Exhibit 10.2

LOCK UP AND CONSENT AGREEMENT

This Lock Up and Consent Agreement (the “Agreement”), dated as of December 18,
2006, is entered into and made by and among Protection One Alarm Monitoring,
Inc. (“POAMI”), Integrated Alarm Services Group, Inc. (“IASG”) and each of the
undersigned holders (each, a “Consenting Holder” and, together, the “Consenting
Holders”) of the Old Notes (as defined below).

WHEREAS, IASG has issued $125,000,000 aggregate principal amount of 12% Senior
Secured Notes due 2011 (the “Old Notes”), pursuant to an Indenture (the “Old
Note Indenture”), dated as of November 16, 2004, by and among IASG, the
guarantors named therein and Wells Fargo Bank, N.A., as trustee (the “Trustee”);

WHEREAS, IASG, POAMI and Protection One, Inc. (“POI”) are contemplating a merger
transaction (the “Merger”) pursuant to which IASG would be merged with and into
a new subsidiary of POI or POAMI;

WHEREAS, POAMI, IASG and the Consenting Holders are contemplating an offer to
exchange the Old Notes for a new series of 12% Senior Secured Notes due 2011 of
POAMI (the “New Notes”) (such offer to be known herein as the “Exchange Offer”);

WHEREAS, as part of the Exchange Offer, IASG will solicit consents to the terms
of the Old Notes set forth in the Old Note Indenture to remove many of the
restrictive covenants and events of default contained therein, among other
modifications (the “Amendments”) and obtain the waiver of the holders of the Old
Notes with respect to any existing defaults under the Old Notes and all related
documents (the “Waiver,” and together with the Amendments, the “Consent
Solicitation”);

WHEREAS, POAMI and the Consenting Holders have engaged in good faith
negotiations with the objective of reaching an agreement with regard to the
Exchange Offer and Consent Solicitation, the material terms of which are set
forth on the term sheet annexed hereto as Exhibit A (the “Term Sheet”);

WHEREAS, to implement the transactions contemplated by the Term Sheet, POAMI and
IASG intend to prepare and deliver an Offering Memorandum and Consent
Solicitation Statement (the “Offering Memorandum”) with respect to the Exchange
Offer and Consent Solicitation;

WHEREAS, each Consenting Holder is the beneficial owner and/or the investment
adviser or manager for the beneficial owner (with the power to vote and dispose
on behalf of such beneficial owner) of the aggregate principal amount of Old
Notes (for each such party, the “Relevant Ownership”), in each case as set forth
below each such Consenting Holder’s signature attached hereto;

WHEREAS, in connection with the Exchange Offer and Consent Solicitation, each
Consenting Holder intends to exchange its Old Notes for New Notes pursuant to
the Exchange Offer and consent to the Amendments and Waiver pursuant to the
Consent

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Solicitation, and POAMI and IASG desire to obtain the agreement of the
Consenting Holders to participate in the Exchange Offer and Consent
Solicitation.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, POAMI, IASG and the
Consenting Holders agree as follows:

SECTION 1.               VOTING.  EACH CONSENTING HOLDER REPRESENTS AND WARRANTS
THAT, AS OF THE DATE HEREOF, IT IS THE LEGAL OWNER, BENEFICIAL OWNER AND/OR THE
INVESTMENT ADVISER OR MANAGER FOR THE BENEFICIAL OWNER (WITH THE POWER TO VOTE
AND DISPOSE ON BEHALF OF SUCH BENEFICIAL OWNER) OF SUCH LEGAL OR BENEFICIAL
OWNER’S RELEVANT OWNERSHIP AND THAT THERE ARE NO OLD NOTES OF WHICH IT IS THE
LEGAL OWNER, BENEFICIAL OWNER AND/OR INVESTMENT ADVISOR OR MANAGER FOR SUCH
LEGAL OR BENEFICIAL OWNER WHICH ARE NOT PART OF ITS RELEVANT OWNERSHIP.  SUBJECT
TO THE CONSUMMATION OF THE MERGER PURSUANT TO TERMS AND CONDITIONS THAT ARE
SUBSTANTIALLY SIMILAR TO THAT CERTAIN DRAFT AGREEMENT AND PLAN OF MERGER DATED
DECEMBER 18, 2006, EACH CONSENTING HOLDER AGREES FOR ITSELF THAT IT SHALL, IN
CONNECTION WITH THE (I) EXCHANGE OFFER, TENDER ITS OLD NOTES IN EXCHANGE FOR THE
NEW NOTES, AND (II) CONSENT SOLICITATION, TIMELY VOTE ITS RELEVANT OWNERSHIP AND
ANY OTHER CLAIMS OR INTERESTS THAT IT HOLDS TO CONSENT TO THE AMENDMENTS AND THE
WAIVER, SUBJECT, IN EACH CASE, TO THE TERMS AND CONDITIONS OF THE EXCHANGE
OFFER, NEW NOTES AND CONSENT SOLICITATION BEING CONSISTENT WITH THE TERM SHEET
IN ALL RESPECTS.

