2.11 Access.



          Each Borrower that is a party hereto shall, during normal business hours, from time to time
not more than four times in any year, at Borrower’s expense, except if an Event of Default has
occurred and is continuing, in which case no such notice shall be required: (a) provide Agent and
any of its officers, employees and agents access to its properties, facilities, advisors, officers
and employees, books, records, contracts and Accounts of each Borrower and to the Collateral
(provided that access to officers, employees and agents shall be provided promptly, but in no event
upon more than five (5) Business Days’ prior notice), (b) permit Agent, and any of its officers,
employees, designees and agents, to inspect, audit and make extracts from any Borrower’s books and
records, contracts and Accounts, and (c) permit Agent, and its officers, employees, designees and
agents, to inspect, review, evaluate and make test verifications and counts of the contracts,
Accounts, Inventory and other Collateral of any Borrower. If an Event of Default has occurred and
is continuing, each Borrower shall provide such access to Agent and to each Lender (and their
respective agents and designees) during normal business hours without advance notice. Furthermore,
so long as any Event of Default has occurred and is continuing, the Borrowers shall provide Agent
and each Lender with access to its suppliers and Subscribers. Lenders agree to use their
commercially reasonable efforts to coordinate all such access with those of Agent and Agent and
Lenders shall use their commercially reasonable efforts to provide the Borrowers copies of any
written correspondence with Subscribers, provided that no liability shall accrue to the Agent or
any Lender for failure to deliver any such correspondence to the Borrowers. Each Borrower shall
make available to Agent and its counsel, reasonably promptly, originals or copies of all books,
records, contracts and Accounts that Agent may reasonably request. Each Borrower shall deliver any
document or instrument necessary for Agent, as it may from time to time reasonably request, to
obtain records from any storage facility, bailee, service bureau or other Person that maintains
records for such Borrower.




39









 








     2.12 Taxes.



          (a) Any and all payments by the Borrowers hereunder or under any Note shall be made, in
accordance with this Section 2.12, free and clear of and without deduction for any and all
present or future Indemnified Taxes and Other Taxes. If the Borrowers shall be required by law to
deduct any Indemnified Taxes from or in respect of any sum payable hereunder or under the any Note,
(i) the sum payable shall be increased as much as shall be necessary so that after making all
required deductions (including deductions applicable to additional sums payable under this
Section 2.12), Agent or Lenders, as applicable, shall receive an amount equal to the sum
they would have received had no such deductions been made, (ii) the Borrowers shall make such
deductions, and (iii) the Borrowers shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law (except for any Indemnified Taxes or other liabilities
that the Borrowers are contesting in good faith by appropriate proceedings). Within thirty (30)
days after the date of any payment of Indemnified Taxes, the Borrowers shall furnish to Agent the
original or a certified copy of a receipt evidencing payment thereof, to the extent such a receipt
has been issued therefor, or such other written proof of payment thereof that is reasonably
satisfactory to Agent.




          (b) Each Borrower that is a signatory hereto shall indemnify and, within thirty (30) days of
written demand therefor, pay Agent and each Lender for the full amount of Indemnified Taxes and
Other Taxes (including any Indemnified Taxes and Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.12) paid by Agent or such Lender, as appropriate, and any
liability (including penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally asserted. Agent and
such Lender, as applicable, shall include with any such written demand a statement setting forth in
reasonable detail the basis and calculation of any such payment or indemnity hereunder, which
statement shall, in the absence of demonstrable error, be conclusive and binding as to the amount
thereof.




          (c) On or prior to the date of its execution and delivery of this Agreement in the case of
each Lender that is listed on the signature pages of this Agreement, and on or prior to the date of
the assignment pursuant to Section 11.1 pursuant to which it becomes a Lender in the case
of each other Lender, and from time to time thereafter as reasonably requested in writing by the
Borrowers or Agent (but only so long thereafter as such Lender remains lawfully able to do so):




               (i) each Lender that is a Non-Corporate Domestic Lender shall provide to the Borrowers (with a
copy to Agent) an original IRS Form W-9, or any successor or other form prescribed by the IRS,
properly completed and duly executed under penalties of perjury; and



               (ii) each Lender that is a Foreign Lender shall provide to the Borrowers (with a copy to
Agent) either:



                    (A) an original IRS Form W-8BEN or W-8IMY, as appropriate, or any successor or other form
prescribed by the IRS, properly completed and duly executed



40









 




under penalties of perjury, certifying that such Lender is entitled to a zero (0) rate of
United States withholding tax on payments made pursuant to this Agreement or any Notes,




                    (B) an original IRS Form W-8ECI, or any successor other form prescribed by the IRS, properly
completed and duly executed under penalties of perjury, certifying that such Lender is exempt from
United States withholding tax on payments made pursuant to this Agreement or any Notes, or



                    (C) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under Code Section 881(c), a certificate, duly executed under penalties of perjury, that
it is not (I) a “bank” (within the meaning of Code Section 881(c)(3)(A)), (II) a “ten
percent shareholder” (within the meaning of Code Section 871(h)(3)(B)) of any Borrower, or
(III) a “controlled foreign corporation” related to any Borrower (within the meaning of the
Code Section 864(d)(4)), and an original IRS Form W-8BEN or Form W-8IMY, as appropriate, or any
successor or other form prescribed by the IRS, properly completed and duly executed under penalties
of perjury, certifying that such Lender is exempt from United States withholding tax on payments
made pursuant to this Agreement or any Notes.


Each Lender shall deliver such new forms and documents prescribed by the IRS upon the expiration or
obsolescence of any previously delivered forms or other documents referred to in this Section
2.12(c) or after the occurrence of any event requiring a change in the most recent forms or
other documents delivered by such Lender. Such Lender shall promptly provide written notice to the
Borrowers (with a copy to Agent) at any time it determines that it is no longer in a position to
provide any previously delivered form or other document (or any other form of certification adopted
by the IRS for such purpose).




          (d) No Default. In no event shall any withholding by any Borrower, as contemplated by
this Section 2.12, on any payment under this Agreement or any Note give rise to a Default
under Section 10.1.




          (e) Mitigation. Each Lender agrees that it shall, to the extent reasonable and
without any additional cost (other than costs which the Borrowers have paid to such Lender, unless
waived by the Lender) or risk to it, (i) take all actions reasonably requested by the Borrowers or
Agent to maintain all exemptions, if any, available to it from United States withholding tax
(whether available by treaty, statute, or existing administrative waiver), and (ii) otherwise
cooperate with the Borrowers to minimize any amounts payable by the Borrowers pursuant to this
Section 2.12.




          (f) Treatment of Certain Refunds. If Agent or any Lender determines, in its sole
discretion, that it is entitled to receive a refund (whether by way of a direct payment or by
offset) of any Indemnified Taxes or Other Taxes that would reasonably be considered allocable to or
resulting from any increase in the amounts paid by the Borrowers or any indemnification by any
Borrower pursuant to this Section 2.12, it shall promptly notify the Borrowers of the
availability of such refund and shall, within thirty (30) days after the receipt of a request from
the Borrowers at the Borrowers’ sole cost and expense, apply for such refund with the Borrowers
being responsible for any incremental costs associated with such refund request. If Agent or any
Lender determines, in its sole discretion, that it has received a refund (as described in the




41









 







preceding sentence), it shall pay to the Borrowers, within thirty (30) days from the date of
such receipt, an amount equal to such refund (but only to the extent of indemnity payments made, or
additional amounts paid, by the Borrowers under this Section with respect to the Indemnified Taxes
or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of Agent or such
Lender, as the case may be, and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided that the Borrowers, upon the request
of Agent or such Lender to the Borrowers, agrees to repay the amount paid over to the Borrowers
(plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to
Agent or such Lender in the event Agent or such Lender is required to repay such refund to such
Governmental Authority. This subsection shall not be construed to require Agent or any Lender to
make available its tax returns (or any other information relating to its Taxes that it deems
confidential) to the Borrowers or any other Person.




     2.13 Capital Adequacy; Increased Costs; Illegality.



          (a) If any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements or compliance by any
Lender with any request or directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law), in each case, adopted or made after the
Closing Date, from any central bank or other Governmental Authority increases or would have the
effect of increasing the amount of capital, reserves or other funds required to be maintained by
such Lender and thereby reducing the rate of return on such Lender’s capital as a consequence of
its obligations hereunder, then the Borrowers shall from time to time promptly after demand by such
Lender (with a copy of such demand to Agent) pay to Agent for the account of such Lender,
additional amounts sufficient to compensate such Lender for such reduction, provided that the
Borrowers shall not be required to compensate a Lender pursuant to this Section for any such
additional amounts incurred more than six months prior to the date that such Lender notifies the
Borrowers of the change in law giving rise to such additional amount; provided further, that if the
change resulting in such increased costs is retroactive, then such six month period shall be
extended to include the retroactive period. A certificate as to the amount of that reduction and
showing in reasonable detail the basis of the computation thereof submitted by such Lender to the
Borrowers and to Agent shall be presumptive evidence of the matters set forth therein.




          (b) If, due to either (i) the introduction of or any change in any law or regulation (or any
change in the interpretation thereof) or (ii) the compliance with any published guideline from any
central bank or other Governmental Authority (whether or not having the force of law) applicable
generally to banks or any class of banks within the same jurisdiction (but not any guideline
specifically required of a single bank), in each case adopted or made after the Closing Date, there
shall be any increase in the cost to any Lender of agreeing to make or making, funding or
maintaining any LIBOR Loan (other than any such increase in cost resulting from (A) Indemnified
Taxes or Other Taxes (as to which Section 2.12 shall govern), (B) the imposition of, or any
change in the rate of, any Excluded Tax payable by such Lender, or (C) changes reflected in the
LIBOR Rate) then Borrowers shall from time to time promptly after demand by such Lender (with a
copy of such demand to Agent), pay to Agent promptly for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost; provided that Borrowers shall
not be required to compensate a Lender pursuant to




42









 







this Section for any such additional amount incurred more than six (6) months prior to the
date that such Lender notifies Borrowers of the change in law giving rise to such additional
amount; provided further, that if the change resulting in such increased costs is retroactive, then
such six (6) month period shall be extended to include the retroactive period. A certificate
showing in reasonable detail the amount of such increased cost, submitted to Borrowers and to Agent
by such Lender, shall be presumptive evidence of the matters set forth therein. Each Lender agrees
that, as promptly as practicable after it becomes aware of any circumstances referred to above
which would result in any such increased cost, the affected Lender shall, to the extent not
inconsistent with such Lender’s internal policies of general application, use reasonable commercial
efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to
this Section 2.13(b).




          (c) Notwithstanding anything to the contrary contained herein, if the introduction of or any
change in any law or regulation (or any change in the interpretation thereof) after the date hereof
shall make it unlawful, or any central bank or other Governmental Authority shall assert after the
date hereof that it is unlawful, for any Lender to agree to make or to make or to continue to fund
or maintain any LIBOR Loan, then, unless that Lender is able to make or to continue to fund or to
maintain such LIBOR Loan at another branch or office of that Lender without, in that Lender’s
reasonable opinion, materially adversely affecting it or its Loans or the income obtained
therefrom, on notice thereof and demand therefor by such Lender to Borrowers through Agent, (i) the
obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR
Loans shall terminate and (ii) Borrowers shall forthwith prepay in full all outstanding LIBOR Loans
owing to such Lender, together with interest accrued thereon, unless Borrowers, within five
(5) Business Days after the delivery of such notice and demand, converts all LIBOR Loans of such
Lender into Base Rate Loans.




          (d) Within sixty (60) days after receipt by Borrowers of written notice and demand from any
Lender (an “Affected Lender”) for payment of additional amounts or increased costs as
provided in Sections 2.12(a), 2.12(b), 2.13(a) or 2.13(b),
Borrowers may, at its option, notify Agent and such Affected Lender of its intention to replace the
Affected Lender. So long as no Event of Default has occurred and is continuing, Borrowers, with
the consent of Agent, which consent shall not be unreasonably withheld or delayed, may obtain, at
the Borrowers’ expense, a replacement Lender (“Replacement Lender”) for the Affected
Lender, which Replacement Lender must be reasonably satisfactory to Agent. If the Borrowers obtain
a Replacement Lender within one hundred eighty (180) days following notice of its intention to do
so, the Affected Lender must sell and assign its Loans and Commitments to such Replacement Lender
for an amount equal to the principal balance of all Loans held by the Affected Lender and all
accrued interest and Fees with respect thereto through the date of such sale and such assignment
shall not require the payment of an assignment fee to Agent; provided, that Borrowers shall have
reimbursed such Affected Lender for the additional amounts or increased costs that it is entitled
to receive under this Agreement through the date of such sale and assignment. Notwithstanding the
foregoing, the Borrowers shall not have the right to obtain a Replacement Lender if the Affected
Lender rescinds its demand for increased costs or additional amounts with in fifteen (15) days
following its receipt of the Borrowers’ notice of intention to replace such Affected Lender.
Furthermore, if the Borrowers give a notice of intention to replace and does not so replace such
Affected Lender within one hundred eighty (180) days thereafter, the Borrowers’ rights under this
Section 2.13(d) shall terminate with respect to such




43









 







Affected Lender in respect of the circumstances giving rise to such notice of termination, and
the Borrowers shall promptly pay all increased costs or additional amounts demanded by such
Affected Lender pursuant to Sections 2.12(a), 2.12(b), 2.13(a) and 2.13(b).




          (e) If Lender requests payment of additional amounts or increased costs as provided in
Sections 2.12(a), 2.12(b), 2.13(a) or 2.13(b), then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans hereunder or to
assign its rights and obligations hereunder to another of its offices, branches or affiliates, if,
in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce the
additional amounts or increased costs payable pursuant to Sections 2.12(a), 2.12(b), 2.13(a) or
2.13(b), as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be materially disadvantageous to such Lender
or otherwise be prohibited by applicable law. The Borrowers hereby agree to pay all reasonable
costs and expenses incurred by any Lender in connection with any such designation or assignment.




     2.14 Single Loan. All Loans, including all Advances, to Borrowers, and all of the
other Obligations of the Borrowers arising under this Agreement and the other Loan Documents shall
constitute one general joint and several obligation of Borrowers secured, until the Termination
Date, by all of the Collateral.



     2.15 Uncommitted Incremental Commitment Increase. Subject to the terms and conditions
set forth below, prior to the Commitment Termination Date, the total aggregate Commitment may be
increased at the request of the Borrowers and with the prior written consent of the Agent (each
such increase being the “Commitment Increase”), provided that the aggregate total of all
Commitment Increases shall never exceed $30,000,000 and the total aggregate of all Lenders’
Commitments shall never exceed $100,000,000. The Borrowers may request no more than three (3)
Commitment Increases, with a minimum of $10,000,000 (or increments of $2,500,000 in excess thereof)
for such request and shall pay to Agent the Additional Commitment Fee in accordance with
Section 2.6(c). A Commitment Increase shall be effectuated pursuant to the following
procedures:



          (a) Not less than thirty (30) days prior to the proposed effective date of a Commitment
Increase, the Borrowers shall notify the Agent in writing of its request for a Commitment Increase
(an “Increase Request”), including the intended date and amount thereto. All other terms
and conditions applicable to such Commitment Increase shall be the same as applicable to the
Commitment in general. Such Increase Request shall be accompanied by (i) a certificate from the
Borrowers certifying to the Agent that (A) no other approvals or consents from any Person are
required by any such Person except to the extent they have been received, including without
limitation, any other Indebtedness permitted to exist in accordance with the terms of Section
7.3 or otherwise and (B) no Default or Event of Default has occurred and is continuing, and
(ii) financial projections in form and substance reasonably acceptable to the
Agent and demonstrating compliance with the Financial Covenants throughout the term of this
Agreement after giving effect to the Commitment Increase.




          (b) Upon receipt of such Increase Request and the other information required by subsection (a)
above, the Agent and the Requisite Lenders in their sole discretion shall




44









 







determine whether to
consent to such an increase. The Agent shall promptly notify existing Lenders of such request by
the Borrowers and each such Lender shall have ten (10) Business Days in which to notify the Agent
in writing of such Lender’s approval or rejection of the Commitment Increase and intent to
participate in such increase (each an “Existing Increase Lender”), and the amount of the
Commitment Increase such Existing Increase Lender is willing to commit to (which amount shall be
allocated to each Existing Increase Lender according to their existing Pro Rata Shares should there
be an over-commitment) which notice shall be irrevocable once received by Agent. Notwithstanding
the foregoing, in no event shall the Agent be obligated to agree to any Commitment Increase nor
shall any Lender be obligated to agree to or participate in any Commitment Increase. Participation
in any such Commitment Increase shall be completely optional and at the sole discretion of each
Lender. Agent’s failure to notify Borrowers of Agent’s and the Requisite Lenders decision with
respect to a Commitment Increase within twenty (20) Business Days of receipt of the Increase
Request and the information set forth in subsection (a) above shall be deemed a rejection of such
Increase Request.




          (c) To the extent that the entire Commitment Increase requested by the Borrowers and consented
to by Agent and the Requisite Lenders is not accepted by Existing Increase Lenders, the Borrowers
may propose to Agent additional new lenders acceptable to Agent and Requisite Lenders (“New
Lenders”) who agree to commit to that portion of the Commitment Increase not accepted by
Existing Increase Lenders. Thus, any Commitment Increase shall be effected by an increase in any
one or more of the Existing Increase Lenders’ Commitments, and/or by the addition of the
Commitments of New Lender(s) (in each case, the “Increase Lenders”).




          (d) Notwithstanding the foregoing, final allocation of the Commitment Increase shall be at the
sole discretion of the Agent in consultation with Borrowers; and each Increase Lender shall commit
to an amount not less than $5,000,000, but shall accept any allocation amount designated by the
Borrowers and the Agent that is equal to or less than its proposed portion of the Commitment
Increase.




     2.16 Borrower Funds Administrator.



          (a) The Borrowers maintain an integrated cash management system reflecting their
interdependence on one another and the mutual benefits shared among them as a result of their
respective operations. In order to efficiently fund and operate their respective businesses and
minimize the number of borrowings which they will make under this Agreement and thereby reduce the
administrative costs and record keeping required in connection therewith, including the necessity
to enter into and maintain separately identified and monitored borrowing facilities, The Borrowers
have requested, and Agent and Lenders have agreed that, subject to Section 2.17, all the
Loans and all Advances will be advanced to and for the account of the Borrowers on a joint and
several basis in accordance with the other provisions hereof. Each Borrower hereby
acknowledges that it will be receiving a direct benefit from each Loan made pursuant to this
Agreement.




          (b) Each Borrower hereby designates, appoints, authorizes and empowers Holdings as its agent
to act as specified in this Agreement and each of the other Loan Documents and Holdings hereby
acknowledges such designation, authorization and empowerment, and




45









 







accepts such appointment. Each
Borrower hereby irrevocably authorizes and directs Holdings to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents, and any other instruments, documents
and agreements referred to herein or therein, and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required of Holdings by the
respective terms and provisions hereof and thereof, and such other powers as are reasonably
incidental thereto, including, without limitation, to take the following actions for and on such
Borrower’s behalf:




               (i) to submit on behalf of each Borrower Notices of Advances to the Agent in accordance with
the provisions of this Agreement;



               (ii) to receive on behalf of each Borrower the proceeds of Loan in accordance with the
provisions of this Agreement, such proceeds to be disbursed to or for the account of the applicable
Borrower as soon as practicable after its receipt thereof; and



               (iii) to submit and receive on behalf of each Borrower, Compliance Certificates and all other
certificates, notices and other communications given or required to be given hereunder.


Holdings is further authorized and directed by each Borrower to take all such actions on behalf of
such Borrower necessary to exercise the specific power granted in clauses (i) through (iii) above
and to perform such other duties hereunder and under the other Loan Documents, and deliver such
documents as delegated to or required of Holdings by the terms hereof or thereof. The agency
relationship established pursuant to this Section 2.16(b) is for administrative convenience
only and such agency relationship shall not extend to any matter outside the scope of the Loan
Documents.




          (c) The administration by the Agent and the Lenders of the credit facilities under this
Agreement as a co-borrowing facility with a funds administrator in the manner set forth herein is
solely as an accommodation to the Borrowers and at their request and neither the Agent nor any
Lender shall incur any liability to any Borrower as a result thereof.




          (d) If the Borrowers intend at any time that a Borrower other than Holdings act as funds
administrator for the Borrowers pursuant to this Section 2.16, all Borrowers shall notify
the Agent in writing of such intent and, upon the written consent of the Agent (which consent shall
not be unreasonably withheld or delayed), such newly appointed Borrower shall act in the capacity
of funds administrator pursuant to this Section 2.16.




     2.17 Acknowledgement of Joint and Several Liability.



          (a) Each Borrower acknowledges that it is jointly and severally liable for all of the
Obligations under the Loan Documents. Each Borrower expressly understands, agrees and
acknowledges that (i) the Borrowers are all affiliated entities by common ownership, (ii) each
Borrower desires to have the availability of one common credit facility instead of separate credit
facilities, (iii) each Borrower has requested that the Lenders extend such a common credit facility
on the terms herein provided, (iv) the Lenders will be lending against, and relying on a lien upon,
all of the each Borrower’s assets even though the proceeds of any particular loan made hereunder
may not be advanced directly to a particular Borrower, (v) each Borrower will




46









 







nonetheless benefit
by the making of all such loans by each Lender and the availability of a single credit facility of
a size greater than each could independently warrant, (vi) all of the representations, warranties,
covenants, obligations, conditions, agreements and other terms contained in the Loan Documents
shall be applicable to and shall be binding upon each Borrower (provided that no Borrower is
deemed, by this statement, to have made any representation, warranty or covenant that is intended,
by its terms to apply specifically to another Borrower or to the extent that such representation or
warranty expressly relates to an earlier date), and (vii) the Borrowers have each executed any Note
as co-makers of such Note and that it would not be able to obtain the credit provided by the
Lenders hereunder without the financial support provided by the other Borrowers.




          (b) Each Borrower’s obligations under this Agreement shall, to the fullest extent permitted by
law, be unconditional irrespective of (i) the validity or enforceability, avoidance, or
subordination of the Obligations of any other Borrower or of any promissory note or other document
evidencing all or any part of the Obligations of any other Borrower, (ii) the absence of any
attempt to collect the Obligations from any other Borrower, or any other security therefor, or the
absence of any other action to enforce the same, (iii) the waiver, consent, extension, forbearance,
or granting of any indulgence by Agent and/or any Lender with respect to any provision of any
instrument evidencing the Obligations of any other Borrower or any part thereof, or any other
agreement now or hereafter executed by any other Borrower and delivered to Agent and/or any Lender,
(iv) the failure by Agent and/or any Lender to take any steps to perfect and maintain its security
interest in, or to preserve its rights to, any security or collateral for the Obligations of any
other Borrower, (v) Agent’s and/or any Lender’s election, in any proceeding instituted under the
Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any
borrowing or grant of a security interest by any other Borrower, as debtor-in-possession under
Section 364 of the Bankruptcy Code, (vii) the disallowance of all or any portion of Agent’s and/or
any Lender’s claim(s) for the repayment of the Obligations of any other Borrower under Section 502
of the Bankruptcy Code, or (viii) any other circumstances which might constitute a legal or
equitable discharge or defense of a guarantor or of any other Borrower (other than actual
indefeasible payment in full in cash). With respect to any Borrower’s obligations arising as a
result of the joint and several liability of Borrowers hereunder with respect to Advances made to
or for any of the other Borrowers hereunder, such Borrower waives, until the Obligations shall have
been indefeasibly paid in full and this Agreement shall have been terminated, any right to enforce
any right of subrogation or any remedy which Agent and/or any Lender now has or may hereafter have
against any other Borrower, or any endorser of all or any part of the Obligations, and any benefit
of, and any right to participate in, any security or collateral given to Agent and/or any Lender to
secure payment of the Obligations or any other liability of any Borrower to Agent and/or any
Lender. During the existence of any Event of Default, Agent may proceed directly and at once,
without notice, against any Borrower to collect and recover the full amount, or any portion of the
Obligations, without first proceeding against any other Borrower or any other Person, or against
any security or collateral for the Obligations.
Each Borrower consents and agrees that Agent shall be under no obligation to marshal any
assets in favor of any Borrower or against or in payment of any or all of the Obligations.




