EXHIBIT 10.5

 

EXECUTION VERSION

 

EXCHANGE AGREEMENT

 

This Exchange Agreement (this “Agreement”) is dated as of November 12, 2004 and
is made by and among Protection One, Inc., a Delaware corporation (“POI”),
Protection One Alarm Monitoring, Inc., a Delaware corporation (“POAMI”), POI
Acquisition, L.L.C., a Delaware limited liability company (“Acquisition LLC”),
POI Acquisition I, Inc., a Delaware corporation (“Acquisition Inc.”), and
Quadrangle Master Funding Ltd., a Cayman Islands exempted company incorporated
with limited liability (“QMFL”).  Certain capitalized terms used herein and not
otherwise defined have the meanings set forth in Article VIII hereof.

 

WHEREAS, POAMI is the borrower under a Revolving Credit Agreement dated as of
December 21, 1998 (as renewed, extended, modified and amended from time to time,
the “Credit Facility”), by and among POAMI, POI, Network Multi-Family Security
Corporation, a Delaware corporation (“Network”), and Acquisition LLC (as
administrative agent and lender under the Credit Facility), which had an
aggregate principal balance of $215.5 million as of October 31, 2004; and

 

WHEREAS, pursuant to the terms of the Credit Facility Standstill Agreement dated
as of February 17, 2004 (as renewed, extended, modified and amended from time to
time, the “Standstill Agreement”), by and among POAMI, POI, Network and
Acquisition LLC, Acquisition LLC forbore, and continues to forbear, from
exercising certain remedies as a result of the Specified Defaults (as defined in
the Standstill Agreement); and

 

WHEREAS, by letter dated February 27, 2004, QMFL assumed from Acquisition LLC
one-third of the total Committed Sums and Principal Debt, together with
one-third of the other Obligations (each term as defined in the Credit
Facility), and agreed to be bound by the obligations of Acquisition LLC set
forth in the Standstill Agreement; and

 

WHEREAS, by letter dated November 12, 2004, a copy of which is set forth on
Annex VI attached hereto, POI and Acquisition Inc. agreed to extend the Equity
Standstill Agreement dated as of February 17, 2004 (as renewed, extended,
modified and amended from time to time, the “Equity Standstill Agreement”), by
and between POI and Acquisition Inc., subject to the conditions set forth
therein, until the earlier of the Closing Date or the termination of this
Agreement pursuant to Article VII; and

 

WHEREAS, by letter dated November 12, 2004, a copy of which is set forth on
Annex VII attached hereto, POAMI, POI, Network and Acquisition LLC agreed to
extend the Standstill Agreement, subject to the conditions set forth therein,
until the earlier of the Closing Date or the termination of this Agreement
pursuant to Article VII; and

 

WHEREAS, the Company Parties and the Quadrangle Parties desire to effect a
Restructuring through which the Quadrangle Parties will, among other things,
reduce the unpaid principal balance outstanding under the Credit Facility by
$120,000,000 in exchange for an aggregate number of shares of common stock, par
value $0.01 per share, of POI (the “Common

 

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Stock”) such that the aggregate number of shares of Common Stock issued in such
exchange will represent approximately 89.1%, and the shares of Common Stock
outstanding immediately prior to such exchange will represent approximately
10.9%, of all shares of Common Stock outstanding immediately following such
exchange, upon the terms and subject to the conditions set forth below.

 

NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and intending to be
legally bound hereby, the Company Parties and the Quadrangle Parties hereby
agree as follows:

 

ARTICLE I
EXCHANGE OF PRINCIPAL DEBT AND RELATED MATTERS

 

SECTION 1.1                                     
(A)                                  EXCHANGE OF PRINCIPAL DEBT FOR COMMON
STOCK. AT THE CLOSING, THE PRINCIPAL BALANCE OUTSTANDING UNDER THE CREDIT
FACILITY SHALL BE REDUCED BY $120,000,000, AND IN CONSIDERATION FOR SUCH
REDUCTION, POI SHALL, OR SHALL CAUSE ITS DULY AUTHORIZED AGENT (THE “EXCHANGE
AGENT”) TO, ISSUE AND DELIVER TO ACQUISITION LLC AND QMFL AN AGGREGATE OF
16,000,000 SHARES OF COMMON STOCK (THE “NEW SHARES”) (THE “EXCHANGE”).  THE
PARTIES UNDERSTAND AND AGREE THAT THE NEW SHARES TO BE ISSUED TO ACQUISITION LLC
AND QMFL IN THE EXCHANGE REPRESENT THE EQUIVALENT OF AN AGGREGATE OF 800,000,000
SHARES OF COMMON STOCK ON A PRE REVERSE STOCK SPLIT (AS DEFINED BELOW) BASIS.

 

(B)                                 REVERSE STOCK SPLIT.  THE ISSUANCE OF THE
NEW SHARES IN THE EXCHANGE SHALL OCCUR AFTER THE FILING AND EFFECTIVENESS OF THE
CHARTER AMENDMENT AND THE 1:50 REVERSE STOCK SPLIT (THE “REVERSE STOCK SPLIT”)
THAT WILL BE IMPLEMENTED PURSUANT TO THE CHARTER AMENDMENT.  AS A RESULT, THE
REVERSE STOCK SPLIT SHALL NOT APPLY TO THE NEW SHARES. ACCORDINGLY, BASED ON THE
98,282,679 SHARES OF COMMON STOCK OUTSTANDING AS OF OCTOBER 31, 2004, THE
AGGREGATE NUMBER OF NEW SHARES ISSUED IN THE EXCHANGE WOULD REPRESENT
APPROXIMATELY 89.1% OF ALL SHARES OF COMMON STOCK OUTSTANDING IMMEDIATELY
FOLLOWING THE EXCHANGE, AND THE SHARES OF COMMON STOCK OUTSTANDING IMMEDIATELY
PRIOR TO THE EXCHANGE WOULD REPRESENT APPROXIMATELY 10.9% OF ALL SHARES OF
COMMON STOCK OUTSTANDING IMMEDIATELY FOLLOWING THE EXCHANGE (EXCLUDING ANY
IMPACT OF CASH ISSUED IN LIEU OF FRACTIONAL SHARES IN CONNECTION WITH THE
REVERSE STOCK SPLIT).

 

(C)                                  PAYMENT OF INTEREST.  AT THE CLOSING, POAMI
SHALL PAY TO ACQUISITION LLC AND QMFL (ALLOCATED IN ACCORDANCE WITH EACH PARTY’S
PRO RATA SHARE OF THE PRINCIPAL DEBT) ALL ACCRUED AND UNPAID INTEREST ON THE
PRINCIPAL DEBT AS OF THE CLOSING DATE.

 

(D)                                 PAYMENT OF EXCHANGE FEE.  AT THE CLOSING,
POAMI SHALL PAY ACQUISITION LLC, AS ADMINISTRATIVE AGENT UNDER THE AMENDED AND
RESTATED CREDIT AGREEMENT, THE FEE REFERRED TO IN SECTION 5.7 OF THE AMENDED AND
RESTATED CREDIT AGREEMENT (THE “EXCHANGE FEE”).

 

(E)                                  CLOSING DELIVERIES.  AT THE CLOSING, POI
SHALL DELIVER TO ACQUISITION LLC AND QMFL OR THE EXCHANGE AGENT, AS THE CASE MAY
BE, CERTIFICATES REPRESENTING THE NEW SHARES ISSUED IN THE NAME OF ACQUISITION
LLC OR QMFL, AS APPLICABLE, WITH ACQUISITION LLC AND QMFL EACH RECEIVING
CERTIFICATES REPRESENTING A SPECIFIED PERCENTAGE OF THE NEW SHARES SO
DISTRIBUTED, BASED ON SUCH PARTY’S PRO RATA SHARE OF THE PRINCIPAL DEBT AS OF
IMMEDIATELY PRIOR TO

 

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THE CLOSING (WHICH AMOUNT SHALL BE SET FORTH IN INSTRUCTIONS TO BE DELIVERED IN
WRITING TO POI BY ACQUISITION LLC AND QMFL NO LATER THAN TWO BUSINESS DAYS PRIOR
TO THE CLOSING).  AT THE CLOSING, POAMI, ACQUISITION LLC AND QMFL SHALL ENTER
INTO AN AMENDED AND RESTATED CREDIT AGREEMENT (THE “AMENDED AND RESTATED CREDIT
AGREEMENT”), THE FORM OF WHICH IS SET FORTH IN ANNEX I ATTACHED HERETO, TO BE
EFFECTIVE AS OF THE CLOSING, WHICH SHALL, AMONG OTHER THINGS, REFLECT THE
$120,000,000 REDUCTION IN UNPAID PRINCIPAL BALANCE IN CONNECTION WITH THE
EXCHANGE, WITH SUCH REDUCTION ALLOCATED AMONG ACQUISITION LLC AND QMFL IN
ACCORDANCE WITH THE PERCENTAGES REFERRED TO IN THE IMMEDIATELY PRECEDING
SENTENCE.  AT THE CLOSING, THE PARTIES, AS APPLICABLE, WILL DELIVER DULY
EXECUTED COPIES OF EACH OF THE RESTRUCTURING DOCUMENTS.

 

(F)                                    CLOSING DATE AND LOCATION. THE CLOSING OF
THE EXCHANGE SHALL TAKE PLACE AT THE OFFICES OF KIRKLAND & ELLIS, 200 EAST
RANDOLPH DRIVE, CHICAGO, IL 60601 AT 10:00 A.M., CHICAGO TIME, AS SOON AS
REASONABLY PRACTICABLE AFTER SATISFACTION OR WAIVER OF THE CONDITIONS SET FORTH
IN ARTICLES IV AND V HEREOF, OR AT SUCH OTHER TIME AND PLACE AS POI AND
ACQUISITION LLC MUTUALLY AGREE UPON ORALLY OR IN WRITING (WHICH TIME AND PLACE
ARE DESIGNATED AS THE “CLOSING”).  THE DATE ON WHICH THE CLOSING MAY OCCUR IS
REFERRED TO HEREIN AS THE “CLOSING DATE.”

 

SECTION 1.2                                     
(A)                                  RELEASE BY THE QUADRANGLE PARTIES. 
EFFECTIVE AS OF THE CLOSING, THE QUADRANGLE PARTIES, FOR THEMSELVES AND EACH OF
THEIR RESPECTIVE PREDECESSORS AND SUCCESSORS, AS WELL AS EACH OF THEIR
RESPECTIVE TRUSTEES, PRIVIES, ADVISORS, CONSULTANTS, ASSIGNS, EMPLOYEES, AGENTS,
ATTORNEYS, LEGAL REPRESENTATIVES, PARENTS, SUBSIDIARIES, SHAREHOLDERS, MEMBERS,
OFFICERS AND DIRECTORS SOLELY IN THEIR CAPACITIES AS SUCH (OTHER THAN POI AND
ITS SUBSIDIARIES OR ANY SUCH RELATED INDIVIDUAL OR ENTITY) (THE “QUADRANGLE
RELEASING PARTIES”), RELEASE, ACQUIT AND FOREVER DISCHARGE THE COMPANY PARTIES
AND EACH OF THEIR RESPECTIVE AFFILIATES, PREDECESSORS AND SUCCESSORS, AS WELL AS
EACH OF THEIR RESPECTIVE TRUSTEES, PRIVIES, ADVISORS, CONSULTANTS, ASSIGNS,
EMPLOYEES, AGENTS, ATTORNEYS, LEGAL REPRESENTATIVES, SHAREHOLDERS, MEMBERS,
OFFICERS AND DIRECTORS SOLELY IN THEIR CAPACITIES AS SUCH (OTHER THAN THE
QUADRANGLE RELEASING PARTIES) (THE “COMPANY RELEASED PARTIES”) OF AND FROM ANY
AND ALL CLAIMS, DEMANDS, DAMAGES, ACTIONS, CAUSES OF ACTION, RIGHTS, REMEDIES,
COSTS, LOSSES, EXPENSES, COMPENSATION, OR SUITS IN EQUITY, OF WHATSOEVER KIND OR
NATURE (COLLECTIVELY, “CLAIMS”), WHETHER OR NOT RELATED TO ANY OF THE AGREEMENTS
REFERENCED IN THE RECITALS, THAT ANY OF THE QUADRANGLE RELEASING PARTIES MIGHT
HAVE BECAUSE OF ANYTHING DONE, OMITTED, SUFFERED, OR ALLOWED TO BE DONE BY ANY
OF THE COMPANY RELEASED PARTIES ON OR PRIOR TO THE DATE OF THIS AGREEMENT,
WHETHER HERETOFORE OR HEREAFTER ACCRUING, WHETHER FORESEEN OR UNFORESEEN, OR
WHETHER KNOWN OR UNKNOWN TO THE PARTIES, INCLUDING WITHOUT LIMITATION, ANY AND
ALL CLAIMS RELATED TO THE RESTRUCTURING AND/OR ANY SETTLEMENT NEGOTIATIONS WITH
RESPECT THERETO AND ALSO INCLUDING WITHOUT LIMITATION, ANY DAMAGES AND THE
CONSEQUENCES THEREOF RESULTING FOR ANY REASON WHATSOEVER (THE “COMPANY RELEASED
MATTERS”).  THE QUADRANGLE PARTIES, FOR THEMSELVES AND ALL OF THE QUADRANGLE
RELEASING PARTIES (TO THE EXTENT WITHIN THE CONTROL OF THE QUADRANGLE PARTIES),
FURTHER AGREE NEVER TO COMMENCE, AID OR PARTICIPATE IN (EXCEPT TO THE EXTENT
REQUIRED BY ORDER OR LEGAL PROCESS ISSUED BY A COURT OR GOVERNMENTAL AGENCY OF
COMPETENT JURISDICTION) ANY LEGAL ACTION OR OTHER PROCEEDING BASED IN WHOLE OR
IN PART UPON THE FOREGOING COMPANY RELEASED MATTERS. THE QUADRANGLE PARTIES
AGREE THAT THIS WAIVER AND RELEASE IS AN ESSENTIAL AND MATERIAL TERM OF THIS
AGREEMENT AND THAT THE AGREEMENTS IN THIS PARAGRAPH ARE INTENDED TO BE IN FULL
SATISFACTION OF ANY ALLEGED INJURIES OR DAMAGES IN CONNECTION WITH THE COMPANY
RELEASED MATTERS.  THE QUADRANGLE PARTIES ALSO UNDERSTAND THAT THIS RELEASE
SHALL APPLY TO ALL UNKNOWN OR UNANTICIPATED RESULTS OF ANY ACTION OF ANY PARTY,
AS WELL AS THOSE KNOWN AND ANTICIPATED.  THE

 

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QUADRANGLE PARTIES HAVE CONSULTED WITH LEGAL COUNSEL PRIOR TO SIGNING THIS
AGREEMENT, AND EXECUTE THIS AGREEMENT VOLUNTARILY, WITH THE INTENTION OF FULLY
AND FINALLY EXTINGUISHING ALL COMPANY RELEASED MATTERS.  THE PARTIES ACKNOWLEDGE
AND AGREE THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE
RIGHTS AND OBLIGATIONS SET FORTH IN THIS AGREEMENT AND THE OTHER RESTRUCTURING
DOCUMENTS AND THE MANAGEMENT AND INFORMATION RIGHTS LETTER DATED FEBRUARY 17,
2004 FROM POI TO QUADRANGLE CAPITAL PARTNERS LP (THE “VCOC LETTER”) SHALL
SURVIVE AND SHALL NOT BE WAIVED OR RELEASED BY THIS AGREEMENT OTHER THAN WITH
RESPECT TO ANY CLAIMS ARISING FROM ANYTHING DONE, OMITTED, SUFFERED, OR ALLOWED
TO BE DONE UNDER THE CREDIT FACILITY ON OR PRIOR TO THE DATE OF THIS AGREEMENT.

 

(B)                                 RELEASE BY THE COMPANY PARTIES.  EFFECTIVE
AS OF THE CLOSING, THE COMPANY PARTIES FOR THEMSELVES AND EACH OF CMS AND
NETWORK (IN THEIR CAPACITIES AS GUARANTORS UNDER THE CREDIT FACILITY AND
SUBSIDIARIES OF THE COMPANY PARTIES) AND EACH OF THEIR RESPECTIVE PREDECESSORS
AND SUCCESSORS, AS WELL AS EACH OF THEIR RESPECTIVE TRUSTEES, PRIVIES, ADVISORS,
CONSULTANTS, ASSIGNS, EMPLOYEES, AGENTS, ATTORNEYS, LEGAL REPRESENTATIVES,
PARENTS, SUBSIDIARIES, SHAREHOLDERS, MEMBERS, OFFICERS AND DIRECTORS SOLELY IN
THEIR CAPACITIES AS SUCH (OTHER THAN THE QUADRANGLE RELEASING PARTIES) (THE
“COMPANY RELEASING PARTIES”), RELEASE, ACQUIT AND FOREVER DISCHARGE THE
QUADRANGLE PARTIES AND EACH OF THEIR RESPECTIVE AFFILIATES, PREDECESSORS AND
SUCCESSORS, AS WELL AS EACH OF THEIR RESPECTIVE TRUSTEES, PRIVIES, ADVISORS,
CONSULTANTS, ASSIGNS, EMPLOYEES, AGENTS, ATTORNEYS, LEGAL REPRESENTATIVES,
SHAREHOLDERS, MEMBERS, OFFICERS AND DIRECTORS SOLELY IN THEIR CAPACITIES AS SUCH
(OTHER THAN THE COMPANY RELEASING PARTIES) (THE “QUADRANGLE RELEASED PARTIES”)
OF AND FROM ANY AND ALL CLAIMS, WHETHER OR NOT RELATED TO ANY OF THE AGREEMENTS
REFERENCED IN THE RECITALS, THAT ANY OF THE COMPANY RELEASING PARTIES MIGHT HAVE
BECAUSE OF ANYTHING DONE, OMITTED, SUFFERED, OR ALLOWED TO BE DONE BY ANY OF THE
QUADRANGLE RELEASED PARTIES ON OR PRIOR TO THE DATE OF THIS AGREEMENT, WHETHER
HERETOFORE OR HEREAFTER ACCRUING, WHETHER FORESEEN OR UNFORESEEN, OR WHETHER
KNOWN OR UNKNOWN TO THE PARTIES, INCLUDING WITHOUT LIMITATION, ANY AND ALL
CLAIMS RELATED TO THE RESTRUCTURING AND/OR ANY SETTLEMENT NEGOTIATIONS WITH
RESPECT THERETO AND ALSO INCLUDING WITHOUT LIMITATION, ANY DAMAGES AND THE
CONSEQUENCES THEREOF RESULTING FOR ANY REASON WHATSOEVER (THE “QUADRANGLE
RELEASED MATTERS”).  THE COMPANY PARTIES, FOR THEMSELVES AND ALL OF THE COMPANY
RELEASING PARTIES (TO THE EXTENT WITHIN THE CONTROL OF THE COMPANY PARTIES),
FURTHER AGREE NEVER TO COMMENCE, AID OR PARTICIPATE IN (EXCEPT TO THE EXTENT
REQUIRED BY ORDER OR LEGAL PROCESS ISSUED BY A COURT OR GOVERNMENTAL AGENCY OF
COMPETENT JURISDICTION) ANY LEGAL ACTION OR OTHER PROCEEDING BASED IN WHOLE OR
IN PART UPON THE FOREGOING QUADRANGLE RELEASED MATTERS.  THE COMPANY PARTIES
AGREE THAT THIS WAIVER AND RELEASE IS AN ESSENTIAL AND MATERIAL TERM OF THIS
AGREEMENT AND THAT THE AGREEMENTS IN THIS PARAGRAPH ARE INTENDED TO BE IN FULL
SATISFACTION OF ANY ALLEGED INJURIES OR DAMAGES IN CONNECTION WITH THE
QUADRANGLE RELEASED MATTERS.  THE COMPANY PARTIES ALSO UNDERSTAND THAT THIS
RELEASE SHALL APPLY TO ALL UNKNOWN OR UNANTICIPATED RESULTS OF ANY ACTION OF ANY
PARTY, AS WELL AS THOSE KNOWN AND ANTICIPATED.  THE COMPANY PARTIES HAVE
CONSULTED WITH LEGAL COUNSEL PRIOR TO SIGNING THIS AGREEMENT, AND EXECUTE THIS
AGREEMENT VOLUNTARILY, WITH THE INTENTION OF FULLY AND FINALLY EXTINGUISHING ALL
QUADRANGLE RELEASED MATTERS.  THE PARTIES ACKNOWLEDGE AND AGREE THAT,
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE RIGHTS AND
OBLIGATIONS SET FORTH IN THIS AGREEMENT, THE OTHER RESTRUCTURING DOCUMENTS AND
THE VCOC LETTER SHALL SURVIVE AND SHALL NOT BE WAIVED OR RELEASED BY THIS
AGREEMENT OTHER THAN WITH RESPECT TO ANY CLAIMS ARISING FROM ANYTHING DONE,
OMITTED, SUFFERED, OR ALLOWED TO BE DONE UNDER THE CREDIT FACILITY ON OR PRIOR
TO THE DATE OF THIS AGREEMENT.