SECTION 2.               TRANSMITTAL.  EACH CONSENTING HOLDER AGREES THAT IT
SHALL DELIVER TO THE DEPOSITARY FOR THE EXCHANGE OFFER AND CONSENT SOLICITATION,
NO LATER THAN THE FIFTH (5TH) BUSINESS DAY FOLLOWING THE COMMENCEMENT OF THE
EXCHANGE OFFER AND CONSENT SOLICITATION, THE FORM OF CONSENT AND LETTER OF
TRANSMITTAL TO BE PROVIDED BY POAMI IN CONNECTION WITH THE EXCHANGE OFFER AND
CONSENT SOLICITATION TOGETHER WITH ANY AND ALL CERTIFICATES REPRESENTING THE OLD
NOTES OWNED BY IT.  EACH CONSENTING HOLDER HEREBY AGREES THAT POAMI HAS THE
RIGHT TO PUBLISH AND DISCLOSE IN THE OFFERING MEMORANDUM TO BE DELIVERED TO
HOLDERS OF THE OLD NOTES AND ANY PRESS RELEASES ISSUED IN CONNECTION WITH THE
EXCHANGE OFFER AND CONSENT SOLICITATION THE IDENTITY OF SUCH CONSENTING HOLDER
AND THE NATURE OF ITS AGREEMENTS, COMMITMENTS, ARRANGEMENTS AND UNDERSTANDINGS
UNDER THIS AGREEMENT.

SECTION 3.               RESTRICTIONS ON TRANSFER.  EACH OF THE CONSENTING
HOLDERS HEREBY AGREES THAT, FOR SO LONG AS THIS AGREEMENT SHALL REMAIN IN
EFFECT, IT SHALL NOT SELL, TRANSFER OR ASSIGN ALL OR ANY OF ITS RELEVANT
OWNERSHIPS OR ANY OPTION THEREON OR ANY RIGHT, INTEREST (VOTING OR OTHERWISE)
THEREIN, UNLESS THE TRANSFEREE AGREES IN WRITING TO BE BOUND BY THE TERMS OF
THIS AGREEMENT BY EXECUTING A COUNTERPART SIGNATURE PAGE TO THIS AGREEMENT AND
THE TRANSFEROR PROMPTLY PROVIDES POAMI WITH A COPY THEREOF.  EACH OF THE
CONSENTING HOLDERS FURTHER AGREES THAT IT WILL NOT GRANT ANY PROXIES OR POWERS
OF ATTORNEY WITH RESPECT TO THE OLD NOTES, OTHER THAN TO THE HOLDER OF RECORD
WITH RESPECT TO THE MATTERS CONTEMPLATED HEREBY, DEPOSIT ANY OLD NOTES INTO A
VOTING TRUST OR ENTER INTO A VOTING AGREEMENT WITH RESPECT TO ANY OLD NOTES.

SECTION 4.               FURTHER ACQUISITION OF OLD NOTES.  THIS AGREEMENT SHALL
IN NO WAY BE CONSTRUED TO PRECLUDE THE CONSENTING HOLDERS OR ANY OF THEIR
RESPECTIVE SUBSIDIARIES OR AFFILIATES FROM ACQUIRING ADDITIONAL OLD NOTES. 
HOWEVER, ANY SUCH ADDITIONAL OLD NOTES ACQUIRED BY A CONSENTING HOLDER OR ANY OF
THEIR RESPECTIVE SUBSIDIARIES OR AFFILIATES SHALL

2

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AUTOMATICALLY BE DEEMED TO BE RELEVANT OWNERSHIPS AND SUBJECT TO THE TERMS OF
THIS AGREEMENT.  UPON THE REQUEST OF POAMI, EACH CONSENTING HOLDER SHALL PROVIDE
AN ACCURATE AND CURRENT WRITTEN LIST OF THE RELEVANT OWNERSHIPS HELD BY SUCH
CONSENTING HOLDER, AND IN ANY EVENT SHALL PROVIDE SUCH WRITTEN LIST OF THE
RELEVANT OWNERSHIPS ON THE SECOND BUSINESS DAY PRIOR TO THE EXPECTED
COMMENCEMENT OF THE EXCHANGE OFFER AND CONSENT SOLICITATION.

SECTION 5.               REPRESENTATIONS AND WARRANTIES.  EACH OF THE CONSENTING
HOLDERS AND POAMI REPRESENTS AND WARRANTS TO ONE ANOTHER THAT THE FOLLOWING
STATEMENTS ARE TRUE, CORRECT AND COMPLETE AS OF THE DATE HEREOF:

(A)           POWER AND AUTHORITY.  IT HAS ALL REQUISITE POWER AND AUTHORITY
(INCLUDING, BUT NOT LIMITED TO CORPORATE, PARTNERSHIP OR LIMITED LIABILITY
COMPANY POWER AND AUTHORITY) TO ENTER INTO THIS AGREEMENT, TO CARRY OUT THE
TRANSACTIONS CONTEMPLATED HEREBY AND TO PERFORM ITS OBLIGATIONS HEREUNDER.