          (c) Each Borrower is obligated to repay the Obligations as joint and several obligors under
this Agreement. To the extent that any Borrower shall, under this Agreement as a joint and several
obligor, repay any of the Obligations constituting Advances made to or for




47









 







another Borrower
hereunder or other Obligations incurred directly and primarily by any other Borrower (an
“Accommodation Payment”), then the Borrowers making such Accommodation Payment shall be
entitled to contribution and indemnification from, and be reimbursed by, each of the other
Borrowers in an amount, for each of such other Borrowers, equal to a fraction of such Accommodation
Payment, the numerator of which fraction is such other Borrower’s Allocable Amount and the
denominator of which is the sum of the Allocable Amounts of all of the Borrowers. As of any date
of determination, the “Allocable Amount” of each Borrower shall be equal to the maximum
amount of liability for Accommodation Payments which could be asserted against such Borrower
hereunder without (i) rendering such Borrower “insolvent” within the meaning of Section 101
(31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or
Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (ii) leaving such
Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the
Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (iii) leaving such Borrower
unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code
or Section 4 of the UFTA, or Section 5 of the UFCA. All rights and claims of contribution,
indemnification, and reimbursement under this Section 2.17 shall be subordinate in right of
payment to the prior payment in full of the Obligations. The provisions of this Section
2.17 shall, to the extent inconsistent with any provision in any Loan Document, supersede such
inconsistent provision.




          (d) If (i) any court holds that Borrowers are guarantors and not jointly and severally liable
or (ii) bankruptcy or reorganization proceedings at any time are instituted by or against any
Borrower under the Bankruptcy Code or any similar debtor relief law, each Borrower hereby: (A)
until indefeasible payment in full in cash of the Obligations, expressly and irrevocably waives, to
the fullest extent possible, on behalf of such Borrower, any and all rights at law or in equity to
subrogation, to reimbursement, to exoneration, to contribution, to indemnification, to set off or
to any other rights that could accrue to a surety against a principal, to a guarantor against a
maker or obligor, to an accommodation party against the party accommodated, to a holder or
transferee against a maker, or to the holder of a claim against any Person, and which such Borrower
may have or hereafter acquire against any Person in connection with or as a result of such
Borrower’s execution, delivery and/or performance of this Agreement, or any other documents to
which such Borrower is a party or otherwise; (B) expressly and irrevocably waives any
“claim” (as such term is defined in the Bankruptcy Code) of any kind against any other
Borrower, and further agrees that it shall not have or assert any such rights against any Person
(including any surety), either directly or as an attempted set off to any action commenced against
such Borrower by Agent or a Lender or any other Person; and (C) acknowledges and agrees (I) that
this waiver is intended to benefit Lenders and shall not limit or otherwise affect such Borrower’s
liability hereunder or the enforceability of this Agreement, and (II) that Agent and Lenders and
their successors and assigns are intended beneficiaries of this waiver, and agreements set forth in
this Section 2.17 and their rights under this Section 2.17 shall survive payment in full of
the Obligations.




          (e) This Agreement shall in all respects be continuing, absolute and unconditional, and shall
remain in full force and effect with respect to each Borrower until all Obligations shall have been
indefeasibly fully paid. No compromise, settlement, release or discharge of, or indulgence with
respect to, or failure, neglect or omission to enforce or exercise




48









 







any right against, any one or
more of the Borrowers shall release or discharge any other Borrowers.




3. CONDITIONS PRECEDENT




     3.1 Conditions to the Initial Loans.



          No Lender shall be obligated to make any Advance on the Closing Date, or to take, fulfill, or
perform any other action hereunder on the Closing Date, until the following conditions have been
satisfied or waived in writing by, Agent and Requisite Lenders:




          (a) Credit Agreement. This Agreement or original counterparts hereof shall have been
duly executed by, and delivered to Agent.




          (b) Appendices. All Appendices to this Agreement shall be in form and substance
reasonably satisfactory to Agent.




          (c) Collateral Documents. Agent shall have received duly executed originals of the
Security Agreement and other Collateral Documents, dated the Closing Date, and all schedules,
instruments, documents and agreements executed pursuant thereto.




          (d) Insurance. Agent shall have received (a) satisfactory evidence that the insurance
policies required by Section 6.4 are in full force and effect, together with appropriate
evidence showing loss payable and/or additional insured clauses or endorsements, as reasonably
requested by Agent, in favor of Agent, on behalf of Lenders, (b) the original policy of the Life
Insurance Policy and (c) the Collateral Assignment of Life Insurance Policy, duly executed by
Borrowers and acknowledged by the respective insurance carrier.




          (e) Security Interests and UCC Filings. The following shall have been delivered to
Agent:




               (i) Evidence reasonably satisfactory to that Agent (for the benefit of itself and Lenders) has
a valid and perfected first priority security interest in all of the Collateral, including (A) such
documents duly executed by each Borrower and Parent (including financing statements under the UCC
and other applicable documents under the laws of any jurisdiction with respect to the perfection of
Liens) as Agent may reasonably request in order to perfect its security interests in the Collateral
and (B) copies of UCC search reports listing all effective financing statements that name any
Borrower as debtor, together with copies of such financing statements, none of which shall cover
the Collateral other than Permitted Encumbrances, or arrangements reasonably satisfactory to the
Agent for the perfection of its security interests in the Collateral shall have been made.



               (ii) Evidence reasonably satisfactory to Agent, including copies, of any UCC-1 and other
financing statements filed in favor of any Borrower with respect to each location, if any, at which
any Collateral may be consigned.



               (iii) Control Letters from (A) all issuers of uncertificated securities and financial assets
held by any Borrower, if any, (B) all securities intermediaries with respect to all



49









 




securities accounts and securities entitlements of any Borrower, if any, and (C) all futures commission agents
and clearing houses with respect to all commodities contracts and commodities accounts held by any
Borrower, if any.




          (f) Payoff Letter; Termination Statements. Copies of a duly executed payoff letter,
shall have been delivered to Agent in form and substance reasonably satisfactory to Agent, by and
between all holders of outstanding Indebtedness on the Closing Date evidencing repayment in full of
all such Indebtedness, if any, together with (a) authorization for Agent to file UCC-3 or other
appropriate termination statements, in form and substance satisfactory to Agent, releasing all
liens of the holders of such Indebtedness upon any of the assets being so acquired, and (b)
termination of all blocked account agreements, bank agency agreements or other similar agreements
or arrangements or arrangements in favor of such holders, if applicable.




          (g) Initial Notice of Advance. Duly executed originals of a Notice of Advance, dated
the Closing Date, with respect to the initial Advance to be requested by Borrower on the Closing
Date, shall have been delivered to Agent (the “Initial Advance”).




          (h) Charter and Good Standing. For the Parent and each Borrower, such Person’s (a)
charter (articles or certificate of incorporation, or similar organizational document) and all
amendments thereto, (b) good standing certificates (including verification of tax status, if
available) in its state of incorporation and (c) good standing certificates (including verification
of tax status, if available) and certificates of qualification to conduct business in each
jurisdiction where its ownership or lease of property or the conduct of its business requires such
qualification, each dated a recent date prior to the Closing Date and certified by the applicable
Secretary of State or other authorized Governmental Authority, shall have been delivered to Agent.




          (i) Bylaws and Resolutions. For the Parent and each Borrower, (a) such Person’s
bylaws, together with all amendments thereto and (b) resolutions of such Person’s Board of
Directors and the manager or other governing body, approving and authorizing the execution,
delivery and performance of the Loan Documents to which such Person is a party and the transactions
to be consummated in connection therewith, each certified as of the Closing Date by such Person’s
corporate secretary or an assistant secretary as being in full force and effect without any
modification or amendment, shall have been delivered to Agent.




          (j) Incumbency Certificates. For the Parent and each Borrower, signature and
incumbency certificates of the officers of each such Person executing any of the Loan Documents,
certified as of the Closing Date by such Person’s corporate secretary or an assistant secretary as
being true, accurate, correct and complete, shall have been delivered to Agent.




          (k) Opinions of Counsel. Duly executed originals of opinions of Akerman Senterfit
counsel for the Parent and each Borrower, together with any local counsel opinions reasonably
requested by Agent, including, without limitation, a perfection opinion with respect to the
Collateral, each in form and substance reasonably satisfactory to Agent and its counsel, dated the
Closing Date, shall have been delivered to Agent.




50









 








          (l) Pledge Agreements. Duly executed originals of each of the Pledge Agreements, in
the form of Exhibit 3.1(l), accompanied by (as applicable) (a) any share certificates
representing all of the outstanding Stock being pledged pursuant to such Pledge Agreement and stock
powers for such share certificates executed in blank and (b) any original Intercompany Notes and
other instruments evidencing Indebtedness being pledged pursuant to such Pledge Agreement, duly
endorsed in blank, shall have been delivered to Agent.




          (m) Accountants’ Letter. A letter from the Borrowers to their independent auditors,
authorizing the independent certified public accountants of the Borrowers to communicate with Agent
and Lender in accordance with Section 5.2, shall have been delivered to Agent.




          (n) Due Diligence Questionnaires. A completed due diligence questionnaire from each
Borrower shall have been delivered to Agent.




          (o) Officer’s Certificate. Agent shall have received duly executed originals of a
certificate of the President of each Borrower, dated the Closing Date, in form satisfactory to
Agent, stating that, since December 31, 2004 (i) no event or condition has occurred or is existing
which could reasonably be expected to have a Material Adverse Effect; (ii) no Litigation has been
commenced which could reasonably be expected to have a Material Adverse Effect or could challenge
any of the transactions contemplated by the Agreement and the other Loan Documents; (iii) there
have been no Restricted Payments made by any Borrower, except as permitted pursuant to the terms of
that certain Credit Agreement dated as of February 28, 2005 by and among Holdings and Services, as
borrowers, CIT Financial USA, Inc., as the agent and a lender, and certain other lenders party
thereto from time to time; and (iv) there has been no material increase in liabilities, liquidated
or contingent, and no material decrease in assets of any Borrower (except for the incurrence of the
Obligations and the Bridge Loan).




          (p) Mortgage. To the extent a Borrower owns real property, Agent shall have received
a duly executed Mortgage covering all of such Real Estate, in form satisfactory to Agent, together
with: (i) a title insurance policy satisfactory in form and substance to Agent in its sole
discretion; (ii) evidence that counterparts of such Mortgage have been delivered to a title company
for recordation in all places to the extent necessary or desirable, in the judgment of Agent, to
create a valid and enforceable first priority lien (subject to Permitted Encumbrances) on the Real
Estate in favor of Agent for the benefit of itself and Lenders (or in favor of such other trustee
as may be required or desired under local law); and (iii) an opinion of counsel in Florida,
relating to such Mortgage, in form and substance and from counsel reasonably satisfactory to Agent.
For the purposes of the initial Closing, Borrowers shall not be required to obtain a Mortgage on
the Real Estate located at 798 Airport Road, Panama City, Florida for the purposes of securing the
Loan.




          (q) Financials; Financial Condition. Agent shall have received the Financial
Statements, Projections and other materials set forth in Section 4.4, certified by
Holdings’ President, in form and substance reasonably satisfactory to Agent, and Agent shall be
satisfied, in its sole discretion, with all of the foregoing. Agent shall have further received a
certificate of the President of Holdings, based on such Pro Forma and Projections, to the effect
that: (i) each Borrower will be Solvent upon the consummation of the transactions contemplated
herein;




51









 







(ii) the Pro Forma fairly presents in all material respects the financial condition of each
Borrower as of the date thereof after giving effect to the transactions contemplated by the Loan
Documents; (iii) the Projections are reasonable and fair in light of current conditions and current
facts known to the Borrowers and, as of the Closing Date, reflect each Borrower’s good faith and
reasonable estimates of the future financial performance of the Borrowers for the period set forth
therein; provided that, the Projections, as projections, are inherently subject to economic and
competitive uncertainties and contingencies beyond the control of the Borrowers, and are based upon
assumptions with respect to future business decisions which are subject to change, and therefore
are not necessarily indicative of future operational results of the Borrowers; and (iv) containing
such other statements with respect to the solvency of Borrower and matters related thereto as Agent
shall reasonably request.




          (r) Material Contracts. Agent shall have reviewed true and correct copies of (i) each
Material Contract and (ii) each Third Party Consent Form received by any Borrower, in form and
substance reasonably satisfactory to Agent, if any, and received separate assignments of any
Material Contract for which it requests an assignment, including without limitation the Coastal
Purchase Agreement and the restrictive covenants in certain employment-related agreements between a
Borrower or Parent and Stephen Ruzika, John Danneberg, Sheldon Katz and Mike McIntosh.




          (s) Approvals. Agent shall have received satisfactory evidence that each Borrower has
obtained required consents, licenses, and approvals of all Persons, including all requisite
material Governmental Approvals, to the execution, delivery and performance of this Agreement and
the other Loan Documents and the making of the Loans, and the operation and maintenance of each
Borrower’s business, including, without limitation, copies of all licenses relating to the
provision and servicing of alarm contract services.




          (t) Payment of Fees. The Borrowers shall have paid the Fees required to be paid on
the Closing Date, in the respective amounts specified in Section 2.6 and in the Fee Letter,
and shall have reimbursed Agent for all reasonable fees, costs and expenses of closing presented as
of the Closing Date.




          (u) Capital Structure. The capital structure of each Borrower shall be as described
in Disclosure Schedule 4.8 hereto.




          (v) Searches; Liens. Agent shall have received the results of UCC, tax lien,
judgment, pending litigation and bankruptcy lien searches, showing no Liens against any Borrower
(including alternate and predecessor names) and such predecessors-in-interest as are deemed
material by Agent with respect to any assets of any such party (including, without limitation, any
Alarm Contracts or other Collateral), other than Permitted Encumbrances, with results of each of
the searches performed reasonably satisfactory to Agent, and the Liens granted
to the Agent pursuant to the Collateral Documents shall be first priority perfected Liens on
the Collateral subject to no other Liens other than Permitted Encumbrances.




          (w) Due Diligence. Agent shall have completed its business, accounting and legal due
diligence, including the financial due diligence performed at Agent’s request, with results
reasonably satisfactory to Agent.




52









 








          (x) Compliance Certificate. Agent shall have received a Compliance Certificate
demonstrating, as of the Closing Date, after giving pro forma effect to the Initial Advance,
compliance with each of the Financial Covenants set forth in Sections 9.1 and 9.2.




          (y) Monitoring Arrangements. Agent shall have received, a complete and final copy of
any Monitoring Contract currently in effect, which contract is fully assignable or consent to
assignment has been given (including Agent’s right to cure) pursuant to a consent to assignment
agreement in the form of Exhibit 3.1(y) (“Assignment and Modification Agreement”)
to Agent, together with evidence of UL listings with respect to each monitoring contractor, and a
power of attorney provided to the Agent relating to the direction of telephone lines, monitoring
station software and customer data.




          (z) Nonsolicitation Agreements. Agent shall have received non-solicitation and
non-disclosure agreements, in substantially the form of Exhibit 3.1(z), from Borrowers and
Parent, whereby Borrowers and Parent agree to, among other things, not solicit Subscribers, to
terminate or enter into new security alarm contracts with an alarm monitoring servicing company
other than Borrowers and not to disclose the names of the Subscribers or the terms of this
Agreement to third parties, except as required under applicable law (collectively, the
“Nonsolicitation and Nondisclosure Agreements”);




          (aa) Leases; Landlord and Bailee Consents. Agent shall have received copies of all
leases of real property, warehouseman’s agreements, Off Site Storage Agreements and related bailee
agreements and any similar arrangements for any location where any Borrower or any of its
Collateral is located, together with (i) waivers and/or consents from the related third parties,
and (ii) leasehold mortgages, relating to any leased location at which any Alarm Contracts (or
copies thereof), any monitoring equipment (or other systems), or any other Collateral which the
Agent, in its sole discretion, deems material, is located.




          (bb) No Material Adverse Change. No material adverse change, including, without
limitation, no material pending or threatened litigation, bankruptcy or other proceeding in the
financial condition, operations, business prospects or assets of any Borrower, or any Material
Adverse Effect shall have occurred to any Borrower since December 31, 2004.




          (cc) Closing Costs. Agent shall have received evidence that the Borrowers have paid
or has made arrangements satisfactory to the Agent to pay all fees, costs and expenses incurred in
connection with the transactions contemplated hereby, including, without limitation, any documented
audit fees, lien search fees, filing fees and the fees and expenses of Agent’s in-house and
external legal counsel, as required pursuant to the terms of the Fee Letter.




          (dd) Alarm Contracts. With respect to all Alarm Contracts owned by any Borrower on
the Closing Date, Agent shall have received a certified list of all Alarm Contracts
held and/or being purchased pursuant to the Coastal Purchase Agreement, together with: (i)
each Borrower’s forms of Alarm Contracts used in each state in which it transacts business (ii) a
representative sampling of the Alarm Contracts certified as to by each Borrower and (iii) evidence
reasonably satisfactory to the Agent that such Alarm Contracts are Qualified Alarm Contracts
(subject to the post-closing audit to the completed by the Agent pursuant to




53









 







Section 6.13), a perfection opinion with respect to the Collateral, in form and substance reasonably satisfactory
to Agent and its counsel, dated the Closing Date.




          (ee) Telephone Numbers. Agent shall have received a collateral assignment of
telephone numbers from Borrowers, in substantially the form of Exhibit 3.1(ee), relating to
the telephone numbers used to monitor Alarm Contracts comprising RMR or otherwise used by Borrowers
in connection with the operation of their businesses (the “Collateral Assignment of Telephone
Numbers”).




          (ff) Subordination Agreement. Agent shall have received a subordination agreement
from Borrowers in substantially the form of Exhibit 3.1(ff), relating to the subordination
of any Indebtedness of any Borrower to Parent or to any other Affiliate of a Borrower that is not
itself a Borrower.




          (gg) Other Documents. Agent shall have received such other certificates, documents
and agreements respecting any Borrower as Lender may reasonably request.




     3.2 Further Conditions to Each Loan. No Lender shall be (i) obligated to fund any
Advance until the Borrowers shall have (x) provided to Agent a Notice of Advance, together with any
required deliveries pursuant to Section 7.1 hereof or any other Section of this Agreement,
(y) other than as to the Initial Advance on the Closing Date, complied with, and provided to the
Agent the items required by the Post Closing Agreement hereof, and (z) delivered to Agent, at least
two (2) days before the borrowing date of the proposed Advance, a Borrowing Base Certificate
certifying that none of the conditions set forth in (a) through (d) below exists as of the time of
the delivery of the Borrowing Base Certificate or will exist as a result of the Advance, or (ii)
obligated to convert or continue any portion of the Loan as a LIBOR Loan if, as of the date
thereof, the provision of (b) below is applicable:



          (a) any representation or warranty by any Borrower contained herein or in any other Loan
Document is untrue or incorrect in any material respect as of such date, except to the extent that
such representation or warranty expressly relates to an earlier date and except for changes therein
expressly permitted or expressly contemplated by this Agreement, and Lenders have determined not to
make such Advance, as a result of the fact that such warranty or representation is untrue or
incorrect in any material respect;




          (b) any Default or Event of Default has occurred and is continuing or would result after
giving effect to any Advance, or any Material Adverse Effect has occurred or would occur upon the
funding of such Advance;




          (c) the amount of the Advance exceeds Borrowing Availability; or




          (d) after giving effect to any Advance, the outstanding principal amount of the Loan would
exceed the Borrowing Base.



The request and acceptance by any Borrower of the proceeds of any Advance or the conversion or
continuation of any Borrowing Base Loan into, or as, a LIBOR Loan shall be deemed to constitute, as
of the date thereof, (i) a representation and warranty by each Borrower that the conditions in this
Section 3.2 have been satisfied and (ii) a reaffirmation by each Borrower of its




54









 







representations and warranties, except to the extent that such representations and warranties
expressly relate solely to an earlier date (in which case such representations and warranties shall
have been true and accurate on and as of such earlier date), and of the granting and continuance of
Agent Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.




4. REPRESENTATIONS AND WARRANTIES




          To induce Lenders to make the Loans, the Borrowers, jointly and severally, make the following
representations and warranties to Agent and each Lender with respect to all Borrowers, each and all
of which shall survive the execution and delivery of this Agreement.




     4.1 Existence; Compliance with Law. Each Borrower (a) is a corporation, limited
liability company or limited partnership duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation or organization set forth in
Disclosure Schedule (4.1); (b) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so qualified would not result
in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse
Effect; (c) has the requisite organizational power and authority and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease the property it
operates under lease and to conduct its business as now conducted or proposed to be conducted
(including, without limitation, to enter into the transactions described herein); (d) subject to
specific representations regarding Environmental Laws, has all material Governmental Approvals from
or by, and has made all material filings with, and has given all material notices to, all
Governmental Authorities having jurisdiction, to the extent required for such ownership, operation
and conduct; (e) is in compliance with its charter and bylaws or partnership or operating
agreement, as applicable; and (f) subject to specific representations set forth herein regarding
ERISA, Environmental Laws, tax and other laws, is in compliance with all applicable provisions of
law, except where the failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.



     4.2 Executive Offices, Collateral Locations, FEIN.



          Each Borrower’s name as it appears in official filings in its state of incorporation or
organization, organization type, organization number, if any, issued by its state of incorporation
or organization, and the current location of each Borrower’s chief executive office and the
warehouses and premises at which any Collateral is located are set forth in Disclosure Schedule
(4.2), and none of such locations has changed within four (4) months preceding the
Closing Date. In addition, Disclosure Schedule (4.2) lists as of the Closing Date the
federal employer identification number of each Borrower.




     4.3 Power, Authorization, Enforceable Obligations.



          The execution, delivery and performance by each Borrower of the Loan Documents to which it is
a party and the creation of all Liens provided for therein: (a) are within such Person’s corporate
or other organizational power; (b) have been duly authorized by all necessary corporate, limited
liability company or limited partnership action; (c) do not





55









 







contravene in any material respect any
provision of such Person’s charter, bylaws or partnership or operating agreement as applicable; (d)
do not violate in any material respect any law or regulation, or any order or decree of any court
or Governmental Authority; (e) do not in any material respect conflict with or result in the breach
or termination of, constitute a default under or accelerate or permit the acceleration of any
performance required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Person is a party or by which such Person or any of its property is bound;
(f) do not result in the creation or imposition of any Lien upon any of the property of such Person
other than those in favor of Agent, on behalf of itself and Lenders, pursuant to the Loan
Documents; and (g) do not require the material consent or approval of any Governmental Authority or
any other Person, except those referred to in Disclosure Schedule 4.3, all of which will
have been duly obtained, made or complied with prior to the Closing Date. Each of the Loan
Documents shall be duly executed and delivered by each Borrower that is a party thereto and each
such Loan Document shall constitute a legal, valid and binding obligation of such Borrower
enforceable against it in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity.