 

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(C)                                  CREDIT FACILITY WAIVERS; FORBEARANCE. 
WITHOUT IN ANY WAY LIMITING SECTION 1.2(A), EFFECTIVE AS OF THE CLOSING,
ACQUISITION LLC AND QMFL HEREBY WAIVE AND RELEASE ALL DEFAULTS AND EVENTS OF
DEFAULT UNDER THE CREDIT FACILITY EXISTING IMMEDIATELY PRIOR TO THE CLOSING. 
WITHOUT IN ANY WAY LIMITING SECTION 1.2(B), EFFECTIVE AS OF THE CLOSING, THE
COMPANY RELEASING PARTIES HEREBY WAIVE, RELEASE, ACQUIT AND FOREVER DISCHARGE
THE QUADRANGLE RELEASED PARTIES FROM ANY CLAIMS RELATING TO THE CREDIT FACILITY,
WHETHER ARISING FROM ANYTHING DONE, OMITTED, SUFFERED, OR ALLOWED TO BE DONE ON
OR PRIOR TO THE DATE OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY CLAIMS
RELATING TO LENDER LIABILITY, THE DOCTRINE OF RECHARACTERIZATION OR EQUITABLE
SUBORDINATION, AND SHALL NOT SEEK TO EXERCISE ANY DEFENSES, RIGHTS OF SET-OFF OR
RECOUPMENT WITH RESPECT TO THE OBLIGATION, OR ANY PORTION THEREOF, IN CONNECTION
WITH ANY SUCH CLAIMS.

 

SECTION 1.3                                      EXCEPTIONS TO RELEASE. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE PROVISIONS OF
THIS ARTICLE I SHALL HAVE NO EFFECT ON ANY ALARM MONITORING OR OTHER SERVICE
AGREEMENTS (INCLUDING CARD ACCESS CONTROL, CCTV AND FIRE AND SECURITY MONITORING
SERVICES), IF ANY, AMONG THE QUADRANGLE RELEASED PARTIES, ON THE ONE HAND, AND
THE COMPANY RELEASED PARTIES, ON THE OTHER HAND, IN EFFECT ON THE DATE OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT NOTHING IN THIS ARTICLE I SHALL BE HELD OR
IMPLIED TO WAIVE, AFFECT OR OTHERWISE MODIFY ANY RIGHTS, CLAIMS OR DEFENSES THAT
ANY QUADRANGLE RELEASED PARTY OR COMPANY RELEASED PARTY HAS OR MAY HAVE WITH
RESPECT TO THE AGREEMENTS DESCRIBED IN THIS SECTION 1.3.

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES

 

The Company Parties represent and warrant to the Quadrangle Parties as follows,
except as disclosed on the disclosure schedule delivered by the Company Parties
to the Quadrangle Parties on the date of this Agreement:

 

SECTION 2.1                                      ORGANIZATION AND STANDING OF
THE COMPANY PARTIES. THE COMPANY PARTIES, NETWORK AND SECURITY MONITORING
SERVICES, INC., A FLORIDA CORPORATION (“CMS”), ARE CORPORATIONS DULY ORGANIZED,
VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THEIR STATE OF
INCORPORATION AND HAVE ALL REQUISITE CORPORATE POWER AND AUTHORITY (A) TO OWN,
LEASE AND OPERATE THEIR MATERIAL PROPERTIES AND TO CARRY ON THEIR BUSINESS AS
NOW BEING CONDUCTED AND (B) TO EXECUTE, DELIVER AND PERFORM THEIR OBLIGATIONS
UNDER, AS APPLICABLE, THIS AGREEMENT AND THE OTHER RESTRUCTURING DOCUMENTS AND
TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.  THE COMPANY
PARTIES AND THEIR SUBSIDIARIES ARE DULY QUALIFIED TO DO BUSINESS AND ARE IN GOOD
STANDING IN ALL JURISDICTIONS WHEREIN SUCH QUALIFICATION IS NECESSARY AND WHERE
FAILURE TO SO QUALIFY WOULD HAVE A MATERIAL ADVERSE EFFECT.

 

SECTION 2.2                                      AUTHORIZATION OF TRANSACTION
DOCUMENTS.  THE EXECUTION AND DELIVERY BY THE COMPANY PARTIES OF THIS AGREEMENT
AND, AS APPLICABLE, THE OTHER RESTRUCTURING DOCUMENTS HAVE BEEN, AND THE
EXECUTION AND DELIVERY BY NETWORK AND CMS OF THE OTHER RESTRUCTURING DOCUMENTS
TO WHICH THEY WILL BE PARTIES WILL BE, DULY AND VALIDLY AUTHORIZED BY, AS
APPLICABLE, THE COMPANY PARTIES (INCLUDING APPROVAL BY THE DISINTERESTED
DIRECTORS OF THE COMPANY PARTIES), NETWORK AND CMS.  THIS AGREEMENT HAS BEEN
DULY EXECUTED AND DELIVERED BY THE COMPANY PARTIES, AND THIS AGREEMENT IS, AND
EACH OF THE OTHER RESTRUCTURING DOCUMENTS, WHEN EXECUTED AND DELIVERED BY THE
COMPANY PARTIES, NETWORK AND CMS, AS APPLICABLE, WILL BE, ASSUMING EACH

 

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IS A VALID AND BINDING AGREEMENT OF THE APPLICABLE QUADRANGLE PARTIES, A VALID
AND BINDING OBLIGATION OF SUCH COMPANY PARTIES, NETWORK AND CMS, AS APPLICABLE,
ENFORCEABLE IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, SUBJECT AS TO
ENFORCEABILITY TO GENERAL PRINCIPLES OF EQUITY AND TO BANKRUPTCY, INSOLVENCY,
MORATORIUM AND OTHER SIMILAR LAWS AFFECTING THE ENFORCEMENT OF CREDITORS’ RIGHTS
GENERALLY.

 

SECTION 2.3                                      NO CONFLICTS.  THE EXECUTION,
DELIVERY AND PERFORMANCE BY THE COMPANY PARTIES OF THIS AGREEMENT, AND THE
EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY PARTIES, NETWORK AND CMS, AS
APPLICABLE, OF THE OTHER RESTRUCTURING DOCUMENTS AND THE CONSUMMATION BY THE
COMPANY PARTIES, NETWORK AND CMS, AS APPLICABLE, OF THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THEREUNDER (INCLUDING THE REVERSE STOCK SPLIT) WILL
NOT (SUBJECT TO THE FILING AND EFFECTIVENESS OF THE CHARTER AMENDMENT) (A)
CONFLICT WITH OR RESULT IN ANY BREACH OF ANY PROVISION OF THEIR CERTIFICATES OF
INCORPORATION OR BY-LAWS, (B) SUBJECT TO COMPLIANCE WITH ANY REQUIRED FILINGS,
MAILINGS TO STOCKHOLDERS, PERMITS, AUTHORIZATIONS, CONSENTS AND APPROVALS AS MAY
BE REQUIRED UNDER, AND OTHER APPLICABLE REQUIREMENTS OF, FEDERAL SECURITIES LAWS
AND APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, CONFLICT WITH OR RESULT IN THE
BREACH OF THE TERMS, CONDITIONS OR PROVISIONS OF OR CONSTITUTE A DEFAULT (OR AN
EVENT WHICH WITH NOTICE OR LAPSE OF TIME OR BOTH WOULD BECOME A DEFAULT) UNDER,
OR GIVE RISE TO ANY RIGHT OF TERMINATION, ACCELERATION OR CANCELLATION UNDER,
ANY AGREEMENT, LEASE, MORTGAGE, LICENSE, INDENTURE, INSTRUMENT OR OTHER CONTRACT
TO WHICH A COMPANY PARTY, NETWORK, OR CMS IS A PARTY OR BY WHICH ANY OF THEIR
PROPERTIES OR ASSETS ARE BOUND (INCLUDING UNDER ANY EQUITY INCENTIVE PLANS AND
ANY OPTIONS, WARRANTS, CONVERTIBLE SECURITIES OR OTHER RIGHTS TO ACQUIRE SHARES
OF COMMON STOCK), OR (C) SUBJECT TO COMPLIANCE WITH ANY REQUIRED FILINGS,
MAILINGS TO STOCKHOLDERS, PERMITS, AUTHORIZATIONS, CONSENTS AND APPROVALS AS MAY
BE REQUIRED UNDER, AND OTHER APPLICABLE REQUIREMENTS OF, FEDERAL SECURITIES
LAWS, APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, RESULT IN A VIOLATION OF ANY
LAW, RULE, REGULATION, ORDER, JUDGMENT OR DECREE (INCLUDING, WITHOUT LIMITATION,
FEDERAL AND STATE SECURITIES LAWS AND REGULATIONS) APPLICABLE TO A COMPANY
PARTY, NETWORK OR CMS OR BY WHICH ANY OF THEIR PROPERTIES OR ASSETS ARE BOUND OR
AFFECTED, EXCEPT IN THE CASE OF CLAUSES (B) OR (C), WHERE SUCH CONFLICTS OR
VIOLATIONS WOULD NOT HAVE A MATERIAL ADVERSE EFFECT OR PREVENT OR MATERIALLY
DELAY THEIR ABILITY TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.

 

SECTION 2.4                                      CAPITALIZATION.  AS OF THE DATE
OF THIS AGREEMENT, THE AUTHORIZED CAPITAL STOCK OF POI IS (A) 150,000,000 SHARES
OF COMMON STOCK AND (B) 5,000,000 SHARES OF PREFERRED STOCK, PAR VALUE $0.10 PER
SHARE (THE “PREFERRED STOCK”).  ALL OF THE OUTSTANDING CAPITAL STOCK OF POI HAS
BEEN DULY AUTHORIZED AND VALIDLY ISSUED AND ARE FULLY PAID AND NON-ASSESSABLE
AND HAVE NO PREEMPTIVE RIGHTS.  AS OF THE DATE OF THIS AGREEMENT, THERE ARE: (A)
98,282,679 SHARES OF COMMON STOCK OUTSTANDING AND (B) NO SHARES OF PREFERRED
STOCK OUTSTANDING.  AS OF THE DATE OF THIS AGREEMENT, POI HAS OUTSTANDING
OPTIONS, WARRANTS AND SIMILAR RIGHTS ENTITLING THE HOLDERS TO PURCHASE OR
ACQUIRE 4,283,898 SHARES OF COMMON STOCK, AND 3,307,305 SHARES OF COMMON STOCK
RESERVED FOR FUTURE GRANTS UNDER EQUITY INCENTIVE PLANS OF POI OR ANY OF ITS
SUBSIDIARIES AND 1,030,837 SHARES OF COMMON STOCK RESERVED FOR ISSUANCE PURSUANT
TO OUTSTANDING WARRANTS.  OTHER THAN AS SET FORTH IN THE PRECEDING SENTENCE,
THERE ARE NOT OUTSTANDING ANY (I) SHARES OF CAPITAL STOCK OR VOTING SECURITIES
(OR OBLIGATION TO ISSUE OR REPURCHASE ANY SUCH SECURITIES) OR (II) SECURITIES OF
POI OR A SUBSIDIARY CONVERTIBLE INTO, EXCHANGEABLE FOR OR OTHERWISE ENTITLING
THE HOLDERS THEREOF TO ACQUIRE SHARES OF CAPITAL STOCK OR VOTING SECURITIES OF
POI.  POI HAS DULY RESERVED FROM ITS AUTHORIZED AND UNISSUED SHARES OF COMMON
STOCK THE FULL NUMBER OF SHARES REQUIRED FOR (A) ALL OPTIONS, WARRANTS,
CONVERTIBLE SECURITIES AND OTHER RIGHTS TO ACQUIRE SHARES OF COMMON STOCK WHICH
ARE OUTSTANDING AND (B) ALL SHARES OF COMMON STOCK AND OPTIONS AND OTHER RIGHTS
TO ACQUIRE SHARES OF

 

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COMMON STOCK WHICH MAY BE ISSUED OR GRANTED UNDER THE STOCK OPTION AND SIMILAR
PLANS WHICH HAVE BEEN ADOPTED BY POI OR ANY OF ITS SUBSIDIARIES.  THE NEW
SHARES, WHEN ISSUED AND DELIVERED IN ACCORDANCE WITH THE TERMS HEREOF, WILL BE
DULY AUTHORIZED AND VALIDLY ISSUED, FULLY PAID AND NON-ASSESSABLE.

 

SECTION 2.5                                      SEC FILINGS.  POI HAS FILED IN
A TIMELY MANNER ALL DOCUMENTS THAT POI WAS REQUIRED TO FILE UNDER THE EXCHANGE
ACT SINCE DECEMBER 31, 2003 (THE “SEC FILINGS”).  THE SEC FILINGS COMPLIED IN
ALL MATERIAL RESPECTS WITH THE REQUIREMENTS OF THE EXCHANGE ACT AS OF THEIR
RESPECTIVE FILING DATES. NO SEC FILINGS CONTAINED ANY UNTRUE STATEMENT OF
MATERIAL FACT OR OMITTED TO STATE ANY MATERIAL FACT NECESSARY IN ORDER TO MAKE
THE STATEMENTS MADE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE
MADE, NOT MISLEADING.

 

SECTION 2.6                                      NO MATERIAL LIABILITIES.  AS OF
SEPTEMBER 30, 2004, NONE OF THE COMPANY PARTIES, NETWORK OR CMS HAS ANY
LIABILITIES OF ANY KIND (WHETHER ACCRUED, ABSOLUTE, CONTINGENT OR OTHERWISE, AND
WHETHER DUE OR TO BECOME DUE) THAT WOULD BE REQUIRED TO BE REFLECTED ON A
BALANCE SHEET PREPARED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES CONSISTENTLY APPLIED IN ORDER FOR SUCH BALANCE SHEET TO
PRESENT FAIRLY IN ALL MATERIAL RESPECTS THE CONSOLIDATED FINANCIAL POSITION OF
POI AND ITS SUBSIDIARIES EXCEPT FOR LIABILITIES SET FORTH ON THE FINANCIAL
STATEMENTS CONTAINED IN THE DRAFT POI FORM 10-Q FOR THE FISCAL QUARTER ENDED
SEPTEMBER 30, 2004 PROVIDED TO THE QUADRANGLE PARTIES ON NOVEMBER 10, 2004 (THE
“DRAFT 10-Q”) OR OTHERWISE REFLECTED IN, RESERVED AGAINST OR OTHERWISE DESCRIBED
IN THE DRAFT 10-Q.

 

SECTION 2.7                                      ABSENCE OF CERTAIN CHANGES. 
EXCEPT AS DISCLOSED IN THE SEC FILINGS OR THE DRAFT 10-Q, SINCE SEPTEMBER 30,
2004, THE BUSINESS OF POI AND ITS SUBSIDIARIES, TAKEN AS A WHOLE, HAS BEEN
CONDUCTED IN THE ORDINARY COURSE CONSISTENT WITH PAST PRACTICE AND THERE HAS NOT
BEEN A MATERIAL ADVERSE CHANGE.

 

SECTION 2.8                                      COMPLIANCE WITH LAWS AND COURT
ORDERS.  NONE OF POI OR ANY OF ITS SUBSIDIARIES IS IN VIOLATION OF ANY
APPLICABLE LAW, RULE, REGULATION, JUDGMENT, INJUNCTION, ORDER OR DECREE, EXCEPT
FOR VIOLATIONS THAT HAVE NOT HAD AND WOULD NOT REASONABLY BE EXPECTED TO HAVE,
INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.

 

SECTION 2.9                                      STANDSTILL AGREEMENT; EQUITY
STANDSTILL AGREEMENT.  THERE HAS NOT OCCURRED A “TERMINATION EVENT” UNDER THE
STANDSTILL AGREEMENT OR AN “EQUITY STANDSTILL TERMINATION EVENT” UNDER THE
EQUITY STANDSTILL AGREEMENT, PROVIDED, THAT A TERMINATION EVENT OR AN EQUITY
STANDSTILL TERMINATION EVENT SHALL NOT BE DEEMED TO HAVE OCCURRED UNDER THE
STANDSTILL AGREEMENT OR EQUITY STANDSTILL AGREEMENT, RESPECTIVELY, DUE TO ANY
ACTION PERFORMED OR CONTEMPLATED TO BE PERFORMED UNDER THIS AGREEMENT.

 

SECTION 2.10                                CREDIT FACILITY.  THE CREDIT
FACILITY IS A VALID AND BINDING AGREEMENT OF POAMI AND POI AND NETWORK (AS
GUARANTORS THEREUNDER) AND IS IN FULL FORCE WITH RESPECT TO SUCH PARTIES AND, AS
OF THE DATE OF THIS AGREEMENT (BUT PRIOR TO GIVING EFFECT TO THE PAYMENT
CONTEMPLATED BY SECTION 6.14), THE TOTAL OBLIGATIONS UNDER THE CREDIT FACILITY
ARE $215,500,000 OF PRINCIPAL DEBT PLUS ALL ACCRUED AND UNPAID INTEREST
THEREON.  NO DEFAULT (AS DEFINED IN THE CREDIT FACILITY) HAS OCCURRED THAT IS
CONTINUING OTHER THAN ANY SPECIFIED DEFAULTS (AS DEFINED IN THE STANDSTILL
AGREEMENT).

 

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SECTION 2.11                                OPINION OF FINANCIAL ADVISOR.  THE
BOARD OF DIRECTORS OF POI HAS RECEIVED AN OPINION OF HOULIHAN LOKEY HOWARD &
ZUKIN (THE “FAIRNESS OPINION”) TO THE EFFECT THAT THE EXCHANGE IS FAIR, FROM A
FINANCIAL POINT OF VIEW, TO POI AND TO THE HOLDERS OF COMMON STOCK OTHER THAN
ACQUISITION INC.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE QUADRANGLE PARTIES

 

The Quadrangle Parties represent and warrant to the Company Parties as follows:

 

SECTION 3.1                                      ORGANIZATION AND STANDING OF
THE QUADRANGLE PARTIES. THE QUADRANGLE PARTIES ARE DULY ORGANIZED, VALIDLY
EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THEIR RESPECTIVE JURISDICTIONS
OF INCORPORATION OR FORMATION AND HAVE ALL REQUISITE POWER AND AUTHORITY (A) TO
OWN, LEASE AND OPERATE THEIR MATERIAL PROPERTIES AND TO CARRY ON THEIR BUSINESS
AS NOW BEING CONDUCTED AND (B) TO EXECUTE, DELIVER AND PERFORM THEIR OBLIGATIONS
UNDER THIS AGREEMENT AND, AS APPLICABLE, THE OTHER RESTRUCTURING DOCUMENTS AND
TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.