(B)           AUTHORIZATION.  THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND
THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER HAVE BEEN DULY AUTHORIZED BY ALL
NECESSARY CORPORATE, PARTNERSHIP OR LIMITED LIABILITY COMPANY ACTION ON ITS
PART.

(C)           NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS
AGREEMENT DOES NOT AND SHALL NOT: (I) VIOLATE ANY PROVISION OF LAW, RULE OR
REGULATION APPLICABLE TO IT OR ANY OF ITS SUBSIDIARIES, (II) VIOLATE ITS
CERTIFICATE OR ARTICLES OF INCORPORATION, BYLAWS OR OTHER ORGANIZATIONAL
DOCUMENTS OR THOSE OF ANY OF ITS SUBSIDIARIES; OR (III) CONFLICT WITH, RESULT IN
A BREACH OF OR CONSTITUTE (WITH DUE NOTICE OR LAPSE OF TIME OR BOTH) A DEFAULT
UNDER ANY MATERIAL CONTRACTUAL OBLIGATION TO WHICH IT OR ANY OF ITS SUBSIDIARIES
IS A PARTY.

(D)           GOVERNMENTAL CONSENTS.  THE EXECUTION, DELIVERY AND PERFORMANCE BY
IT OF THIS AGREEMENT DO NOT AND SHALL NOT REQUIRE ANY REGISTRATION OR FILING
WITH, CONSENT OR APPROVAL OF, OR NOTICE TO, OR OTHER ACTION TO, WITH OR BY, ANY
FEDERAL, STATE OR OTHER GOVERNMENTAL AUTHORITY OR REGULATORY BODY.

(E)           BINDING OBLIGATION.  THIS AGREEMENT IS A LEGALLY VALID AND BINDING
OBLIGATION, ENFORCEABLE IN ACCORDANCE WITH ITS TERMS.

SECTION 6.               ACCREDITED INVESTORS.  EACH OF THE CONSENTING HOLDERS
UNDERSTANDS AND ACKNOWLEDGES THAT THE NEW NOTES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR ANY OTHER APPLICABLE
SECURITIES LAW, THE NEW NOTES ARE BEING OFFERED FOR EXCHANGE IN TRANSACTIONS NOT
REQUIRING REGISTRATION UNDER THE SECURITIES ACT OR ANY OTHER SECURITIES LAWS,
AND NONE OF THE NEW NOTES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY
OTHER APPLICABLE SECURITIES LAW, PURSUANT TO AN EXEMPTION THEREFROM OR IN A
TRANSACTION NOT SUBJECT THERETO.  EACH OF THE CONSENTING HOLDERS HEREBY FURTHER
REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT (I) IT IS AN “ACCREDITED INVESTOR” AS
SUCH TERM IS DEFINED IN REGULATION D OF THE SECURITIES ACT, (II) IT HAS SUCH
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT IT IS CAPABLE OF
EVALUATING THE MERITS AND RISKS OF THE EXCHANGE OFFER AND THE CONSENT
SOLICITATION AND (III) IT HAS RECEIVED ALL INFORMATION REGARDING POAMI, IASG,
THE TERMS OF THE CONTEMPLATED MERGER TRANSACTION AND

3

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THE TERMS OF THE NEW NOTES AS SUCH CONSENTING HOLDER DEEMS NECESSARY IN ORDER TO
EVALUATE THE MERITS AND RISKS OF THE EXCHANGE OFFER AND THE CONSENT
SOLICITATION.

SECTION 7.               BROKERS AND INTERMEDIARIES.  NO BROKER, INVESTMENT
BANKER, FINANCIAL ADVISER OR OTHER PERSON IS ENTITLED TO ANY BROKER’S, FINDER’S,
FINANCIAL ADVISOR’S OR OTHER SIMILAR FEE OR COMMISSION IN CONNECTION WITH THE
EXCHANGE OFFER OR CONSENT SOLICITATION CONTEMPLATED HEREBY BASED UPON
ARRANGEMENTS MADE BY OR ON BEHALF OF SUCH CONSENTING HOLDERS.

SECTION 8.               COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT.  THIS
AGREEMENT AND THE OTHER AGREEMENTS REFERENCED HEREIN CONSTITUTE THE COMPLETE
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF.  THIS
AGREEMENT MAY NOT BE MODIFIED, ALTERED, AMENDED OR SUPPLEMENTED EXCEPT BY AN
AGREEMENT IN WRITING SIGNED BY POAMI AND EACH OF THE CONSENTING HOLDERS WHICH
ARE A SIGNATORY HERETO.