     4.4 Financial Statements and Projections.



          Except for the Projections, all Financial Statements concerning the Borrowers that are
referred to below have been prepared in accordance with GAAP consistently applied throughout the
periods covered (except as disclosed therein and except, with respect to unaudited Financial
Statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly
in all material respects the financial position of the Persons covered thereby as at the dates
thereof and the results of their operations and cash flows for the periods then ended.




          (a) Financial Statements. The following Financial Statements attached hereto as
Disclosure Schedule (4.4(a)) have been delivered on the date hereof:




               (i) The audited consolidated balance sheet at December 31, 2004, and the related statement of
income and cash flows of Holdings for the fiscal year then ended.



               (ii) The unaudited consolidated balance sheets at September 30, 2005, and the related
statements of income and cash flows of Holdings for the Fiscal Quarter then ended.



          (b) Pro Forma. The Pro Forma delivered on the date hereof and attached hereto as
Disclosure Schedule (4.4(b)) was prepared by Holdings giving pro forma effect to
the Loans, was based on the unaudited consolidated balance sheets of Holdings.




          (c) Projections. The Projections delivered on the date hereof and attached hereto as
Disclosure Schedule (4.4(c)) have been prepared by the Borrowers and reflect projections
for the five (5) year period beginning on January 1, 2005, on a year-by-year basis thereafter. The
Borrowers reasonably believe the Projections to be reasonable and fair in light of current
conditions and current facts known to the Borrowers and, as of the Closing Date, reflect each
Borrower’s good faith and reasonable estimates of the future financial performance of the Borrowers
for the period set forth therein; provided that, the Projections, as projections, are




56









 







inherently subject to economic and competitive uncertainties and contingencies beyond the control of the
Borrowers, and are based upon assumptions with respect to future business decisions which are
subject to change, and therefore are not necessarily indicative of future operational results of
Holdings and its consolidated Subsidiaries.




     4.5 Material Adverse Effect.



          Between December 31, 2004 and the Closing Date, (a) no Borrower has incurred any obligations,
contingent or noncontingent liabilities, liabilities for Taxes or Charges, long-term leases or
unusual forward or long-term commitments that are not reflected in the Pro Forma and that, alone or
in the aggregate, could reasonably be expected to have a Material Adverse Effect, (b) no contract,
lease or other agreement or instrument has been entered into by any Borrower or has become binding
upon any Borrower’s assets and no law or regulation applicable to any Borrower has been adopted
that has had or could reasonably be expected to have a Material Adverse Effect, and (c) neither any
Borrower nor, to any Borrower’s knowledge, any third party is in default under any Material
Contract, lease or other agreement or instrument, that in any such case alone or in the aggregate
could reasonably be expected to have a Material Adverse Effect. Except for events disclosed to the
Agent in writing by any of the Borrowers, since the Closing Date, no event has occurred that alone
or together with other events, has had or could reasonably be expected to have a Material Adverse
Effect.




     4.6 Ownership of Property; Liens.



          The real estate (“Real Estate”) listed in Disclosure Schedule (4.6)
constitutes all of the material real property owned, leased, subleased, or used by any Borrower.
Except as set forth on Disclosure Schedule (4.6), except for defects in title that do not
materially interfere with its ability to conduct its business as currently conducted or to utilize
such property or assets for their intended purposes and except where the failure to have such title
could not reasonably be expected to have a Material Adverse Effect, each Borrower owns good and
marketable fee simple title to all of its owned Real Estate, and valid and marketable leasehold
interests in all of its leased Real Estate, all as described on Disclosure Schedule (4.6),
and copies of all such leases or a summary of terms thereof reasonably satisfactory to Agent have
been delivered to Agent. Disclosure Schedule (4.6) further describes any Real Estate with
respect to which any Borrower or any Subsidiary is a lessor, sublessor or assignor. Each Borrower
has good and marketable title to, or valid leasehold interests in, all of its personal property and
assets except for defects in title that do not materially interfere with its ability to conduct its
business as currently conducted or to utilize such property or assets for their intended purposes
and except where the failure to have such title could not reasonably be expected to have a Material
Adverse Effect. None of the properties and assets of any Borrower or any Subsidiary are subject to
any Liens other than Permitted Encumbrances, and there are no facts, circumstances or conditions
known to any Borrower that may reasonably be expected to result in any Liens (including Liens arising under
Environmental Laws) other than Permitted Encumbrances. Except as set forth on Disclosure
Schedule (4.6), each Borrower or each Subsidiary has received, or will receive simultaneously
with the closing of the Loan, all material deeds, assignments, waivers, consents, nondisturbance
and attornment or similar agreements, bills of sale and other documents, and has duly effected all
recordings, filings and other actions necessary to establish, protect and perfect such Borrower’s
right, title and interest in and to all such Real Estate and other material properties and assets.




57









 







Disclosure Schedule (4.6) also describes any purchase options, rights of first refusal or
other similar contractual rights pertaining to any Real Estate. Except as set forth on
Disclosure Schedule (4.6), no portion of any Borrower’s Real Estate has suffered any material
damage by fire or other casualty loss that has not heretofore been repaired and restored in all
material respects to its original condition or otherwise remedied. All material permits required
to have been issued or appropriate to enable such Real Estate to be lawfully occupied and used for
all of the purposes for which it is currently occupied and used have been lawfully issued and are
in full force and effect.




     4.7 Labor Matters.



          Except as set forth on Disclosure Schedule (4.7): (a) no strikes or other material
labor disputes against any Borrower are pending or, to any Borrower’s knowledge, threatened; (b)
hours worked by and payment made to employees of Borrowers comply in all material respects with the
Fair Labor Standards Act and each other material federal, state, local or foreign law applicable to
such matters; (c) all material payments due from any Borrower for employee health and welfare
insurance have been paid or accrued as a liability on the books of such Borrower; (d) no Borrower
is a party to or bound by, or has assumed, any collective bargaining agreement, management
agreement, consulting agreement, employment agreement, bonus, restricted stock, stock option, or
stock appreciation plan or agreement or any similar plan, agreement or arrangement except for
agreements that can be terminated on no more than thirty (30) days notice without material penalty
(and true and complete copies of any written agreements described on Disclosure Schedule
(4.7) have been made available to Agent); (e) there are no representation proceedings involving
any Borrower pending or, to any Borrower’s knowledge, threatened with the National Labor Relations
Board, and no labor organization or group of employees of any Borrower, or assumed by any Borrower,
has made a pending demand for recognition by any Borrower; and (f) there are no material complaints
or charges against any Borrower pending or, to the knowledge of any Borrower, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out of, in connection with,
or otherwise relating to the employment or termination of employment by any Borrower of any
individual.




     4.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.



          Except as set forth in Disclosure Schedule (4.8): (i) no Borrower has any
Subsidiaries, or is engaged in any joint venture or partnership with any other Person; (ii) all of
the issued and outstanding Stock of each Borrower is owned by each of the Stockholders and in the
amounts set forth in Disclosure Schedule (4.8); (iii) there are no outstanding rights to
purchase, options, warrants or similar rights or agreements pursuant to which any Borrower may be
required to issue, sell, repurchase or redeem any of its Stock or other equity securities or any
Stock or other equity securities of its Subsidiaries; and (iv) no Borrower has any outstanding
Indebtedness or Guaranty Obligations (except for the Obligations) or as permitted by
Section 7.3.




     4.9 Government Regulation.



          No Borrower is an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company,” as such
terms are defined in




58









 







the Investment Company Act of 1940. No Borrower is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any other federal
or state statute that restricts or limits its ability to incur Indebtedness or to perform its
obligations hereunder. The making of the Loans by Lenders to Borrower, the application of the
proceeds thereof and repayment thereof, the taking or perfection of Agent’s Liens in the Collateral
and the enforcement of any rights or remedies under the Loan Documents, will not violate any
provision of any such statute or any rule, regulation or order issued by the Securities and
Exchange Commission or any other Governmental Authority or any Governmental Approval issued to the
Parent or any Borrower.




     4.10 Margin Regulations.



          No Borrower is engaged, nor will it engage, principally or as one of its important activities,
in the business of extending credit for the purpose of “purchasing” or “carrying”
any “margin stock” as such terms are defined in Regulation U of the Federal Reserve Board
as now and from time to time hereafter in effect (such securities being referred to herein as
“Margin Stock”). No Borrower owns any Margin Stock, and none of the proceeds of the Loan
or other extensions of credit under this Agreement will be used, directly or indirectly, for the
purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any
Indebtedness that was originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Loans or other extensions of credit under this Agreement to be
considered a “purpose credit” within the meaning of Regulations T, U or X of the Federal
Reserve Board. No Borrower will take or permit to be taken any action that might cause any Loan
Document to violate any regulation of the Federal Reserve Board.




     4.11 Taxes and Charges.



          All Federal and other material tax returns, reports and statements, including information
returns, required by any Governmental Authority to be filed by any Borrower have been filed with
the appropriate Governmental Authority, and all Taxes have been paid prior to the date on which any
fine, penalty, interest or late charge may be added thereto for nonpayment thereof (or any such
fine, penalty, interest, late charge or loss has been duly paid), except Taxes, Charges or other
amounts being contested in accordance with Section 6.2(b). Each Borrower has complied with
all applicable federal, state, local and foreign withholding obligations with respect to its
employees. Disclosure Schedule (4.11) sets forth those taxable years of any Borrower
currently being audited by the IRS or any other applicable Governmental Authority and any
assessments or threatened assessments in connection with such audit, or otherwise currently
outstanding. Except as described in Disclosure Schedule (4.11), no Borrower has executed
or filed with the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or collection of any
material Taxes or Charges. None of the Borrowers or their respective predecessors are liable
for any Taxes or Charges (with respect to predecessors, only those Taxes and Charges assumed by the
Borrowers): (x) under any agreement (including any tax sharing agreement) or (y) to each
Borrower’s knowledge, as a transferee. No Borrower has agreed or been requested to make any
adjustment under Code Section 481(a) by reason of a change in accounting method or otherwise.




59









 








     4.12 ERISA.



          (a) Disclosure Schedule (4.12) lists all Plans sponsored or maintained by any Borrower
and all Plans sponsored and maintained by an ERISA Affiliate the operating of which could lead to a
liability of any Borrower which could reasonably be expected to have a Material Adverse Effect, and
separately identifies any Pension Plans, including Title IV Plans, Multiemployer Plans, ESOPs and
Welfare Plans, including all Retiree Welfare Plans. Copies of all such listed Plans, together with
a copy of the latest form IRS/DOL 5500-series for each such Plan have been made available to Agent.
Except with respect to Multiemployer Plans, each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the Code (or has been adapted using a prototype plan document that has
been approved by the IRS), the trusts created thereunder have been determined to be exempt from tax
under the provisions of Section 501 of the Code, and, to each Borrower’s knowledge, nothing has
occurred that would cause the loss of such qualification or tax-exempt status. Each Plan is in
compliance with the applicable provisions of ERISA and the Code, except to the extent any such
non-compliance could not reasonably be expected to have a Material Adverse Effect. No Borrower, or
ERISA Affiliate has failed to make any contribution or pay any amount due as required by either
Section 412 of the Code or Section 302 of ERISA or the terms of any such Plan, except to the extent
any such failure could not reasonably expected to have a Material Adverse Effect. No Borrower or
any ERISA Affiliate has engaged in, or assumed any liability in connection with, a non-exempt
“prohibited transaction,” as defined in Section 406 of ERISA and Section 4975 of the Code,
in connection with any Plan, that could reasonably be expected to have a Material Adverse Effect.




          (b) Except as set forth in Disclosure Schedule (4.12) and except as could not
reasonably be expected to have a Material Adverse Effect: (i) no Title IV Plan has any material
Unfunded Pension Liability; (ii) no ERISA Event or event described in Section 4062(e) of ERISA with
respect to any Title IV Plan has occurred or is reasonably expected to occur; (iii) there are no
pending, or to the knowledge of any Borrower, threatened material claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any
Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Borrower or ERISA Affiliate has
incurred, assumed or reasonably expects to incur or assume any material liability as a result of a
complete or partial withdrawal from a Multiemployer Plan; (v) within the last five (5) years no
Title IV Plan of any Borrower or ERISA Affiliate has been terminated, other than in a “standard
termination” as that term is used in Section 4041 of ERISA; (vi) Stock of all Borrowers and
their ERISA Affiliates makes up, in the aggregate, no more than ten percent (10%) of fair market
value of the assets of any Plan measured on the basis of fair market value as of the latest
valuation date of any Plan; and (vii) no liability under any Title IV Plan has been satisfied with
the purchase of a contract from an insurance company that is not rated AAA by the Standard & Poor’s
Corporation or an equivalent rating by another nationally recognized rating agency.




     4.13 No Litigation.



          No action, claim, lawsuit, demand, investigation (known to any Borrower) or proceeding is now
pending or, to the knowledge of any Borrower, threatened against any Borrower before any
Governmental Authority or before any arbitrator or panel of arbitrators (collectively,
“Litigation”), (a) that challenges any Borrower’s right or power to enter into or




60









 







perform any of its obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) that could reasonably be
expected to have a Material Adverse Effect. Except as set forth on Disclosure Schedule
(4.13), (or any other date to which this representation is reaffirmed) there is no Litigation
pending, or to any Borrower’s knowledge, threatened that seeks damages in excess of $300,000 or
injunctive relief against, or alleges criminal misconduct of, any Borrower.




     4.14 Brokers.



          Except as set forth on Disclosure Schedule (4.14), no broker or finder acting on
behalf of any Borrower or Affiliate thereof brought about the obtaining, making or closing of the
Loan, and no Borrower or Affiliate thereof has any obligation to any Person in respect of any
finder’s or brokerage fees in connection therewith.




     4.15 Intellectual Property.



          Except as set forth on Disclosure Schedule (4.15), each Borrower owns or has rights to
use all material Intellectual Property necessary to continue to conduct its business as now
conducted by it or presently proposed to be conducted by it, and each Trademark, Copyright, Patent
or Patent application, and Internet domain name and URL (and all registrations or applications for
any of the foregoing) owned or leased, together with application or registration numbers, as
applicable, is listed in Disclosure Schedule (4.15). Each Borrower conducts its business
and affairs without known infringement of or interference with any Intellectual Property materially
necessary to continue to conduct its business as now conducted by it or presently proposed to be
conducted by it of any other Person in any material respect. Except as set forth in Disclosure
Schedule (4.15), no Borrower is aware of any material infringement claim by any other Person
with respect to any Intellectual Property.




     4.16 Full Disclosure.



          No information contained in this Agreement, any of the other Loan Documents, any Financial
Statements or Collateral Reports or other written reports from time to time prepared by any
Borrower and delivered hereunder or any written statement prepared by any Borrower and furnished by
or on behalf of any Borrower to Agent or any Lender pursuant to the terms of this Agreement taken
as a whole contains or will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which, and at the time, they were made. The
Projections from time to time delivered hereunder are or will be based upon the estimates and
assumptions stated therein, all of which the Borrowers shall reasonably believe to be reasonable
and fair in light of current conditions and current facts known to the Borrowers as of the date
such Projections are delivered, and shall reflect each
Borrower’s good faith and reasonable estimates of the future financial performance of the
Borrowers for the period set forth therein; provided that, the Projections, as projections, are
inherently subject to economic and competitive uncertainties and contingencies beyond the control
of the Borrowers, and are based upon assumptions with respect to future business decisions which
are subject to change, and therefore are not necessarily indicative of future operational results
of Holdings and its consolidated Subsidiaries. The Liens granted to Agent or





61









 





any Agent, on behalf
of itself and Lenders, pursuant to the Collateral Documents will at all times be fully perfected
first priority Liens in and to the Collateral described therein, subject, as to priority, only to
Permitted Encumbrances.




     4.17 Environmental Matters.



          (a) Except as set forth in Disclosure Schedule (4.17): (i) the owned Real Estate, and
to the knowledge of the Borrowers, the leased Real Estate, is free of contamination from any
Hazardous Material except for such contamination that would not result in Environmental Liabilities
that could reasonably be expected to exceed $300,000; (ii) no Borrower has caused or suffered to
occur any Release of Hazardous Materials on, at, in, under, from, or to any of its Real Estate that
could reasonably be expected to result in Environmental Liabilities in excess of $300,000; (iii)
the Borrowers are in material compliance with all Environmental Laws, except for such noncompliance
that would not result in Environmental Liabilities which could reasonably be expected to exceed
$300,000; (iv) the Borrowers have obtained, and are in material compliance with, all Environmental
Permits required by Environmental Laws for the operations of their respective businesses as
presently conducted or as proposed to be conducted, except where the failure to so obtain, or
materially comply with, such Environmental Permits would not result in Environmental Liabilities
that could reasonably be expected to exceed $300,000, and all such Environmental Permits are, to
the knowledge of any Borrower holding such Environmental Permit, validly issued and not subject to
any administrative or judicial appeal; (v) no Borrower is involved in any operations or knows of
any facts, circumstances or conditions that are reasonably likely to cause such Borrower to incur
any Environmental Liabilities which could reasonably be expected to exceed $300,000; (vi) there is
no Litigation alleging that any Borrower is liable under, or has violated, criminally or civilly,
any Environmental Laws with respect to the owned or leased Real Estate; (vii) no notice has been
received by any Borrower identifying it as a “potentially responsible party” or requesting
information under CERCLA or analogous state statutes, and, to the knowledge of Borrowers; there are
no facts, circumstances or conditions that may reasonably result in any Borrower being identified
as a “potentially responsible party” under CERCLA or analogous state statutes; and (viii)
Borrowers have provided to Agent copies of all existing environmental reports, reviews and audits
in their possession pertaining to actual or potential Environmental Liabilities with respect to the
owned or leased Real Estate, in each case relating to any Borrower.




          (b) Each Borrower hereby acknowledges and agrees that Agent (i) is not now, and has not ever
been, pursuant to this Agreement or the other Loan Documents, in control of any of the Real Estate
or any Borrower’s affairs, and (ii) except as provided in the Loan Documents, does not have the
capacity through the provisions of the Loan Documents or otherwise to influence any Borrower’s
conduct with respect to the ownership, operation or management of any of its Real Estate or
compliance with Environmental Laws or Environmental Permits.




     4.18 Insurance.



          Disclosure Schedule (4.18) lists all insurance policies of any nature maintained, for
current occurrences by any Borrower, as well as a brief description of the types of coverage with
respect to each such policy.






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     4.19 Bank Accounts.



          Disclosure Schedule (4.19) lists all banks and other financial institutions at which
any Borrower maintains deposit or other accounts, and such Schedule correctly identifies the name,
address and telephone number of each depository, the name in which the account is held, a
description of the purpose of the account, and the complete account number therefor.




     4.20 [Intentionally Omitted].



     4.21 Customer and Trade Relations.



          Except as set forth on Disclosure Schedule (4.21), there exists no actual or, to the
knowledge of any Borrower, threatened termination or cancellation of (other than through any
stated expiration of term or maturity of contract), or any material adverse modification or change
in the business relationship of any Borrower with any Subscriber or group of Subscribers whose
contracts during the preceding twelve (12) months accounted for greater than five percent (5%) of
the revenues of any Borrower; or the business relationship of any Borrower with any supplier
essential to its operations that could reasonably be expected to have a Material Adverse Effect.




     4.22 Bonding; Licenses.



          Except as set forth on Disclosure Schedule (4.22), neither any Borrower nor any
Subsidiary is a party to or bound by any surety bond agreement or bonding requirement with respect
to products or services sold by it or any License with respect to products sold by it.




     4.23 Solvency.



          Both before and after giving effect to (a) the Advance to be made on the Closing Date or such
other date as any Advance requested hereunder is made, (b) the disbursement of the proceeds of such
Advance pursuant to the instructions of the Borrowers, and (c) the payment and accrual of all
transaction costs in connection with the foregoing, each Borrower is and will be Solvent.




     4.24 OFAC.



          No Borrower or any Affiliate thereof (i) is a person whose property or interest in property is
blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions
prohibited by Section 2 of such executive order, or is otherwise associated with any such person in
any manner violative of such Section 2, or (iii) is a person on the list of Specially Designated
Nationals and Blocked Persons or subject to the limitations or
prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control
regulation or executive order.





63









 








     4.25 Patriot Act.



          Each Borrower and each Affiliate thereof is in compliance, in all material respects, with (i)
the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of
the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other
enabling legislation or executive order relating thereto, and (ii) Title III of the Uniting And
Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism
(USA Patriot Act of 2001). No part of the proceeds of the Loans will be used, directly or
indirectly, for any payments to any governmental official or employee, political party, official of
a political party, candidate for political office, or anyone else acting in an official capacity,
in order to obtain, retain or direct business or obtain any improper advantage, in violation of the
United States Foreign Corrupt Practices Act of 1977, as amended.




     4.26 Material Contracts.



          Disclosure Schedule (4.26) sets forth a complete and accurate list of all Material
Contracts of any Borrower in effect. Other than as set forth in Disclosure Schedule 4.26,
each such Material Contract is, and after giving effect to the consummation of the transactions
contemplated by the Loan Documents will be, in full force and effect in accordance with the terms
thereof. Except as disclosed in Disclosure Schedule (4.26), each Material Contract is,
pursuant to the terms thereunder, assignable to Agent.




     4.27 Absence of Defaults.



          Each Borrower (and, to the knowledge of the Borrowers, each other party to any Material
Contract, agreement, instrument, decree or order), is in compliance with all provisions of all
Material Contracts, agreements, instruments, decrees and orders to which such Borrower is a party
or by which such Borrower or its property is bound or affected (or in the case of such other
parties, each Material Contract), the breach or default of which could reasonably be expected to
have a Material Adverse Effect.




     4.28 Alarm Contracts.



          All Alarm Contracts owned by the Borrowers comply with the provisions of Sections
6.13(a) and (d).




     4.29 Write-Offs.



          Disclosure Schedule 4.29 sets forth Borrowers’ current policies for writing off
accounts receivable on its books of account (collectively, the “Write-Off Policy”).




5. FINANCIAL STATEMENTS AND INFORMATION




     5.1 Reports and Notices.



          (a) Each Borrower executing this Agreement hereby agrees that from and after the Closing Date
and until the Loans have been paid in full and the Commitments have




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terminated, it shall deliver
the Financial Statements, notices, Projections and other information at the times, to the Persons
and in the manner set forth below:




               (i) Monthly Financials. To the Agent and each Lender, within thirty (30) days after
the end of each Fiscal Month: (i) consolidated unaudited balance sheets of Holdings as of the
close of such Fiscal Month and the related statements of income and cash flows for that portion of
the Fiscal Year ending as of the close of such Fiscal Month; (ii) consolidated and unaudited
statements of income of Holdings for such Fiscal Month, setting forth in comparative form (for each
Fiscal Month ending after the first anniversary of the Closing Date) the figures for the
corresponding period in the prior year and the figures contained in the Projections for such Fiscal
Year, all prepared in accordance with GAAP (subject to normal year-end adjustments and the absence
of footnotes); (iii) a summary of the outstanding balance of all Intercompany Notes as of the last
day of that Fiscal Month. Such financial information shall be accompanied by a certificate of the
President or Chief Financial Officer of Borrowers (each, a “Compliance Certificate”) which
shall include, among other things, the calculations used in determining compliance with each of the
Financial Covenants that is tested on a monthly basis and the certification that (i) such financial
information presents fairly in all material respects in accordance with GAAP (subject to normal
year-end adjustments and the absence of footnotes) the financial position, results of operations
and statements of cash flows of Holdings, on a consolidated basis, as at the end of such Fiscal
Month and for that portion of the Fiscal Year then ended, (ii) such financial information presents
fairly in all material respects the financial position and results of operations of Holdings, on a
consolidated basis, as at the end of such Fiscal Month and for that portion of the Fiscal Year then
ended, and (iii) any other information presented is true, correct and complete in all material
respects and that there was no Default or Event of Default in existence as of such time or, if a
Default or Event of Default has occurred and is continuing, describing the nature thereof and
efforts undertaken to cure such Default or Event of Default. Each such Compliance Certificate must
be given in writing (by telecopy or overnight courier) in the form of Exhibit 5.1(a), and
shall include the information and attachments required in such Exhibit.