 

SECTION 3.2                                      AUTHORIZATION OF TRANSACTION
DOCUMENTS.  THE EXECUTION AND DELIVERY BY THE QUADRANGLE PARTIES OF THIS
AGREEMENT AND, AS APPLICABLE, THE OTHER RESTRUCTURING DOCUMENTS HAVE BEEN DULY
AND VALIDLY AUTHORIZED BY THE QUADRANGLE PARTIES. THIS AGREEMENT HAS BEEN DULY
EXECUTED AND DELIVERED BY THE QUADRANGLE PARTIES, THE STOCKHOLDER CONSENT HAS
BEEN DULY EXECUTED AND DELIVERED BY ACQUISITION INC., AND EACH OF THIS AGREEMENT
AND THE STOCKHOLDER CONSENT IS, AND EACH OF THE OTHER RESTRUCTURING DOCUMENTS,
WHEN EXECUTED AND DELIVERED BY THE APPLICABLE QUADRANGLE PARTIES, WILL BE,
ASSUMING EACH IS A VALID AND BINDING AGREEMENT OF THE APPLICABLE COMPANY
PARTIES, A VALID AND BINDING OBLIGATION OR CONSENT, AS APPLICABLE, OF SUCH
QUADRANGLE PARTIES ENFORCEABLE IN ACCORDANCE WITH THEIR RESPECTIVE TERMS,
SUBJECT AS TO ENFORCEABILITY TO GENERAL PRINCIPLES OF EQUITY AND TO BANKRUPTCY,
INSOLVENCY, MORATORIUM AND OTHER SIMILAR LAWS AFFECTING THE ENFORCEMENT OF
CREDITORS’ RIGHTS GENERALLY.

 

SECTION 3.3                                      NO CONFLICTS.  THE EXECUTION,
DELIVERY AND PERFORMANCE BY THE QUADRANGLE PARTIES OF THIS AGREEMENT AND, AS
APPLICABLE, THE OTHER RESTRUCTURING DOCUMENTS AND THE CONSUMMATION BY THE
QUADRANGLE PARTIES OF THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THEREUNDER
WILL NOT (A) CONFLICT WITH OR RESULT IN ANY BREACH OF ANY PROVISION OF THEIR
CERTIFICATES OF INCORPORATION OR BY-LAWS OR SIMILAR ORGANIZATIONAL DOCUMENTS, AS
APPLICABLE, (B) SUBJECT TO COMPLIANCE WITH ANY REQUIRED FILINGS, MAILINGS TO
STOCKHOLDERS, PERMITS, AUTHORIZATIONS, CONSENTS AND APPROVALS AS MAY BE REQUIRED
UNDER, AND OTHER APPLICABLE REQUIREMENTS OF, FEDERAL SECURITIES LAWS AND
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, CONFLICT WITH OR RESULT IN THE
BREACH OF THE TERMS, CONDITIONS OR PROVISIONS OF OR CONSTITUTE A DEFAULT (OR AN
EVENT WHICH WITH NOTICE OR LAPSE OF TIME OR BOTH WOULD BECOME A DEFAULT) UNDER,
OR GIVE RISE TO ANY RIGHT OF TERMINATION, ACCELERATION OR CANCELLATION UNDER,
ANY AGREEMENT, LEASE, MORTGAGE, LICENSE, INDENTURE, INSTRUMENT OR OTHER CONTRACT
TO WHICH A QUADRANGLE PARTY IS A PARTY OR BY WHICH ANY OF THEIR PROPERTIES OR
ASSETS ARE BOUND, OR  (C) SUBJECT TO COMPLIANCE WITH ANY REQUIRED FILINGS,
MAILINGS TO STOCKHOLDERS, PERMITS, AUTHORIZATIONS, CONSENTS AND APPROVALS AS MAY
BE REQUIRED UNDER, AND OTHER APPLICABLE REQUIREMENTS OF, FEDERAL SECURITIES
LAWS, APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, RESULT IN A VIOLATION OF ANY
LAW, RULE, REGULATION, ORDER, JUDGMENT OR DECREE (INCLUDING, WITHOUT LIMITATION,
FEDERAL AND STATE SECURITIES LAWS AND REGULATIONS) APPLICABLE TO A QUADRANGLE

 

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PARTY OR BY WHICH ANY OF THEIR PROPERTIES OR ASSETS ARE BOUND OR AFFECTED,
EXCEPT IN THE CASE OF CLAUSES (B) OR (C), WHERE SUCH CONFLICTS OR VIOLATIONS
WOULD NOT HAVE A MATERIAL ADVERSE EFFECT ON THEIR ABILITY TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

SECTION 3.4                                      CREDIT FACILITY.  THE CREDIT
FACILITY IS A VALID AND BINDING AGREEMENT OF ACQUISITION LLC AND QMFL AND IS IN
FULL FORCE WITH RESPECT TO SUCH PARTIES AND NEITHER ACQUISITION LLC NOR QMFL IS
IN DEFAULT OR BREACH IN ANY MATERIAL RESPECT UNDER THE TERMS OF THE CREDIT
FACILITY (EXCEPT ANY DEFAULT OR BREACH CAUSED BY THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY).  ACQUISITION LLC AND QMFL ARE THE ONLY
LENDERS UNDER THE CREDIT FACILITY, AND AS OF THE DATE OF THIS AGREEMENT, EACH
HOLDS THE AMOUNT OF PRINCIPAL DEBT SET FORTH UNDER ITS NAME ON THE SIGNATURE
PAGES HERETO.  THERE ARE NO OUTSTANDING AGREEMENTS, ARRANGEMENTS OR
UNDERSTANDINGS UNDER WHICH ACQUISITION LLC OR QMFL MAY BE OBLIGATED TO TRANSFER
ANY COMMITTED SUMS, PRINCIPAL DEBT OR OTHER OBLIGATIONS.  AS OF OR PRIOR TO THE
DATE OF THIS AGREEMENT, NEITHER ACQUISITION LLC NOR QMFL HAS SOLD, ASSIGNED OR
TRANSFERRED ANY CLAIMS WITH RESPECT TO THE CREDIT FACILITY, EXCEPT THAT IN
FEBRUARY OF 2004 ACQUISITION LLC ASSIGNED TO QMFL, AND QMFL ASSUMED FROM
ACQUISITION LLC, ONE-THIRD OF THE TOTAL COMMITTED SUMS (AS DEFINED IN THE CREDIT
FACILITY) AND PRINCIPAL DEBT (AS DEFINED IN THE CREDIT FACILITY), TOGETHER WITH
ONE-THIRD OF THE OTHER OBLIGATIONS (AS DEFINED IN THE CREDIT FACILITY).

 

SECTION 3.5                                      OWNERSHIP OF COMMON STOCK. 
ACQUISITION INC. OWNS (AND WILL CONTINUOUSLY OWN THROUGH THE TIME OF THE
CLOSING) OF RECORD AND BENEFICIALLY 85,291,497 SHARES OF COMMON STOCK (SUBJECT
TO ADJUSTMENT AS A RESULT OF THE REVERSE STOCK SPLIT) (AND ACQUISITION INC. HAS
NOT SOLD, ASSIGNED OR TRANSFERRED ANY CLAIMS WITH RESPECT TO SUCH SHARES OF
COMMON STOCK, AND THROUGH THE TIME OF THE CLOSING WILL NOT SELL, ASSIGN OR
TRANSFER ANY CLAIMS WITH RESPECT TO SUCH SHARES OF COMMON STOCK); PROVIDED, THAT
ACQUISITION INC. SHALL BE ENTITLED TO TRANSFER ANY SUCH SHARES OF COMMON STOCK
TO AN AFFILIATE, TO THE EXTENT SUCH AFFILIATE AGREES IN WRITING, REASONABLY
ACCEPTABLE TO POI, TO BE BOUND BY ALL OF THE PROVISIONS APPLICABLE HEREUNDER OR
UNDER THE EQUITY STANDSTILL AGREEMENT TO ACQUISITION INC.

 

SECTION 3.6                                      LIENS. THE CREDIT FACILITY IS
NOT SUBJECT TO ANY LIEN.  THE EXECUTION AND DELIVERY OF, AND THE PERFORMANCE BY
THE QUADRANGLE PARTIES OF THEIR OBLIGATIONS UNDER, THIS AGREEMENT WILL NOT
RESULT IN THE CREATION OF ANY LIEN UPON THE CREDIT FACILITY.

 

SECTION 3.7                                      INVESTMENT REPRESENTATIONS. 
THE QUADRANGLE PARTIES UNDERSTAND THAT THE NEW SHARES TO BE ISSUED TO
ACQUISITION LLC AND QMFL PURSUANT TO THIS AGREEMENT WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT BASED ON AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION
4(2) OF THE SECURITIES ACT AND REGULATION D THEREOF AND SIMILAR PROVISIONS UNDER
APPLICABLE STATE SECURITIES LAWS.  AS OF THE DATE OF THIS AGREEMENT AND AT ALL
TIMES PRIOR TO AND INCLUDING THE CLOSING, THE QUADRANGLE PARTIES ARE AND WILL BE
“ACCREDITED INVESTORS” AS SUCH TERM IS DEFINED IN RULE 501(A) OF REGULATION D
PROMULGATED UNDER THE SECURITIES ACT.  THE QUADRANGLE PARTIES HAVE REVIEWED
COPIES OF THE SEC FILINGS TO THE EXTENT THEY DEEM NECESSARY TO MAKE AN
INVESTMENT DECISION OR A DECISION TO ENTER INTO THIS AGREEMENT, AND IN
CONNECTION WITH THE QUADRANGLE PARTIES’ DECISIONS TO ACCEPT THE NEW SHARES IN
CONNECTION WITH THE EXCHANGE OR TO ENTER INTO AND CONSUMMATE THE TRANSACTION
CONTEMPLATED BY THIS AGREEMENT, THE QUADRANGLE PARTIES HAVE RELIED SOLELY ON THE
SEC FILINGS AND THE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN. 
ACQUISITION LLC AND QMFL ARE ACQUIRING THE NEW SHARES SOLELY FOR INVESTMENT WITH
NO PRESENT INTENTION TO DISTRIBUTE ANY OF THE NEW SHARES TO ANY PERSON AND WILL
NOT SELL OR OTHERWISE DISPOSE OF ANY OF

 

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THE NEW SHARES EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OR
EXEMPTION PROVISIONS OF THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES
LAWS.

 

ARTICLE IV
CONDITIONS PRECEDENT TO THE QUADRANGLE PARTIES’ OBLIGATIONS

 

The obligation of the Quadrangle Parties to consummate the Exchange is subject
to the following conditions (any or all of which may be waived by Acquisition
LLC in its sole discretion), unless the failure to satisfy any such condition
results primarily from a Quadrangle Party breaching any representation,
warranty, or covenant contained in this Agreement or in any other document in
connection with the Restructuring:

 

Section 4.1                                      No Material Adverse Change. 
Between the date hereof and the Closing, no Material Adverse Change shall have
occurred.

 

Section 4.2                                      Representations and
Warranties.  The representations and warranties of the Company Parties set forth
in this Agreement shall be true and correct in all material respects on the
Closing Date, except for the representations and warranties set forth in Section
2.9 and such representations and warranties that are subject to Material Adverse
Effect or Material Adverse Change qualifications or exceptions, which in each
case shall be true and correct in all respects on the Closing Date.

 

Section 4.3                                      Performance; No Default. The
Company Parties shall have performed and complied in all material respects with
their covenants and agreements contained in this Agreement required to be
performed or complied with by the Company Parties prior to the Closing.

 

Section 4.4                                      Officer’s Certificate. The
Quadrangle Parties shall have received, on or prior to the Closing Date, a
certificate from the Company Parties, dated as of the Closing Date, duly
executed by an officer of the Company Parties, certifying that the conditions
set forth in Sections 4.1, 4.2 and 4.3 have been satisfied.

 

Section 4.5                                      No Actions.  No law, rule,
regulation or preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction shall be in effect which would
prevent the consummation of this Agreement.

 

Section 4.6                                      Implementation of Long-Term
Incentive Plan.  The Company Parties shall have implemented the Long-Term
Incentive Plan, substantially in accordance with the terms set forth in Annex
III attached hereto.

 

Section 4.7                                      Execution of Other Transaction
Documents. The Company Parties, Network and CMS, as applicable, shall have
executed or adopted, as applicable, the Restructuring Documents and shall be
prepared to consummate the Closing.

 

Section 4.8                                      Charter Amendment.  The Charter
Amendment shall have been filed with the Secretary of State of the State of
Delaware and be in effect.

 

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Section 4.9                                      Exchange Fee.  POAMI shall be
prepared to pay to Acquisition LLC, as administrative agent under the Amended
and Restated Credit Agreement, the Exchange Fee.

 

ARTICLE V
CONDITIONS PRECEDENT TO THE COMPANY PARTIES’ OBLIGATIONS

 

The obligation of the Company Parties to consummate the Exchange is subject to
the following conditions (any or all of which may be waived by POI in its sole
discretion), unless the failure to satisfy any such condition results primarily
from a Company Party breaching any representation, warranty, or covenant
contained in this Agreement or in any other document in connection with the
Restructuring:

 

Section 5.1                                      Representations and
Warranties.  The representations and warranties of the Quadrangle Parties set
forth in this Agreement shall be true and correct in all material respects on
the Closing Date, except for such representations and warranties that are
subject to Material Adverse Effect or Material Adverse Change qualifications or
exceptions, which in each case shall be true and correct in all respects on the
Closing Date.

 

Section 5.2                                      Performance; No Default. The
Quadrangle Parties shall have performed and complied in all material respects
with their covenants and agreements contained in this Agreement required to be
performed or complied with by the Quadrangle Parties prior to the Closing.

 

Section 5.3                                      Officer’s Certificate. The
Company Parties shall have received, on or prior to the Closing Date, a
certificate from the Quadrangle Parties, dated as of the Closing Date, duly
executed by an officer, managing member, principal or person performing a
similar role at the Quadrangle Parties, certifying that the conditions set forth
in Sections 5.1 and 5.2 have been satisfied.

 

Section 5.4                                      No Actions.  No law, rule,
regulation or preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction shall be in effect which would
prevent the consummation of this Agreement.

 

Section 5.5                                      Implementation of Long-Term
Incentive Plan.  The Company Parties shall have implemented the Long-Term
Incentive Plan, substantially in accordance with the terms set forth in Annex
III attached hereto.

 

Section 5.6                                      Execution of Other Transaction
Documents. The Quadrangle Parties, as applicable, shall have executed the
Restructuring Documents and shall be prepared to consummate the Closing.

 

Section 5.7                                      Charter Amendment.  The Charter
Amendment shall have been filed with the Secretary of State of the State of
Delaware and be in effect.

 

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ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES

 

Section 6.1                                      Further Action by the
Quadrangle Parties. The Quadrangle Parties shall, at the written request of a
Company Party, at any time and from time to time following the Closing, execute
and deliver to the Company Parties all such further instruments and take all
such further action as may be reasonably necessary or appropriate in order to
confirm or carry out their obligations under this Agreement or to evidence or
effectuate the agreements described in this Agreement.

 

Section 6.2                                      Further Action by the Company
Parties. The Company Parties shall, at the written request of a Quadrangle
Party, at any time and from time to time following the Closing, execute and
deliver to the Quadrangle Parties all such further instruments and take all such
further action as may be reasonably necessary or appropriate in order to confirm
or carry out their obligations under this Agreement or evidence or effectuate
the agreements described in this Agreement.

 

Section 6.3                                      Reasonable Best Efforts. Unless
another standard is explicitly required herein, the Company Parties and the
Quadrangle Parties shall use their respective reasonable best efforts to
consummate the transactions contemplated to be performed by them under this
Agreement.

 

Section 6.4                                      Support of Restructuring. 
Acquisition Inc. shall not seek to revoke or modify the Stockholder Consent. 
Prior to the Closing, at any meeting of the stockholders of POI called with
respect to the Restructuring, and at every postponement or adjournment thereof,
and with respect to any action or approval by written consent of POI’s
stockholders with respect to the Restructuring, Acquisition Inc. agrees to vote
its shares of Common Stock in favor of, or consent to, and to cause its
Affiliates to vote in favor of, or consent to, the Restructuring.  Prior to the
Closing, Acquisition Inc. will not, and will cause its Affiliates not to, enter
into any agreement or understanding with any person or entity to vote or give
instructions in any manner inconsistent with this Agreement.  For avoidance of
doubt, the provisions of this Section 6.4 shall not survive termination of this
Agreement.

 

Section 6.5                                      SEC Filings. As soon as
reasonably practicable after the date of this Agreement, POI will prepare and
file with the SEC a preliminary information statement (the “Information
Statement”)  pursuant to Regulation 14C of the Exchange Act (“Regulation 14C”)
relating to, among other things, the Charter Amendment and the Long-Term
Incentive Plan.  POI will use its reasonable best efforts to respond to the
comments of the SEC thereon and, as promptly as practicable after the
Information Statement shall have been cleared by the SEC, shall use its
reasonable best efforts to promptly distribute the Information Statement to its
stockholders.  The Quadrangle Parties will provide POI with such information and
assistance in connection with the foregoing filing as POI may reasonably
request.  The Parties understand and agree that POI must comply with the
requirements of Section 14c-2 of Regulation 14C prior to filing the Charter
Amendment, and the Parties agree that POI shall not be required to file the
Charter Amendment unless and until all other conditions to the consummation of
the Exchange shall have been satisfied or waived and the Parties shall be
prepared to consummate the Closing immediately following the filing of the
Charter Amendment.

 

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Section 6.6                                      Quotation on OTC Bulletin
Board.  POI shall use its reasonable best efforts to cause, to the extent within
POI’s control, shares of Common Stock to remain eligible for quotation on the
OTC Bulletin Board.

 

Section 6.7                                      Repurchase Offer.  As soon as
reasonably practicable after the Closing, POAMI shall commence a change of
control repurchase offer for the then-outstanding 135/8% Senior Subordinated
Discount Notes due June 2005 (the “Senior Sub Discount Notes”) on substantially
the same terms as are contemplated by the Indenture (the “Indenture”) dated as
of May 17, 1995, between POAMI, POI, Protection One Alarm Services, Inc., A-Able
Lock & Alarm, Inc. and The First National Bank of Boston.  To the extent that
any Senior Sub Discount Notes remain outstanding following expiration of the
change of control repurchase offer, POAMI shall use the cash amount that
otherwise would have been used to repurchase such Senior Sub Discount Notes in
the manner as stipulated in the Amended and Restated Credit Agreement.