SECTION 9.               GOOD FAITH NEGOTIATION OF DOCUMENTS.  EACH PARTY HEREBY
FURTHER COVENANTS AND AGREES TO NEGOTIATE THE DOCUMENTATION IMPLEMENTING THE
EXCHANGE OFFER AND CONSENT SOLICITATION AND ANY DEFINITIVE DOCUMENTS RELATING
THERETO (INCLUDING, BUT NOT LIMITED TO, THE NEW NOTES AND A NEW NOTES INDENTURE)
IN GOOD FAITH AND, IN ANY EVENT, IN ALL RESPECTS CONSISTENT WITH THE TERM SHEET.

SECTION 10.             SPECIFIC PERFORMANCE.  IT IS UNDERSTOOD AND AGREED BY
THE PARTIES THAT MONEY DAMAGES WOULD NOT BE A SUFFICIENT REMEDY FOR ANY BREACH
OF THIS AGREEMENT BY ANY PARTY AND EACH NON-BREACHING PARTY SHALL BE ENTITLED TO
THE REMEDY OF SPECIFIC PERFORMANCE AND INJUNCTIVE OR OTHER EQUITABLE RELIEF,
INCLUDING ATTORNEYS’ FEES AND COSTS, AS A REMEDY OF ANY SUCH BREACH, AND EACH
PARTY AGREES TO WAIVE ANY REQUIREMENT FOR THE SECURING OR POSTING OF A BOND IN
CONNECTION WITH SUCH REMEDY.

SECTION 11.             ASSIGNMENT.  EXCEPT AS SET FORTH IN SECTION 3, NO RIGHTS
OR OBLIGATIONS OF ANY PARTY UNDER THIS AGREEMENT MAY BE ASSIGNED OR TRANSFERRED
TO ANY OTHER PERSON OR ENTITY.

SECTION 12.             GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE.  BY ITS EXECUTION AND DELIVERY
OF THIS AGREEMENT, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES FOR ITSELF THAT ANY LEGAL ACTION, SUIT OR PROCEEDING
AGAINST IT WITH RESPECT TO ANY MATTER UNDER OR ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT RENDERED
IN ANY SUCH ACTION, SUIT OR PROCEEDING, MAY BE BROUGHT IN ANY COURT IN THE STATE
OF NEW YORK.  BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY ACCEPTS AND SUBMITS ITSELF TO THE NONEXCLUSIVE
JURISDICTION OF EACH SUCH COURT, GENERALLY AND UNCONDITIONALLY, WITH RESPECT TO
ANY SUCH ACTION, SUIT OR PROCEEDING.

SECTION 13.             REPRESENTATION BY COUNSEL.  EACH PARTY HERETO
ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED BY COUNSEL IN CONNECTION WITH THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  ACCORDINGLY, ANY
RULE OF LAW OR ANY LEGAL DECISION THAT WOULD

4

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PROVIDE ANY PARTY HERETO WITH A DEFENSE TO THE ENFORCEMENT OF THE TERMS OF THIS
AGREEMENT AGAINST SUCH PARTY BASED UPON LACK OF LEGAL COUNSEL SHALL HAVE NO
APPLICATION AND IS EXPRESSLY WAIVED.

SECTION 14.             INDEPENDENT DUE DILIGENCE AND DECISION-MAKING.  EACH OF
THE CONSENTING HOLDERS HEREBY CONFIRMS THAT ITS DECISION TO EXECUTE THIS
AGREEMENT HAS BEEN BASED UPON ITS INDEPENDENT INVESTIGATION OF THE OPERATIONS,
BUSINESSES, FINANCIAL AND OTHER CONDITIONS AND PROSPECTS OF POAMI.  TO THE
EXTENT ANY MATERIALS OR INFORMATION HAVE BEEN FURNISHED TO IT BY POAMI OR IASG,
THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT THEY HAVE BEEN PROVIDED FOR
INFORMATIONAL PURPOSES ONLY, WITHOUT ANY REPRESENTATION OR WARRANTY.

SECTION 15.             CONSIDERATION.  IT IS HEREBY ACKNOWLEDGED BY POAMI, IASG
AND EACH OF THE CONSENTING HOLDERS THAT NO CASH CONSIDERATION SHALL BE DUE OR
PAID TO THE CONSENTING HOLDERS FOR THEIR AGREEMENT TO PARTICIPATE IN THE
EXCHANGE OFFER AND VOTE FOR THE AMENDMENTS AND WAIVER IN ACCORDANCE WITH THE
TERMS AND CONDITIONS OF THIS AGREEMENT AND THE TERM SHEET.