               (ii) Quarterly Financials. To the Agent and each Lender, within forty-five (45) days
after the end of each Fiscal Quarter: (i) consolidated unaudited balance sheets of Holdings as of
the close of such Fiscal Quarter and the related statements of income and cash flow for that
portion of the Fiscal Year ending as of the close of such Fiscal Quarter; and (ii) consolidated
unaudited statements of income of Holdings for such Fiscal Quarter, in each case setting forth in
comparative form the figures for the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all prepared in accordance with GAAP (subject to
normal year-end adjustments and the absence of footnotes).



               (iii) Operating Plan. To the Agent and each Lender, as soon as available, but not
later than sixty (60) days after the end of each Fiscal Year, an annual operating
plan for Holdings, and its consolidated Subsidiaries, approved by the Board of Directors of
Parent, for the following Fiscal Year, which (i) includes a statement of all of the material
assumptions on which such plan is based, (ii) includes monthly balance sheets and a monthly budget
for the following year and (iii) integrates sales, gross profits, operating expenses, operating
profit, cash flow projections and Borrowing Availability projections, all prepared on the same
basis and in similar detail as that on which operating results are reported (and in the



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case of
cash flow projections, representing management’s good faith estimates of future financial
performance based on historical performance), and including plans for personnel, Capital
Expenditures and facilities.



               (iv) Annual Audited Financials. To the Agent and each Lender, within one hundred and
twenty (120) days after the end of each Fiscal Year, audited Financial Statements for Holdings on a
consolidated basis, consisting of balance sheets and statements of income and retained earnings and
cash flows, setting forth in comparative form (for each Fiscal Year ending after the first
anniversary of the Closing Date) in each case the figures for the previous Fiscal Year, which
Financial Statements shall be prepared in accordance with GAAP and certified without qualification,
by an independent certified public accounting firm of national standing or otherwise reasonably
acceptable to Agent. Such Financial Statements shall be accompanied by (i) a statement prepared in
reasonable detail showing the calculations used in determining compliance with each of the
Financial Covenants, (ii) a report from such accounting firm to the effect that, in connection with
their audit examination, nothing has come to their attention to cause them to believe that a
Default or Event of Default has occurred with respect to the Financial Covenants (or specifying
those Defaults and Events of Default that they became aware of), it being understood that such
audit examination extended only to accounting matters and that no special investigation was made
with respect to the existence of Defaults or Events of Default, (iii) the annual letters to such
accountants in connection with their audit examination detailing contingent liabilities and
material litigation matters, (iv) unaudited versions of such Financial Statements, and (v) the
certification of the President or Chief Financial Officer of Holdings that (A) all such Financial
Statements present fairly in all material respects in accordance with GAAP the financial position,
results of operations and statements of cash flows of Holdings on a consolidated basis, as at the
end of such Fiscal Year and for the period then ended, (B) all such Financial Statements present
fairly in all material respects the financial position, results of operations and statements of
cash flows of Holdings on a consolidated basis, as at the end of such Fiscal Year and for the
period then ended, and (C) that there was no Default or Event of Default in existence as of such
time or, if a Default or Event of Default has occurred and is continuing, describing the nature
thereof and a detailed summary of efforts undertaken to cure such Default or Event of Default.



               (v) Management Letters. To the Agent, within ten (10) Business Days after receipt
thereof by any Borrower, copies of all management letters, exception reports or similar letters or
reports received by such Borrower from its independent certified public accountants.



               (vi) Default Notices. To the Agent, as soon as practicable, and in any event within
five (5) Business Days after an executive officer of Borrower has actual knowledge of the existence
of any event that has had a Material Adverse Effect, any Default or Event of Default, telephonic or
telecopied notice specifying the nature of such Default or Event of Default
or other event, including the anticipated effect thereof, which notice, if given
telephonically, shall be promptly confirmed in writing on the next Business Day.



               (vii) Subordinated Debt and Equity Notices. To the Agent, as soon as practicable,
copies of all material written notices given or received by any Borrower with respect to any
Subordinated Debt or Stock of such Person, and, within five (5) Business Days after any



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Borrower
obtains knowledge of any matured or unmatured event of default with respect to any Subordinated
Debt, notice of such event of default.



               (viii) Supplemental Schedules. To the Agent, supplemental disclosures, if any,
required by Section 6.6.



               (ix) Litigation. To the Agent in writing, promptly upon learning thereof and in any
event within five (5) Business Days, notice of any Litigation commenced or threatened against any
Borrower that (i) seeks damages in excess of $300,000, (ii) seeks injunctive relief, (iii) is
asserted or instituted against any Plan, its fiduciaries or its assets or against any Borrower or
ERISA Affiliate in connection with any Plan, (iv) alleges criminal misconduct by any Borrower, (v)
alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental
Liabilities; or (vi) involves any product recall, that could in any such case reasonably be
expected to have a Material Adverse Effect.



               (x) Insurance Notices. To the Agent, disclosure of losses or casualties required by
Section 6.4.



               (xi) Lease and Material Contract Default Notices. To the Agent (i) promptly, but not
later than five (5) days after receipt thereof, copies of any and all default notices received
under or with respect to any leases of real property, warehouseman’s agreements, Off Site Storage
Agreements and related bailee agreements and any similar arrangements for any location where any
Borrower or any of its Collateral is located (other than any self-storage unit which does not
contain any Alarm Contracts or other assets with a value in excess of $50,000), (ii) within five
(5) days after receipt thereof, copies of any and all default notices received under or with
respect to any Material Contract, and (iii) such other notices or documents as Agent may reasonably
request.



               (xii) Changes in Applicable Law. To the Agent, promptly upon knowledge thereof, notice
of any change in any requirement of law governing any Alarm Contract which could reasonably be
expected to require an amendment to such Alarm Contract.



               (xiii) Other Documents. Such other financial and other information respecting any
Borrower’s business or financial condition as Agent or the Requisite Lenders shall, from time to
time, reasonably request.



          (b) Each Borrower executing this Agreement hereby agrees that from and after the Closing Date
and until the Loans have been indefeasibly paid in full and the Commitments have been terminated,
it shall deliver the various collateral reports (the “Collateral Reports”) set forth below
at the times, to the Persons and in the manner set forth below.




               (i) To Agent (A) within thirty (30) days of the end of each month, electronic copies of all
Alarm Contracts, and (B) at the time of delivery of each of the quarterly Financial Statements
delivered pursuant to Section 5.1, to the extent the following has changed from the prior
delivery thereof, a list of any applications for the registration of any Patent, Trademark or
Copyright filed by any Borrower with the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in the prior Fiscal Quarter.



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               (ii) To Agent, within thirty (30) days of the end of each month end:



                    (A) an attrition detail report for the immediately preceding six (6) Fiscal Months, in form
and substance satisfactory to Agent in its Permitted Discretion, prepared and certified to by the
President, Vice President or Chief Financial Officer of Holdings;



                    (B) an RMR summary report for the Fiscal Year-to-date, in form and substance satisfactory to
Agent in its Permitted Discretion, prepared and certified to by the President, Vice President or
Chief Financial Officer of Holdings;



                    (C) an acquisitions schedule for the Fiscal Year-to-date, in form and substance satisfactory
to Agent in its Permitted Discretion, prepared and certified to by the President, Vice President or
Chief Financial Officer of Holdings; and



                    (D) a month-end Qualified RMR report, providing details of all RMR and Qualified RMR,
including, without limitation, the reasons that any RMR is not Qualified RMR, prepared and
certified to by the President, Vice President or Chief Financial Officer of Holdings in the form of
Exhibit 5.1(b) (a “Borrowing Base Certificate”).



                    (E) a month-end accounts receivable report, providing all balances outstanding by customer.



     5.2 Communication with Accountants.



          Each Borrower executing this Agreement authorizes Agent and each Lender, so long as an Event
of Default has occurred and is continuing, to communicate directly with its independent certified
public accountants and authorizes and shall instruct those accountants and advisors to communicate
to Agent and each Lender through the Agent information relating to any Borrower with respect to the
business, results of operations and financial condition of any Borrower.




6. AFFIRMATIVE COVENANTS




          Each Borrower executing this Agreement jointly and severally agrees that from and after the
date hereof and until the Loans have been indefeasibly paid in full and the Commitments have been
terminated:




     6.1 Maintenance of Existence and Conduct of Business.



          Except as otherwise permitted under this Agreement, each such Borrower shall: (i) do or cause
to be done all things necessary to preserve and keep in full force and effect its existence and its
material rights and franchises; (ii) continue to conduct its business substantially as conducted as
of the Closing Date or as otherwise permitted hereunder; (iii) at all times maintain, preserve and
protect all of its material assets and properties used or useful in the conduct of its business,
and keep all of its material tangible assets and properties in good repair, working order and
condition in all material respects (taking into consideration ordinary wear and tear) and from time
to time make, or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices; and (iv) give




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thirty (30) days prior
written notice to Agent of any proposed change in its name from that set forth in Disclosure
Schedule (6.1).




     6.2 Payment of Taxes and Charges.



          (a) Subject to Section 6.2(b), each such Borrower shall pay and discharge or cause to
be paid and discharged prior to the imposition of any penalties therefor all material Taxes and
Charges payable by it, including, without limitation: (i) Taxes and Charges imposed upon it, its
income and profits, or any of its property (real, personal or mixed) and all Taxes or Charges with
respect to social security and unemployment withholding with respect to its employees; (ii) lawful
claims for labor, materials, supplies and services or otherwise, that would, if not paid, become
Charges; and (iii) all storage or rental charges payable to warehousemen and bailees, in each case,
before any penalty is imposed for failure to pay, except in the case of clauses (ii) and
(iii) where the failure to pay or discharge such Charge could not reasonably be expected to
result in a Material Adverse Effect.




          (b) Each such Borrower may in good faith contest, by appropriate proceedings, including
negotiations, the validity or amount of any Tax or Charge, or claims described in Section
6.2(a); provided, that: (i) adequate reserves with respect to such contest are
maintained on the books of such Borrower, in accordance with GAAP; (ii) no Lien, other than
Permitted Encumbrances, shall be imposed to secure payment of such Tax or Charge (other than
payments to warehousemen and/or bailees) that is superior to any of the Liens securing the
Obligations and such contest is maintained and prosecuted continuously and with diligence
(including by conducting negotiations) and operates to suspend collection or enforcement of such
Tax or Charge; (iii) none of the Collateral becomes subject to forfeiture or loss as a result of
such contest; (iv) such Borrower shall promptly pay or discharge such contested Tax or Charge, or
claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to
Agent evidence reasonably acceptable to Agent of such compliance, payment or discharge, if such
contest is terminated or discontinued adversely to such Borrower or the conditions set forth in
this Section 6.2(b) are no longer met; and (v) Agent has not advised Borrower in writing
that Agent reasonably believes that nonpayment or nondischarge thereof could have or result in a
Material Adverse Effect.




     6.3 Books and Records.



          Each such Borrower shall keep (a) adequate books and records with respect to its business
activities in which proper entries, reflecting all financial transactions, are made in accordance
with GAAP, with such books and records for a given period to be on a basis consistent with the
books and records from the previous period in all material respects, except as noted therein with
reasonable explanatory comments and (b) set up and maintain on its books such reserves as may be
required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and
claims and with respect to its business.





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     6.4 Insurance; Damage to or Destruction of Collateral.



          (a) Each such Borrower shall maintain in full force and effect, at its own expense, with
insurers reasonably acceptable to the Agent and comply with all terms and conditions of the
following insurance coverages:




               (i) All Risk Real and Personal Property and Boiler and Machinery Insurance. ‘All
risk’ or ‘special form’ real and personal property insurance against direct physical loss or damage
on an all risks basis, including comprehensive boiler and machinery coverage but, so long as the
Borrowers provide evidence reasonably acceptable to the Agent that any Real Estate is not located
in a hazardous flood zone, excluding flood and earthquake, subject to a maximum deductible of
$5,000. The property shall be insured for the full replacement cost and no co-insurance.



               (ii) Business Income. As an extension of the coverage required under paragraph (a)(i)
above, business income insurance including extra expense in an agreed amount equal to six (6)
months projected loss of net profits, continuing expenses and debt service payments, subject to a
maximum deductible of ninety-six (96) hours and shall contain an agreed amount endorsement waiving
any coinsurance penalty.



               (iii) Commercial General Liability/Errors & Omissions Insurance: Commercial general
liability/errors & omissions insurance written on an occurrence basis with a limit of not less than
$1,000,000 each occurrence and $3,000,000 in the aggregate per location. Such coverage shall
include, but not be limited to, premises/operations, blanket contractual liability, independent
contractors, broad form products and completed operations, personal injury, fire legal liability,
employee benefits liability, and losses resulting from the negligent acts, errors or omissions of
the named insured and arising out of the operations of the named insured, and shall cover all
contract forms used or acquired by any Borrower. Such insurance shall not exclude coverage for
punitive or exemplary damages where insurable by law.



               (iv) Workers’ Compensation/Employers Liability. Workers’ compensation insurance in
accordance with statutory provisions covering accidental injury, illness or death of an employee of
such Borrower while at work or in the scope of his or her employment with such Borrower and
employer’s liability insurance in an amount not less than $500,000. Such coverage shall not
contain any occupational disease exclusions.



               (v) Automobile Liability. Automobile liability insurance covering owned, non-owned,
leased, hired or borrowed vehicles against bodily injury or property damage. Such coverage shall have a limit of not less than $1,000,000 or such higher amount as may be
required by law.



               (vi) Excess/Umbrella Liability. Excess or umbrella liability insurance in an amount
not less than $10,000,000, written on an occurrence basis providing coverage limits in excess of
the insurance limits required under paragraphs (a)(iii), (a)(iv) (employers liability only), and
(a)(v) above. Such insurance shall follow from the primary insurances and drop down in case of
exhaustion of underlying limits and /or aggregates. Such insurance shall not exclude coverage for
punitive or exemplary damages where insurable by law.



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               (vii) Keyman Life Insurance. The Life Insurance Policy.


Without limiting the obligations of the Borrowers under the provisions of this Section, in the
event any Borrower shall fail to maintain in full force and effect insurance as required by this
Section, then Agent may, but shall have no obligation to, procure insurance covering the interests
of the Agent and Lenders in such amounts and against such risks as Agent shall deem appropriate,
and such Borrower shall reimburse Agent in respect of any premiums paid by Agent (all such amounts
being deemed additional Obligations).




          (b) In addition to the foregoing, each Borrower and each Subsidiary shall maintain at its own
expense, with insurers acceptable to the Agent, such other insurance to such extent and against
such risks, as are reasonably satisfactory to the Agent.




          (c) The Borrowers shall cause each insurance policy (other than any policy referred to in
clause (a)(iv) above related to workers’ compensation) pertaining to the insurable properties to
(i) name the Agent and each Lender as an “additional insured” if such policy is a liability
policy, (ii) name the Agent for itself and on behalf of the Lenders as “loss payee” if such
policy is a property and/or boiler & machinery policy or a business income policy, (iii) provide
that the Agent and each Lender shall be notified in writing of any proposed cancellation or
material change in risk, of such policy, initiated by the insurer at least thirty (30) days prior
to any proposed cancellation or material change in risk, (iv) contain a waiver of subrogation in
favor of the Agent for itself and on behalf of the Lenders; (v) contain a breach of warranty
provision in favor of the loss payee; (vi) contain a cross liability/separation of insureds clause,
(vii) provide that the insurance shall be primary and without right of contribution from any other
insurance which may be available to the Agent and Lenders, (viii) provide that the Agent and
Lenders have no responsibility for premiums, warranties or representations to underwriters.




          (d) On the Closing Date and at least thirty (30) days prior to expiry of the policies, the
Borrowers shall deliver or cause to be delivered to the Agent a certificate of insurance which
shall (i) evidence that all the coverages listed in this Section have been renewed and will
continue to be in full force and effect for such period as shall be then stipulated, (ii) specify
the insurers with whom the insurances are carried and (iii) contain such other certifications and
undertakings as are customarily provided to lenders, as reasonably requested by the Agent.




          (e) Each Borrower shall promptly notify Agent of any loss, damage, or destruction to any
property in the amount of $125,000 or more, whether or not covered by
insurance. After deducting from the proceeds of such insurance (i) the expenses incurred by
Agent in the collection or handling thereof, and (ii) amounts required to be paid to creditors
(other than Lenders) having Permitted Encumbrances, Agent shall apply such proceeds to the
reduction of the Obligations in accordance with Section 2.2(c); provided, that if
no Event of Default has occurred or is continuing, such insurance proceeds do not exceed $250,000
in the aggregate and such proceeds together with other funds available to such Borrower will be
sufficient for such purpose, at such Borrower’s request Agent shall permit the applicable Borrower
to use such money, or any part thereof, to replace, repair, restore or rebuild the affected
property in a diligent and expeditious manner with materials and workmanship of substantially the
same quality as existed before the loss, damage or destruction or to acquire other assets to be




71









 







used on the location of the damaged or destroyed property; provided further that if (x)
such Borrower has not completed or entered into binding agreements to complete such replacement,
restoration, repair or rebuilding or to acquire such related assets within one hundred eighty (180)
days of such casualty, or (y) and Event of Default has occurred or is continuing during such
period, Agent may apply such insurance proceeds to the Obligations in accordance with Section
2.2(c). All insurance proceeds made available to any Borrower to replace, repair, restore or
rebuild property shall be deposited in a Bank Account (except to the extent the Agent, in its
reasonable discretion, requires such Borrower to deposit such amounts into a blocked account). To
the extent such funds are placed in a blocked account, they shall be made available to such
Borrower to replace, repair, restore or rebuild the property as follows: (i) such Borrower shall
request that an Advance or release from any such blocked account be made to such Borrower in the
amount requested to be released; (ii) so long as no Event of Default has occurred and is
continuing, Lenders shall make such Advance or Agent shall release funds from such blocked account;
and (iii) in the case of insurance proceeds applied against the Loan, any reserve established with
respect to such insurance proceeds shall be reduced by the amount of such Advance. To the extent
(x) not used to replace, repair, restore or rebuild property, or (y) if any Event of Default has
occurred or is continuing, such insurance proceeds shall be applied in accordance with Section
2.2(c).




     6.5 Compliance with Laws.



          Except as otherwise required hereunder, each such Borrower shall comply in all material
respects, with all material, federal, state, local and foreign laws and regulations applicable to
it, except to the extent that the failure to comply would not reasonably be expected to give rise
to a Material Adverse Effect.




     6.6 Supplemental Disclosure.



          Not more frequently than once each Fiscal Year at the request of the Agent, the Borrowers
shall and Borrowers may, at any time from time to time as often as Borrowers elect, supplement each
Disclosure Schedule hereto, or any representation herein or in any other Loan Document, with
respect to any matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such Disclosure Schedule or as
an exception to such representation or that is necessary to correct any information in such
Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case
of any supplements to any Disclosure Schedule, such Disclosure Schedule shall be appropriately
marked to show the changes made therein); provided that no such supplement to
any such Disclosure Schedule or representation shall amend, supplement or otherwise modify any
Disclosure Schedule or representation, or be or be deemed a waiver of any Default or Event of
Default resulting from the matters disclosed therein, unless consented to by the Requisite Lenders
in writing, or unless such supplement relates to any matter arising after the Closing Date that is
not prohibited by the terms hereof and the contents of the disclosure does not evidence an event or
circumstance that would give rise to an Event of Default.





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     6.7 Intellectual Property.



          Each such Borrower shall conduct its business and affairs without knowing infringement of or
interference with any Intellectual Property of any other Person in any material respect and shall
comply in all material respects with the terms of its Licenses.




     6.8 Environmental Matters.



          Each such Borrower shall: (a) conduct its operations and keep and maintain its Real Estate in
compliance with all Environmental Laws and Environmental Permits other than noncompliance that
could not reasonably be expected to result in Environmental Liabilities that could reasonably be
expected to exceed $300,000; (b) implement any and all investigation, remediation, removal and
response actions that are necessary to respond to any Release that could reasonably be expected to
result in Environmental Liabilities in excess of $300,000, or legally required to respond to any
Release unpermitted by any applicable Environmental Law of any Hazardous Material, or to comply
with Environmental Laws and Environmental Permits pertaining to the presence, generation,
treatment, storage, use, disposal, transportation or Release of any Hazardous Material, on, at, in,
under, from, or to its Real Estate, except as could not reasonably be expected, in each case, to
result in Environmental Liabilities in excess of $300,000; provided that upon prior written notice
to Agent, each affected Borrower may in good faith contest or challenge its liability and shall not
be deemed in violation of this covenant while any such challenges are pending; and (c) notify Agent
promptly after such Borrower becomes aware of any Release unpermitted by any applicable
Environmental Law of a Hazardous Material, or of any violation of Environmental Laws or
Environmental Permits, on, at, in, under, from or to any of its Real Estate that, in each case, is
reasonably likely to result in Environmental Liabilities in excess of $300,000 and promptly forward
to Agent a copy of any order, notice, request for information or any communication or report
received by such Borrower in connection with any such Release unpermitted by any applicable
Environmental Law or such violation of Environmental Laws or Environmental Permits as the Agent may
reasonably request in each case, regardless of whether a Governmental Authority having jurisdiction
to enforce any applicable Environmental Laws has taken or threatened any action in connection with
any such unpermitted Release or violation. If Agent at any time has a reasonable basis to believe
that, on, at, in, under, from, or to the Real Estate of each Borrower, there is or has been a
Release unpermitted by any applicable Environmental Law of a Hazardous Material, or a violation of
any Environmental Laws or Environmental Permits by any such Borrower or any Environmental Liability
arising thereunder that, in each case, could reasonably be expected to result in Environmental
Liabilities in excess of $300,000, then each such Borrower shall, upon Agent’s written request, (i)
cause the performance of such environmental assessments including subsurface sampling of soil and
groundwater, and preparation of such environmental reports (“Environmental Assessments”),
at the Borrowers’ expense, as Agent may from time to time
reasonably request, which shall be conducted by reputable environmental consulting firms
reasonably acceptable to Agent and shall be in form and substance reasonably acceptable to Agent,
and (ii) upon reasonable notice, permit Agent or its representatives to have reasonable access to
all Real Estate for the purpose of conducting such Environmental Assessments (to the extent any
such Borrower has such access) as Agent reasonably deems appropriate, including any sampling and
testing of soil, surface water, or groundwater which Agent or its representatives may reasonably
request, it being understood that any such Environmental




73









 







Assessments shall not unreasonably
interfere with any such Borrower’s business or operations, shall be conducted in a manner
consistent with all applicable law, and shall not interfere with any investigation, assessment, or
remedial activities required by Environmental Law that may be underway or proposed. The Agent
and/or its consultants shall return the Real Estate to the same condition that existed prior to the
Environmental Assessments and shall indemnify any Borrower from and against all loss, damage, cost
or expense associated with any claims, demands, suits, proceedings or judgments relating to the
Real Estate and resulting from a condition on, at, in, or under the Real Estate which was created
by performance of the Environmental Assessments. Borrowers shall reimburse Agent for the
reasonable costs of such Environmental Assessments and the same will constitute a part of the
Obligations secured hereunder.