 

Section 6.8                                      Conduct of the Business.  From
the date hereof until the Closing Date, except (a) as disclosed on the
disclosure schedule delivered by the Company Parties to the Quadrangle Parties
on the date of this Agreement, (b) as otherwise contemplated by the
Restructuring Documents or (c) with the prior written consent of Acquisition LLC
and QMFL, POI shall, and shall cause its Subsidiaries to, manage its working
capital in the ordinary course consistent with past practice and to otherwise
conduct its businesses in the ordinary course consistent with past practice and
to use reasonable best efforts to preserve intact its business organizations,
material contracts, permits and authorizations and relationships with third
parties and to keep available the services of its present officers and
employees.  Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, except (x) as disclosed on the disclosure
schedule delivered by the Company Parties to the Quadrangle Parties on the date
of this Agreement, (y) as otherwise contemplated by the Restructuring Documents
or (z) with the prior written consent of Acquisition LLC and QMFL, POI shall
not, and shall cause its Subsidiaries not to:

 

(A)  ADOPT OR PROPOSE ANY CHANGE IN ITS CERTIFICATE OF INCORPORATION OR BY-LAWS;

 

(B)  MERGE OR CONSOLIDATE WITH ANY OTHER PERSON OR ACQUIRE A MATERIAL AMOUNT OF
ASSETS OF ANY PERSON;

 

(C)  SELL, LEASE, LICENSE OR OTHERWISE DISPOSE OF ANY MATERIAL ASSETS OR
PROPERTY EXCEPT PURSUANT TO EXISTING CONTRACTS OR COMMITMENTS OR OTHERWISE IN
THE ORDINARY COURSE;

 

(D)  DECLARE, SET ASIDE OR PAY ANY DIVIDEND OR OTHER DISTRIBUTION WITH RESPECT
TO ANY SHARES OF COMMON STOCK, OR REPURCHASE, REDEEM OR OTHERWISE ACQUIRE ANY
OUTSTANDING SHARES OF COMMON STOCK OR OTHER SECURITIES OF POI OR ITS
SUBSIDIARIES (INCLUDING THE SENIOR SUB DISCOUNT NOTES AND POAMI’S SENIOR NOTES
OR SUBORDINATED NOTES (EACH TERM AS DEFINED IN THE AMENDED AND RESTATED CREDIT
AGREEMENT));

 

(E)  INCUR, ASSUME, REFINANCE OR GUARANTEE ANY MATERIAL INDEBTEDNESS FOR
BORROWED MONEY;

 

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(F)  ISSUE, SELL, TRANSFER, ENCUMBER OR OTHERWISE DISPOSE OF SHARES OF ITS
CAPITAL STOCK (OTHER THAN SHARES OF ITS COMMON STOCK ISSUED AND SOLD IN
ACCORDANCE WITH THE TERMS OF OPTIONS, WARRANTS OR OTHER STOCK PURCHASE RIGHTS
OUTSTANDING ON THE DATE HEREOF OR ISSUED UNDER EMPLOYEE BENEFIT PLANS IN EFFECT
AS OF THE DATE HEREOF OR PURSUANT TO ANY OF THE TRANSACTIONS COMPRISING THE
RESTRUCTURING), OPTIONS, WARRANTS, SUBSCRIPTIONS, RIGHTS OR OTHER SECURITIES
CONVERTIBLE INTO OR EXERCISABLE OR EXCHANGEABLE FOR CAPITAL STOCK;

 

(G) (I) GRANT ANY INCREASE IN COMPENSATION, BENEFITS OR ANY SEVERANCE OR
TERMINATION PAY TO ANY PRESENT OR FORMER DIRECTOR, OFFICER, EMPLOYEE OR
INDEPENDENT CONTRACTOR (FOR THE AVOIDANCE OF DOUBT, THIS SHALL NOT PROHIBIT THE
PAYMENT OF INCREASED COMPENSATION, BENEFITS OR ANY SEVERANCE OR TERMINATION PAY
(A) PURSUANT TO ANY ARRANGEMENT EXISTING ON THE DATE OF THIS AGREEMENT OR (B) IN
THE ORDINARY COURSE OF BUSINESS TO ANY EMPLOYEE OR INDEPENDENT CONTRACTOR THAT
IS NOT A PRESENT OR FORMER DIRECTOR OR OFFICER); (II) ADOPT ANY NEW SEVERANCE,
RETENTION OR CHANGE IN CONTROL ARRANGEMENT, EXCEPT AS REQUIRED BY APPLICABLE LAW
OR PURSUANT TO WRITTEN AGREEMENTS IN EFFECT OR POLICIES EXISTING ON THE DATE OF
THIS AGREEMENT; (III) LOAN OR ADVANCE ANY MONEY OR OTHER PROPERTY TO ANY PRESENT
OR FORMER DIRECTOR, OFFICER, EMPLOYEE OR INDEPENDENT CONTRACTOR OF POI OR ANY
SUBSIDIARY OF POI, OTHER THAN TRAVEL ADVANCES OR SIMILAR ADVANCES MADE IN THE
ORDINARY COURSE CONSISTENT WITH PAST PRACTICE; (IV) (A) ESTABLISH, ADOPT, ENTER
INTO, AMEND OR TERMINATE ANY EMPLOYEE BENEFIT PLAN OR (B) GRANT ANY EQUITY OR
EQUITY-BASED AWARDS OR ALLOW FOR THE COMMENCEMENT OF ANY NEW OFFERING PERIODS
UNDER POI’S EMPLOYEE STOCK PURCHASE PLANS;

 

(H)  ESTABLISH, ADOPT, ENTER INTO, AMEND OR TERMINATE ANY, COLLECTIVE
BARGAINING  AGREEMENT (OTHER THAN AS MAY BE REQUIRED UNDER THE TERMS OF AN
EXISTING COLLECTIVE BARGAINING AGREEMENT, OR AS MAY BE REQUIRED BY APPLICABLE
LAW);

 

(I)  SETTLE OR COMPROMISE ANY SUIT, CLAIM, PROCEEDING OR DISPUTE OR THREATENED
SUIT, CLAIM, PROCEEDING OR DISPUTE IF SUCH SETTLEMENT OR COMPROMISE WOULD RESULT
IN (I) ANY INJUNCTIVE OR SIMILAR RELIEF, (II) AN OBLIGATION TO MAKE A PAYMENT IN
EXCESS OF $100,000, EXCEPT TO THE EXTENT SUCH PAYMENTS ARE TO BE MADE WITH
INSURANCE PROCEEDS (NET OF ANY INSURANCE POLICY INDEMNITY OR RETROSPECTIVE
PREMIUM ADJUSTMENT), OR (III) ANY RESTRUCTURING OF ANY OF ITS INDEBTEDNESS;

 

(J)  ENTER INTO ANY NEGOTIATIONS WITH HOLDERS OF THE SENIOR SUB DISCOUNT NOTES
OR POAMI’S SENIOR NOTES OR SUBORDINATED NOTES (EACH TERM AS DEFINED IN THE
AMENDED AND RESTATED CREDIT AGREEMENT) WITH RESPECT TO ANY PAYMENT IN RESPECT OF
ANY PRINCIPAL AMOUNT UNDER ANY SUCH INDEBTEDNESS, ANY RESTRUCTURING OF SUCH
INDEBTEDNESS OR THE AMENDMENT OF ANY INDENTURE GOVERNING ANY SUCH INDEBTEDNESS;

 

(K)  MAKE OR CHANGE ANY MATERIAL TAX ELECTION, FILE ANY MATERIAL AMENDED TAX
RETURNS OR SETTLE ANY MATERIAL TAX CLAIM, AUDIT OR ASSESSMENT IF SUCH ELECTION,
CHANGE, FILING OR SETTLEMENT WOULD RESULT IN AN OBLIGATION TO MAKE PAYMENTS, IN
THE AGGREGATE, IN EXCESS OF THE AMOUNT RESERVED BY POI FOR SUCH PAYMENTS AS OF
SEPTEMBER 30, 2004;

 

(L)  MAKE ANY CHANGE IN ANY METHOD OF ACCOUNTING OR ACCOUNTING PRACTICE BY POI
OR ANY SUBSIDIARY OF POI, EXCEPT AS REQUIRED BY LAW OR TO COMPLY WITH UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES;

 

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(M)  MAKE ANY MATERIAL CAPITAL EXPENDITURES OR COMMITMENTS THAT AGGREGATE IN
EXCESS OF $100,000, EXCLUDING CAPITAL EXPENDITURES MADE IN ACCORDANCE WITH THE
PROJECTIONS PREVIOUSLY PROVIDED TO ACQUISITION LLC AND QMFL;

 

(N)  HIRE, RETAIN OR OTHERWISE ENGAGE ANY OUTSIDE CONSULTANT OR FINANCIAL
ADVISOR; OR

 

(O)  AGREE OR COMMIT TO DO ANY OF THE FOREGOING.

 

Section 6.9                                      Information.  From and after
the date hereof until the Closing Date, (i) as soon as reasonably practicable,
but in any event within twenty-five (25) calendar days after the end of each
month, POI will furnish to Acquisition LLC and QMFL a monthly management report
and an unaudited consolidated balance sheet of POI and its Subsidiaries as of
the end of such month and statements of operations, changes in capital and a
statement of cash flows for such month and (ii) POI will furnish to Acquisition
LLC and QMFL such other information regarding POI and its Subsidiaries as such
parties may reasonably request from time to time.

 

Section 6.10                                Asset Sales.  To the extent POI and
its Subsidiaries consummate Asset Sales (as defined in the form of Amended and
Restated Credit Agreement set forth on Annex I attached hereto) prior to the
Closing, the proceeds of any such Asset Sale shall be applied pursuant to
Section 3.2(b)(iii) of the form of Amended and Restated Credit Agreement as
though such agreement were then in effect.

 

Section 6.11                                Legend.  The certificates evidencing
the New Shares issued to Acquisition LLC and QMFL pursuant to this Agreement
shall bear a prominent legend reading substantially as follows:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION THEREUNDER.

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL 
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF                       , AMONG THE
ISSUER OF SUCH SECURITIES (THE “COMPANY”) AND CERTAIN OF THE COMPANY’S SECURITY
HOLDERS, AS AMENDED FROM TIME TO TIME, AND A STOCKHOLDERS AGREEMENT, DATED AS OF
                      , AMONG THE COMPANY AND CERTAIN OF THE COMPANY’S SECURITY
HOLDERS, AS AMENDED FROM TIME TO TIME.  A COPY OF SUCH REGISTRATION RIGHTS
AGREEMENT AND STOCKHOLDERS AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY’S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.”

 

Section 6.12                                Publicity. Neither the Company
Parties nor the Quadrangle Parties shall, nor shall they permit their respective
officers, directors, employees, Controlled Affiliates or authorized agents of
such Person to, issue or cause the publication of any press release or make any
other public statement, filing or announcement with respect to this Agreement
and the Restructuring and the transactions contemplated hereby and thereby
without the prior approval of

 

15

--------------------------------------------------------------------------------

 

the other party; provided, however, that the Company Parties and the Quadrangle
Parties shall be entitled, without the prior approval of the other party, to
make any press release or other public disclosure or filing with respect to such
transactions as is required by applicable law or regulation.  The Company
Parties and the Quadrangle Parties shall cooperate in issuing press releases or
otherwise making public statements with respect to this Agreement and the
Restructuring and the transactions contemplated hereby and thereby, which
cooperation shall include first consulting the other party concerning the
requirement for, and timing and content of, such public announcement.

 

Section 6.13                                Liens; Transfer. Prior to the
Closing, Acquisition LLC and QMFL shall not (a) encumber the Credit Facility
with any Lien, (b) permit such Credit Facility to be encumbered with any Lien or
(c) sell, transfer or assign any of the Committed Sums, Principal Debt or other
Obligations under the Credit Facility (or any Claims with respect thereto) to
any Person (other than to an Affiliate, to the extent such Affiliate agrees in
writing, reasonably acceptable to POI, to be bound by all of the provisions
applicable hereunder or under the Standstill Agreement to Acquisition LLC and
QMFL).

 

Section 6.14                                Repayment under Credit Facility.  As
of the date of this Agreement, POAMI shall repay a total of $14,500,000 of
Principal Debt under the Credit Facility, together with accrued and unpaid
interest under the Credit Facility of $2,152,056.01.

 

Section 6.15                                Credit Facility Termination Date. 
The Parties agree that as of the date of this Agreement, through and until
Closing, the “Termination Date” (as such term is defined in the Credit Facility)
of the Credit Facility means the earlier of (a) August 15, 2005, and (b) the
date of the termination, if any, of this Agreement pursuant to Article VII.

 

Section 6.16                                Stockholder Consent.  As soon as
reasonably practicable, Acquisition Inc. shall execute and deliver to POI a
written stockholder consent (the “Stockholder Consent”) approving the Charter
Amendment and the Long-Term Incentive Plan.

 

ARTICLE VII
TERMINATION

 

Section 7.1                                      Termination.  Notwithstanding
anything in this Agreement to the contrary, this Agreement may be terminated and
the transactions contemplated by this Agreement abandoned at any time prior to
the Closing (i) by any Party if the Closing shall not have occurred on or prior
to 120 days after the date hereof (the “Outside Date”) or (ii) by the Quadrangle
Parties, upon the occurrence of any of the events specified in Sections 4.1, 4.2
(assuming for such purpose that the “Closing Date” specified therein is the date
of termination) or 4.3 that, in each case, has not been waived by the Quadrangle
Parties in writing or is not reasonably capable of cure by the Company Parties
prior to the Outside Date; provided, however, that the Company Parties and the
Quadrangle Parties shall not have the right to terminate this Agreement if the
failure to consummate the transactions contemplated by this Agreement shall be
primarily attributable to a the failure of a Company Party or a Quadrangle
Party, respectively, to satisfy its obligations hereunder; provided further that
the provisions of Section 6.12 shall survive any such termination of this
Agreement.

 

16

--------------------------------------------------------------------------------

 

ARTICLE VIII
DEFINITIONS

 

Section 8.1                                      Definitions. As used in this
Agreement, in addition to the terms defined elsewhere, the following terms shall
have the meanings set forth below, unless the context otherwise requires:

 

“Action” shall mean any action, suit or legal, administrative or arbitral
proceeding or investigation before any Governmental Body.

 

“Affiliate” shall mean, when used with respect to a specified Person, another
Person that either directly or indirectly, through one or more intermediaries,
Controls, or is Controlled by, or is under common Control with, the Person
specified.

 

“Agent” shall mean, with respect to any Person, any officer, director, employee,
stockholder, controlling person (within the meaning of the Securities Act),
affiliate or authorized agent of such Person.

 

“Charter Amendment” shall mean an amended and restated certificate of
incorporation of POI, the form of which is set forth in Annex II attached
hereto.

 

“Company Parties” means POI and POAMI.

 

“Control” shall mean the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

 

“Controlled Affiliate” shall mean, when used with respect to a specified Person,
an Affiliate that is Controlled by the Person specified.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Governmental Body” shall mean any government or political subdivision thereof,
whether federal, state, local or foreign, or any agency or instrumentality of
any such government or political subdivision thereof, or any federal or state
court or arbitrator.

 

“Lien” shall mean any lien, pledge, mortgage, security interest, charge, option
or other encumbrance of any kind.

 

“Long-Term Incentive Plan” shall mean a long-term incentive plan of POI and its
Subsidiaries, to be implemented substantially in accordance with the terms set
forth in Annex III attached hereto.

 

“Material Adverse Effect” or “Material Adverse Change” shall mean any effect,
change or development that is material and adverse to the assets, liabilities,
business or results of operations of the Company Parties and their Subsidiaries
taken as a whole or the ability of any Company Party (or other Subsidiary of POI
that will provide a Subsidiary Guaranty) to perform its obligations under the
Credit Facility, except to the extent that any such effect, change or

 

17

--------------------------------------------------------------------------------

 

development has been disclosed in writing to Acquisition LLC and QMFL prior to
the date of this Agreement.

 

“Parties” means POI, POAMI, Acquisition LLC, Acquisition Inc. and QMFL.

 

“Person” means any individual, corporation, partnership, joint venture, trust,
estate, limited liability company, unincorporated organization or governmental
agency.

 

“POI Guaranty” means the guaranty executed by POI as of the Closing Date in the
form of Exhibit D-1 to the Amended and Restated Credit Agreement.

 

“Quadrangle Parties” means Acquisition LLC, Acquisition Inc. and QMFL.

 

“Registration Rights Agreement” means the agreement dated as of the Closing, by
and between the Quadrangle Parties and POI, the form of which is set forth in
Annex IV attached hereto.

 

“Restructuring” means the Exchange, the implementation of the Long-Term
Incentive Plan, and the consummation of the other transactions contemplated by
the Restructuring Documents.

 

“Restructuring Documents” means this Agreement, the Amended and Restated Credit
Agreement, the Registration Rights Agreement, the Stockholders Agreement, the
Stockholder Consent, the Tax-Sharing Settlement Agreement, the Long-Term
Incentive Plan, the POI Guaranty, the Subsidiary Guaranties and the other
instruments and agreements contemplated thereby.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Stockholders Agreement” means the agreement dated as of the Closing, by and
between Acquisition LLC, QMFL and POI, the form of which is set forth in Annex
VIII attached hereto.

 

“Subsidiary” means any Person, a majority of the capital stock of which is owned
by a Company Party or another Subsidiary of a Company Party.

 

“Subsidiary Guaranties” means the guaranties executed by Network and Security
Monitoring Services Inc. as of the Closing Date in the form of Exhibit D-2 to
the Amended and Restated Credit Agreement.

 

“Tax-Sharing Settlement Agreement” means the agreement dated as of November 12,
2004, by and among Westar Energy, Inc., POI, Acquisition LLC and Acquisition
Inc., a copy of which is set forth on Annex V attached hereto.

 

18

--------------------------------------------------------------------------------

 

ARTICLE IX
MISCELLANEOUS

 

Section 9.1                                      Payment of Expenses.  At the
Closing, the Company Parties shall pay the reasonable and documented
out-of-pocket expenses of the Quadrangle Parties in connection with the Exchange
and the other transactions to be effectuated at the Closing (if, and only if,
such expenses may not be paid and have not already been paid by a Company Party
pursuant to any other agreement or arrangement), including the reasonable and
documented fees and expenses of the Quadrangle Parties’ outside legal counsel
and third-party financial advisor.

 

Section 9.2                                      Prior Agreements. This
Agreement, together with the Restructuring Documents, the Standstill Agreement,
the Equity Standstill Agreement and the VCOC Letter, constitutes the entire
agreement between the Parties concerning the subject matter hereof and
supersedes any prior representations, understandings or agreements.  There are
no representations, warranties, agreements, conditions or covenants, of any
nature whatsoever (whether express or implied, written or oral) between the
parties hereto with respect to such subject matter except as expressly set forth
herein and therein.

 

Section 9.3                                      Severability. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision or the validity and enforceability of this
Agreement in any other jurisdiction.

 

Section 9.4                                      GOVERNING LAW. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF DELAWARE WITHOUT REGARD TO ITS CHOICE OF LAW RULES.

 

Section 9.5                                      Counterparts. This Agreement
and the other Restructuring Documents may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the Parties may execute this Agreement and the other
Restructuring Documents by signing any such counterpart.  A facsimile
transmission of this Agreement or any other Restructuring Document bearing a
signature on behalf of a Party shall be legal and binding on such Party.

 

Section 9.6                                      Amendment.  This Agreement may
be modified or amended only by written agreement of the Parties. 
Notwithstanding that the Company Released Parties (other than the Company
Parties) and the Quadrangle Released Parties (other than the Quadrangle Parties)
are intended third party beneficiaries of this Agreement, prior to the Closing,
no consent of any such party shall be required to modify or amend this Agreement
pursuant to the first sentence of this Section 9.6.

 

Section 9.7                                      Assignment; Binding Effect. 
The Quadrangle Parties shall not convey, assign or otherwise transfer any of
their rights or obligations under this Agreement without the express written
consent of the Company Parties, and the Company Parties shall not convey, assign
or otherwise transfer any of their rights and obligations under this Agreement
without the express written consent of the Quadrangle Parties; provided, that
each of the Quadrangle Parties shall be entitled to assign any of its rights and
obligations hereunder in whole or in part to any Affiliate of such Quadrangle
Party without the consent of the Company Parties, to the extent

 

19

--------------------------------------------------------------------------------

 

such Affiliate agrees in writing, reasonably acceptable to POI, to be bound by
all of the provisions applicable hereunder to such Quadrangle Party.  This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns.