SECTION 16.             FURTHER ASSURANCES.  FROM TIME TO TIME, AT POAMI’S OR
IASG’S REQUEST AND WITHOUT FURTHER CONSIDERATION, EACH CONSENTING HOLDER SHALL
EXECUTE AND DELIVER SUCH ADDITIONAL DOCUMENTS AND TAKE ALL SUCH FURTHER ACTION
AS MAY BE NECESSARY OR DESIRABLE TO CONSUMMATE AND MAKE EFFECTIVE, IN THE MOST
EXPEDITIOUS MANNER PRACTICABLE, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

SECTION 17.             HEADINGS.  THE HEADINGS OF THE SECTIONS, PARAGRAPHS AND
SUBSECTIONS OF THIS AGREEMENT ARE INSERTED FOR CONVENIENCE ONLY AND SHALL NOT
AFFECT THE INTERPRETATION HEREOF.

SECTION 18.             PRIOR NEGOTIATIONS.  THIS AGREEMENT AND THE TERM SHEET
SUPERSEDE ALL PRIOR NEGOTIATIONS WITH RESPECT TO THE SUBJECT MATTER HEREOF.

SECTION 19.             NO THIRD PARTY BENEFICIARIES.  THIS AGREEMENT SHALL BE
SOLELY FOR THE BENEFIT OF THE PARTIES HERETO, INCLUDING THEIR PERMITTED ASSIGNS,
AND NO OTHER PERSON OR ENTITY SHALL BE A THIRD PARTY BENEFICIARY HEREOF. 
NOTHING IN THIS AGREEMENT, EXPRESS OR IMPLIED, SHALL GIVE TO ANY PARTY OR ENTITY
OTHER THAN THE PARTIES ANY BENEFIT OR ANY LEGAL OR EQUITABLE RIGHT, REMEDY OR
CLAIM UNDER THIS AGREEMENT.

SECTION 20.             SUCCESSORS AND ASSIGNS.  THIS AGREEMENT IS INTENDED TO
BIND AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE
SUCCESSORS, PERMITTED ASSIGNS, HEIRS, EXECUTORS, ADMINISTRATORS AND
REPRESENTATIVES.

SECTION 21.             NOTICES.

(A)           ALL NOTICES HEREUNDER TO BE SERVED TO POAMI SHALL BE DEEMED GIVEN
IF IN WRITING AND DELIVERED OR SENT BY TELECOPY, COURIER OR BY REGISTERED OR
CERTIFIED MAIL (RETURN RECEIPT REQUESTED) TO THE FOLLOWING ADDRESSES OR
TELECOPIER NUMBERS (OR AT SUCH OTHER ADDRESSES OR TELECOPIER NUMBERS AS SHALL BE
SPECIFIED BY LIKE NOTICE):

Protection One Alarm Monitoring, Inc.
1035 N. 3rd Street

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Lawrence, KS 66044
Attn: Darius G. Nevin
Fax: (785) 856-9700

 

with copies to:

Protection One, Inc.
4221 W. John Carpenter Frwy.
Irving, TX 75063
Attn: J. Eric Griffin, Esq.
Fax: (972) 916-6195

 

and

 

Kirkland & Ellis LLP
200 E. Randolph Drive
Chicago, IL 60601
Attn: R. Scott Falk, P.C.
Fax: (312) 861-2200

 

and

 

Mayer, Brown, Rowe & Maw LLP
71 South Wacker Drive
Chicago, Illinois  60606
Attn: Edward S. Best
Fax: (312) 701-7711

 

(B)           ALL NOTICES HEREUNDER TO BE SERVED TO A CONSENTING HOLDER SHALL BE
DEEMED GIVEN IF IN WRITING AND DELIVERED OR SENT BY COURIER OR BY REGISTERED OR
CERTIFIED MAIL (RETURN RECEIPT REQUESTED) TO THE ADDRESS FOR SUCH CONSENTING
HOLDER SET FORTH BELOW ITS SIGNATURE HERETO (OR AT SUCH OTHER ADDRESSES AS SHALL
BE SPECIFIED BY LIKE NOTICE) AND:

Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attn: Cristopher Greer
Fax: (212) 728-8111

SECTION 22.             COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ANY
NUMBER OF COUNTERPARTS, EACH OF WHICH SHALL, COLLECTIVELY AND SEPARATELY,
CONSTITUTE ONE AND THE SAME AGREEMENT.

SECTION 23.             TERMINATION.  THIS AGREEMENT SHALL TERMINATE IN ALL
RESPECTS ON THE EARLIER TO OCCUR OF MAY 31, 2007, AND THE DATE OF CONSUMMATION
OR ABANDONMENT OF THE MERGER OR TERMINATION OF THE MERGER AGREEMENT (THE
“TERMINATION DATE”), AND SHALL HAVE NO FURTHER FORCE OR EFFECT AFTER THE
TERMINATION DATE; PROVIDED, HOWEVER, THAT SUCH TERMINATION DATE MAY

6

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BE EXTENDED UPON THE WRITTEN AGREEMENT OF POAMI, IASG AND CONSENTING HOLDERS OF
66% OF THE AGGREGATE PRINCIPAL AMOUNT OF THE OLD NOTES, AND ALL CONSENTING
HOLDERS SHALL BE BOUND BY THIS AGREEMENT AS SO EXTENDED.