     6.9 Agreements Regarding Real Estate.



          After the Closing Date, no real property, warehouse, storage, bailment or other space, shall
be owned, leased or otherwise used by any such Borrower without the prior written consent of Agent
(which consent shall not be unreasonably withheld or delayed), and unless and until such Borrower
has obtained, unless waived by Agent in its sole discretion, (i) with respect to leased property at
which original Alarm Contracts are located or which is the site of a Borrower’s central monitoring
station or principal place of business, a landlord lien waiver or similar agreement, as the case
may be, or an assignment of the existing landlord lien waiver, in form and substance reasonably
satisfactory to Agent, with respect to such location, and (ii) a mortgage, deed of trust or
leasehold mortgage, as applicable, granting to Agent a first priority Lien (subject to Permitted
Encumbrances) on such interest in real property, together with, to the extent requested by Agent,
environmental audits, mortgage title insurance, real property insurances, real property surveys,
local counsel opinion(s), and supplemental casualty insurance and flood insurance, and such other
documents, instruments or agreements reasonably requested by Agent, in each case, in form and
substance reasonably satisfactory to Agent. Each such Borrower shall timely and fully pay and
perform its material obligations under all leases and other agreements with respect to each leased
location or public warehouse where any (a) Alarm Contracts, (b) monitoring equipment or (c)
Collateral with an aggregate value in excess of $50,000, is or may be located, unless such
obligations are being contested in accordance with Section 6.2(b). To the extent permitted
hereunder, if any such Borrower proposes to acquire a fee ownership interest in Real Estate after
the Closing Date, such Borrower shall, promptly after such acquisition, provide to Agent a Mortgage
granting Agent a first priority Lien (subject to Permitted Encumbrances) on such Real Estate,
together with, to the extent requested by Agent, environmental audits, mortgage title insurance (in
an amount not to exceed the purchase price of such real property), real property survey, local
counsel opinion(s), and supplemental casualty insurance and flood insurance, and such other
documents, instruments or agreements reasonably requested by Agent, in each case, in form and
substance reasonably satisfactory to Agent. In addition, at such time as the Bridge Loan has been
indefeasibly paid in full and all of any
Borrower’s obligations arising under the Bridge Loan Documents (other than the Account Control
Agreements and the Lockbox Agreements) have been terminated, Borrowers shall promptly provide to
Agent a Mortgage granting Agent, on its own behalf and that of the Lenders, a first priority Lien
(subject to Permitted Encumbrances) on the Real Estate located at 798 Airport Road, Panama City,
Florida.




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     6.10 Further Assurances.



          Each Borrower agrees that it shall and shall cause each other Borrower to, at such Borrower’s
expense and upon the reasonable request of Agent, duly execute and deliver, or cause to be duly
executed and delivered, to Agent within five (5) Business Days of Agent’s demand such further
instruments and do and cause to be done such further acts as may be necessary or proper in the
reasonable opinion of to carry out more effectively the provisions and purposes of this Agreement
and each Loan Document, including without limitation, take or cause to be taken such actions and
otherwise perform, observe and comply with such obligations, as are set forth in that certain
Post-Closing Agreement between the Borrowers, the Agent and the Lenders, dated as of the date of
this Agreement (the “Post-Closing Agreement”), provided that Borrower shall be obligated to
perform, observe and comply with any obligations pursuant to the Post-Closing Agreement in
accordance with any date set forth therein.




     6.11 Future Borrowers.



          In the event that, subsequent to the Closing Date, any Person becomes a direct or indirect
Subsidiary of any Borrower, as permitted by this Agreement, (a) the Borrower that owns the Stock of
such Person shall pledge 100% of such Stock and any Intercompany Notes issued by such Person to
Agent pursuant to the Pledge Agreement, and (b) such Person shall (i) execute a joinder agreement
in the form attached hereto as Exhibit 6.11, and, upon executing such an agreement shall
become a party hereto and be bound by all the terms and conditions hereof to the same extent as
though such Person had originally executed this Agreement and the other Loan Documents as a
Borrower, (ii) provide all relevant documentation with respect thereto and to take such other
actions as such Person would have been required to provide and take pursuant to Section 3.1
if such Person had been a Borrower on the Closing Date, (iii) provide all relevant documentation
with respect thereto and to take such other actions as such Person would have been required to
provide and take pursuant to Section 3.1 if such Person had been a Borrower on the Closing
Date and (iv) take all steps necessary to comply with Sections 6.9 with respect to the
matters set forth therein. Each Borrower agrees that, following the delivery of any Collateral
Documents required to be executed and delivered by this Section 6.11, Agent shall have a
valid and enforceable, perfected, first priority Lien on the respective Collateral covered thereby,
free and clear of all Liens, other than Permitted Encumbrances. All actions to be taken pursuant
to this Section 6.11 shall be at the expense of the Borrowers and shall be taken to the
reasonable satisfaction of Agent.




     6.12 Interest Rate Fluctuations Protection.



          Not later than sixty (60) days following the Agent’s written request, after consultation with
the Borrowers, and at all times thereafter prior to the Maturity Date, Borrower shall enter into
and maintain an interest rate cap, swap, collar, or other agreement or arrangement
designed to provide protection against fluctuations in interest rates, pursuant to which
Borrower is protected against increases in interest rates from and after the date of such contracts
as to all or a portion of outstanding Loans at such time, as reasonably requested by Agent.
Whether or not required by this Section 6.12, all such interest rate protection agreements
entered into by any Borrower shall be on terms, for periods (which shall not be required to exceed
two (2) years) and with counterparties reasonably acceptable to Agent.





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     6.13 Alarm Contracts.



          (a) As to each Alarm Contract generated, acquired or otherwise owned by any Borrower from time
to time:




               (i) Such Alarm Contract shall comply in all material respects with requirements of law. To
the extent any change in any requirement of law governing any Alarm Contract could reasonably be
expected to require an amendment to such Alarm Contract, such Borrower shall use commercially
reasonable efforts to replace such Alarm Contract with an Alarm Contract which complies with such
law, and shall, in any case, amend all such Alarm Contracts if a Material Adverse Effect could
reasonably by expected to result from such change in law.



               (ii) The alarm system related to such Alarm Contract is installed in (A) New York or Florida
or (B) any other state consented to in writing by Agent.



               (iii) To the best of each Borrower’s knowledge after due inquiry, the related dealer and
seller, if any, has all licenses and permits necessary and material to the enforceability of such
Alarm Contract, including, without limitation, having filed and maintained an effective and current
notice of business activities report or similar evidence of qualification to transact business in
each state in which such dealer (and seller) enters into, services or acquires Alarm Contracts.



          (b) Upon the occurrence and during the continuance of any Event of Default, the Agent may
direct the Borrowers to promptly (but, in any case, within ten (10) days) have the original of each
Alarm Contract stored with a third party bailee pursuant to an Off Site Storage Agreement and
acknowledged by a bailee acknowledgement letter granting the Agent access and control of such Alarm
Contracts without the consent of any Borrower and otherwise reasonably acceptable to the Agent.
Prior to any such direction, at all times on or after the Closing Date, the Borrowers shall
maintain all original Alarm Contracts together at one real property location of a Borrower (subject
to either a mortgage or a leasehold mortgage (and corresponding landlord waiver and consent) in
favor of the Agent), segregated from any other Collateral, in locked fireproof cabinets of a UL
rating reasonably satisfactory to the Agent and shall not remove any such original other than (i)
to the extent the original is required in connection with any legal proceedings, (ii) ninety (90)
days following cancellation of such Alarm Contract, or (iii) or as requested by the Agent in
connection with the exercise of any of its rights or remedies hereunder; provided however,
that and notwithstanding anything in this Agreement to the contrary, Borrowers shall assure that
such Alarm Contracts are locked in such fireproof cabinets within forty-five (45) days after the
Closing Date.




          (c) Notwithstanding any other provisions of this Agreement or any other Loan Document, if at
any time the original Alarm Contracts are maintained by any Borrower, the Borrowers shall provide
the Agent unfettered access to such Alarm Contracts immediately upon any request of the Agent.




          (d) Additionally, every Alarm Contract shall be a Qualified Alarm Contract, except to the
extent designated as not being so in the Collateral Reports delivered after such




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Alarm Contract
ceases to be a Qualified Alarm Contract. Further with respect to the Alarm Contracts: (i) the RMR
related amounts shown on all invoices, statements and Collateral Reports which may be delivered to
the Agent with respect thereto are actually and absolutely owing to a Borrower as indicated thereon
and are not in any way contingent; (ii) no payments have been or shall be made thereon except
payments immediately delivered to the applicable Bank Accounts or the Agent as required pursuant to
the terms of this Agreement; (iii) to each Borrower’s knowledge, all Alarm Contract subscribers
have the capacity to contract; (iv) no Alarm Contract is evidenced by a judgment, an Instrument or
Chattel Paper or secured by a letter of credit, except (A) such judgment as has been assigned to
the Agent, for the benefit of the Lenders, (B) such Instrument or Chattel Paper as has been
endorsed and delivered to the Agent, for the benefit of the Lenders, or (C) such letter of credit
as has been assigned and delivered to the Agent with any necessary notification to the issuer
thereof); (v) each represents a bona fide completed transaction; (vi) the amount shown on books and
records and on any list, invoice or statement furnished to the Agent with respect to each such
Alarm Contract is owing to it or by it (as the case may be); and (vii) the title to each such Alarm
Contract is absolute, and any Borrower’s interest in each such Alarm Contract has not been
transferred or assigned to any other Person (except for the granting of the liens in favor of
Agent); and (viii) no set-off or counter-claim on the part of any other parties to each such Alarm
Contract exists, and no agreement has been made with any person under which any deduction or
discount may be claimed or any extension of time for the payment thereof.




          (e) The Borrowers will use their commercially reasonable efforts to timely enforce and
exercise any of their rights under any stock or asset purchase agreement to maximize the rights and
interests (whether for indemnities, holdbacks or otherwise) which may be available to Borrowers
with respect thereto.




          (f) Not less frequently than once during each Fiscal Quarter, the Borrowers will back up their
Subscriber data with DICE Corporation (“Dice”), using Dice’s disaster recovery methodology.




          (g) Borrowers shall deliver to Agent a copy of each Monitoring Contract entered into after the
Closing Date and shall cause each monitoring contractor that provides electronic monitoring
services to a Subscriber to enter into an Assignment and Modification Agreement within fifteen (15)
days of the RMR of such Subscriber becoming Collateral hereunder.




     6.14 Write-Off Policy.



          Borrowers shall continue to give effect to the Write-Off Policy unless otherwise agreed to by
Agent in writing.




7. NEGATIVE COVENANTS




          Each Borrower executing this Agreement jointly and severally agrees that from and after the
date hereof until the Loans have been indefeasibly paid in full and the Commitments have been
terminated:




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     7.1 Mergers, Subsidiaries, Etc.



          Except as otherwise permitted under this Agreement, no such Borrower shall directly or
indirectly, by operation of law or otherwise, (1) form or acquire any Subsidiary, (2) merge with,
consolidate with, or otherwise combine with any Person, (3) acquire, whether through purchase or
exchange of Stock or assets or otherwise, all or any part of the assets of any other Person
(including, without limitation, Alarm Contracts) or any Stock of or other equity interest in any
other Person, (4) dissolve, terminate its existence, consummate any recapitalization,
reorganization or other change in its capital structure or the respective voting rights of its
members, including without limitation the issuance of any new, additional or different type or
class of Stock, the modification, reduction or retirement of any existing class of Stock, or (5)
enter into any agreement to do any of the foregoing.




          Notwithstanding the foregoing, at any time and from time to time, so long as at the time
thereof and after giving effect thereto no Default or Event of Default has occurred and is
continuing, any Borrower may (A) form wholly-owned Subsidiaries organized under the laws of the
United States or any State thereof (so long as the terms of Section 6.11 are fully complied
with) and (B) acquire all or any part of the assets of any Person organized under the laws of the
United States or any State thereof (the “Target”), including any Alarm Contracts of a
Target (in each case, a “Permitted Acquisition”), subject to the satisfaction of each of
the following conditions:




          (a) Agent shall receive at least seven (7) days prior written notice of such proposed
Permitted Acquisition, which notice shall include a draft of the proposed acquisition agreement for
such proposed Permitted Acquisition;




          (b) such Permitted Acquisition shall only involve assets located in the United States and
comprising a business, or those assets of a business, of the type engaged in by the Borrowers as of
the Closing Date, and which business would not subject Agent or any Lender to regulatory or third
party approvals in connection with the exercise of its rights and remedies under this Agreement or
any other Loan Documents other than approvals applicable to the exercise of such rights and
remedies with respect to Borrower prior to such Permitted Acquisition;




          (c) no additional Indebtedness, Guaranty Obligations, contingent obligations or other
liabilities shall be incurred, assumed or otherwise be reflected on a consolidated balance sheet of
the Borrowers after giving effect to such Permitted Acquisition, except (A) the Loan made
hereunder, or (B) other Indebtedness, Guaranty Obligations, contingent obligations and other
liabilities permitted hereunder;




          (d) such Permitted Acquisition shall have a purchase price (whether payable in cash, Stock,
Indebtedness or other form of consideration) in an amount less than $2,500,000,
and such purchase price, when added to the purchase price paid in all Permitted Acquisitions
in any Fiscal Year shall not exceed $7,500,000;




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          (e) the business and assets acquired in such Permitted Acquisition shall be free and clear of
all Liens (other than Permitted Encumbrances) and Liens otherwise permitted hereunder;




          (f) at or prior to the closing of any Permitted Acquisition, Agent will be granted a first
priority perfected Lien (subject to Permitted Encumbrances) in all assets acquired pursuant
thereto, and the Borrowers shall have executed such documents and taken such actions as may be
required by Agent in connection therewith (including, without limitation, adequate UCC financing
statements and assignments);




          (g) Concurrently with delivery of the notice referred to in subsection (a) above, the
Borrowers shall have delivered to Agent, in form and substance reasonably satisfactory to Agent, a
pro forma consolidated balance sheet, income statement and cash flow statement of Holdings (the
“Acquisition Pro Forma”), based on recent financial statements, which shall be complete and
shall fairly present in all material respects the assets, liabilities, financial condition and
results of operations of Holdings and its consolidated Subsidiaries in accordance with GAAP
consistently applied, but taking into account such Permitted Acquisition and the funding of all
Advances in connection therewith, and such Acquisition Pro Forma shall reflect that (i) on a pro
forma basis, the Borrowers would have been in compliance with the Financial Covenants for the four
quarter period reflected in the Compliance Certificate most recently delivered to Agent pursuant to
Section 5.1(a) prior to the consummation of such Permitted Acquisition (after giving effect
to such Permitted Acquisition and all Advances funded in connection therewith as if made on the
first day of such period), and (ii) on a pro forma basis, no Event of Default has occurred and is
continuing or would result after giving effect to such Permitted Acquisition, and certified by the
President or Chief Financial Officer of Holdings to the effect that: (A) each Borrower (after
taking into consideration all rights of contribution and indemnity any Borrower has against Parent
and any other Borrower) will be Solvent upon the consummation of the Permitted Acquisition; (B) the
Acquisition Pro Forma fairly presents in all material respects the financial condition of the
Borrowers (on a consolidated basis) as of the date thereof after giving effect to the Permitted
Acquisition; and (C) no Event of Default has occurred and is continuing or would result after
giving effect to such Permitted Acquisition;




          (h) at least one (1) Business Day prior to the date of such Permitted Acquisition, Agent shall
have received the following acquisition documents, in form and substance reasonably satisfactory to
Agent (collectively, the “Acquisition Documents”):




               (i) a copy of the fully-executed complete and final purchase agreement and bill of sale
relating to such Permitted Acquisition, including, without limitation, all exhibits and schedules
thereto and related documents and agreements;



               (ii) Lien searches on the Target (and any dealers from whom the Target acquired such Alarm
Contracts if the two entities are different) and its assets, in form and substance (and with
results) satisfactory to Agent, and releases, in form and substance satisfactory to Agent all Liens
disclosed in such searches;



               (iii) a duly completed report, in form and substance reasonably satisfactory to Agent,
summarizing the financial and operation details of such acquisition (an



79









 







“Acquisition
Report”), including, without limitation, as attachments thereto (1) evidence of the filing of
either a blanket or precautionary UCC-1 financing statements against the related dealer, in the
appropriate jurisdiction, covering all of the dealers Alarm Contracts or listing such the Alarm
Contracts being acquired, as applicable, and (2) the related non-solicitation agreement (which
agreement shall be in form and substance reasonably satisfactory to Agent);



               (iv) a sampling, if requested by the Agent, of certified true and correct copies of the Alarm
Contracts, together with evidence of delivery of originals pursuant to any required Off Site
Storage Agreement; and



               (v) if any of the acquired Alarm Contracts relate to alarm systems located in a state in which
such Borrower does not operate as of the Closing Date, Borrower will deliver to the Agent evidence
that such Borrower has all Governmental Approvals necessary with respect to such acquisition and
that Agent shall not be required to obtain any Governmental Approval in order to take or perfect
its Lien on such Collateral or enforce its remedies with respect thereto, together with such other
evidence of compliance with the Laws of such new state (including without limitation licensing
Laws) as Agent may reasonably require, including, without limitation, opinions of counsel relating
thereto;



               (vi) evidence of such approvals and consents as may be required in connection with such
proposed transaction and evidence that the parties from whom such assets are being acquired were
properly licensed and qualified to do business in all relevant jurisdictions; and



               (vii) such other reports, certificates, filings, documents, agreements, opinions of counsel
and information as the Agent may require in connection therewith, with all such items to be in form
and substance satisfactory to the Agent.



          (i) as applicable, the conditions set forth in Section 6.11 shall be satisfied as of
the closing date of the Permitted Acquisition; and




          (j) Borrowers shall collaterally assign non-competition agreements or restrictive covenants
arising out of the Permitted Acquisition.




     7.2 Investments; Loans and Advances.



          No such Borrower shall make or permit to exist any investment in, or make, accrue or permit to
exist loans or advances of money to, any Person, through the direct or indirect lending of money,
holding of securities or otherwise, except that such Borrower may:




          (a) maintain its existing investments in its Subsidiaries as of the Closing Date and
investments in new Subsidiaries formed and Targets acquired through Permitted Acquisitions pursuant
to Section 7.1;




          (b) so long as no Event of Default has occurred and is continuing, make investments, subject
to Control Letters in favor of Agent for the benefit of Lenders or otherwise
subject to a perfected security interest in favor of Agent for the benefit of Lenders, in (i)
marketable direct obligations issued or unconditionally guaranteed by the United States of




80









 







America
or any agency thereof maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation thereof and currently
having the highest rating obtainable from either Standard & Poor’s Ratings Group or Moody’s
Investors Service, Inc., (iii) certificates of deposit maturing no more than one (1) year from the
date of creation thereof issued by commercial banks incorporated under the laws of the United
States of America, each having combined capital, surplus and undivided profits of not less than
$300,000,000 and having a senior unsecured rating of “A” or better by a nationally recognized
rating agency (an “A Rated Bank”), (iv) time deposits maturing no more than thirty (30)
days from the date of creation thereof with A Rated Banks and (v) mutual funds that invest solely
in one or more of the investments described in clauses (i) through (iv) above;




          (c) make investments permitted by Section 7.4(b);




          (d) hold checking and deposits accounts used in the ordinary course of business subject to
compliance with Section 2.5;




          (e) issue Guaranty Obligations permitted by Section 7.6;




          (f) make investments consisting of advances from any Borrower to another Borrower and
evidenced by Intercompany Notes as set forth in Section 7.3(a)(iv);




          (g) make Capital Expenditures to the extent permitted hereunder;




          (h) make investments constituting (i) accounts receivable received and other trade credit
granted in the ordinary course of business; (ii) prepaid expenses, negotiable instruments held for
collection and lease, and utility and workers’ compensation, performance and other similar
deposits; (iii) deposits of proceeds from sales and other dispositions permitted pursuant hereto
with a “qualified intermediary,” “qualified trustee” or similar Person for purposes of facilitating
a “like-kind” exchange made in accordance with the applicable provisions of the UCC; and (iv)
Investments in connection with the bankruptcy or reorganization of suppliers or Subscribers and in
settlement of delinquent obligations of, and other disputes with, Subscribers arising in the
ordinary course of business; and




          (i) make investments in interest rate cap, swap or collar agreements, or other agreements or
arrangements designed to provide protection against fluctuations in interest rates, to the extent
required hereby.




     7.3 Indebtedness.



          (a) No such Borrower shall create, incur, assume or permit to exist any Indebtedness, except
(without duplication):




               (i) the Loans and the other Obligations and the Bridge Loan;



               (ii) unfunded pension fund and other employee benefit plan obligations and liabilities to the
extent they are permitted to remain unfunded under applicable law;



81









 





               (iii) existing Indebtedness described in Disclosure Schedule (7.3) and refinancings
thereof or amendments or modifications thereof that do not have the effect of increasing the
principal amount thereof or changing the amortization thereof (other than to extend the same) and
that are otherwise on terms and conditions taken as a whole no less favorable to any Borrower,
Agent or any Lender, as reasonably determined by Agent, than the terms of the Indebtedness being
refinanced, amended or modified;



               (iv) Indebtedness consisting of intercompany loans and advances made by any Borrower to any
other Borrower; provided, that: (A) such Borrower shall have executed and delivered to
each such Borrower, and each such Borrower shall have executed and delivered to Borrower a demand
note (collectively, the “Intercompany Notes”) to evidence any such intercompany
Indebtedness owing at any time by any Borrower to another Borrower, which Intercompany Notes shall
be in form and substance reasonably satisfactory to Agent and shall be pledged and delivered to
Agent pursuant to the applicable Pledge Agreement or Security Agreement as additional collateral
security for the Obligations; (B) such Borrower shall record all intercompany transactions on its
books and records in a manner consistent with GAAP; (C) the obligations of any Borrower under any
such Intercompany Notes shall be subordinated to the Obligations of Borrower hereunder in a manner
reasonably satisfactory to Agent; (D) at the time any such intercompany loan or advance is made by
Borrower and after giving effect thereto, each Borrower shall be Solvent; and (E) no Event of
Default exists or would occur before or after giving effect to any such proposed intercompany loan;



               (v) Guaranty Obligations permitted under Section 7.6;



               (vi) Indebtedness under any interest rate cap, swap or collar agreements, or other agreements
or arrangements required hereunder to provide protection against fluctuations in interest rates;



               (vii) Indebtedness in respect of statutory obligations, performance, surety or appeal bonds,
bankers acceptances, or other obligations of a like nature incurred in the ordinary course of
business;



               (viii) lease payment and other monetary obligations under equipment Capital Leases, including
obligations that give rise to purchase money security interests, provided the aggregate amount of
such obligations for all Borrowers does not exceed $750,000;



               (ix) Indebtedness of up to $50,000 in the aggregate for all Borrowers provided that it is
incurred in the ordinary course of business, is not for borrowed money, is not evidenced by a
promissory note and is unsecured; and



               (x) Indebtedness acquired from a seller or incurred by a Borrower and payable to a seller in
connection with a Permitted Acquisition provided such Indebtedness is unsecured and subordinated to
the Obligations in accordance with Exhibit 7.3 (a)(x).



               (xi) Subordinated Indebtedness as such term is defined in that (A) Subordination and
Intercreditor Agreement dated as of the date of this Agreement between and among Borrower,
CapitalSource and Parent and (B) Subordination and Intercreditor Agreement dated as of the date
hereof among Borrowers, CapitalSource and Devcon



82









 







Construction Management, Inc. and in each case
only to the extent such Subordinated Indebtedness remedies subject to the terms of the applicable
Subordination Agreement.