 

Section 9.8                                      Construction.  The obligations
of the Quadrangle Parties are joint and several, and the obligations of the
Company Parties are joint and several.  The words “hereof,” “herein” and
“hereunder” and words of like import used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.  The
captions herein are included for convenience of reference only and shall be
ignored in the construction or interpretation hereof.  References to Articles or
Sections are Articles or Sections of this Agreement unless otherwise specified. 
Any singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular.  Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation,” whether or not they are in fact followed by
those words or words of like import.  “Writing,” “written” and comparable terms
refer to printing, typing and other means of reproducing words (including
electronic media) in a visible form.  References to any agreement or contract
are to that agreement or contract as amended, modified or supplemented from time
to time in accordance with the terms hereof and thereof.  References to any
Person include the successors and permitted assigns of that Person.  References
from or through any date mean, unless otherwise specified, from and including or
through and including, respectively.

 

Section 9.9                                      Waiver; Remedies. No delay on
the part of the Quadrangle Parties or the Company Parties in exercising any
right, power or privilege under this Agreement shall operate as a wavier
thereof, nor shall any waiver on the part of the Quadrangle Parties or the
Company  Parties of any right, power or privilege under this Agreement operate
as a waiver of any other right, power or privilege of any such Party under this
Agreement, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege under this Agreement.

 

Section 9.10                                Limited Third Party Beneficiaries. 
Other than the provisions of Section 1.2, with respect to which the Company
Released Parties and the Quadrangle Released Parties  are intended third party
beneficiaries following the Closing, the provisions of this Agreement are solely
for the benefit of the Parties and are not intended to confer upon any Person
any rights or remedies hereunder, and there are no other third party
beneficiaries of this Agreement.

 

*                                        
*                                        
*                                         *

 

20

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Parties, intending to be legally bound, have caused this
Agreement to be executed by their respective duly authorized signatory, as of
the date first above written.

 

 

PROTECTION ONE, INC.

 

 

 

By:

/s/ Richard Ginsburg

 

 

NAME:

RICHARD GINSBURG

 

 

Title:

President and CEO

 

 

 

 

PROTECTION ONE ALARM MONITORING, INC.

 

 

 

By:

/s/ Richard Ginsburg

 

 

NAME:

RICHARD GINSBURG

 

 

Title:

President and CEO

 

 

 

 

POI ACQUISITION I, INC.

 

 

 

By:

/s/ David A. Tanner

 

 

NAME:

DAVID A. TANNER

 

 

Title:

President

 

 

 

 

POI ACQUISITION, L.L.C.

 

 

 

By:

/s/ David A. Tanner

 

 

NAME:

DAVID A. TANNER

 

 

Title:

Member

 

 

 

 

Aggregate principal amount under Credit Facility of $143,666,667

 

 

 

QUADRANGLE MASTER FUNDING LTD.

 

 

 

By:

/s/ Michael Weinstock

 

 

NAME:

MICHAEL WEINSTOCK

 

 

Title:

Member

 

 

 

 

Aggregate principal amount under Credit Facility of $71,833,333

 

--------------------------------------------------------------------------------

ANNEX I

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

 

among

 

 

PROTECTION ONE ALARM MONITORING, INC.
Borrower

 

 

POI ACQUISITION, L.L.C.,
Administrative Agent

 

 

and

 

 

THE LENDERS NAMED HEREIN,
Lenders

 

 

$[•]

 

 

Dated as of [•], 2005

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

 

SECTION 1

DEFINITIONS AND TERMS

 

1.1

Definitions

 

1.2 [a04-13318_1ex10d5.htm#NumberAndGenderO]

Number and Gender of Words; Other References
[a04-13318_1ex10d5.htm#NumberAndGenderO]

 

1.3 [a04-13318_1ex10d5.htm#AccountingPrinc]

Accounting Principles [a04-13318_1ex10d5.htm#AccountingPrinc]

 

SECTION 2 [a04-13318_1ex10d5.htm#Section2BorrowingProvisions]

BORROWING PROVISIONS [a04-13318_1ex10d5.htm#Section2BorrowingProvisions]

 

2.1 [a04-13318_1ex10d5.htm#Commitments]

Commitments [a04-13318_1ex10d5.htm#Commitments]

 

2.2 [a04-13318_1ex10d5.htm#Intentionally]

[Intentionally Omitted] [a04-13318_1ex10d5.htm#Intentionally]

 

2.3 [a04-13318_1ex10d5.htm#Termination]

Termination of Commitments [a04-13318_1ex10d5.htm#Termination]

 

2.4 [a04-13318_1ex10d5.htm#Borrowing]

Borrowing Procedure [a04-13318_1ex10d5.htm#Borrowing]

 

2.5 [a04-13318_1ex10d5.htm#IntentionallyOmitt]

[Intentionally Omitted] [a04-13318_1ex10d5.htm#IntentionallyOmitt]

 

SECTION 3 [a04-13318_1ex10d5.htm#Section3]

TERMS OF PAYMENT [a04-13318_1ex10d5.htm#Section3]

 

3.1 [a04-13318_1ex10d5.htm#LoanAccountsAndPayments]

Loan Accounts and Payments [a04-13318_1ex10d5.htm#LoanAccountsAndPayments]

 

3.2 [a04-13318_1ex10d5.htm#InterestAndPrincipal]

Interest and Principal Payments [a04-13318_1ex10d5.htm#InterestAndPrincipal]

 

3.3 [a04-13318_1ex10d5.htm#InterestOpt]

Interest Options [a04-13318_1ex10d5.htm#InterestOpt]

 

3.4 [a04-13318_1ex10d5.htm#QuotationOfRa]

Quotation of Rates [a04-13318_1ex10d5.htm#QuotationOfRa]

 

3.5 [a04-13318_1ex10d5.htm#DefaultRat]

Default Rate [a04-13318_1ex10d5.htm#DefaultRat]

 

3.6 [a04-13318_1ex10d5.htm#InterestRec]

Interest Recapture [a04-13318_1ex10d5.htm#InterestRec]

 

3.7 [a04-13318_1ex10d5.htm#InterestCalcula]

Interest Calculations [a04-13318_1ex10d5.htm#InterestCalcula]

 

3.8 [a04-13318_1ex10d5.htm#MaximumR]

Maximum Rate [a04-13318_1ex10d5.htm#MaximumR]

 

3.9 [a04-13318_1ex10d5.htm#InterestPeriod]

Interest Periods [a04-13318_1ex10d5.htm#InterestPeriod]

 

3.10 [a04-13318_1ex10d5.htm#Conversions]

Conversions [a04-13318_1ex10d5.htm#Conversions]

 

3.11 [a04-13318_1ex10d5.htm#OrderOfApplicatio]

Order of Application [a04-13318_1ex10d5.htm#OrderOfApplicatio]

 

3.12 [a04-13318_1ex10d5.htm#SharingOfPayments]

Sharing of Payments, Etc [a04-13318_1ex10d5.htm#SharingOfPayments]

 

3.13 [a04-13318_1ex10d5.htm#Offset]

Offset [a04-13318_1ex10d5.htm#Offset]

 

3.14 [a04-13318_1ex10d5.htm#BookingBorrowing]

Booking Borrowings [a04-13318_1ex10d5.htm#BookingBorrowing]

 

3.15 [a04-13318_1ex10d5.htm#ReplacementOfLenders]

Replacement of Lenders under Certain Circumstances
[a04-13318_1ex10d5.htm#ReplacementOfLenders]

 

3.16 [a04-13318_1ex10d5.htm#ExtensionOfTerminat]

Extension of Termination Date [a04-13318_1ex10d5.htm#ExtensionOfTerminat]

 

SECTION 4 [a04-13318_1ex10d5.htm#Section4]

CHANGE IN CIRCUMSTANCES [a04-13318_1ex10d5.htm#Section4]

 

4.1 [a04-13318_1ex10d5.htm#IncreasedCostAndReducedR]

Increased Cost and Reduced Return
[a04-13318_1ex10d5.htm#IncreasedCostAndReducedR]

 

4.2 [a04-13318_1ex10d5.htm#LimitationOnTypes]

Limitation on Types of Borrowings [a04-13318_1ex10d5.htm#LimitationOnTypes]

 

4.3 [a04-13318_1ex10d5.htm#Illegalit]

Illegality [a04-13318_1ex10d5.htm#Illegalit]

 

4.4 [a04-13318_1ex10d5.htm#TreatmentOfAffect]

Treatment of Affected Loans [a04-13318_1ex10d5.htm#TreatmentOfAffect]

 

4.5 [a04-13318_1ex10d5.htm#Compensatio]

Compensation [a04-13318_1ex10d5.htm#Compensatio]

 

4.6 [a04-13318_1ex10d5.htm#Taxes]

Taxes [a04-13318_1ex10d5.htm#Taxes]

 

SECTION 5 [a04-13318_1ex10d5.htm#Section5]

FEES [a04-13318_1ex10d5.htm#Section5]

 

 

i

--------------------------------------------------------------------------------

 

5.1 [a04-13318_1ex10d5.htm#TreatmentOfF]

Treatment of Fees [a04-13318_1ex10d5.htm#TreatmentOfF]

 

5.2 [a04-13318_1ex10d5.htm#In]

[Intentionally Omitted] [a04-13318_1ex10d5.htm#In]

 

5.3 [a04-13318_1ex10d5.htm#Int]

[Intentionally Omitted] [a04-13318_1ex10d5.htm#Int]

 

5.4 [a04-13318_1ex10d5.htm#Inte]

[Intentionally Omitted] [a04-13318_1ex10d5.htm#Inte]

 

5.5 [a04-13318_1ex10d5.htm#Inten]

[Intentionally Omitted] [a04-13318_1ex10d5.htm#Inten]

 

5.6 [a04-13318_1ex10d5.htm#Exch]

Exchange Fee [a04-13318_1ex10d5.htm#Exch]

 

5.7 [a04-13318_1ex10d5.htm#Terminati]

Termination Date [a04-13318_1ex10d5.htm#Terminati]

 

SECTION 6 [a04-13318_1ex10d5.htm#Section6]

GUARANTIES [a04-13318_1ex10d5.htm#Section6]

 

6.1 [a04-13318_1ex10d5.htm#PoiGua]

POI Guaranty [a04-13318_1ex10d5.htm#PoiGua]

 

6.2 [a04-13318_1ex10d5.htm#Subsidia]

Subsidiary Guaranty [a04-13318_1ex10d5.htm#Subsidia]

 

6.3 [a04-13318_1ex10d5.htm#OtherGuar]

Other Guaranties [a04-13318_1ex10d5.htm#OtherGuar]

 

SECTION 7 [a04-13318_1ex10d5.htm#Section7]

CONDITIONS PRECEDENT [a04-13318_1ex10d5.htm#Section7]

 

7.1 [a04-13318_1ex10d5.htm#Intenti]

[Intentionally Omitted] [a04-13318_1ex10d5.htm#Intenti]

 

7.2 [a04-13318_1ex10d5.htm#ConditionsToAllBorr]

Conditions to all Borrowings [a04-13318_1ex10d5.htm#ConditionsToAllBorr]

 

SECTION 8 [a04-13318_1ex10d5.htm#Section8]

REPRESENTATIONS AND WARRANTIES [a04-13318_1ex10d5.htm#Section8]

 

8.1 [a04-13318_1ex10d5.htm#PurposeOfCre]

Purpose of Credit Facility [a04-13318_1ex10d5.htm#PurposeOfCre]

 

8.2 [a04-13318_1ex10d5.htm#Existence]

Existence, Good Standing, Authority, and Authorizations
[a04-13318_1ex10d5.htm#Existence]

 

8.3 [a04-13318_1ex10d5.htm#Subsidiarie]

Subsidiaries; Capital Stock [a04-13318_1ex10d5.htm#Subsidiarie]

 

8.4 [a04-13318_1ex10d5.htm#Authorizatio]

Authorization and Contravention [a04-13318_1ex10d5.htm#Authorizatio]

 

8.5 [a04-13318_1ex10d5.htm#BindingEff]

Binding Effect [a04-13318_1ex10d5.htm#BindingEff]

 

8.6 [a04-13318_1ex10d5.htm#FinancialStatem]

Financial Statements [a04-13318_1ex10d5.htm#FinancialStatem]

 

8.7 [a04-13318_1ex10d5.htm#Litigatio]

Litigation, Claims, Investigations [a04-13318_1ex10d5.htm#Litigatio]

 

8.8 [a04-13318_1ex10d5.htm#Tax]

Taxes [a04-13318_1ex10d5.htm#Tax]

 

8.9 [a04-13318_1ex10d5.htm#Environmenta]

Environmental Matters [a04-13318_1ex10d5.htm#Environmenta]

 

8.10 [a04-13318_1ex10d5.htm#EmployeeBenefit]

Employee Benefit Plans [a04-13318_1ex10d5.htm#EmployeeBenefit]

 

8.11 [a04-13318_1ex10d5.htm#Properties]

Properties; Liens [a04-13318_1ex10d5.htm#Properties]

 

8.12 [a04-13318_1ex10d5.htm#GovernmentRe]

Government Regulations [a04-13318_1ex10d5.htm#GovernmentRe]

 

8.13 [a04-13318_1ex10d5.htm#MaterialAgre]

Material Agreements [a04-13318_1ex10d5.htm#MaterialAgre]

 

8.14 [a04-13318_1ex10d5.htm#LaborMatte]

Labor Matters [a04-13318_1ex10d5.htm#LaborMatte]

 

8.15 [a04-13318_1ex10d5.htm#Solve]

Solvency [a04-13318_1ex10d5.htm#Solve]

 

8.16 [a04-13318_1ex10d5.htm#Intellectual]

Intellectual Property [a04-13318_1ex10d5.htm#Intellectual]

 

8.17 [a04-13318_1ex10d5.htm#Complianc]

Compliance with Laws [a04-13318_1ex10d5.htm#Complianc]

 

8.18 [a04-13318_1ex10d5.htm#FullDiscl]

Full Disclosure [a04-13318_1ex10d5.htm#FullDiscl]

 

8.19 [a04-13318_1ex10d5.htm#Intentio]

[Intentionally Omitted] [a04-13318_1ex10d5.htm#Intentio]

 

8.20 [a04-13318_1ex10d5.htm#SeniorDe]

Senior Debt [a04-13318_1ex10d5.htm#SeniorDe]

 

SECTION 9 [a04-13318_1ex10d5.htm#Section9]

AFFIRMATIVE COVENANTS [a04-13318_1ex10d5.htm#Section9]

 

9.1 [a04-13318_1ex10d5.htm#UseOfProce]

Use of Proceeds [a04-13318_1ex10d5.htm#UseOfProce]

 

9.2 [a04-13318_1ex10d5.htm#BooksAndRe]

Books and Records [a04-13318_1ex10d5.htm#BooksAndRe]

 

 

ii

--------------------------------------------------------------------------------

 

9.3 [a04-13318_1ex10d5.htm#ItemsToBeFu]

Items to be Furnished [a04-13318_1ex10d5.htm#ItemsToBeFu]

 

9.4 [a04-13318_1ex10d5.htm#Inspection]

Inspections [a04-13318_1ex10d5.htm#Inspection]

 

9.5 [a04-13318_1ex10d5.htm#Taxe]

Taxes [a04-13318_1ex10d5.htm#Taxe]

 

9.6 [a04-13318_1ex10d5.htm#MaintenanceOfEx]

Maintenance of Existence, Assets, and Business
[a04-13318_1ex10d5.htm#MaintenanceOfEx]

 

9.7 [a04-13318_1ex10d5.htm#Insuran]

Insurance [a04-13318_1ex10d5.htm#Insuran]

 

9.8 [a04-13318_1ex10d5.htm#PreservationAndProtectio]

Preservation and Protection of Rights
[a04-13318_1ex10d5.htm#PreservationAndProtectio]

 

9.9 [a04-13318_1ex10d5.htm#EnvironmentalLa]

Environmental Laws [a04-13318_1ex10d5.htm#EnvironmentalLa]

 

9.10 [a04-13318_1ex10d5.htm#Intentional]

[Intentionally Omitted] [a04-13318_1ex10d5.htm#Intentional]

 

9.11 [a04-13318_1ex10d5.htm#ComplianceWit]

Compliance with Laws [a04-13318_1ex10d5.htm#ComplianceWit]

 

9.12 [a04-13318_1ex10d5.htm#AfteracquiredSubs]

After-Acquired Subsidiaries [a04-13318_1ex10d5.htm#AfteracquiredSubs]

 

9.13 [a04-13318_1ex10d5.htm#OtherRequiredG]

Other Required Guarantors [a04-13318_1ex10d5.htm#OtherRequiredG]

 

SECTION 10 [a04-13318_1ex10d5.htm#Section10]

NEGATIVE COVENANTS [a04-13318_1ex10d5.htm#Section10]

 

10.1 [a04-13318_1ex10d5.htm#EmployeeBe]

Employee Benefit Plans [a04-13318_1ex10d5.htm#EmployeeBe]

 

10.2 [a04-13318_1ex10d5.htm#DebtOfForeignSu]

Debt of Foreign Subsidiaries [a04-13318_1ex10d5.htm#DebtOfForeignSu]

 

10.3 [a04-13318_1ex10d5.htm#Lien]

Liens [a04-13318_1ex10d5.htm#Lien]

 

10.4 [a04-13318_1ex10d5.htm#TransactionsWithAffiliate]

Transactions with Affiliates [a04-13318_1ex10d5.htm#TransactionsWithAffiliate]

 

10.5 [a04-13318_1ex10d5.htm#ComplianceWithDocuments]

Compliance with Documents [a04-13318_1ex10d5.htm#ComplianceWithDocuments]

 

10.6 [a04-13318_1ex10d5.htm#FiscalYearAndAccountingMethods]

Fiscal Year and Accounting Methods
[a04-13318_1ex10d5.htm#FiscalYearAndAccountingMethods]

 

10.7 [a04-13318_1ex10d5.htm#NewBusiness]

New Business [a04-13318_1ex10d5.htm#NewBusiness]

 

10.8 [a04-13318_1ex10d5.htm#Loans]

Loans, Advances, and Investments [a04-13318_1ex10d5.htm#Loans]

 

10.9 [a04-13318_1ex10d5.htm#DistributionsAndSubordinatedDebtPaym]

Distributions and Subordinated Debt Payments
[a04-13318_1ex10d5.htm#DistributionsAndSubordinatedDebtPaym]

 

10.10 [a04-13318_1ex10d5.htm#RestrictionsOnCompanies]

Restrictions on Companies [a04-13318_1ex10d5.htm#RestrictionsOnCompanies]

 

10.11 [a04-13318_1ex10d5.htm#SaleOfAssets]

Sale of Assets [a04-13318_1ex10d5.htm#SaleOfAssets]

 

10.12 [a04-13318_1ex10d5.htm#MergersAndDissolutionsSaleOfCapita]

Mergers and Dissolutions; Sale of Capital Stock
[a04-13318_1ex10d5.htm#MergersAndDissolutionsSaleOfCapita]

 

10.13 [a04-13318_1ex10d5.htm#FinancialCovenants]

Financial Covenants [a04-13318_1ex10d5.htm#FinancialCovenants]

 

SECTION 11 [a04-13318_1ex10d5.htm#Section11]

DEFAULT [a04-13318_1ex10d5.htm#Section11]

 

11.1 [a04-13318_1ex10d5.htm#PaymentOfObligation]

Payment of Obligation [a04-13318_1ex10d5.htm#PaymentOfObligation]

 

11.2 [a04-13318_1ex10d5.htm#Covenants]

Covenants [a04-13318_1ex10d5.htm#Covenants]

 

11.3 [a04-13318_1ex10d5.htm#DebtorRelief_]

Debtor Relief [a04-13318_1ex10d5.htm#DebtorRelief_]

 

11.4 [a04-13318_1ex10d5.htm#JudgmentsAndAttachments]

Judgments and Attachments [a04-13318_1ex10d5.htm#JudgmentsAndAttachments]

 

11.5 [a04-13318_1ex10d5.htm#Misrepresentation]