*     *     *     *     *

7

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

PROTECTION ONE ALARM MONITORING, INC.

 

 

 

By:

/s/ Darius G. Nevin

 

Its:

Executive VP and CFO

 

 

 

INTEGRATED ALARM SERVICES GROUP, INC.

 

 

 

By:

/s/ Charles T. May

 

Its:

Chief Executive Officer

 

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HOLDERS OF RELEVANT OWNERSHIP:

 

 

 

GREYWOLF HIGH YIELD MASTERS FUND

 

GREYWOLF CAPITAL PARTNERS II LP

 

GREYWOLF CAPITAL PARTNERS LP

 

 

 

 

By:

GREYWOLF CAPITAL MANAGEMENT LP, as Investment Manager

 

 

 

 

 

 

 

By:

/s/ Michelle Lynd

 

 

Name:

Michelle Lynd

 

 

Title:

Authorized Signatory

 

 

 

Aggregate Principal Amount
of Old Notes: $37,925,000

 

 

 

Address for Notices:

 

 

 

87 Graham Street, Suite 140
San Francisco, CA 94129-1722

 

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GLENVIEW CAPITAL PARTNERS, LP
GLENVIEW INSTITUTIONAL PARTNERS, LP
GLENVIEW CAPITAL MASTER FUND, LTD
GCM LITTLE ARBOR PARTNERS, LP
GCM LITTLE ARBOR INSTITUTIONAL PARTNERS, LP
GCM LITTLE ARBOR MASTER FUND, LTD

 

 

 

 

 

 

 

By:

/s/ Larry Robbins

 

 

Name:

Larry Robbins

 

 

Title:

CEO, Glenview Capital

 

 

 

Management, LLC

 

 

 

Aggregate Principal Amount
of Old Notes: $29,500,000

 

 

 

Address for Notices:

 

 

 

767 Fifth Avenue, 44th Floor
New York, NY 10153

 

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CASPIAN CAPITAL PARTNERS, L.P.
MARINER OPPORTUNITIES FUND, LP
MARINER LDC
MARINER VOYAGER MASTER FUND, LTD

 

 

 

 

By:

MARINER INVESTMENT GROUP, INC., as Investment Advisor

 

 

 

 

 

 

 

By:

/s/ Adam S. Cohen

 

 

Name:

Adam S. Cohen

 

 

Title:

Principal

 

 

 

Aggregate Principal Amount
of Old Notes of All Entities Listed on this Page: $18,500,000

 

 

 

Address for Notices of All Entities Listed on this Page:

 

 

 

500 Mamaroneck Avenue, Suite 101
Harrison, NY 10528

 

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RIVA RIDGE MASTER FUND, LTD.
MARINER LDC

 

 

 

 

By:

RIVA RIDGE CAPITAL MANAGEMENT LP, as Investment Manager

 

 

 

 

By:

RIVA RIDGE GP LLC, GP to the Investment Manager

 

 

 

 

 

 

 

By:

/s/ Stephen Golden

 

 

Name:

Stephen Golden

 

 

Title:

Managing Member

 

 

 

Aggregate Principal Amount
of Old Notes: $12,920,000

 

 

 

Address for Notices:

 

 

 

55 Fifth Avenue, 18th Floor
New York, NY  10003

 

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REDWOOD MASTER FUND, LTD.

 

 

 

 

 

 

 

By:

/s/ Jonathan Kolatch

 

 

Name:

Jonathan Kolatch

 

 

Title:

Director

 

 

 

Aggregate Principal Amount
of Old Notes: $8,000,000

 

 

 

Address for Notices

 

 

 

910 Sylvan Avenue
Englewood Cliffs, NJ 07632

 

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EXHIBIT A

PROTECTION ONE, INC.
INTEGRATED ALARM SERVICES GROUP, INC.

EXCHANGE OFFER TERM SHEET FOR IASG 12% SENIOR SECURED NOTES

This term sheet is a confidential proposal made to certain holders of the 12%
Senior Secured Notes of Integrated Alarm Services Group, Inc. (“IASG”) listed on
Schedule A hereto, acting in their capacity as bondholders, that describes the
principal terms and conditions of a proposed exchange offer for such existing
12% Senior Secured Notes.  The terms and conditions outlined in this term sheet
are not intended to be all-inclusive, but rather set forth a general framework
from which a mutually satisfactory exchange offer may be structured.  The actual
terms and conditions are subject to, among other things, requisite approvals and
satisfactory preparation and review of documentation.  This term sheet
supersedes any prior oral or written agreements, proposals or understandings
with respect to the matters described herein.  The parties agree that the actual
indenture may require customary changes to the terms thereof in addition to
those set forth below, provided that no such changes shall affect the covenants,
related definitions or other economic terms without the consent of the
bondholders.