          (b) No such Borrower shall directly or indirectly, voluntarily purchase, redeem, defease or
prepay any principal of, premium, if any, interest or other amount payable in respect of any
Indebtedness prior to its scheduled maturity, other than:




               (i) Indebtedness arising under the Loan Documents and the Bridge Loan Documents;



               (ii) Indebtedness secured by a Permitted Encumbrance if the asset securing such Indebtedness
has been sold or otherwise disposed of in accordance with Sections 7.8 (b) or (c);



               (iii) Indebtedness permitted by Section 7.3(a)(iv) upon any refinancing thereof in
accordance with Section 7.3(a)(iii); and



               (iv) Indebtedness permitted pursuant to Section 7.3(a)(viii) and (ix).



     7.4 Employee Loans and Affiliate Transactions.



          (a) Except as otherwise permitted in this Section 7 with respect to Affiliates, no
Borrower shall enter into or be a party to any transaction with any other Borrower or any Affiliate
thereof except upon fair and reasonable terms that are no less favorable to such Borrower than
would be obtained in a comparable arm’s length transaction with a Person not an Affiliate of such
Borrower. All such transactions existing as of the date hereof are described in Disclosure
Schedule (7.4(a)).




          (b) No Borrower shall enter into any lending or borrowing transaction with any employees of
any Borrower, except loans and advances to any Borrower’s respective employees in the ordinary
course of business for travel and entertainment expenses, relocation costs and similar purposes up
to a maximum of $100,000 to any employee and up to a maximum of $250,000 in the aggregate at any
one time outstanding.




     7.5 Capital Structure and Business.



          No Borrower shall issue additional Stock unless immediately upon such issuance such additional
Stock is pledged to Agent pursuant to a Pledge Agreement in form and substance reasonably
satisfactory to Agent. No Borrower shall amend its charter or bylaws in a manner that would
adversely affect Agent or Lenders or such Borrower’s duty or ability to repay the Obligations. No
Borrower shall engage in any business other than the acquisition and servicing of Alarm Contracts
and no Person described by clauses (a) and (b) of the definition of Affiliate of any Borrower
(including, without limitation, the Parent and any Subsidiary or Person
described by clauses (a) and (b) of the definition of Affiliate of the Parent), other than
Borrowers, shall engage in the business of acquiring or servicing Alarm Contracts.





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     7.6 Guaranty Obligations.



          No Borrower shall create, incur, assume or permit to exist any Guaranty Obligations except (a)
by endorsement of instruments or items of payment for deposit to the general account of any
Borrower, and (b) for Guaranty Obligations incurred for the benefit of any other Borrower if the
primary obligation is expressly permitted by this Agreement.




     7.7 Liens.



          (a) No such Borrower shall create, incur, assume or permit to exist any Lien on or with
respect to its Accounts or any of its other properties or assets (whether now owned or hereafter
acquired) except for (i) Liens securing Capital Leases and purchase money Indebtedness permitted
under Section 7.3 hereof, (ii) Liens pursuant to the Bridge Loan Documents and (iii)
Permitted Encumbrances.




          (b) No such Borrower shall become a party to any agreement, note, indenture or instrument, or
take any other action, that would prohibit the creation of a Lien on any of its properties or other
assets in favor of Agent, on behalf of itself and Lenders, as additional collateral for the
Obligations, except operating leases, Capital Leases or Licenses which prohibit Liens upon the
assets that are subject thereto except: (i) any negative pledge incurred or provided in favor of
any holder of Indebtedness outstanding on the date any Subsidiary of any Borrower becomes a
Subsidiary (so long as such agreement was not entered into solely in contemplation of such
Subsidiary becoming a Subsidiary of any Borrower), (ii) any encumbrance or restriction that
restricts in a customary manner the subletting, assignment or transfer of any property or asset
that is subject to a lease, license or other contract or the assignment, encumbrance or
hypothecation of such lease, license or other contract, (iii) any limitation or restriction
contained in any Permitted Encumbrance to the extent such limitation or restriction restricts the
transfer of the property subject to such Permitted Encumbrance, and (iv) any restriction imposed
pursuant to an agreement entered into in connection with a sale or other disposition permitted
pursuant hereto pending the closing of such sale or other disposition.




     7.8 Sale of Stock and Assets.



     No such Borrower shall sell, transfer, convey, assign or otherwise dispose of any of its
properties or other assets, including the Stock of any of its Subsidiaries to any Person other than
another Borrower, other than (a) the sale of Inventory in the ordinary course of business, (b) the
discount or compromise of Accounts (for purposes of collection) in the ordinary course of business,
and (c) so long as no Event of Default has occurred and is continuing, sales of assets (other than
Stock of any of its Subsidiaries) in the ordinary course of business to the extent that such
disposition shall have a sale price (whether payable in cash, Stock, Indebtedness or other form of
consideration) in an amount less than $1,000,000, and such sale price, when added to the sale price
paid in all such sales shall not exceed $2,500,000 in the aggregate (and provided that all other
applicable provisions of this Agreement are complied with).



     7.9 ERISA.



          No such Borrower shall or shall cause or permit any ERISA Affiliate to, cause or permit to
occur (i) an event that could result in the imposition of a Lien on the assets of any




84









 







Borrower
under Section 412 of the Code or Section 302 or 4068 of ERISA or (ii) an ERISA Event, to the extent
any such event or ERISA Event combined with all other ERISA Events could reasonably be expected to
result in a Material Adverse Effect.




     7.10 Financial Covenants.



          No such Borrower shall breach or fail to comply with any of the Financial Covenants.




     7.11 Hazardous Materials.



          No such Borrower shall cause or permit a Release of any Hazardous Material on, at, in, under,
above, to, from or about any of the Real Estate where such Release would (a) violate in any
respect, or form the basis for any Environmental Liabilities under, any Environmental Laws or
Environmental Permits or (b) otherwise adversely impact the value or marketability of any of the
Real Estate or any of the Collateral, other than such violations or Environmental Liabilities or
impacts that could not reasonably be expected to have a Material Adverse Effect.




     7.12 Sale-Leasebacks.



          No such Borrower shall engage in any sale-leaseback, synthetic lease or similar transaction
involving any of its assets.




     7.13 Restricted Payments.



          No such Borrower shall make any Restricted Payment, except: (a) intercompany loans and
advances among the Borrowers to the extent permitted by Section 7.3; (b) dividends and
distributions to another Borrower; (c) employee loans permitted under Section 7.4(b); (d)
payments of principal and interest of Intercompany Notes issued in accordance with Section
7.3; and (e) any payment of reasonable and customary expenses to the Parent or any Borrower or
Affiliate thereof, so long as such expenses are paid in the ordinary course of business, on an
arm’s length basis, in an aggregate amount not to exceed $360,000 plus the amount of any reasonable
out-of-pocket expenses incurred in connection with the management of Borrowers in any Fiscal Year;
and provided that no Event of Default exists or would occur before or after giving effect to any
such proposed payment in clauses (a) through (e) of this Section.




     7.14 Change of Name or Location; Change of Fiscal Year.



          No such Borrower shall (a) change its name as it appears in official filings in the state of
its incorporation or other organization, (b) change its chief executive office, principal place of
business, corporate offices or warehouses or locations at which Collateral is held or stored, or
the location of its records concerning the Collateral, (c) change the type of entity that it
is, (d) change its organization identification number, if any, issued by its state of
incorporation or other organization, or (e) change its state of incorporation or organization, in
each case without at least thirty (30) days prior written notice to Agent and after Agent’s written
acknowledgment that any reasonable action requested by Agent in connection therewith, including to
continue the




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perfection of any Liens in favor of Agent, on behalf of Lenders, in any Collateral,
has been completed or taken, and provided that any such new location shall be in the
continental United States. No Borrower shall change its Fiscal Year.




     7.15 No Impairment of Intercompany Transfers.



          No Borrower shall directly or indirectly enter into or become bound by any agreement,
instrument, indenture or other obligation (other than this Agreement and the other Loan Documents)
that could directly or indirectly restrict, prohibit or require the consent of any Person with
respect to the payment of dividends or distributions or the making or repayment of intercompany
loans by a Subsidiary of any Borrower to such Borrower.




     7.16 Changes Relating to Material Contracts.



          No Borrower shall change or amend the terms of any Material Contract in any respect that could
reasonably be expected to be materially adverse to Lenders or could reasonably be expected to have
a Material Adverse Effect.




8. TERM




     8.1 Termination.



          The financing arrangements contemplated hereby shall be in effect until the Maturity Date, and
the Loan and all other Obligations shall be automatically due and payable in full on such date.




     8.2 Survival of Obligations Upon Termination of Financing Arrangements.



          Except as otherwise provided for in the Loan Documents, no termination or cancellation
(regardless of cause or procedure) of any financing arrangement under this Agreement shall in any
way affect or impair the obligations, duties and liabilities of the Borrowers or the rights of
Agent and Lenders relating to any unpaid portion of the Loan or any other Obligations, due or not
due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such
termination, or any transaction or event, the performance of which is required after the
Termination Date. Except as otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations of or binding upon the
Borrowers, and all rights of Agent and each Lender, all as contained in the Loan Documents, shall
not terminate or expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided, that the provisions
of Section 11, the payment obligations under Section 2.12 and Section 2.13,
and the indemnities contained in the Loan Documents shall survive the Termination Date.




9. FINANCIAL COVENANTS




          The Borrowers shall not breach or fail to comply with any of the following financial
covenants, each of which shall be calculated in accordance with GAAP consistently applied:





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     9.1 Maximum Leverage Ratio.



          Holdings and its Subsidiaries shall maintain on a consolidated basis at all times a Qualifying
Retail RMR Leverage Ratio of not greater than 26.0 to 1.0.




     9.2 Minimum Fixed Charge Coverage Ratio.



          Holdings and its Subsidiaries shall maintain at all times, to be measured on a consolidated
basis at the end of each Fiscal Month, commencing with November 30, 2005, a Fixed Charge Coverage
Ratio for the six (6) month period then ended of not less than 1.25 to 1.0.




          Notwithstanding the foregoing, for the purpose of calculating the Fixed Charge Coverage Ratio
(i) Fixed Charges and EBITDA for the six (6) month period ending November 30, 2005 shall be
calculated as Fixed Charges and EBITDA for the one (1) month period ending November 30, 2005
multiplied by six, (ii) Fixed Charges and EBITDA for the six (6) month period ending December 31,
2005 shall be calculated as Fixed Charges and EBITDA for the two (2) month period ending December
31, 2005 multiplied by three, (iii) Fixed Charges and EBITDA for the six (6) month period ending
January 31, 2006 shall be calculated as Fixed Charges and EBITDA for the three (3) month period
ending January 31, 2006 multiplied by two, (iv) Fixed Charges and EBITDA for the six (6) month
period ending February 28, 2006 shall be calculated as Fixed Charges and EBITDA for the four (4)
month period ending February 28, 2006 multiplied by one and one-half and (v) Fixed Charges and
EBITDA for the five (5) month period ending March 31, 2006 shall be calculated as Fixed Charges and
EBITDA for the five (5) month period ending March 31, 2006 multiplied by one and two-tenths.




     9.3 Maximum Capital Expenditures.



          Holdings and its Subsidiaries shall not incur more than $1,500,000 of Capital Expenditures in
the aggregate in any Fiscal Year (other than Capital Expenditures for Inventory installed pursuant
to Alarm Contracts).




     9.4 Maximum Attrition Ratio.



          Holdings and its Subsidiaries shall maintain on a consolidated basis, at the end of each
Fiscal Month, commencing with November 30, 2005, an Attrition Ratio of not greater than eleven
percent (11%).




     9.5 Accounting Changes.



          Unless otherwise specifically provided herein, any accounting term used in the Agreement shall
have the meaning customarily given such term in accordance with GAAP, and all financial
computations hereunder shall be computed in accordance with GAAP consistently
applied. That certain items or computations are explicitly modified by the phrase “in
accordance with GAAP” shall in no way be construed to limit the foregoing. If any Accounting
Changes (as defined below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan Document, then the
Borrowers, Agent and Lenders agree to enter into negotiations in order to amend such provisions of
the Agreement so as to equitably reflect such Accounting Changes with the desired result that




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the
criteria for evaluating the Borrowers’ and its Subsidiaries’ financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made, provided, however,
that the agreement of the Agent and the Requisite Lenders to any required amendments of such
provisions shall be sufficient to bind all Lenders. “Accounting Changes” means (i) changes
in accounting principles required by the promulgation of any rule, regulation, pronouncement or
opinion by the Financial Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions), (ii) changes in accounting
principles concurred in by the Borrowers’ certified public accountants; and (iii) the reversal of
any reserves established as a result of purchase accounting adjustments. All such adjustments
resulting from expenditures made subsequent to the Closing Date (including capitalization of costs
and expenses or payment of pre-Closing Date liabilities) shall be treated as expenses in the period
the expenditures are made and deducted as part of the calculation of EBITDA in such period. If
Agent, the Borrowers and Requisite Lenders agree upon the required amendments, then after
appropriate amendments have been executed and the underlying Accounting Change with respect thereto
has been implemented, any reference to GAAP contained in the Agreement or in any other Loan
Document shall, only to the extent of such Accounting Change, refer to GAAP, consistently applied
after giving effect to the implementation of such Accounting Change. If Agent, the Borrowers and
Requisite Lenders cannot agree upon the required amendments within thirty (30) days following the
date of implementation of any Accounting Change, then all Financial Statements delivered and all
calculations of financial covenants and other standards and terms in accordance with the Agreement
and the other Loan Documents shall be prepared, delivered and made without regard to the underlying
Accounting Change.




10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES




     10.1 Events of Default.



          The occurrence of any one or more of the following events (regardless of the reason therefor)
shall constitute an “Event of Default” hereunder:




          (a) The Borrowers fail to (i) make any payment of principal of any Obligations when due, (ii)
pay any interest on, or Fees owing in respect of, the Loans or any of the other Obligations when
due and payable, and such Default continues for three (3) Business Days or more thereafter; or
(iii) pay or reimburse Agent or any Lender for any expense reimbursable hereunder or under any
other Loan Document within ten (10) Business Days following Agent’s (or a Lender’s written demand
for such reimbursement or payment of expenses.




          (b) if any representation or warranty made (or deemed made pursuant to the terms of this
Agreement or any other Loan Document) by any Borrower or the Parent in any
Loan Document or in any certificate, agreement, instrument, statement, or report made or
delivered pursuant to or in connection with any thereof, or if any information furnished to the
Lenders or the Agent shall prove to have been incorrect in any material respect when made (or
deemed made pursuant to the terms of this Agreement or any other Loan Document) or furnished,
except to the extent already qualified by materiality, in which case it shall be true and correct
in all respects and shall not be false or misleading in any respect;




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          (c) Any Borrower fails or neglects to perform, keep or observe any of the provisions set forth
in Sections 2.5, 7 or 9, the Parent fails or neglects to perform, keep or observe
any of the provisions of the Parent Pledge Agreement, or any Borrower fails or neglects to perform,
keep or observe any of the provisions set forth in Section 5, and the same shall remain
unremedied for five (5) days or more.




          (d) Any Borrower fails or neglects to perform, keep or observe any other provision of this
Agreement or of any of the other Loan Documents (other than any provision embodied in or covered by
any other clause of this Section 10.1) and the same shall remain unremedied for ten (10)
Business Days or more.




          (e) Any Borrower or Parent fails or neglects to perform or keep or observe any of the
provisions of any of the Bridge Loan Documents, and the same is not cured within any applicable
grace period therefor.




          (f) A default or breach occurs under any agreement, document or instrument to which any
Borrower or any Subsidiary is a party other than the Loan Documents or the Bridge Loan Documents
that is not cured or waived within any applicable grace period therefor, and such default or breach
(i) involves the failure to make any payment when due in respect of any Indebtedness or Guaranty
Obligations of any Borrower in excess of $300,000 individually or $500,000 in the aggregate
(including (x) undrawn committed or available amounts and (y) amounts owing to all creditors under
any combined or syndicated credit arrangements), or (ii) causes, or permits any holder of such
Indebtedness or Guaranty Obligations or a trustee to cause, Indebtedness or Guaranty Obligations or
a portion thereof in excess of $300,000 individually or $500,000 in the aggregate to become due
prior to its stated maturity or prior to its regularly scheduled dates of payment, or cash
collateral to be demanded in respect thereof, in each case, regardless of whether such right is
exercised, by such holder or trustee.




          (g) Assets of any Borrower or any Subsidiary with a fair market value of $500,000 or more are
attached, seized, levied upon or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of creditors of any
Borrower and such condition continues for sixty (60) days or more.




          (h) A case or proceeding is commenced against any Borrower or Parent seeking a decree or order
in respect of such Borrower or Parent (i) under the Bankruptcy Code or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for such Borrower or Parent or
for any substantial part of any such Borrower’s or Parent’s assets, or (iii) ordering the
winding-up or liquidation of the affairs of such Borrower, and such case or proceeding shall remain
undismissed or unstayed for sixty (60) days or more or a decree or order
granting the relief sought in such case or proceeding is granted by a court of competent
jurisdiction.




          (i) Any Borrower or Parent (i) files a petition seeking relief under the Bankruptcy Code or
any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consents to or
fails to contest in a timely and appropriate manner to the institution of proceedings thereunder or
to the filing of any such petition or to the appointment of or taking




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possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Borrower or
Parent or for any substantial part of any Borrower’s or Parent’s assets, (iii) makes an assignment
for the benefit of creditors (other than a limited assignment of specified assets in an amount not
to exceed $100,000 in the aggregate to accomplish the settlement of a claim or litigation), or (iv)
takes any action in furtherance of any of the foregoing, or (v) admits in writing its inability to,
or is generally unable to, pay its debts as such debts become due.




          (j) A final judgment or judgments for the payment of money in excess of $300,000 individually
or $500,000 in the aggregate at any time are outstanding against any Borrower or any Subsidiary
(which judgments are not covered by insurance policies as to which liability has not been denied by
the insurance carrier), and the same are not, within sixty (60) days after the entry thereof,
discharged or execution thereof stayed or bonded pending appeal, or such judgments are not
discharged within sixty (60) days following the expiration of any such stay.




          (k) Any provision of any Loan Document for any reason ceases to be valid, binding and
enforceable in accordance with its terms (or any Borrower shall challenge in writing the
enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction
based on any such assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms), or any Lien created
under any Loan Document ceases to be a valid and perfected first priority Lien (except as otherwise
permitted herein or therein) in any of the Collateral purported to be covered thereby.




          (l) Any Change of Control, Change of Management or Material Adverse Effect occurs.




          (m) Holdings, Services or Systems ceases any material portion of its business operations as
conducted as of the Closing Date.




          (n) Any “Event of Default” shall occur under Article 8 of the Bridge Loan Agreement
evidencing the Bridge Loan.




     10.2 Remedies.



          (a) If any Event of Default has occurred and is continuing, Agent may (and at the written
request of the Requisite Lenders shall), without notice, suspend the Commitment with respect to
additional Advances, whereupon any additional Advances shall be made or incurred in the sole
discretion of the Requisite Lenders so long as such Event of Default is continuing. If any Event
of Default has occurred and is continuing, no action permitted under Article 7 hereof
may be taken unless approved by Agent in writing and Agent may (and at the written request of
Requisite Lenders shall), without prior notice except as otherwise expressly provided herein,
increase the rate of interest applicable to the Loans to the Default Rate; provided, that
upon the occurrence of an Event of Default specified in Sections 10.1(a), (h) or (i), the
Default Rate shall immediately be applicable to the Loans. The Agent agrees to notify the
Borrowers following an election as set forth above to apply the Default Rate to the Loans, provided
that the Agent shall




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have no liability to the Borrowers for any failure to provide such notice.
Notwithstanding the foregoing, if the Event of Default which gave rise to any suspension of the
Commitment was as a result of an Event of Default arising under Section 10.1(a), no
additional Advances shall be made or incurred following such suspension without the consent of all
Lenders and Agent.




          (b) If any Event of Default has occurred and is continuing, Agent may (and at the written
request of the Requisite Lenders shall), without notice: (i) terminate the Commitment with respect
to further Advances; (ii) reduce the Commitment from time to time; (iii) declare all or any portion
of the Obligations (other than Obligations in respect of hedging obligations or interest rate swaps
obligations permitted hereunder), including all or any portion of the Loan to be forthwith due and
payable, all without presentment, demand, protest or further notice of any kind, all of which are
expressly waived by all Borrowers; or (iv) exercise any rights and remedies provided to Agent under
the Loan Documents or at law or equity, including all remedies provided under the UCC;
provided, that upon the occurrence of an Event of Default specified in Sections 10.1(h)
or (i), the Commitments shall be immediately terminated and all of the Obligations (other than
Obligations in respect of hedging obligations or interest rate swaps obligations permitted
hereunder), including the Loan, shall become immediately due and payable without declaration,
notice or demand by any Person.




          (c) Without limiting the generality of the foregoing or limiting in any way the rights of the
Lenders and Agent under the Loan Documents or otherwise under applicable law, at any time, and from
time to time, after the earliest to occur of (i) acceleration of the Loan, (ii) the occurrence, and
during the continuance, of an Event of Default specified in Sections 10.1(a), (e) (g), (h), (i)
or (k), or (iii) thirty (30) days following the occurrence, and during the continuance, of an
Event of Default not specified in Sections 10.1(a), (e), (g), (h), (i) or (k), the Agent
shall be, whether such action is undertaken at its option or at the direction of the Requisite
Lenders, entitled to apply for and have a receiver or receiver and manager appointed under state,
or Federal law by a court of competent jurisdiction in any action taken by Agent or Lenders to
enforce their rights and remedies hereunder and under the other Loan Documents in order to manage,
protect, preserve, sell and otherwise dispose of all or any portion of the Collateral and continue
the operation of the business of Borrowers, and to collect all revenues and profits thereof and
apply the same to the payment of all expenses and other charges of such receivership, including the
compensation of the receiver, and to the payment of any Note until a sale or other disposition of
such Collateral shall be finally made and consummated. EACH BORROWER HEREBY IRREVOCABLY CONSENTS
TO AND WAIVES ANY RIGHT TO OBJECT TO OR OTHERWISE CONTEST THE APPOINTMENT OF A RECEIVER AS PROVIDED
ABOVE. EACH BORROWER GRANTS SUCH WAIVER AND CONSENT KNOWINGLY AFTER HAVING DISCUSSED THE
IMPLICATIONS THEREOF WITH COUNSEL, ACKNOWLEDGES THAT THE UNCONTESTED RIGHT TO HAVE A RECEIVER
APPOINTED FOR THE FOREGOING PURPOSES IS CONSIDERED ESSENTIAL BY LENDERS IN CONNECTION WITH THE
ENFORCEMENT OF THEIR
RIGHTS AND REMEDIES HEREUNDER AND UNDER THE SECURITY DOCUMENTS, AND THE AVAILABILITY OF SUCH
APPOINTMENT AS A REMEDY UNDER THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCING LENDERS
TO MAKE (AND COMMIT TO MAKE) THE LOANS TO THE BORROWERS, AND AGREES TO ENTER INTO ANY AND ALL
STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER INSTRUMENTS IN CONNECTION WITH THE




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FOREGOING AND TO COOPERATE FULLY WITH THE AGENT AND LENDERS IN CONNECTION WITH THE ASSUMPTION AND
EXERCISE OF CONTROL BY THE RECEIVER OVER ALL OR ANY PORTION OF THE COLLATERAL.