Misrepresentation [a04-13318_1ex10d5.htm#Misrepresentation]

 

11.6 [a04-13318_1ex10d5.htm#ChangeOfControl]

Change of Control [a04-13318_1ex10d5.htm#ChangeOfControl]

 

11.7 [a04-13318_1ex10d5.htm#DefaultUnderOtherDebtAndAgreements]

Default Under Other Debt and Agreements
[a04-13318_1ex10d5.htm#DefaultUnderOtherDebtAndAgreements]

 

11.8 [a04-13318_1ex10d5.htm#EmployeeBenefitPlans]

Employee Benefit Plans [a04-13318_1ex10d5.htm#EmployeeBenefitPlans]

 

11.9 [a04-13318_1ex10d5.htm#ValidityAndEnforceabilityOfLoanDocu]

Validity and Enforceability of Loan Documents
[a04-13318_1ex10d5.htm#ValidityAndEnforceabilityOfLoanDocu]

 

11.10 [a04-13318_1ex10d5.htm#EnvironmentalLiability]

Environmental Liability [a04-13318_1ex10d5.htm#EnvironmentalLiability]

 

SECTION 12 [a04-13318_1ex10d5.htm#Section12RightsAndRemedies]

RIGHTS AND REMEDIES [a04-13318_1ex10d5.htm#Section12RightsAndRemedies]

 

12.1 [a04-13318_1ex10d5.htm#RemediesUponDefault]

Remedies Upon Default [a04-13318_1ex10d5.htm#RemediesUponDefault]

 

 

iii

--------------------------------------------------------------------------------

 

12.2 [a04-13318_1ex10d5.htm#CompanyWaivers]

Company Waivers [a04-13318_1ex10d5.htm#CompanyWaivers]

 

12.3 [a04-13318_1ex10d5.htm#PerformanceByAdministrativeAgent]

Performance by Administrative Agent
[a04-13318_1ex10d5.htm#PerformanceByAdministrativeAgent]

 

12.4 [a04-13318_1ex10d5.htm#DelegationOfDutiesAndRights]

Delegation of Duties and Rights
[a04-13318_1ex10d5.htm#DelegationOfDutiesAndRights]

 

12.5 [a04-13318_1ex10d5.htm#NotInControl]

Not in Control [a04-13318_1ex10d5.htm#NotInControl]

 

12.6 [a04-13318_1ex10d5.htm#CourseOfDealing]

Course of Dealing [a04-13318_1ex10d5.htm#CourseOfDealing]

 

12.7 [a04-13318_1ex10d5.htm#CumulativeRights]

Cumulative Rights [a04-13318_1ex10d5.htm#CumulativeRights]

 

12.8 [a04-13318_1ex10d5.htm#ApplicationOfProceeds]

Application of Proceeds [a04-13318_1ex10d5.htm#ApplicationOfProceeds]

 

12.9 [a04-13318_1ex10d5.htm#CertainProceedings]

Certain Proceedings [a04-13318_1ex10d5.htm#CertainProceedings]

 

12.10 [a04-13318_1ex10d5.htm#ExpendituresByLenders]

Expenditures by Lenders [a04-13318_1ex10d5.htm#ExpendituresByLenders]

 

12.11 [a04-13318_1ex10d5.htm#Indemnification]

Indemnification [a04-13318_1ex10d5.htm#Indemnification]

 

SECTION 13 [a04-13318_1ex10d5.htm#Section13AgreementAmongLenders]

AGREEMENT AMONG LENDERS [a04-13318_1ex10d5.htm#Section13AgreementAmongLenders]

 

13.1 [a04-13318_1ex10d5.htm#AdministrativeAgent_]

Administrative Agent [a04-13318_1ex10d5.htm#AdministrativeAgent_]

 

13.2 [a04-13318_1ex10d5.htm#Expenses]

Expenses [a04-13318_1ex10d5.htm#Expenses]

 

13.3 [a04-13318_1ex10d5.htm#ProportionateAbsorptionOfLosses]

Proportionate Absorption of Losses
[a04-13318_1ex10d5.htm#ProportionateAbsorptionOfLosses]

 

13.4 [a04-13318_1ex10d5.htm#DelegationOfDutiesReliance]

Delegation of Duties; Reliance
[a04-13318_1ex10d5.htm#DelegationOfDutiesReliance]

 

13.5 [a04-13318_1ex10d5.htm#LimitationOf]

Limitation of Liability [a04-13318_1ex10d5.htm#LimitationOf]

 

13.6 [a04-13318_1ex10d5.htm#Default]

Default [a04-13318_1ex10d5.htm#Default]

 

13.7 [a04-13318_1ex10d5.htm#LimitationOf]

Limitation of Liability [a04-13318_1ex10d5.htm#LimitationOf]

 

13.8 [a04-13318_1ex10d5.htm#RelationshipOfLenders]

Relationship of Lenders [a04-13318_1ex10d5.htm#RelationshipOfLenders]

 

13.9 [a04-13318_1ex10d5.htm#BenefitsOfAgreement]

Benefits of Agreement [a04-13318_1ex10d5.htm#BenefitsOfAgreement]

 

13.10 [a04-13318_1ex10d5.htm#IntentionallyOmitted]

[Intentionally Omitted] [a04-13318_1ex10d5.htm#IntentionallyOmitted]

 

13.11 [a04-13318_1ex10d5.htm#ObligationsSeveral]

Obligations Several [a04-13318_1ex10d5.htm#ObligationsSeveral]

 

SECTION 14 [a04-13318_1ex10d5.htm#Miscellaneous]

MISCELLANEOUS [a04-13318_1ex10d5.htm#Miscellaneous]

 

14.1 [a04-13318_1ex10d5.htm#Headings]

Headings [a04-13318_1ex10d5.htm#Headings]

 

14.2 [a04-13318_1ex10d5.htm#NonbusinessDays]

Nonbusiness Days [a04-13318_1ex10d5.htm#NonbusinessDays]

 

14.3 [a04-13318_1ex10d5.htm#Communications]

Communications [a04-13318_1ex10d5.htm#Communications]

 

14.4 [a04-13318_1ex10d5.htm#FormAndNumberOfDocuments]

Form and Number of Documents [a04-13318_1ex10d5.htm#FormAndNumberOfDocuments]

 

14.5 [a04-13318_1ex10d5.htm#Confidentiality]

Confidentiality [a04-13318_1ex10d5.htm#Confidentiality]

 

14.6 [a04-13318_1ex10d5.htm#Survival]

Survival [a04-13318_1ex10d5.htm#Survival]

 

14.7 [a04-13318_1ex10d5.htm#GoverningLaw]

Governing Law [a04-13318_1ex10d5.htm#GoverningLaw]

 

14.8 [a04-13318_1ex10d5.htm#InvalidProvisions]

Invalid Provisions [a04-13318_1ex10d5.htm#InvalidProvisions]

 

14.9 [a04-13318_1ex10d5.htm#Entirety]

Entirety [a04-13318_1ex10d5.htm#Entirety]

 

14.10 [a04-13318_1ex10d5.htm#Jurisdiction]

Jurisdiction; Venue; Service of Process; Jury Trial
[a04-13318_1ex10d5.htm#Jurisdiction]

 

14.11 [a04-13318_1ex10d5.htm#Amendments]

Amendments, Consents, Conflicts, and Waivers [a04-13318_1ex10d5.htm#Amendments]

 

14.12 [a04-13318_1ex10d5.htm#MultipleCounterparts]

Multiple Counterparts [a04-13318_1ex10d5.htm#MultipleCounterparts]

 

14.13 [a04-13318_1ex10d5.htm#SuccessorsAndAssignsAssignmentsAnd]

Successors and Assigns; Assignments and Participations
[a04-13318_1ex10d5.htm#SuccessorsAndAssignsAssignmentsAnd]

 

14.14 [a04-13318_1ex10d5.htm#DischargeOnly]

Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances
[a04-13318_1ex10d5.htm#DischargeOnly]

 

14.15 [a04-13318_1ex10d5.htm#DesignatedSeniorIndebtedness]

Designated Senior Indebtedness
[a04-13318_1ex10d5.htm#DesignatedSeniorIndebtedness]

 

 

iv

--------------------------------------------------------------------------------

 

SCHEDULES AND EXHIBITS

 

Schedule 2.1 [a04-13318_1ex10d5.htm#Schedule2_1]

-

 

Lenders and Commitments; Addresses for Notice
[a04-13318_1ex10d5.htm#Schedule2_1]

Schedule 8.2 [a04-13318_1ex10d5.htm#Schedule8_2]

-

 

Companies [a04-13318_1ex10d5.htm#Schedule8_2]

Schedule 8.3 [a04-13318_1ex10d5.htm#Schedule8_3]

-

 

Subsidiaries and Stock [a04-13318_1ex10d5.htm#Schedule8_3]

Schedule 10.3 [a04-13318_1ex10d5.htm#Schedule10_3]

-

 

Existing Capital Leases [a04-13318_1ex10d5.htm#Schedule10_3]

Schedule 10.4

-

 

Affiliate Transactions

Schedule 10.8 [a04-13318_1ex10d5.htm#Schedule10_8]

-

 

Existing Investments [a04-13318_1ex10d5.htm#Schedule10_8]

 

 

 

 

Exhibit A-1 [a04-13318_1ex10d5.htm#ExhibitA1]

-

 

Form of Compliance Certificate [a04-13318_1ex10d5.htm#ExhibitA1]

Exhibit B [a04-13318_1ex10d5.htm#ExhibitB]

-

 

Form of Note [a04-13318_1ex10d5.htm#ExhibitB]

Exhibit C-1 [a04-13318_1ex10d5.htm#ExhibitC1]

-

 

Form of Notice of Borrowing [a04-13318_1ex10d5.htm#ExhibitC1]

Exhibit C-2 [a04-13318_1ex10d5.htm#ExhibitC2]

-

 

Form of Notice of Conversion [a04-13318_1ex10d5.htm#ExhibitC2]

Exhibit D-1 [a04-13318_1ex10d5.htm#ExhibitD1]

-

 

Form of POI Guaranty [a04-13318_1ex10d5.htm#ExhibitD1]

Exhibit D-2 [a04-13318_1ex10d5.htm#ExhibitD2]

-

 

Form of Subsidiary Guaranty [a04-13318_1ex10d5.htm#ExhibitD2]

Exhibit F [a04-13318_1ex10d5.htm#ExhibitF]

-

 

Form of Assignment and Acceptance Agreement [a04-13318_1ex10d5.htm#ExhibitF]

 

v

--------------------------------------------------------------------------------

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of [•], 2005,
among PROTECTION ONE ALARM MONITORING, INC., a Delaware corporation
(“Borrower”), Lenders (hereinafter defined), and POI ACQUISITION, L.L.C. (“POI
Acquisition”), as Administrative Agent (hereinafter defined).

 

R E C I T A L S

 

A.            POI Acquisition and Quadrangle Master Funding Ltd. (“QDRF”) are
lenders, and POI Acquisition is administrative agent, under that certain
Revolving Credit Agreement dated as of December 21, 1998 (as renewed, extended,
modified and amended from time to time, the “Revolving Credit Facility”) with
Protection One Alarm Monitoring, Inc, as borrower, and Protection One, Inc. and
certain of its subsidiaries, as guarantors thereunder.

 

B.            Pursuant to an exchange agreement dated as of November 12, 2004
(the “Exchange Agreement”) by and among Protection One, Inc., QDRF, POI
Acquisition and a wholly-owned subsidiary of POI Acquisition, certain
indebtedness under the Revolving Credit Facility shall be discharged (the
transactions described in the Exchange Agreement, collectively known as the
“Restructuring”).

 

C.            In connection with, and as a condition to, the Restructuring, the
parties hereto desire to amend and restate the Revolving Credit Facility in the
form hereof, pursuant to which the Lenders will extend the Borrower credit in
the amount of $[•][to equal amount outstanding as of the Execution Date] in
accordance with the terms set forth below.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Borrower, Administrative Agent and Lenders
agree as follows:

 

SECTION 1                               DEFINITIONS AND TERMS.

 

1.1  DEFINITIONS.  AS USED HEREIN:

 

Acquisition means any transaction or series of related transactions for the
purpose of, or resulting in, directly or indirectly, (a) the acquisition by any
Company of all or substantially all of the assets of a Person or of any line of
business or division of a Person, (b) the acquisition by any Company of more
than fifty percent (50%) of any class of Stock (or similar ownership interests)
of any Person (provided that formation or organization of any entity shall not
constitute an “Acquisition” to the extent that the amount of the loan, advance,
investment, or capital contribution in such entity constitutes a permitted
investment under Section 10.8); or (c) a merger, consolidation, amalgamation, or
other combination by any Company with another Person if a Company is the
surviving entity; provided that in any merger involving Borrower, Borrower must
be the surviving entity.

 

Adjusted Eurodollar Rate means, for any Eurodollar Borrowing for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by Administrative Agent to be equal to the
quotient obtained by dividing (a) the

 

--------------------------------------------------------------------------------

 

Eurodollar Rate for such Eurodollar Borrowing for such Interest Period by (b)
one (1) minus the Reserve Requirement for such Eurodollar Borrowing for such
Interest Period.

 

Administrative Agent means POI Acquisition, and its permitted successors or
assigns as “Administrative Agent” for Lenders under this Agreement.

 

Affiliate as to any Person means any other Person who directly or indirectly
controls, or is controlled by, or is under common control with, such Person,
and, for purposes of this definition only, “control,” “controlled by,” and
“under common control with” mean possession, directly or indirectly, of the
power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract, or otherwise); provided
that “affiliate” shall not include the Administrative Agent or any Lenders.

 

Agreement means this Amended and Restated Credit Agreement (as the same may
hereafter be amended, modified, supplemented, or restated from time to time).

 

Applicable Lending Office means, for each Lender and for each Type of Borrowing,
the “Lending Office” of such Lender (or an Affiliate of such Lender) designated
on Schedule 2.1 attached hereto or such other office that such Lender (or an
Affiliate of such Lender) may from time to time specify to Administrative Agent
and Borrower by written notice in accordance with the terms hereof.

 

Applicable Margin means 5.75% for Base Rate Borrowings and 7.00% for Eurodollar
Borrowings; provided, that if the Termination Date is extended to January 15,
2006 pursuant to Section 3.16, the Applicable Margin for Eurodollar Borrowings
during the period from and including August 15, 2005 to and including January
15, 2006 shall be 10.00% and the Applicable Margin for Base Rate Borrowings
during such period shall be 8.75%.

 

Asset Sale means the sale, transfer, or other disposition by any Company of any
of its assets other than any sale, transfer or disposition of any assets
permitted by subsections 10.11 (a), (b), (c), (f) and (g).

 

Authorizations means all filings, recordings, and registrations with, and all
validations or exemptions, approvals, orders, authorizations, consents,
franchises, licenses, certificates, and permits from, any Governmental
Authority.

 

Base Rate means, for any day, the rate per annum equal to the greater of (a) the
Federal Funds Rate for such day plus one-half of one percent (.5%), and (b) the
Prime Rate for such day.  Any change in the Base Rate due to a change in the
Prime Rate or the Federal Funds Rate shall be effective on the effective date of
such change in the Prime Rate or the Federal Funds Rate, as applicable.

 

Base Rate Borrowing means a Borrowing bearing interest at the sum of the Base
Rate plus the Applicable Margin for Base Rate Borrowings.

 

Borrower is defined in the preamble to this Agreement.

 

2

--------------------------------------------------------------------------------

 

Borrowing means any amount disbursed (a) by one or more Lenders to Borrower
under the Loan Documents, whether such amount constitutes an original
disbursement of funds or the Continuation of an amount outstanding, or (b) by
any Lender in accordance with, and to satisfy the obligations of any Obligor
under, any Loan Document.

 

Borrowing Date is defined in Section 2.4(a).

 

Budget means the annual financial budget for the Companies delivered to
Administrative Agent pursuant to Section 9.3(c).

 

Business Day means (a) for all purposes, any day other than Saturday, Sunday,
and any other day on which commercial banking institutions are required or
authorized by Law to be closed in New York, New York, and (b) in addition to the
foregoing, in respect of any Eurodollar Borrowing; a day on which dealings in
United States dollars are conducted in the London interbank market and
commercial banks are open for international business in London.

 

Capital Expenditures means for any period, with respect to any Person, the
aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed assets or capital
assets (including expenditures for the purchase of installed security systems)
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries, other than any
such expenditures made (x) with the proceeds of any condemnation award or
insurance or which will be reimbursed by insurance, (y) in connection with
normal replacement and maintenance programs properly expensed in accordance with
GAAP, or (z) with the proceeds of any asset sale made pursuant to Section 10.11
other than Net Proceeds Borrower is required to use to make mandatory
prepayments of Principal Debt pursuant to Section 3.2(b); provided that costs
required to be capitalized with or pursuant to Securities and Exchange
Commission Staff Accounting Bulletin No. 101 (as revised by Securities and
Exchange Commission Staff Accounting Bulletin No. 104) shall be excluded from
Capital Expenditures.

 

Capital Lease means any capital lease or sublease which should be capitalized on
a balance sheet in accordance with GAAP.

 

Cash Amount means, as of the date of any mandatory repayment pursuant to Section
3.2(b), an amount equal to the sum of (a) $7 million, (b) the aggregate amount
of all accrued and unpaid interest on the Borrowings, the Senior Notes, the
Senior Subordinated Notes and the Subordinated Notes as of such date, (c) the
aggregate amount required by the Companies to satisfy their obligations under
the change of control repurchase offer to be made to holders of the Subordinated
Notes as of such date (without duplication of clause (b) above) and (d) the
applicable Restricted Cash Amount.

 

Closing Date means December 21, 1998.

 

Code means the Internal Revenue Code of 1986, as amended.

 

Commitment Usage means, at the time of any determination thereof, the Total
Principal Debt.

 

3

--------------------------------------------------------------------------------

 

Committed Sum means, for any Lender at any date of determination, the amount
stated beside each Lender’s name on the most-recently amended Schedule 2.1
(which amount is subject to increase, reduction, or cancellation in accordance
with this Agreement).

 

Companies means, as of any date, POI and each of its Subsidiaries, and Company
means any one of the Companies.

 

Compliance Certificate means a certificate signed by a Responsible Officer,
substantially in the form of Exhibit A-1.

 

Consequential Loss means any loss or expense which any Lender reasonably incurs
in respect of a Eurodollar Borrowing as a consequence of any event described in
Section 4.5.

 

Consolidated Debt means, as of any date of determination, all Debt of the
Companies, on a consolidated basis, of the types described in clauses (a)(i) and
(a)(ii) of the definition of Debt.

 

Consolidated EBITDA means, for any period of determination, the EBITDA of the
Companies, on a consolidated basis.

 

Consolidated Interest Expense means, for any period of determination, the
Interest Expense of the Companies, on a consolidated basis.

 

Constituent Documents means, with respect to any Person, its articles or
certificate of incorporation, bylaws, partnership agreements, limited liability
company agreements, trust agreement, or such other document as may govern such
Person’s formation or organization.

 

Continue, Continuation, and Continued refers to the continuation pursuant to
Section 3.10 hereof of a Eurodollar Borrowing from one Interest Period to the
next Interest Period.

 

Convert, Conversion, and Converted refers to a conversion pursuant to Section
3.10 of one Type of Borrowing into another Type of Borrowing.

 

Credit Parties means the Administrate Agent and Lenders, and “Credit Party”
means any one of the Credit Parties.

 

Current Financials means, at the time of any determination thereof, the more
recently delivered to Lenders of the Financial Statements required to be
delivered under Sections 9.3(a) or 9.3(b), as the case may be.