*              *              *              *

I.                 Comparison of Terms of Existing Notes and New Notes

 

Existing Indenture

Proposed Indenture

Issuer:

Integrated Alarm Services Group, Inc.

Protection One Alarm Monitoring, Inc. (“POAMI”)

Issue:

Senior Secured Notes (the “Existing Notes”)

New Senior Secured Notes (the “New Notes”)

Principal Amount:

$125 million

Based upon principal amount exchanged (on a par-for-par basis)

Maturity Date:

November 15, 2011

Same

Interest Rate:

12% per annum (currently 13% due to non-registration), payable semi-annually in
cash on May 15 and November 15

Initially 13% per annum due to non-registration, subject to reduction to 12%
upon consummation of an exchange of the New Notes as described below under
“Registration Rights”

 

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Ranking:

The Existing Notes are senior secured obligations of IASG.

The New Notes will be pari passu in right of payment to POI/POAMI’s senior
secured term loan and revolving credit facility and senior to POAMI’s 8-1/8%
subordinated notes (the “8-1/8% Notes”).  The New Notes will be secured by a
second priority lien on POAMI’s assets, subject to an intercreditor agreement
reasonably acceptable to all parties.  The intercreditor provisions in such
agreement shall provide, among other things, that (i) the lenders (the “Senior
Lienholders”) under the POI/POAMI senior secured term loan and revolving credit
facility (the “Bank Debt”) will have an absolute block on the ability of the
holders of the New Notes (the “Second-Lien Lenders”) to exercise lien-related
remedies during a period of 180 days following notice to the agent for the
Senior Lienholders, (ii) the Second-Lien Lenders will not object to the Senior
Lienholders’ liens, (iii) the Second-Lien Lenders will not object to a
“debtor-in-possession” financing below $50mm, which preserves the priority of
the Second-Lien Lenders in the collateral securing the New Notes relative to the
Senior Lienholders and (iv) the Second-Lien Lenders will not object to the
Senior Lienholders’ adequate protection, subject to customary protections
granted to the Second-Lien Lenders.

 

In the event that the exchange offer described under “Registration Rights” below
has occurred and Rule 3-10 or Rule 3-16 of Regulation S-X would require the
filing with the SEC of separate financial statements of any subsidiary due to
such subsidiary’s capital stock being pledged as collateral for the New Notes as
so exchanged, such capital stock shall be automatically deemed to not be part of
the collateral (but only to the extent necessary to not be subject to such
requirement), it being understood that, upon any change to the assets of POAMI
or such subsidiary, or any change in such rules that results in such separate
financial statements not being required to be filed, such capital stock (or any
portion thereof) shall be included as part of the collateral, to the extent such
inclusion would not trigger such reporting requirement.

 

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Redemption:

Optional redemption by IASG pursuant to the redemption schedule contained in the
Existing Notes.

Same redemption schedule, including make-whole provision.

Registration Rights:

Registration rights pursuant to the Registration Rights Agreement, dated as of
November 16, 2004, by and among IASG, the guarantors named therein, and Morgan
Joseph & Co. Inc. and Wells Fargo Securities, LLC, as representatives of the
several purchasers named therein.

POAMI will use its reasonable best efforts to register the New Notes, it being
understood that the consequence of not registering the New Notes is that the
interest rate shall not be reduced to 12% during the period of non-registration.

Guarantors:

Subsidiaries of IASG identified in the Existing Notes.

Subsidiaries of POAMI that guarantee the Bank Debt or the 8-1/8% Notes;
Protection One, Inc. (“POI”) and IASG.

Covenants:

The Existing Notes contain certain covenants typically found in high yield note
obligations, including, but not limited to, a change of control put, optional
redemption, limitations on indebtedness, mergers, transactions with affiliates
and restricted payments.

The New Notes will contain certain covenants found in the Existing Notes and
certain revised covenants detailed below.  Covenants will apply to a restricted
group consisting of POI and all of its subsidiaries, including POAMI and IASG,
and will generally permit transactions within this restricted group.  Covenants
to be included in the New Notes shall include, without limitation:

 

—Section 4.01 (Payment of Notes).  Same.

 

—Section 4.02 (Maintenance of Office or Agency).  Same.

 

—Revised Section 4.03 (Commission Reports).   For so long as POI is reporting
consolidated financials with the SEC that are compliant with the Exchange Act,
no separate reporting shall be required for POI’s subsidiaries.  The covenant
shall also require POI/POAMI to timely file reports with the SEC and deliver the
same to their bondholders/trustee.

 

—Section 4.04 (Compliance Certificate).  Same.

 

—Section 4.05 (Taxes). Same.

 

—Section 4.06 (Stay, Extension and Usury Laws).  Same.