     10.3 Waivers by Borrowers.



          Except as otherwise provided for in this Agreement or by applicable law, each Borrower waives:
(a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, all defenses, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract
rights, documents, instruments, chattel paper and guaranties at any time held by Agent on which any
Borrower may in any way be liable, and hereby ratifies and confirms whatever Agent may reasonably
do in this regard, (b) all rights to notice and a hearing prior to Agent’s taking possession or
control of, or to Agent’s replevy, attachment or levy upon, the Collateral or any bond or security
that might be required by any court prior to allowing Agent to exercise any of its remedies, and
(c) the benefit of all valuation, appraisal, marshaling and exemption laws. For the purposes of
clarity and notwithstanding anything in this Agreement to the contrary, with respect to this
Agreement the Borrowers’ obligations are absolute and unconditional without any right of
rescission, setoff, counterclaim or defense for any reason against Agent or any Lender.




     10.4 Intercreditor Agreements; Lenders Benefit.



          (a) Borrowers, Agent and Lenders acknowledge that, upon the exercise of any rights and
remedies by CapitalSource as the Agent under this Agreement and the Loan Documents and as Lender
under the Bridge Loan Documents (including, the exercise of rights and remedies with respect to the
Collateral), all proceeds of the Collateral shall be applied first to satisfy the Bridge Loan and
all other obligations of Borrowers arising under the Bridge Loan Documents before being applied to
the Loan or Obligations. For so long as any such Bridge Loan obligations remain unsatisfied, any
payments (including payments from any proceeds of Collateral) with respect to the Loans and other
Obligations received by the Agent or any Lender at any time (i) after all of the Obligations have
become immediately due and payable, with or without declaration, pursuant to Section 10.2,
or (ii) when an event of default has occurred and is continuing under the Bridge Loan Documents and
the occurrence or omission constituting such event of default has not been cured or waived, shall
be applied first to satisfy the Bridge Loan and all other obligations of Borrowers arising under
the Bridge Loan Documents before being applied to the Loans or other Obligations. In the event
that any Lender under this Agreement shall receive any proceeds of Collateral in contravention of
this Agreement, the Lenders shall promptly so notify CapitalSource and shall segregate and hold in
trust any such payment or distribution, which amounts shall be paid over promptly on demand to
CapitalSource for its benefit as Lender under the Bridge Loan, for application to the payment of
the Bridge Loan and
other obligations of Borrowers arising under the Bridge Loan Documents until the same shall
have been indefeasibly paid in full in cash. The Lenders hereby waive any claim they may now or
hereafter have arising out of the Requisite Lenders election, in any proceeding instituted under
Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) of the application
of Section 1111(b)(2) of the Bankruptcy Code, and/or any borrowing or grant of a security interest
under Section 364 of the Bankruptcy Code by any Borrower.




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          (b) The provisions of this Section 10.4 and the rights and benefits hereof shall inure
solely to the benefit of the CapitalSource in its capacity as Lender under the Bridge Loan
Documents and its respective successors and permitted assigns thereunder and no other Person
(including any Borrower) shall have or be entitled to assert rights or benefits under this
Section 10.4.




     10.5 Rights to Appoint Receiver.



          Without limiting and in addition to any other rights, options and remedies Agent has for
itself and the benefit of Lenders under the Loan Documents, the UCC, at law or in equity, upon the
occurrence and continuation of an Event of Default, Agent shall have the right to apply for and
have a receiver appointed by a court of competent jurisdiction in any action taken by Agent to
enforce such rights and remedies in order to manage, protect and preserve the Collateral and
continue the operation of the business or any Borrower and to collect all revenues and profits
thereof and apply the same to the payment of all expenses and other charges of such receivership
including the compensation of the receiver and to the payments as aforesaid until a sale or other
disposition of such Collateral shall be finally made and consummated.




11. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT




     11.1 Assignment and Participations.



          Subject to the terms of this Section 11.1, any Lender may make an assignment of, or
sale of participations in, at any time or times, the Loan Documents, Loans and any Commitment or
any portion thereof or interest therein, including any Lender’s rights, title, interests, remedies,
powers or duties thereunder. Any assignment by a Lender shall: (i) require (x) the consent of
Agent (which consent shall not be unreasonably withheld or delayed with respect to a Qualified
Assignee), and (y) the execution of an assignment agreement (an “Assignment Agreement”)
substantially in the form attached hereto as Exhibit 11.1 and otherwise in form and
substance reasonably satisfactory to, and acknowledged by, Agent; (ii) be conditioned on such
assignee Lender representing to the assigning Lender and Agent that it is purchasing the applicable
Loans to be assigned to it for its own account, for investment purposes and not with a view to the
distribution thereof; (iii) after giving effect to any such partial assignment, the assignee Lender
shall have Commitments in an amount at least equal to $5,000,000 and the assigning Lender shall
have retained Commitments in an amount at least equal to $5,000,000; and (iv) include a payment to
Agent of an assignment fee of $3,500. In the case of an assignment by a Lender under this
Section 11.1, the assignee shall have, to the extent of such assignment, the same rights,
benefits and obligations as all other Lenders hereunder. The assigning Lender shall be relieved of
its obligations hereunder with respect to its Commitments or assigned portion thereof from and
after the date of such assignment. Each Borrower hereby
acknowledges and agrees that any assignment permitted hereunder shall give rise to a direct
obligation of the Borrowers to the assignee and that the assignee shall be considered to be a
“Lender”. In all instances, each Lender’s liability to make Loans hereunder shall be several and
not joint and shall be limited to such Lender’s Pro Rata Share of the applicable Commitment. In
the event Agent or any Lender assigns or otherwise transfers all or any part of the Obligations,
Agent or any such Lender shall so notify the Borrowers and the Borrowers shall, upon the request of
Agent or such Lender, execute new Notes in exchange for the Notes, if any, being




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assigned.
Notwithstanding the foregoing provisions of this Section 11.1, any Lender may at any time
pledge the Obligations held by it and such Lender’s rights under this Agreement and the other Loan
Documents to a Federal Reserve Bank, and any Lender that is an investment fund may assign the
Obligations held by it and such Lender’s rights under this Agreement and the other Loan Documents
to another investment fund managed by the same investment advisor; provided, that no such pledge to
a Federal Reserve Bank shall release such Lender from such Lender’s obligations hereunder or under
any other Loan Document.




          (a) Any participation by a Lender of all or any part of its Commitments shall be made with the
understanding that all amounts payable by the Borrowers hereunder shall be determined as if that
Lender had not sold such participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder except actions
directly affecting (i) any reduction in the principal amount of, or interest rate or Fees payable
with respect to, any Loan in which such holder participates, (ii) any extension of any scheduled
amortization of the principal amount of the Loan or the Maturity Date, and (iii) any release of all
or substantially all of the Collateral (other than in accordance with the terms of this Agreement,
the Collateral Documents or the other Loan Documents). Subject to Section 11.1(f), solely
for purposes of Sections 2.10, 2.12, 2.13 and 11.8, each Borrower acknowledges and
agrees that a participation shall give rise to a direct obligation of the Borrowers to the
participant and the participant shall be considered to be a “Lender”; provided, however, a
participant shall not be entitled to receive any greater payment under Sections 2.10, 2.12,
2.13 or 11.8 than the applicable Lender would have been entitled to receive with
respect to the participation sold to such participant, unless the sale of the participation to such
participant is made with any Borrower’s prior written consent. Except as set forth in the
preceding sentence no Borrower shall have any obligation or duty to any participant. Neither Agent
nor any Lender (other than the Lender selling a participation) shall have any duty to any
participant and may continue to deal solely with the Lender selling a participation as if no such
sale had occurred.




          (b) Except as expressly provided in this Section 11.1, no Lender shall, as between any
Borrower and that Lender, or Agent and that Lender, be relieved of any of its obligations hereunder
as a result of any sale, assignment, transfer or negotiation of, or granting of participation in,
all or any part of the Loans, any Notes or other Obligations owed to such Lender.




          (c) Each Borrower shall assist any Lender permitted to sell assignments or participations
under this Section 11.1 as reasonably required to enable the assigning or selling Lender to
effect any such assignment or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments not inconsistent with the terms of this
Agreement as shall be reasonably requested and the preparation of informational materials for, and
the participation of management in meetings with, potential assignees or
participants, provided that the requesting Lender shall bear its own costs in connection with
any such assignment and shall not be entitled to reimbursement of such costs from any Borrower.




          (d) A Lender may furnish any information concerning Borrowers in the possession of such Lender
from time to time to assignees and participants (including potential assignees and participants);
provided that such potential assignees or participants agree to confidentiality provisions
substantially equivalent to those contained in Section 13.8.





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          (f) So long as no Event of Default has occurred and is continuing, no Lender shall assign or
sell participations in any portion of its Loans or Commitments to a potential Lender or
participant, if, as of the date of the proposed assignment or sale, the assignee Lender or
participant would be subject to capital adequacy or similar requirements under Section
2.13(a), increased costs under Section 2.13(b), or an inability to fund LIBOR Loans
under Section 2.13(c). A participant that would be a Non-Corporate Domestic Lender or a
Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.13
unless the Borrowers are notified of the participation sold to such participant and such
participant agrees, for the benefit of the Borrowers to comply with Sections 2.12, 2.13(d)
and 2.13(e) as though it were a Lender.




     11.2 Appointment of Agent.



          CapitalSource is hereby appointed to act on behalf of all Lenders as Agent under this
Agreement and the other Loan Documents. The provisions of this Section 11.2 are solely for
the benefit of Agent and Lenders and no Borrower nor any other Person shall have any rights as a
third party beneficiary of any of the provisions hereof. In performing its functions and duties
under this Agreement and the other Loan Documents, Agent shall act solely as an agent of Lenders
and does not assume and shall not be deemed to have assumed any obligation toward or relationship
of agency or trust with or for any Borrower or any other Person. Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the other Loan
Documents. The duties of Agent shall be mechanical and administrative in nature and Agent shall
not have, or be deemed to have, by reason of this Agreement, any other Loan Document or otherwise a
fiduciary relationship in respect of any Lender. Except as expressly set forth in this Agreement
and the other Loan Documents, Agent shall not have any duty to disclose, and shall not be liable
for failure to disclose, any information relating to any Borrower or any of their respective
Subsidiaries or any Account Debtor that is communicated to or obtained by CapitalSource or any of
its Affiliates in any capacity. Neither Agent nor any of its Affiliates nor any of their
respective officers, directors, employees, agents or representatives shall be liable to any Lender
for any action taken or omitted to be taken by it hereunder or under any other Loan Document, or in
connection herewith or therewith, except for damages caused by its or their own gross negligence or
willful misconduct, as finally determined by a court of competent jurisdiction.




          If Agent shall request instructions from Requisite Lenders or all affected Lenders with
respect to any act or action (including failure to act) in connection with this Agreement or any
other Loan Document, then Agent shall be entitled to refrain from such act or taking such action
unless and until Agent shall have received instructions from Requisite Lenders or all affected
Lenders, as the case may be, and Agent shall not incur liability to any Person by reason
of so refraining. Agent shall be fully justified in failing or refusing to take any action
hereunder or under any other Loan Document (a) if such action would, in the opinion of Agent, be
contrary to law or the terms of this Agreement or any other Loan Document, (b) if such action
would, in the opinion of Agent, expose Agent to Environmental Liabilities or (c) if Agent shall not
first be indemnified to its satisfaction against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent
acting or




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refraining from acting hereunder or under any other Loan Document in accordance with the
instructions of Requisite Lenders or all affected Lenders, as applicable.




     11.3 Agent’s Reliance, Etc.



          Neither Agent nor any of its Affiliates nor any of their respective directors, officers,
agents or employees shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or the other Loan Documents, except for damages caused by its
or their own gross negligence or willful misconduct, as finally determined by a court of competent
jurisdiction. Without limiting the generality of the foregoing, Agent: (a) may treat the payee of
any Note as the holder thereof until Agent receives written notice of the assignment or transfer
thereof in accordance with the provisions of Section 11.1 signed by such payee and in form
reasonably satisfactory to Agent; (b) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants
or experts; (c) makes no warranty or representation to any Lender and shall not be responsible to
any Lender for any statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (d) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of this Agreement or the
other Loan Documents on the part of any Borrower or to inspect the Collateral (including the books
and records) of any Borrower; (e) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the
other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and
(f) shall incur no liability under or in respect of this Agreement or the other Loan Documents by
acting upon any notice, consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.




     11.4 CapitalSource and Affiliates.



          With respect to its Commitments hereunder, CapitalSource shall have the same rights and powers
under this Agreement and the other Loan Documents as any other Lender and may exercise the same as
though it were not Agent; and the term “Lender” or “Lenders” shall, unless otherwise expressly
indicated, include CapitalSource in its individual capacity. CapitalSource and its Affiliates may
lend money to, invest in, and generally engage in any kind of business with, any Borrower, any of
their Affiliates and any Person who may do business with or own securities of any Borrower or any
such Affiliate, all as if CapitalSource were not Agent and without any duty to account therefor to
Lenders. CapitalSource and its Affiliates may accept fees and other consideration from any
Borrower for services in connection with this Agreement or otherwise without having to account for
the same to Lenders. CapitalSource may also
purchase equity interests in Affiliates of the Borrowers and may invest in a fund that has
invested debt or equity directly or indirectly in the Borrowers. CapitalSource may also purchase
equity interests in Parent or its Affiliates and may invest in a fund that has invested debt or
equity directly or indirectly in Parent. Each Lender acknowledges the potential conflict of
interest between CapitalSource as a Lender holding disproportionate interests in the Loans,
CapitalSource as a Stockholder, warrant holder of Parent or indirect investor in debt or equity
issued by Parent, and CapitalSource as Agent. Notwithstanding anything in the Loan Documents




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to
the contrary, (i) CapitalSource and its Affiliates shall not be required to execute and deliver an
Assignment Agreement in connection with any transaction involving its Affiliates or lenders and
(ii) there shall be no limitation or restriction on CapitalSource’s ability to assign or otherwise
transfer any Loan Document to any such Affiliate or lender; provided, however, CapitalSource shall
continue to be liable as a “Lender” under the Loan Documents unless such Affiliate or lender
executes an Assignment Agreement.




     11.5 Lender Credit Decision.



          Each Lender acknowledges that it has, independently and without reliance upon Agent or any
other Lender and based on the Financial Statements referred to in Section 4.4(a) and such
other documents and information as it has deemed appropriate, made its own credit and financial
analysis of the Borrowers and its own decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this Agreement. Each Lender
acknowledges the potential conflict of interest of each other Lender as a result of Lenders holding
disproportionate interests in the Loans, and expressly consents to, and waives any claim based
upon, such conflict of interest.




     11.6 Indemnification.



          Lenders agree to indemnify Agent (to the extent not reimbursed by Borrowers and without
limiting the obligations of Borrowers hereunder), ratably according to their respective Pro Rata
Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or omitted to be taken by Agent in
connection therewith; provided, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent’s gross negligence or willful misconduct as finally determined
by a court of competent jurisdiction. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including
reasonable in-house and external counsel fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the extent that Agent is
not reimbursed for such expenses by Borrowers.




     11.7 Successor Agent.



          Agent may resign at any time by giving not less than thirty (30) days’ prior written notice
thereof to Lenders and the Borrowers. Upon any such resignation, the Requisite Lenders shall have
the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the
Requisite Lenders and shall have accepted such appointment within thirty (30) days after the
resigning Agent’s giving notice of resignation, then the resigning Agent may, on behalf of Lenders,
appoint a successor Agent, which shall be a Lender, if a Lender is willing to




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accept such
appointment, or otherwise shall be a commercial bank or financial institution or a subsidiary of a
commercial bank or financial institution if such commercial bank or financial institution is
organized under the laws of the United States of America or of any State thereof and has a combined
capital and surplus of at least $300,000,000. If no successor Agent has been appointed pursuant to
the foregoing, within thirty (30) days after the date such notice of resignation was given by the
resigning Agent, such resignation shall become effective and the Requisite Lenders shall thereafter
perform all the duties of Agent hereunder until such time, if any, as the Requisite Lenders appoint
a successor Agent as provided above. Any successor Agent appointed by Requisite Lenders hereunder
shall be subject to the written approval of the Borrowers, such approval not to be unreasonably
withheld or delayed; provided that such approval shall not be required if any Default or
Event of Default has occurred and is continuing. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all
the rights, powers, privileges and duties of the resigning Agent. Upon the earlier of the
acceptance of any appointment as Agent hereunder by a successor Agent or the effective date of the
resigning Agent’s resignation, the resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that any indemnity rights or
other rights in favor of such resigning Agent shall continue. After any resigning Agent’s
resignation hereunder, the provisions of this Section 11 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was acting as Agent under this Agreement
and the other Loan Documents.




     11.8 Setoff and Sharing of Payments.



          In addition to any rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence and during the continuance of any Event of
Default and subject to Section 11.9(f), each Lender is hereby authorized at any time or
from time to time, without prior notice to any Borrower or to any Person other than Agent, to
offset and to appropriate and to apply any and all balances held by it at any of its offices for
the account of any Borrower (regardless of whether such balances are then due to any Borrower) and
any other properties or assets at any time held or owing by that Lender or that holder to or for
the credit or for the account of any Borrower against and on account of any of the Obligations that
are not paid when due; provided that the Lender exercising such offset rights shall give notice
thereof to the affected Borrower promptly after exercising such rights. Any Lender exercising a
right of setoff or otherwise receiving any payment on account of the Obligations in excess of its
Pro Rata Share thereof shall purchase for cash (and the other Lenders or holders shall sell) such
participations in each such other Lender’s or holder’s Pro Rata Share of the Obligations as would
be necessary to cause such Lender to share the amount so offset or otherwise received with each
other Lender or holder in accordance with their respective Pro Rata Shares, (other than offset
rights exercised by any Lender with respect to Sections 2.10, 2.12 or 2.13). Each Borrower
agrees, to the fullest extent permitted by law, that (a) any Lender may exercise its right to
offset with respect to amounts in excess of its Pro Rata Share of the Obligations and may sell
participations in such amounts so offset to other Lenders and holders and (b) any Lender so
purchasing a participation in the Loans made or other Obligations held by other Lenders or holders
may exercise all rights of offset, bankers’ lien, counterclaim or similar rights with respect to
such participation as fully as if such Lender or holder were a direct holder of the Loans and the
other Obligations in the amount of such participation. Notwithstanding the foregoing, if all or
any portion of the offset amount or payment otherwise received is thereafter recovered from




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the
Lender that has exercised the right of offset, the purchase of participations by that Lender shall
be rescinded and the purchase price restored without interest.




     11.9 Advances; Payments; Non-Funding Lenders; Information; Actions in Concert.



          (a) Advances; Payments.




               (i) Agent shall notify appropriate Lenders, promptly after receipt of a Notice of Advance and
in any event prior to 1:00 p.m. (New York time) on the date such Notice of Advance, is received, by
telecopy, telephone or other similar form of transmission. Each Lender shall make the amount of
such Lender’s Pro Rata Share of such Advance available to Agent in each case in same day funds by
wire transfer to Agent’s account as set forth in Section 11 not later than 3:00 p.m. (New
York time) on the requested funding date, in the case of a Base Rate Loan, and not later than 11:00
a.m. (New York time) on the requested funding date, in the case of a LIBOR Loan. After receipt of
such wire transfers (or, in the Agent’s sole discretion, before receipt of such wire transfers),
subject to the terms hereof, Agent shall make the requested Advance to the Borrowers. All payments
by each Lender shall be made without setoff, counterclaim or deduction of any kind.



               (ii) Provided that each Lender has funded all payments and Advances required to be made by it
and purchased all participations required to be purchased by it under this Agreement and the other
Loan Documents as of the date of any receipt of such payments by the Agent, Agent shall pay to each
Lender such Lender’s Pro Rata Share of principal, interest and Fees paid by the Borrowers no later
than the close of business with respect to any payments received prior to 2:00 p.m. New York time
and no later than 2:00 p.m. New York time one Business Day thereafter with respect to all payments
received by Agent after 2:00 p.m. New York time on any Business Day for the benefit of such Lender
on the Loans held by it. To the extent that any Lender (a “Non-Funding Lender”) has failed
to fund all such payments and Advances or failed to fund the purchase of all such participations,
Agent shall be entitled to set off the funding short-fall against that Non-Funding Lender’s Pro
Rata Share of all payments received from the Borrowers. Such payments shall be made by wire
transfer to such Lender’s account (as specified by such Lender in writing from time to time) not
later than the times set forth above.



          (b)
Availability of Lender’s Pro Rata Share. Agent may assume that each
Lender will make its Pro Rata Share of each Advance available to Agent on each funding date. If
such Pro Rata Share is not, in fact, paid to Agent by such Lender when due, Agent will be entitled
to recover such amount on demand from such Lender without setoff, counterclaim or deduction of any
kind. If any Lender fails to pay the amount of its Pro Rata Share forthwith
upon Agent’s demand, Agent shall promptly notify the Borrowers and the Borrowers shall
immediately repay such amount to Agent. Nothing in this Section 11.9(b) or elsewhere in
this Agreement or the other Loan Documents shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that the Borrowers may have against any Lender as a result of
any default by such Lender or hereunder. To the extent that Agent advances funds to the Borrowers
on behalf of any Lender and is not reimbursed therefor on the same Business Day as




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such Advance is
made, Agent shall be entitled to retain for its account all interest accrued on such Advance until
reimbursed by the applicable Lender.




          (c) Return of Payments.




               (i) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that
a related payment has been or will be received by Agent from the Borrowers and such related payment
is not received by Agent, then Agent will be entitled to recover such amount from such Lender on
demand without setoff, counterclaim or deduction of any kind.



               (ii) If Agent determines at any time that any amount received by Agent under this Agreement
must be returned to the Borrowers or paid to any other Person pursuant to any insolvency law or
otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any Lender. In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to
such Lender, together with interest at such rate, if any, as Agent is required to pay to the
Borrowers or such other Person, without setoff, counterclaim or deduction of any kind.



          (d) Non-Funding Lenders. The failure of any Non-Funding Lender to make any Advance or
any payment required by it hereunder shall not relieve any other Lender (each such other Lender an
“Other Lender”) of its obligations to make such Advance or purchase such participation on
such date, but neither any Other Lender nor Agent shall be responsible for the failure of any
Non-Funding Lender to make an Advance, purchase a participation or make any other payment required
hereunder. Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall
not have any voting or consent rights under or with respect to any Loan Document or constitute a
“Lender” (or be included in the calculation of “Requisite Lenders” hereunder), and the outstanding
amounts of any Loans held by a Non-Funding Lender shall not be deemed to be outstanding, for any
voting or consent rights under or with respect to any Loan Document. At the Borrowers’ request,
Agent, another Lender or a Person acceptable to Agent shall have the right (but shall have no
obligation) to purchase from any Non-Funding Lender, and each Non-Funding Lender agrees that it
shall, at Agent’s request, sell and assign to Agent, another Lender or such Person, all of the
Commitments of that Non-Funding Lender for an amount equal to the principal balance of all Loans
held by such Non-Funding Lender and all accrued interest and fees with respect thereto through the
date of sale, such purchase and sale to be consummated pursuant to an executed Assignment
Agreement.