 

Debt means (without duplication), for any Person, the sum of the following: (a)
all liabilities, obligations, and indebtedness of such Person which in
accordance with GAAP should be classified upon such Person’s balance sheet as
liabilities in respect of (i) money borrowed, including, without limitation, the
Principal Debt, (ii) obligations of such Person under Capital Leases, and (iii)
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations, and obligations under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (b) all obligations of the type referred to in
clauses (a)(i) through (a)(iii) preceding of other Persons for the payment of
which such Person is responsible or liable as obligor, guarantor, or otherwise;
(c) all

 

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obligations of the type referred to in clauses (a)(i) through clause (a)(iii)
and clause (b) preceding of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such Person),
the amount of such obligation being deemed to be the lesser of the fair value of
such property or assets or the amount of the obligation so secured as determined
in good faith by such Person; (d) the face amount of all letters of credit and
banker’s acceptances issued for the account of such Person, and without
duplication, all drafts drawn and unpaid thereunder; and (e) net liabilities
under Financial Hedges.

 

Debtor Relief Laws means the Bankruptcy Code of the United States of America and
all other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, fraudulent transfer or
conveyance, suspension of payments, or similar Laws from time to time in effect
affecting the Rights of creditors generally.

 

Default is defined in Section 11.

 

Defaulting Lender means, as of any date, any Lender that has (a) failed to make
a Borrowing required to be made by it hereunder, or (b) given notice to
Administrative Agent or Borrower that it will not make, or that it has
disaffirmed or repudiated any obligation to make, any Advances hereunder (unless
such notice is given by all Lenders).

 

Default Rate means a per annum rate of interest equal from day to day to the
lesser of (a) the sum of the Base Rate plus the Applicable Margin for Base Rate
Borrowings plus two percent (2%), and (b) the Maximum Rate.

 

Distribution for any Person means, with respect to any Stock issued by such
Person, (a) the retirement, redemption, purchase, or other acquisition for value
of any such Stock, (b) the declaration or payment of any dividend on or with
respect to any such Stock, and (c) any other payment by such Person with respect
to such Stock.

 

Dollar-Equivalent, at any time, means, (a) any amount denominated in Dollars,
and (b) for any amount denominated in a Foreign Currency, an amount of Dollars
into which Administrative Agent determines that it could convert the relevant
amount of that Foreign Currency by using the applicable-quoted-spot rate
reported on the appropriate page of the Reuters Screen at 11:00 a.m. (London
time) three (3) Business Days before the day on which the calculation is made.

 

Dollars and the symbol $ means lawful money of the United States of America.

 

Domestic Subsidiary means any Subsidiary of POI other than a Foreign Subsidiary.

 

EBITDA means, with respect to any Person for any fiscal period, an amount equal
to (a) consolidated net income of such Person for such period, minus (b) the sum
of (i) income tax credits, (ii) interest income, (iii) gains from extraordinary
items for such period, and (iv) any aggregate net gain during such period
arising from the sale, exchange, or other disposition of capital assets by such
Person (including any fixed assets, whether tangible or intangible, and all
inventory sold in conjunction with the disposition of fixed assets, but
excluding asset sales in the ordinary course of business permitted pursuant to
Section 10.11), in each case to the extent included in the calculation of
consolidated net income of such Person for such period in

 

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accordance with GAAP, but without duplication, minus (c) any cash payments made
in respect of any item of extraordinary loss accrued during a prior period and
added back to EBITDA in such prior period pursuant to clause (g)(v) below, plus
(d) to the extent deducted from the calculation of consolidated net income in
clause (a) above, (i) non-recurring expenses incurred in connection with the
restructuring (including the payment, prepayment, renegotiation, buyout, or
other compromise, collection, or other restructuring transaction and all
expenses related thereto including attorneys’ fees and expenses) of dealer
contracts and receivables and (ii) expenses related to the writeoff of dealer
receivables (provided that the aggregate amount of such expenses that may be
added pursuant to this clause (d) may not exceed $10,000,000 in the aggregate
during the term of this Agreement), plus (e) expenses related to the purchase of
accounts from Paradigm Direct, LLC recognized during such period that, in
accordance with GAAP, are required to be expensed (as opposed to capitalized),
plus (f) expenses related to the internal generation of accounts recognized
during such period that, in accordance with GAAP, are required to be expensed
(as opposed to capitalized), plus (g) the sum of (i) any provision for income
taxes, (ii) Interest Expense, (iii) the amount of depreciation and amortization
for such period, (iv) the amount of any deduction to consolidated net income as
the result of any Stock option expense, (v) the amount of any item of
extraordinary loss not paid in cash in such period, and (vi) the absolute value
of any aggregate net loss during such period arising from the sale, exchange, or
other disposition of capital assets by such Person (including any fixed assets,
whether tangible or intangible, and all inventory sold in conjunction with the
disposition of fixed assets, but excluding asset sales in the ordinary course of
business permitted pursuant to Section 10.11), plus (h) non-recurring expenses
incurred in connection with work force reductions by Borrower, the consolidation
of Borrower’s call centers or offices, or the closing of Borrower’s patrol and
national accounts operations, plus (i) in the case of POI (to the extent
deducted in the calculation of consolidated net income of POI for such period),
the excess of (A) the aggregate amount of POI’s directors & officers insurance
expense for such period (the “EBITDA Measurement Period”) over (B) the quotient
of (1) the aggregate cash cost of POI’s August 2002 renewal of its directors &
officers insurance divided by (2) the number of EBITDA Measurement Periods
contained in a single fiscal year (e.g., if the relevant EBITDA Measurement
Period is a fiscal quarter, the denominator described in this clause (2) is four
(4)), plus (j) in the case of POI (to the extent deducted in the calculation of
consolidated net income of POI for such period), and solely for purposes of
calculating the “Leverage Ratio” and the “Interest Coverage Ratio” to determine
compliance with Section 10.13(a) or Section 10.13(b), as the case may be, the
amount of POI’s key employee retention plan expense for such period (not to
exceed an aggregate amount of $1,900,000 for any fiscal quarter) arising in
connection with the employee retention plan approved by POI’s board of directors
on June 3, 2004 in each case to the extent included in the calculation of
consolidated net income of such Person for such period in accordance with GAAP,
but without duplication, plus (k) to the extent deducted in the calculation of
consolidated net income for such period, expenses incurred in connection with
the Restructuring (including payments, prepayments, accruals, or other
restructuring transactions and all expenses related thereto including financial
advisory and attorneys’ fees and expenses) of Debt, plus (l) expenses incurred
in connection with the Shared Services Agreement between Westar Energy, Inc. and
POI in excess of scheduled payments made by POI to Westar Energy, Inc. for
periods during which services were provided, plus (m) all expenses and costs
with respect to legal and tax settlements relating to events which occurred
prior to the Execution Date . In the case of any Permitted Acquisition or
internally generated account during any period of calculation, EBITDA

 

6

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shall, for the purposes of the foregoing calculations, be adjusted to give
effect to such Permitted Acquisition or internally generated account, as if such
Permitted Acquisition or internally generated account occurred on the first
(1st) day of such period, by, with respect to any Permitted Acquisition,
increasing, if positive, or decreasing, if negative, EBITDA by the EBITDA of
such newly-acquired business during such period of calculation occurring prior
to the date of such Permitted Acquisition.

 

Eligible Assignee means: (a) a Lender; (b) an Affiliate of a Lender (so long as
such assignment is not made in conjunction with the sale of such Affiliate); and
(c) any other Person approved by Administrative Agent (which approval will not
be unreasonably withheld or delayed by Administrative Agent).

 

Employee Plan means an employee pension benefit plan covered by Title IV of
ERISA and established or maintained by Borrower or any ERISA Affiliate, but not
including any Multiemployer Plan.

 

Environmental Law means any applicable Law that relates to (a) the condition or
protection of the environment (including air, groundwater, surface water, soil,
other environmental media, or natural resources) and remediation to the
environment, (b) the regulation of any Hazardous Substances, or (c) the Release
or threatened Release of Hazardous Substances, including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. § 9601 et seq.) (“CERCLA”), the Clean Air Act (42 U.S.C. § 7401 et seq.),
the Federal Water Pollution Control Act, as amended by the Clean Water Act (33
U.S.C. § 1251 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. § 136 et seq.), the Emergency Planning and Community Right to Know Act
of 1986 (42 U.S.C. § 11001 et seq.), the Hazardous Materials Transportation Act
(49 U.S.C. § 1801 et seq.), the National Environmental Policy Act of 1969 (42
U.S.C. § 4321 et seq.), the Oil Pollution Act (33 U.S.C. § 2701 et. seq.), the
Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Rivers
and Harbors Act (33 U.S.C. § 401 et seq.), the Safe Drinking Water Act (42
U.S.C. § 201 and § 300f et seq.), the Solid Waste Disposal Act, as amended by
the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid
Waste Amendments of 1984 (42 U.S.C. § 6901 et seq.), the Toxic Substances
Control Act (15 U.S.C. § 2601 et seq.), and analogous state and local Laws, as
any of the foregoing may have been and may be amended or supplemented from time
to time, and any analogous future enacted or adopted Law.

 

ERISA means the Employee Retirement Income Security Act of 1974, as amended.

 

ERISA Affiliate means any company or trade or business (whether or not
incorporated) which, for purposes of Title IV of ERISA, is a member of
Borrower’s controlled group or which is under common control with Borrower
within the meaning of Section 414(b), (c), (m), or (o) of the Code.

 

Eurodollar Borrowing means a Borrowing bearing interest at the sum of the
Adjusted Eurodollar Rate plus the Applicable Margin for Eurodollar Borrowings.

 

Eurodollar Rate means, for any Eurodollar Borrowing for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on

 

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Dow Jones Markets (Telerate) Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two (2) Business Days prior to the first (1st) day of such
Interest Period for a term comparable to such Interest Period.  If for any
reason such rate is not available, then the term “Eurodollar Rate” shall mean,
for any Eurodollar Borrowing for any Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to
the first (1st) day of such Interest Period for a term comparable to such
Interest Period; provided however, if more than one (1) rate is specified on
Reuters Screen LIBO Page, then the applicable rate shall be the arithmetic mean
of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).

 

Exchange Agreement is defined in the recitals.

 

Excluded Taxes is defined in Section 4.6(a).

 

Execution Date means [•], 2005.

 

Exhibit means an exhibit to this Agreement unless otherwise specified.

 

Extension Fee means, in connection with the extension of the Termination Date
from August 15, 2005 to January 15, 2006, a fee equal to 1% of the Total
Commitment as of August 15, 2005.

 

Facility means the credit facility as described in and subject to the
limitations set forth in Section 2.1 hereof.

 

Federal Funds Rate means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined (which determination shall be
conclusive and binding, absent manifest error) by Administrative Agent to be
equal to the weighted average of the rates on overnight Federal funds
transactions with member banks of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day; provided that (a) if such day is
not a Business Day, then the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Business Day as so published on the
next succeeding Business Day, and (b) if no such rate is so published on such
next succeeding Business Day, then the Federal Funds Rate for such day shall be
the average rate quoted to Administrative Agent (in its individual capacity) at
approximately 11:00 a.m. (New York, New York time) on such day received by
Administrative Agent from three (3) Federal funds brokers of recognized national
standing selected by Administrative Agent in its sole discretion.

 

Financial Hedge means a swap, collar, floor, cap, or other contract which is
intended to reduce or eliminate the risk of fluctuations in interest rates.

 

Financial Statements means balance sheets, statements of operations, statements
of shareholders’ investments, and statements of cash flows prepared in
accordance with GAAP, which statements of operations and statements of cash
flows shall be in comparative form to the

 

8

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corresponding period of the preceding fiscal year, and which balance sheets and
statements of shareholders’ investments shall be in comparative form to the
prior fiscal year-end figures.

 

Foreign Currency means any freely-convertible lawful currency acceptable to
Administrative Agent, so long as (a) such currency is dealt with in the London
interbank deposit market, and (b) such currency is freely transferable and
convertible into Dollars in the London foreign exchange market.

 

Foreign Subsidiary means any Subsidiary of POI which is not organized under the
Laws of any State of the United States of America or the District of Columbia.

 

GAAP means generally accepted accounting principles in the United States of
America as set forth in the opinions and pronouncements of the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable from time to
time.

 

Governmental Authority means any applicable (a) local, state, municipal, or
federal judicial, executive, or legislative instrumentality, (b) private
arbitration board or panel presiding over binding arbitration, or (c) central
bank.

 

Guaranties means the POI Guaranty, the Subsidiary Guaranty, and any other
guaranty executed pursuant to Section 6.3, and Guaranty means any one of the
Guaranties.

 

Guarantors means POI, the Subsidiary Guarantors, and any other Person that is
required to execute a guaranty pursuant to Section 6.3, and Guarantor means any
one of the Guarantors.

 

Hazardous Substance means (a) any substance that is designated, defined, or
classified as a hazardous waste, hazardous material, pollutant, contaminant, or
toxic or hazardous substance by any applicable Governmental Authority, including
without limitation, any hazardous substance within the meaning of Section 101 of
CERCLA, or (b) any other substances regulated by a Governmental Authority having
jurisdiction over any Company with respect to environmental matters because of
their effect or potential effect on public health and/or the environment,
including, without limitation, (i) petroleum, oil, gasoline, natural gas or
liquids, fuel oil, motor oil, waste oil, diesel fuel, jet fuel, and other
petroleum hydrocarbons, (ii) regulated asbestos and asbestos-containing
materials in any form, (iii) polychlorinated biphenyls, (iv) urea formaldehyde
foam, (v) lead paint, and (vi) radioactive material.

 

Indemnified Parties is defined in Section 12.11.

 

Interest Coverage Ratio means, as of any date of determination thereof, the
ratio of (a) the product of (i) Consolidated EBITDA for the most-recent fiscal
quarter ending on or prior to the date of determination, and (ii) four (4), to
(b) Consolidated Interest Expense for the most-recent four (4) fiscal quarters
ending on or prior to the date of determination; provided, however, for purposes
of calculating the Interest Coverage Ratio, (i) Consolidated Interest Expense
shall be adjusted to give pro forma effect to the reduction in Interest Expense
as a result of the reduction of Indebtedness from the application of the
proceeds from such asset disposition (whether such proceeds are in cash or
bonds) as if such asset disposition and corresponding reduction of Indebtedness
occurred on the first day of such determination period and (ii)

 

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Consolidated EBITDA shall be adjusted to give pro forma effect to such asset
disposition as if such asset disposition had occurred on the first day of such
determination period.

 

Interest Expense means, for any period of calculation thereof, for any Person
(a) interest expense determined in accordance with GAAP (excluding the fees and
expenses incurred in connection with the Senior Subordinated Note Indenture, the
Extension Fee and the Exchange Fee), minus (b) cash interest income received by
such Person during such period.

 

Interest Period is defined in Section 3.9.

 

Laws means all applicable statutes, laws, treaties, ordinances, tariff
requirements, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, or binding interpretations of any Governmental Authority.

 

Lenders means, on any date of determination, the financial institutions named on
Schedule 2.1 (as the same may be amended from time to time by Administrative
Agent to reflect the assignments made in accordance with Section 14.13(b) of
this Agreement and delivered to Borrower and the Credit Parties), and subject to
the terms and conditions of this Agreement, their respective successors and
assigns.

 

Leverage Ratio means, as of any date of determination thereof, the ratio of (a)
Consolidated Debt outstanding on such date, to (b) the product of (i)
Consolidated EBITDA for the most-recent fiscal quarter ending on or prior to the
date of determination, and (ii) four (4).

 

Lien means, with respect to any property or assets, any lien, mortgage,
collateral assignment, hypothecation, security interest, pledge, assignment,
charge, conditional sale or title retention agreement, levy, execution, seizure,
attachment, garnishment, or other encumbrance of any kind in respect of such
property or assets.

 

Litigation means any action by or before any Governmental Authority.

 

Loan Documents means (a) this Agreement, any Notes, and the Guaranties, (b) all
agreements, documents, or instruments in favor of any Credit Party ever
delivered pursuant to this Agreement or otherwise delivered in connection with
all or any part of the Obligation, (c) any Financial Hedge between any Obligor
and any Credit Party or any Affiliate of any Credit Party, and (d) any and all
future renewals, extensions, restatements, reaffirmations, or amendments of, or
supplements to, all or any part of the foregoing.

 

Material Adverse Event means any set of one or more circumstances or events
which, individually or collectively, could reasonably be expected to result in
any (a) material impairment of the ability of any Obligor to perform any of its
payment or other material obligations under the Loan Documents or the ability of
any Credit Party to enforce any such obligations or any of their respective
Rights under the Loan Documents, (b) material and adverse effect on the
business, properties, condition (financial or otherwise), or results of
operations of the Companies, taken as a whole, or (c) Default.

 

Material Companies means POI and its Material Subsidiaries, and Material Company
means any one of the Material Companies.

 

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Material State means any State of the United States of America or the District
of Columbia in which any Obligor is conducting business and where the failure to
qualify to do business as a foreign corporation or other entity would be a
Material Adverse Event.

 

Material Subsidiary of POI means, at any time, any of:

 

(a)  Borrower;

 

(b)  any Domestic Subsidiary of POI that has (or, in respect of a newly formed
or acquired Subsidiary, would have on a pro forma basis) contributed at least
fifteen percent (15%) of either (i) the gross revenues of the Companies for the
immediately preceding fiscal year of the Companies, or (ii) the consolidated net
income of the Companies for the immediately preceding fiscal year of the
Companies, or (iii) the consolidated total assets of the Companies as of the
last day of the immediately preceding fiscal year of the Companies (any Domestic
Subsidiaries that do not meet the requirements of this clause (b) being
“Individual Immaterial Subsidiaries”);

 

(c)  such additional Domestic Subsidiaries that are Individual Immaterial
Subsidiaries selected by Borrower and approved by Administrative Agent so that
all other Individual Immaterial Subsidiaries shall collectively contribute
fifteen percent (15%) or less of each of (i) the gross revenues of the Companies
for the immediately preceding fiscal year of the Companies, or (ii) the
consolidated net income of the Companies for the immediately preceding fiscal
year of the Companies, or (iii) the consolidated total assets of the Companies
as of the last day of the immediately preceding fiscal year of the Companies;
and

 

(d)  to the extent not addressed above, Security Monitoring Services Inc.

 

Maximum Amount and Maximum Rate respectively mean, for each Lender, the maximum
non-usurious amount and the maximum non-usurious rate of interest which, under
applicable Law, such Lender is permitted to contract for, charge, take, reserve,
or receive on the Obligation.

 

Moody’s means Moody’s Investors Service, Inc.

 

Moody’s Rating means the most recently-announced rating from time to time of
Moody’s assigned to any class of long-term senior, unsecured debt securities
issued by Borrower, as to which no letter of credit or guaranty or third-party
credit support (other than from the Companies) is in place, regardless of
whether all or any part of such Indebtedness has been issued at the time such
rating was issued.

 

Multiemployer Plan means a multiemployer plan as defined in Sections 3(37) or
4001(a)(3) of ERISA or Section 41(f) of the Code to which any Company or any
ERISA Affiliate has any obligation or liability (contingent or otherwise).

 

Net Proceeds means, with respect to any Asset Sale by any Company, the amount of
cash received by such Company in connection with such transaction after
deducting therefrom the aggregate, without duplication, of the following amounts
to the extent properly attributable to such transaction: (a) reasonable
brokerage commissions, attorneys’ fees, finder’s fees, accounting fees, and
other similar commissions and fees, in each case, to the extent paid or

 

11

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payable by such Company; (b) taxes paid or payable by such Company to any
Governmental Authority as a result of such transaction; (c) severance costs; (d)
termination costs with respect to facility and other leases; and (e)
reprogramming and other costs relating to the transition of monitoring services.

 

Notes means any promissory notes executed pursuant to Section 3.1(a)(ii), and
Note means any one of the Notes.

 

Notice of Borrowing means a notice substantially in the form of Exhibit C-1.