—Revised Section 4.07 (Limitation on Indebtedness).  Interest coverage ratio to
be

 

 

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reduced to 2.25:1.0 and related definitions (e.g., coverage ratio, EBITDA and
interest expense; provided, however, that EBITDA shall not include nonrecurring,
unusual and extraordinary items and gains and losses on asset sales, and the
coverage ratio calculation shall limit pro forma calculations to that which is
permitted under Regulation S-X; and provided, further, that interest expense
shall exclude any amortization of debt discounts created through purchase
accounting adjustments in respect of existing discounted debt) to be conformed
to those found in indenture for 8-1/8% Notes.  Senior credit facility basket to
be $375mm, plus an amount  (not to exceed $15mm) sufficient to repurchase all
outstanding Existing Notes not tendered in the exchange offer, and other
permitted indebtedness exceptions to be conformed to those found in indenture
for 8-1/8% Notes (e.g., $75mm unsecured hell or high water basket, $25mm capital
expenditures basket (of which up to $15mm may be secured), refinancing
indebtedness basket, etc.).

 

—Revised Section 4.08 (Restricted Payments).  Covenant and related definitions
to be conformed to those found in indenture for 8-1/8% Notes.  The restricted
payment basket will grow beginning with the first full quarter ended after the
consummation of the exchange offer, plus $5mm (provided that such $5mm shall not
be available to pay dividends).  Refinancing the 8-1/8% Notes with unsecured
senior or subordinated indebtedness shall be carved out from the restricted
payment covenant.

 

—Section 4.09 (Limitation on Liens).  Revised covenant to include additional
carevouts for (i) any interest or title of a lessor, licensor or sublicensor
under any lease, license or sublicense entered into by POI/POAMI/IASG in the
ordinary course of business, (ii) liens securing indebtedness in an amount of
not more than $5mm and (iii) first priority liens under the POI/POAMI senior
secured term loan and revolving credit facility.

 

—Section 4.10 (Repurchase Offer Following

 

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Excess Retail Attrition).  Shall be deleted.

 

—Revised Section 4.11 (Limitation on Asset Sales).  Covenant and related
definitions to be conformed to those found in indenture for 8-1/8% Notes (75%
cash consideration for asset sales; mandatory offer to repurchase if excess
proceeds at least $10mm).  Revised covenant shall also permit transfers of
assets among POI, IASG, POAMI and their subsidiaries.

 

—Revised Section 4.12 (Limitation on Restrictions on Distributions from
Restricted Subsidiaries).  Same.

 

—Revised Section 4.13 (Limitation on Transactions with Affiliates).  Covenant to
be revised to require (i) Board approval if affiliate transaction in excess of
$5mm (vs. $2mm in Existing Notes indenture) and (ii) Board approval and fairness
opinion if affiliate transaction in excess of $15mm (vs. $5mm in Existing Notes
indenture).  There shall also be a carveout for transactions among POI, POAMI,
IASG and their subsidiaries.

 

—Section 4.14 (Limitation on Purchases of Retail Alarm Monitoring Contracts
Following Certain Events).  Shall be deleted.

 

—Section 4.15 (Limitation on Issuances and Sales of Equity Interests in
Restricted Subsidiaries).  Same.

 

—Section 4.16 (Additional Subsidiary Guarantees).  Same.

 

—Section 4.17 (Business Activities).  Same.

 

—Section 4.18 (Payments for Consent).  Same.

 

—Revised Section 4.19 (Repurchase at the Option of Holders Upon a Change of
Control). Covenant and related definitions to be conformed to those found in the
indenture for 8-1/8% Notes.

 

—Revised Section 5.01 (Merger, Consolidation or Sale of Assets).  Covenant to be
revised to delete the Consolidated Net Worth Test.

 

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Remaining terms to stay the same.

*              *              *              *

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Schedule A

Name of Bondholder

Aggregate Principal Amount of
Old Notes Held

GREYWOLF HIGH YIELD MASTER FUND

$37,925,000

GREYWOLF CAPITAL PARTNERS II LP

GREYWOLF CAPITAL OVERSEAS FUND

GLENVIEW CAPITAL PARTNERS LP

$29,500,000

GLENVIEW INSTITUTIONAL PARTNERS LP

GLENVIEW CAPITAL MASTER FUND LTD

GCM LITTLE ARBOR PARTNERS LP

GCM LITTLE ARBOR INSTITUTIONAL PARTNERS LP

GCM LITTLE ARBOR MASTER FUND LTD

CASPIAN CAPITAL PARTNERS, L.P.

$18,500,000

MARINER LDC

MARINER OPPORTUNITIES FUND, LP

MARINER VOYAGER MASTER FUND, LTD

RIVA RIDGE MASTER FUND, LTD.

$12,920,000

REDWOOD MASTER FUND, LTD.

$8,000,000

TOTAL

$106,845,000.00

 

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