          (e) Dissemination of Information. Agent shall use reasonable efforts to provide
Lenders with any notice of Default or Event of Default received by Agent from, or
delivered by Agent to, any Borrower, with notice of any material Event of Default of which
Agent has actually become aware and with notice of any action taken by Agent following any such
Event of Default; provided, that Agent shall not be liable to any Lender for any failure to do so,
except to the extent that such failure is attributable to Agent’s gross negligence or willful
misconduct, as finally determined by a court of competent jurisdiction. Notwithstanding the
foregoing, Lenders acknowledge that the Borrowers are required to provide Financial Statements and
Collateral Reports to Lenders in accordance with Section 5 hereof and to provide other




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documentation and information in connection with Advances or other provisions of this Agreement,
and agree that Agent shall have no duty to provide the same to Lenders and Agent shall not be
liable to Lenders should Agent fail to enforce any provision of this Agreement or the other Loan
Documents.




          (f) Actions in Concert. Anything in this Agreement to the contrary notwithstanding,
each Lender hereby agrees with each other Lender that no Lender shall take any action to protect or
enforce its rights arising out of this Agreement or any Notes (including exercising any rights of
setoff) without first obtaining the prior written consent of Agent and Requisite Lenders, it being
the intent of Lenders that any such action to protect or enforce rights under this Agreement and
any Notes shall be taken in concert and at the direction or with the consent of Agent and Requisite
Lenders.




     11.10 Other Lender Rights.



          Notwithstanding any other provision set forth in this Agreement, any Lender may at any time
create a security interest in all or any portion of its rights under this Agreement, including,
without limitation, the obligations owing to it and any Notes held by it and the other Loan
Documents and Collateral.




12. SUCCESSORS AND ASSIGNS




     12.1 Successors and Assigns.



          This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit
of each Borrower, Agent, Lenders and their respective successors and assigns (including, in the
case of any Borrower, a debtor-in-possession on behalf of such Borrower), except as otherwise
provided herein or therein. No Borrower may assign, transfer, hypothecate or otherwise convey its
rights, benefits, obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by any Borrower without the prior express written consent of
Lenders shall be void. The terms and provisions of this Agreement are for the purpose of defining
the relative rights and obligations of each Borrower, Agent and Lenders with respect to the
transactions contemplated hereby and, except as otherwise provided for herein, no Person shall be a
third party beneficiary of any of the terms and provisions of this Agreement or any of the other
Loan Documents.




13. MISCELLANEOUS




     13.1 Complete Agreement; Modification of Agreement.



          The Loan Documents constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set forth in
Section 13.2. Any letter of interest, fee letter, fee letter or confidentiality agreement,
if any, between any Borrower and Agent or any Lender or any of their respective Affiliates,
predating this Agreement and relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement, except to the extent that the Fee Letter is, by the
terms thereof, intended to survive.




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     13.2 Amendments and Waivers.



          (a) Except for actions expressly permitted to be taken by Agent, no amendment, modification,
termination or waiver of any provision of this Agreement or any other Loan Document, or any consent
to any departure by any Borrower therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Borrowers and by Requisite Lenders or all affected Lenders, as
applicable. Except as set forth in clause (b) below, all such amendments, modifications,
terminations or waivers requiring the consent of any Lenders shall require the written consent of
Requisite Lenders.




          (b) No amendment, modification, termination or waiver shall, unless in writing and signed by
each Lender directly affected thereby: (i) increase the principal amount of any Lender’s
Commitment (which action shall be deemed to directly affect all Lenders); (ii) reduce the principal
of, rate of interest on or Fees payable with respect to any Loan of any affected Lender; (iii)
extend any scheduled payment date (other than payment dates of mandatory prepayments under
Section 2.2(b)(ii)-(iii)) or final maturity date of the principal amount of any Loan of any
affected Lender; (iv) waive, forgive, defer, extend or postpone any payment of interest or Fees as
to any affected Lender (provided that the waiver of any Default or Event of Default shall not be
deemed to be an extension or postponement of any payment that otherwise would have been required
due to acceleration thereof); (v) except as otherwise permitted herein or in the other Loan
Documents, release, or permit any Borrower to sell or otherwise dispose of, or otherwise
subordinate (except Permitted Encumbrances), all or substantially all of the Collateral (which
action shall be deemed to directly affect all Lenders and (vi) amend or waive this Section
13.2 or the definition of the term “Requisite Lenders” insofar as such definitions affect the
substance of this Section 13.2. Furthermore, no amendment, modification, termination or
waiver affecting the rights or duties of Agent under this Agreement or any other Loan Document
shall be effective unless in writing and signed by Agent, in addition to Lenders required
hereinabove to take such action. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which it was given. No
amendment, modification, termination or waiver shall be required for Agent to take additional
Collateral pursuant to any Loan Document. No amendment, modification, termination, or waiver of
any provision of any Note shall be effective without the written concurrence of the holder of that
Note. No notice to or demand on any Borrower in any case shall entitle such Borrower or any other
Borrower to any other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent
effected in accordance with this Section 13.2 shall be binding upon each holder of any
Note at the time outstanding and each future holder of any Note.




          (c) If, in connection with any proposed amendment, modification, waiver or termination (a
“Proposed Change”) requiring the consent of all affected Lenders, the consent of Requisite
Lenders is obtained, but the consent of other Lenders whose consent is required is not obtained
(any such Lender whose consent is not obtained as described in this clause (i) and in clauses (ii)
and (iii) below being referred to as “Non-Consenting Lender”), then, so long as Agent is
not a Non Consenting Lender, at the Borrowers’ request any other Lender or a Person reasonably
acceptable to Agent, shall have the right with Agent’s consent (but shall have no obligation) to
purchase from such Non Consenting Lenders, and such Non Consenting Lenders agree that they shall,
upon Agent’s request, sell and assign to such Lender or such Person, all of




102









 







the Commitments of such
Non Consenting Lenders for an amount equal to the principal balance of all Loans held by the Non
Consenting Lenders and all accrued interest and Fees with respect thereto through the date of sale,
such purchase and sale to be consummated pursuant to an executed Assignment Agreement.




          (d) Upon indefeasible payment in full in cash and performance of all of the Obligations (other
than indemnification Obligations), termination of the Commitments and a release of all claims
against Agent and Lenders, and so long as no suits, actions proceedings, or claims are pending or
threatened against any Indemnified Person asserting any damages, losses or liabilities that are
Indemnified Liabilities, Agent shall deliver to the Borrowers, at the Borrowers’ sole cost and
expense, termination statements, mortgage releases and other documents reasonably necessary or
appropriate to evidence the termination of the Liens securing payment of the Obligations.




     13.3 Fees and Expenses.



          The Borrowers shall reimburse (i) Agent for all reasonable fees, costs and expenses (including
the reasonable fees and expenses of all of its in-house and external counsel, advisors, consultants
and auditors) and (ii) Agent (and, with respect to clauses (c) and (d) below, all Lenders; provided
that in the case of reimbursement of counsel for Lenders other than Agent, such reimbursement shall
be limited to one counsel for all such Lenders) for all reasonable fees, costs and expenses,
including the documented reasonable fees, costs and expenses of in-house and external counsel or
other advisors (including environmental and management consultants and appraisers) incurred in
connection with the negotiation, preparation and filing and/or recordation of the Loan Documents
and incurred in connection with:




          (a) any amendment, modification or waiver of, or consent with respect to, or termination of,
any of the Loan Documents or advice in connection with the syndication and administration of the
Loans made pursuant hereto or its rights hereunder or thereunder; provided, however, that so long
as no Event of Default has occurred or is continuing, upon the Borrowers’ written request, the
Agent shall consult with the Borrowers with respect to estimated fees and expenses of counsel in
connection with any proposed amendment, modification or waiver of any of the Loan Documents;




          (b) any litigation, contest, dispute, suit, proceeding or action (whether instituted by Agent,
any Lender, any Borrower or any other Person and whether as a party, witness or otherwise) in any
way relating to the Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection herewith or therewith, including any litigation, contest, dispute, suit,
case, proceeding or action, and any appeal or review thereof, in connection with a case commenced
by or against any or all of the Borrowers or any other Person that may be obligated to Agent by
virtue of the Loan Documents, including any such litigation, contest, dispute, suit, proceeding or
action arising in connection with any work-out or restructuring of the Loans during the pendency of
one or more Events of Default; provided, that no Person shall be entitled to reimbursement
under this clause (b) in respect of any litigation, contest, dispute, suit, proceeding or
action to the extent any of the foregoing results from such Person’s gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction;





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          (c) any attempt to enforce any remedies of Agent or any Lender against any or all of the
Borrowers or any other Person that may be obligated to Agent or any Lender by virtue of any of the
Loan Documents, including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Loans, in any case during the pendency of one or more Events of
Default; provided, that in the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders;




          (d) any workout or restructuring of the Loans during the pendency of one or more Events of
Default; and provided, that in the case of reimbursement of counsel for Lenders other than Agent,
such reimbursement shall be limited to one counsel for all such Lenders;




          (e) efforts to (i) monitor the Loans or any of the other Obligations, (ii) evaluate, observe
or assess any of the Borrowers or their respective affairs, and (iii) verify, protect, evaluate,
assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral; and




          (f) portfolio management and CapitalAnalytics or other underwriting services.



including, as to each of clauses (a) through (e) above, all reasonable in-house and
external attorneys’ and other professional and service providers’ fees arising from such services
and other advice, assistance or other representation, including those in connection with any
appellate proceedings, and all reasonable expenses, costs, charges and other fees incurred by such
counsel and others in connection with or relating to any of the events or actions described in this
Section 13.3, all of which shall be payable, on demand, by the Borrowers to Agent. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees may include:
reasonable fees, costs and expenses of accountants, environmental advisors, appraisers, investment
bankers, management and other consultants and in-house and external paralegals; court costs and
expenses; photocopying and duplication expenses; court reporter fees, costs and expenses; long
distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime
charges; and reasonable expenses for travel, lodging and food paid or
incurred in connection with the performance of such in-house and external legal or other advisory
services.




     13.4 No Waiver.



          Agent’s or any Lender’s failure, at any time or times, to require strict performance by the
Borrowers of any provision of this Agreement or any other Loan Document shall not waive, affect or
diminish any right of Agent or such Lender thereafter to demand strict compliance and performance
herewith or therewith. Any suspension or waiver of any Default or Event of Default shall not
suspend, waive or affect any other Default or Event of Default whether the same is prior or
subsequent thereto and whether the same or of a different type. Subject to the provisions of
Section 13.2, none of the undertakings, agreements, warranties, covenants and
representations of any Borrower contained in this Agreement or any of the other Loan Documents and
no Default or Event of Default by any Borrower shall be deemed to have been suspended or waived by
Agent or any Lender, unless such waiver or suspension is by an





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instrument in writing signed by an
officer of or other authorized employee of Agent (to the extent required) and the applicable
required Lenders and directed to the Borrowers specifying such suspension or waiver.




     13.5 Remedies.



          Agent’s and Lenders’ rights and remedies under this Agreement shall be cumulative and
nonexclusive of any other rights and remedies that Agent or any Lender may have under any other
agreement, including the other Loan Documents, by operation of law or otherwise. Recourse to the
Collateral shall not be required.




     13.6 Severability.



          Wherever possible, each provision of this Agreement and the other Loan Documents shall be
interpreted in such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement or any other Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions of
this Agreement or such other Loan Document.




     13.7 Conflict of Terms.



          Except as otherwise provided in this Agreement or any of the other Loan Documents by specific
reference to the applicable provisions of this Agreement, if any provision contained in this
Agreement conflicts with any provision in any of the other Loan Documents, the provision contained
in this Agreement shall govern and control.




     13.8 Confidentiality.



          (a) Agent and each Lender agrees to use commercially reasonable efforts (equivalent to the
efforts Agent or such Lender applies to maintain the confidentiality of its own confidential
information) to maintain as confidential all financial information (including compliance
certificates) provided to them by the Borrowers which is marked confidential, and all
other information which the Borrowers have designated in writing as confidential, at all times
prior to the earlier of (i) the Maturity Date and (ii) the acceleration of the Loan, except that
Agent and each Lender may disclose such information: (a) to Persons employed or engaged by Agent
or such Lender or its affiliates; (b) to any bona fide assignee or participant or potential
assignee or participant that has agreed to comply with the covenant contained in this Section
13.8 (and any such bona fide assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by them as described in clause (a)
above); (c) as required or requested by any Governmental Authority or reasonably believed by Agent
or such Lender to be compelled by any court decree, subpoena or legal or administrative order or
process or any other regulation, order or decree; (d) to any of the parties that provide funding to
any Lender or any party engaged as an administrative agent with respect to such funding; (e) to its
affiliates, auditors, agents, officers or directors, or otherwise, as, on the advice of Agent’s or
such Lender’s counsel, is required by law; (f) in connection with the exercise of any right or
remedy under the Loan Documents (whether prior to or after acceleration), or in connection with





105









 







any
Litigation to which Agent or such Lender is a party; or (g) that ceases to be confidential through
no fault of Agent or any Lender.




          (b) Except as required by law, Borrower(s) agree, and agree to cause each of their Affiliates,
(i) not to transmit or disclose provision of any Loan Document to any Person (other than to
Borrowers’ advisors and officers on a need-to-know basis, including without limitation Lehman
Brothers for the purpose of raising equity capital) without Agent’s prior written consent, (ii) to
inform all Persons, including its advisors and officers, of the confidential nature of the Loan
Documents and to direct them not to disclose the same to any other Person and to require each of
them to be bound by these provisions. Borrowers agree that Agent shall have the right to review
and approve all materials (other than Parent’s filings with the Securities and Exchange Commission
(“SEC Filings”) or other disclosure required by law) that any Borrower or any of its
respective Affiliates prepares or proposes to transmit or disclose that contain the Agent’s or any
Lender’s name or describe or refer to any Loan Document, any of the terms thereof or any of the
transactions contemplated thereby. Nothing contained in any Loan Document is intended to permit or
authorize any Borrower or any of its respective Affiliates to contract on behalf of the Agent or
any Lender. To the extent a Borrower is required by law (other than with respect to the SEC
Filings) to disclose any provision of this Loan Agreement or an Agent or Lender’s name, such
Borrower shall give Agent prompt notice of such disclosure upon becoming aware of the need for such
disclosure. The parties hereto agree that Agent, Lenders and their respective Affiliates may (i)
disclose a general description of transactions arising under the Loan Documents for advertising,
marketing or other similar purposes, and (ii) use any Borrower’s name, logo or other indicia
germane to such party in connection with such advertising, marketing or other similar purposes.




     13.9 GOVERNING LAW.



          EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE
OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF MARYLAND. EXCEPT AS OTHERWISE PROVIDED IN ANY OF THE LOAN DOCUMENTS EACH BORROWER
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN MARYLAND, SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWERS, AGENT
AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED,
THAT AGENT, LENDERS AND THE BORROWERS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF MARYLAND AND; PROVIDED, FURTHER THAT NOTHING IN
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH BORROWER
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH




106









 







JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES ANY OBJECTION THAT SUCH BORROWER MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY
SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE ADDRESS
SET FORTH IN SECTION 13.10 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR FIVE (5) DAYS AFTER
DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.




     13.10 Notices.



          Except as otherwise provided herein, whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be given to or served
upon any of the parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be in writing and
shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual
receipt and five (5) Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by
telecopy or other similar facsimile transmission during normal business hours of the recipient
(with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this Section 13.10); (c) one (1) Business Day
after deposit with a reputable overnight courier with all charges prepaid or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated below or to such other address (or facsimile number)
as may be substituted by notice given as herein provided. The giving of any notice required
hereunder may be waived in writing
by the party entitled to receive such notice. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication to any Person (other
than to the Borrowers or Agent) designated below to receive copies shall in no way adversely affect
the effectiveness of such notice, demand, request, consent, approval, declaration or other
communication. In addition, any delivery required to be made by the Borrowers to the Lenders under
this Agreement will be deemed effective if delivered to the Agent as required; provided that the
Borrowers shall have no liability hereunder if any delivery of documentation and information
required hereunder shall have been furnished to Agent as required.




107









 








	 	 	 	 	 
	 

	 	(a)
	 	If to Agent or CapitalSource, at
	 
	 	 	 	 
	 

	 	 	 	CapitalSource Finance LLC
	 

	 	 	 	4445 Willard Avenue, 12th Floor
	 

	 	 	 	Chevy Chase, MD 20815
	 

	 	 	 	Attention: Health Care and Specialty Finance Business, Portfolio Manager
	 

	 	 	 	Telecopier: 301-841-2340
	 

	 	 	 	Telephone: 301-841-2700
	 
	 	 	 	 
	 

	 	 	 	With copies to:
	 
	 	 	 	 
	 

	 	 	 	Buchanan Ingersoll
	 

	 	 	 	One Oxford Centre
	 

	 	 	 	301 Grant Street
	 

	 	 	 	Pittsburgh, PA 15219
	 

	 	 	 	Attention: S. Bryan Lawrence
	 

	 	 	 	Telecopier: 412-562-1041
	 

	 	 	 	Telephone: 412-562-8830
	 
	 	 	 	 
	 

	 	(b)
	 	If to Borrowers, at
	 
	 	 	 	 
	 

	 	 	 	Devcon Security Holdings, Inc.
	 

	 	 	 	c/o Devcon International Corp.
	 

	 	 	 	1350 E. Newport Center Drive, #201
	 

	 	 	 	Deerfield Beach, FL 33442
	 

	 	 	 	Attention: President
	 

	 	 	 	Telecopier: 954-429-1506
	 

	 	 	 	Telephone: 954-429-1500
	 
	 	 	 	 
	 

	 	 	 	-and-
	 
	 	 	 	 
	 

	 	 	 	Akerman Senterfit
	 

	 	 	 	One Southeast 3rd Avenue
	 

	 	 	 	28th Floor
	 

	 	 	 	Miami, FL 33131
	 

	 	 	 	Attention: Stephen Roddenberry
	 

	 	 	 	Telecopier: 305-374-5095
	 

	 	 	 	Telephone: 305-982-5618






     13.11 Section Titles.



          The Section titles and Table of Contents contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of the agreement between
the parties hereto.





108









 








     13.12 Counterparts.



          This Agreement may be executed in any number of separate counterparts, each of which shall
collectively and separately constitute one agreement.




     13.13 WAIVER OF JURY TRIAL.



          BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY
AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE
AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES
BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE, AMONG , LENDERS AND ANY BORROWER ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS (EXCEPT AS OTHERWISE PROVIDED THEREIN) OR THE
TRANSACTIONS RELATED THERETO.




     13.14 Press Releases and Related Matters.



          Each Borrower executing this Agreement agrees that neither it nor its controlled Affiliates
will in the future issue any press releases or other public disclosure using the name of
CapitalSource or its affiliates or referring to this Agreement, or the other Loan Documents without
at least two (2) Business Days’ prior notice to CapitalSource and without the prior written consent
of CapitalSource unless (and only to the extent that) such Borrower or Affiliate is required to do
so under law or by a Governmental Authority and then, in any event, such Borrower or Affiliate will
use its commercially reasonable efforts to consult with CapitalSource before issuing such press
release or other public disclosure. Agent reserves the right to provide to industry trade
organizations information necessary and customary for inclusion in league table measurements.




     13.15 Reinstatement.



          This Agreement shall remain in full force and effect and continue to be effective should any
petition be filed by or against any Borrower for liquidation or reorganization, should any Borrower
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any significant part of any
Borrower’s assets, and shall continue to be effective or to be reinstated, as the case may be, if
at any time payment and performance of the Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee of the Obligations, whether as a “voidable preference,” “fraudulent
conveyance,” or otherwise, all as though such payment or performance had not been made. In the
event that any





109









 







payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations (and Agent’s Liens) shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.




     13.16 Advice of Counsel.



     Each of the parties represents to each other party hereto that it has discussed this Agreement
and, specifically, the provisions of Sections 13.9 and 13.13, with its counsel.



     13.17 No Strict Construction.



          The parties hereto have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.




     13.18 Collateral Matters.



          The Lenders irrevocably authorize the Agent, at its option and in its discretion,




          (a) to release any Lien on any property granted to or held by the Agent under any Loan
Document (i) upon termination of the Commitments and payment in full of all Obligations (other than
contingent indemnification obligations), (ii) that is sold or to be sold as part of or in
connection with any sale permitted hereunder or under any other Loan Document, or (iii) if
approved, authorized or ratified in writing by the Requisite Lenders;




          (b) to subordinate any Lien on any property granted to or held by the Agent under any Loan
Document to the holder of any Permitted Encumbrance; and




          (c) to release any Borrower from its obligations under the Loan Documents if such Person
ceases to be a Subsidiary of a Borrower as a result of a transaction permitted hereunder.



Upon request by the Agent at any time, the Requisite Lenders will confirm in writing the Agent’s
authority to release or subordinate its interest in particular types or items of property, or to
release any Borrower from its obligations under the Loan Documents pursuant to this Section
13.18.




     13.19 Release.



          Notwithstanding any other provision of any Loan Document, each Borrower voluntarily,
knowingly, unconditionally and irrevocably, with specific and express intent, for and on behalf of
itself (the “Releasing Party”), hereby fully and completely releases and forever discharges
each Indemnified Person and any other Person or insurer which may be responsible or liable for the
acts or omissions of any of the Indemnified Persons, or who may be liable for the injury or damage
resulting therefrom (collectively, with the Indemnified Persons, the “Released Parties”),
of and from any and all actions, causes of action, damages, claims, obligations,




110









 







liabilities,
costs, expenses and demands of any kind whatsoever, at law or in equity, matured or unmatured,
vested or contingent, that the Releasing Party has against any of the Released Parties as of the
Closing Date (“Losses”), other than Losses resulting from the gross negligence or willful
misconduct of the Released Party. Each Borrower acknowledges that the foregoing release is a
material inducement to (a) Lender’s decision to extend to Borrower the financial accommodations
hereunder and has been relied upon by each Lender in agreeing to make the Advances (b)
CapitalSource’s decision to serve as Agent.




111









 








          IN WITNESS WHEREOF, this Credit Agreement has been duly executed as of the date first written
above.




	 	 	 	 	 
	 	BORROWERS:





DEVCON SECURITY SERVICES CORP.

 	 
	 	By:  	/s/ Stephen J. Ruzika
 	 
	 	Name:  	Stephen J. Ruzika 	 
	 	Title:  	President & CEO 	 
	 
	 	DEVCON SECURITY HOLDINGS, INC.

 	 
	 	By:  	
/s/ Stephen J. Ruzika
 	 
	 	Name:  	Stephen J. Ruzika 	 
	 	Title:  	President & CEO 	 
	 
	 	COASTAL SECURITY COMPANY

 	 
	 	By:  	/s/ Stephen J. Ruzika
 	 
	 	Name:  	Stephen J. Ruzika 	 
	 	Title:  	President & CEO 	 
	 
	 	COASTAL SECURITY SYSTEMS, INC.

 	 
	 	By:  	/s/ Stephen J. Ruzika
 	 
	 	Name:  	Stephen J. Ruzika 	 
	 	Title:  	President & CEO 	 
	 
	 	CENTRAL ONE, INC. [Sic]

 	 
	 	By:  	/s/ Stephen J. Ruzika
 	 
	 	Name:  	Stephen J. Ruzika 	 
	 	Title:  	President & CEO 	 
	 


[Signature Page One to Credit Agreement — Revolver]





 









 








	 	 	 	 	 
	 	AGENT AND LENDER:





CAPITALSOURCE FINANCE LLC, as Agent and Lender

 	 
	 	By:  	/s/William L. Polk, Jr.
 	 
	 	Name: 	William L. Polk, Jr. 	 
	 	Title:  	Managing Director 	 
	 


[Signature
Page Two to Credit Agreement — Revolver]





 









 








SCHEDULE 1




	 	 	 	 	 
	Lender	 	Commitment Amount	 	Commitment Percentage
	CapitalSource Finance LLC
	 	$70,000,000	 	100%