 

Notice of Conversion means a notice substantially in the form of Exhibit C-2.

 

Obligation means all present and future indebtedness, liabilities, and
obligations, and all renewals and extensions thereof, or any part thereof, now
or hereafter owed to any Credit Party or any Affiliate of any Credit Party by
any Obligor arising from, by virtue of, or pursuant to any Loan Document,
together with all interest accruing thereon, fees, costs, and expenses
(including, without limitation, all reasonable attorneys’ fees and expenses
incurred in the enforcement or collection thereof as provided in Section 12.10
or in any other Loan Document) payable under the Loan Documents.

 

Obligors means Borrower and Guarantors, and Obligor means any one of the
Obligors.

 

Other Required Guarantor is defined in Section 6.3.

 

Other Taxes is defined in Section 4.6(b).

 

Participant is defined in Section 14.13(e).

 

Payment Default means any Default described in Section 11.1.

 

PBGC means the Pension Benefit Guaranty Corporation, or any successor thereof,
established pursuant to ERISA.

 

Permitted Acquisitions means any Acquisition for which the prior written consent
of Required Lenders has been obtained (and Lenders agree to respond to a request
for consent to any such Acquisition within ten (10) Business Days following
Borrower’s request for such consent; provided that the failure to provide a
response to such request; for consent shall be deemed to be a refusal to grant
such consent).

 

Permitted Liens means Liens permitted under Section 10.3 as described in such
Section.

 

Person means any individual, entity, or Governmental Authority.

 

POI means Protection One, Inc., a Delaware corporation.

 

POI Guaranty means (a) an Unconditional Guaranty of Payment in substantially the
form of Exhibit D-1, executed and delivered by POI, and (b) any amendments,
modifications,

 

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supplements, restatements, ratifications, or reaffirmations thereof made from
time to time in accordance with the Loan Documents.

 

Prime Rate means, as of any date, the per annum rate of interest established by
JP Morgan on such date as its prime rate, which rate may not be the lowest rate
of interest charged by JP Morgan to its customers.

 

Principal Debt means, for a Lender and at any time, the unpaid principal balance
of all outstanding Borrowings from such Lender hereunder as of such date.

 

Pro Rata or Pro Rata Part, for each Lender, means (a) for purposes of any
commitment to fund in respect of the Facility the percentage stated opposite
such Lender’s name as set forth on Schedule 2.1 or on the most recently amended
Schedule 2.1, if any, prepared by Administrative Agent pursuant to Section
14.13, and (b) for all other purposes, the proportion which the portion of the
Principal Debt owed to such Lender bears to the Principal Debt owed to all
Lenders at the time in question, or if no Principal Debt is outstanding, then
the proportion that the aggregate of such Lender’s Committed Sum bears to the
Total Commitment then in effect.

 

Protection One Europe means Protection One Europe Holding SA, a French société
anonyme.

 

Register is defined in Section 14.13(c).

 

Regulation D means Regulation D of the Board of Governors of the Federal Reserve
System, as amended.

 

Regulation U means Regulation U of the Board of Governors of the Federal Reserve
System, as amended.

 

Release means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing into the
environment (including air, groundwater, surface water, soil, other
environmental media, or natural resources).

 

Reportable Event shall have the meaning specified in Section 4043 of ERISA or
the regulations issued thereunder in connection with an Employee Plan, excluding
events for which the thirty (30) day notice requirement is waived under
applicable PBGC regulations other than those events described in Sections
2615.11, 2615.15 and 2615.19 of such regulations, including each such provision
as it may subsequently be renumbered.

 

Representatives means representatives, officers, directors, employees,
attorneys, and agents.

 

Required Lenders means (a) on any date of determination prior to termination of
the Total Commitment, those Lenders (other than Defaulting Lenders) holding more
than fifty percent (50%) of the Total Commitment (excluding the Committed Sums
of any Defaulting Lenders), or (b) on any date of determination occurring after
the Total Commitment has

 

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terminated, those Lenders holding more than fifty percent (50%) of the
outstanding Total Principal Debt (excluding the Principal Debt of any Defaulting
Lenders).

 

Reserve Requirement means, at any time, the maximum rate at which reserves
(including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against, in the case of
Eurodollar Borrowings, “Eurocurrency liabilities” (as such term is used in
Regulation D).  Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks with respect to (a) any category of liabilities which includes
deposits by reference to which the Adjusted Eurodollar Rate is to be determined,
or (b) any category of extensions of credit or other assets which include
Eurodollar Borrowings.  The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement.

 

Responsible Officer of Borrower means its chairman, president, chief executive
officer, chief financial officer (or officer having comparable duties),
treasurer, or secretary, or any vice president, assistant treasurer, or
assistant secretary, or, for all purposes under the Loan Documents, any other
officer designated from time to time by the Board of Directors of Borrower,
which designated officer is reasonably acceptable to Administrative Agent.

 

Restricted Cash Amount means the amount of any cash or cash equivalents which,
in accordance with the Companies’ stated accounting policies, would reasonably
be expected to be restricted by legal or contractual requirements for use, or is
on deposit, to secure letters of credit or maintain insurance during the
twelve-month period following the relevant determination of Cash Amount.

 

Rights means rights, remedies, powers, privileges, and benefits.

 

Schedule means, unless specified otherwise, a schedule attached to this
Agreement, as the same may be supplemented and modified from time to time in
accordance with the terms of the Loan Documents.

 

Senior Note Indenture means that certain Indenture for the 7-3/8 Senior Notes
due 2005 dated as of August 16, 1998, by and among the Bank of New York, as
Trustee, Borrower and POI, as the same may be amended, supplemented, or
otherwise modified from time to time.

 

Senior Notes means the notes issued pursuant to the Senior Note Indenture.

 

Senior Subordinated Note Indenture means that certain Indenture for the 8-1/8%
Senior Subordinated Notes due 2009 dated as of December 21, 1998, by and among
Bank of New York, as Trustee, Borrower, as issuer, and the Guarantors named
therein, as the same may be amended, supplemented, or otherwise modified from
time to time.

 

Senior Subordinated Notes means the notes issued pursuant to the Senior
Subordinated Note Indenture.

 

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Solvent means, as to a Person, that (a) the aggregate fair market value (on a
going concern basis) of such Person’s assets exceeds its liabilities (whether
contingent, subordinated, unmatured, unliquidated, or otherwise), (b) such
Person reasonably expects to have sufficient cash flow (including amounts
reasonably expected to be received pursuant to asset sales and refinancings) to
enable it to pay its Debts as they mature, and (c) such Person does not have
unreasonably small capital to conduct such Person’s businesses.

 

S & P means Standard & Poor’s Ratings Group, a division of McGraw Hill, Inc., a
New York corporation.

 

S & P Rating means the most recently-announced rating from time to time of S & P
assigned to any class of long-term senior, unsecured debt securities issued by
Borrower, as to which no letter of credit or guaranty or third-party credit
support (other than from the Companies) is in place, regardless of whether all
or any part of such Indebtedness has been issued at the time such rating was
issued.

 

Stock means all shares, options, warrants, general or limited partnership
interests, membership interests, or other ownership interests (regardless of how
designated) of or in a corporation, partnership, limited liability company,
trust, or other 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, as amended).

 

Subordinated Debt means any Debt of any Obligor subordinated to the Obligation,
including, without limitation, Debt issued pursuant to the Senior Subordinated
Note Indenture and the Subordinated Note Indenture.

 

Subordinated Note Indenture means that certain Indenture for the 13-5/8 Senior
Subordinated Discount Notes due 2005 dated as of May 17, 1995, by and among U.S.
Bank, as Trustee, Borrower, as issuer, and POI, Protection One Alarm Services,
Inc., and A-Able Lock & Alarm, Inc., as guarantors, as the same may be amended,
supplemented, or otherwise modified from time to time.

 

Subordinated Notes means the notes issued pursuant to the Subordinated Note
Indenture.

 

Subsidiary of any Person means (a) any entity of which an aggregate of more than
fifty percent (50%) (in number of votes) of the Stock is owned of record or
beneficially, directly or indirectly, by such Person, or (b) any partnership
(limited or general) of which such Person shall at any time be the general
partner.

 

Subsidiary Guarantors means each Material Subsidiary of POI that has executed
the Subsidiary Guaranty, and Subsidiary Guarantor means any one of the
Subsidiary Guarantors.

 

Subsidiary Guaranty means (a) an Unconditional Guaranty of Payment in
substantially the form of Exhibit D-2, executed and delivered by each Subsidiary
Guarantor pursuant to the requirements of Section 6.2, and (b) any amendments,
modifications, supplements, restatements, ratifications, or reaffirmations
thereof made from time to time in accordance with the Loan Documents.

 

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Taxes means, for any Person, taxes, assessments, duties, levies, imposts,
deductions, charges, or withholdings, or other governmental charges or levies
imposed upon such Person, its income, or any of its properties, franchises, or
assets.

 

Termination Date means the earlier of (a) August 15, 2005, subject to extension
in accordance with Section 3.16, and (b) the effective date of any other
termination or cancellation of the Lenders’ commitments to lend under, and in
accordance with, this Agreement.

 

Total Commitment means, on any date of determination, the sum of all Committed
Sums for all Lenders (as the same may have been reduced or canceled as provided
in the Loan Documents) then in effect.

 

Total Principal Debt means, at any time, the sum of the Principal Debt of all
Lenders.

 

[Trademark License Agreement means a trademark license agreement between
Borrower and Protection One Europe (or such other Person as shall be approved in
writing by the Required Lenders) pursuant to which Borrower (1) grants to
Protection One Europe (or such other Person as shall be approved in writing by
the Required Lenders) an exclusive license to use the “Protection One” trade
name (together with the related community trademark and national trademark) for
a period of three years and (2) agrees not to transfer such licensed trademarks
or the rights under such trademark license agreement or to permit the use of
such licensed trademarks for an additional period of two years, which trademark
license agreement shall be in form and substance satisfactory to the Required
Lenders.]

 

Type means either a Base Rate Borrowing or a Eurodollar Borrowing, as the
context may require.

 

Unmatured Default  means the existence of any event or circumstance set forth in
Section 11 hereof, which after notice and/or the expiration of any cure period
set forth in Section 11 hereof would constitute a Default.

 

Wholly-owned when used in connection with any Subsidiary shall mean a Subsidiary
of which all of the issued and outstanding Stock (except shares required as
directors’ qualifying Stock) shall be owned by Borrower or one or more of its
Wholly-owned Subsidiaries.

 

1.2  Number and Gender of Words; Other References. Unless otherwise specified in
the Loan Documents, (a) where appropriate, the singular includes the plural and
vice versa, and words of any gender include each other gender, (b) heading and
caption references may not be construed in interpreting provisions, (c) monetary
references are to currency of the United States of America, (d) section,
paragraph, annex, schedule, exhibit, and similar references are to the
particular Loan Document in which they are used, (e) references to “telecopy,”
“facsimile,” “fax,” or similar terms are to facsimile or telecopy transmissions,
(f) references to “including” mean including without limiting the generality of
any description preceding that word, (g) the rule of construction that
references to general items that follow references to specific items are limited
to the same type or character of those specific items is not applicable in the
Loan Documents, (h) references to any Person include that Person’s heirs,
personal representatives, successors, trustees, receivers, and permitted
assigns, (i) references to any Law include every amendment or supplement to it,
rule and regulation adopted under it, and successor or

 

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replacement for it, and (j) references to any Loan Document or other document
include every renewal and extension of it, amendment and supplement to it, and
replacement or substitution for it.

 

1.3  Accounting Principles. All accounting and financial terms used in the Loan
Documents and the compliance with each financial covenant therein shall be
determined in accordance with GAAP, and, all accounting principles shall be
applied on a consistent basis so that the accounting principles in a current
period are comparable in all material respects to those applied during the
preceding comparable period.  If Borrower or any Credit Party determines that a
change in GAAP from that in effect on the date hereof has altered the treatment
of certain financial data to its detriment under this Agreement, then such party
may, by written notice to Administrative Agent not later than ten (10) days
after the effective date of such change in GAAP, request renegotiation of the
financial covenants affected by such change whereupon the Borrower and
Administrative Agent, on behalf of Lenders, shall negotiate in good faith for a
period of not more than thirty (30) days regarding amendments to any affected
covenants to make such covenants consistent with the prior covenants and GAAP,
as then in effect, and, after any such revision as shall be agreed to by
Borrower and Required Lenders, this Agreement will be construed in accordance
with GAAP as then in effect.  If Borrower and Required Lenders have not agreed
on revised covenants within thirty (30) days after delivery of such notice,
then, for purposes of this Agreement, GAAP will mean generally accepted
accounting principles on the date just prior to the date on which the change
that gave rise to the renegotiation occurred.

 

SECTION 2                               BORROWING PROVISIONS.

 

2.1  Commitments. Subject to and in reliance upon the terms, conditions,
representations, and warranties in the Loan Documents, each Lender severally and
not jointly agrees to lend to Borrower such Lender’s Pro Rata Part of one or
more Borrowings not to exceed such Lender’s Committed Sum, subject to the
following conditions:

 

(A)   EACH BORROWING REQUESTED BY BORROWER HEREUNDER MUST OCCUR ON A BUSINESS
DAY AND NO LATER THAN THE BUSINESS DAY IMMEDIATELY PRECEDING THE TERMINATION
DATE;

 

(B)   EACH BORROWING REQUESTED BY BORROWER MUST BE IN AN AMOUNT NOT LESS THAN
$5,000,000 OR A GREATER MULTIPLE OF $1,000,000;

 

(C)   THE COMMITMENT USAGE MAY NOT EXCEED THE TOTAL COMMITMENT;

 

(D)   EACH LENDER’S PRINCIPAL DEBT MAY NOT EXCEED SUCH LENDER’S COMMITTED SUM;
AND

 

(e)   any amounts repaid may not be reborrowed.

 

2.2  [Intentionally Omitted]

 

2.3  Termination of Commitments.

 

(a) Voluntary. Without premium or penalty, and upon giving not less than three
(3) Business Days prior telephonic notice (followed by written notice) to
Administrative Agent, Borrower may terminate in whole or in part the unused
portion of the Total Commitment

 

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provided that (i) each partial termination shall be in an amount of not less
than $10,000,000 or a greater integral multiple of $1,000,000; (ii) the amount
of the Commitment Usage may not exceed the Total Commitment (unless Borrowings
are simultaneously paid in an amount equal to such excess); and (iii) each
reduction shall be allocated Pro Rata among Lenders in accordance with their
respective Pro Rata Parts. Promptly after receipt of such notice of termination
or reduction, Administrative Agent shall notify each Lender of the proposed
cancellation or reduction. Such termination or partial reduction of the Total
Commitment shall be effective on the Business Day specified in Borrower’s notice
(which date must be at least three (3) Business Days after Borrower’s delivery
of such notice). In the event that the Total Commitment is reduced to zero at a
time when there shall be no Principal Debt, this Agreement shall be terminated
to the extent specified in Section 14.14, and all commitment fees and other fees
then earned and unpaid hereunder and all other amounts of the Obligation then
due and owing shall be immediately due and payable, without notice or demand by
Administrative Agent or any Lender.

 

(b) Mandatory. The Total Commitment shall automatically terminate in an amount
equal to each mandatory prepayment pursuant to Section 3.2(b)(iii). Each
termination in the Total Commitment pursuant to this Section 2.3(b) shall be
allocated Pro Rata among Lenders in accordance with their respective Pro Rata
Parts.

 

2.4  BORROWING PROCEDURE. THE FOLLOWING PROCEDURES APPLY TO BORROWINGS:

 

(A)   NOTICE OF BORROWING.  EACH BORROWING SHALL BE MADE PURSUANT TO A NOTICE OF
BORROWING DELIVERED TO ADMINISTRATIVE AGENT REQUESTING THAT LENDERS FUND A
BORROWING ON A CERTAIN DATE (THE “BORROWING DATE”), WHICH NOTICE (I) SHALL BE
IRREVOCABLE AND BINDING ON BORROWER, (II) SHALL SPECIFY THE BORROWING DATE,
AMOUNT, TYPE, AND (FOR A BORROWING COMPRISED OF EURODOLLAR BORROWINGS) INTEREST
PERIOD, AND (III) MUST BE RECEIVED BY ADMINISTRATIVE AGENT NO LATER THAN (A)
3:00 P.M. NEW YORK, NEW YORK TIME ON THE THIRD (3RD) BUSINESS DAY PRECEDING THE
BORROWING DATE FOR ANY EURODOLLAR BORROWING, AND (B) 12:00 P.M. NEW YORK, NEW
YORK TIME ON THE BORROWING DATE FOR ANY BASE RATE BORROWING.  ADMINISTRATIVE
AGENT SHALL TIMELY NOTIFY EACH LENDER WITH RESPECT TO EACH NOTICE OF BORROWING. 
NOTWITHSTANDING THE FOREGOING, NO BORROWING SHALL BE A BASE RATE BORROWING
EXCEPT PURSUANT TO SECTIONS 4.1, 4.2 OR 4.3.

 

(B)   FUNDING.  EACH LENDER SHALL REMIT ITS PRO RATA PART OF EACH REQUESTED
BORROWING TO ADMINISTRATIVE AGENT’S PRINCIPAL OFFICE IN DALLAS, IN FUNDS WHICH
ARE OR WILL BE AVAILABLE FOR IMMEDIATE USE BY ADMINISTRATIVE AGENT BY 2:00 P.M.
NEW YORK, NEW YORK TIME ON THE BORROWING DATE THEREFOR.  SUBJECT TO RECEIPT OF
SUCH FUNDS, ADMINISTRATIVE AGENT SHALL (UNLESS TO ITS ACTUAL KNOWLEDGE ANY OF
THE CONDITIONS PRECEDENT THEREFOR HAVE NOT BEEN SATISFIED BY BORROWER OR WAIVED
BY REQUIRED LENDERS) MAKE SUCH FUNDS AVAILABLE TO BORROWER BY CAUSING SUCH FUNDS
TO BE DEPOSITED TO BORROWER’S ACCOUNT AS DESIGNATED TO ADMINISTRATIVE AGENT BY
BORROWER.  NOTWITHSTANDING THE FOREGOING, UNLESS ADMINISTRATIVE AGENT SHALL HAVE
BEEN NOTIFIED BY A LENDER PRIOR TO A BORROWING DATE THAT SUCH LENDER DOES NOT
INTEND TO MAKE AVAILABLE TO ADMINISTRATIVE AGENT SUCH LENDER’S PRO RATA PART OF
THE APPLICABLE BORROWING, ADMINISTRATIVE AGENT MAY ASSUME THAT SUCH LENDER HAS
MADE SUCH PROCEEDS AVAILABLE TO ADMINISTRATIVE AGENT ON SUCH DATE, AS REQUIRED
HEREIN, AND ADMINISTRATIVE AGENT MAY (UNLESS TO ITS ACTUAL KNOWLEDGE ANY OF THE
CONDITIONS PRECEDENT THEREFOR HAVE NOT BEEN SATISFIED BY BORROWER OR WAIVED BY
REQUIRED LENDERS), IN RELIANCE UPON SUCH ASSUMPTION (BUT SHALL NOT BE REQUIRED
TO), MAKE AVAILABLE TO BORROWER A CORRESPONDING AMOUNT IN ACCORDANCE WITH THE
FOREGOING TERMS, BUT, IF

 

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SUCH CORRESPONDING AMOUNT IS NOT IN FACT MADE AVAILABLE TO ADMINISTRATIVE AGENT
BY SUCH LENDER ON SUCH BORROWING DATE, THEN ADMINISTRATIVE AGENT SHALL BE
ENTITLED TO RECOVER SUCH CORRESPONDING AMOUNT ON DEMAND (I) FROM SUCH LENDER,
TOGETHER WITH INTEREST AT THE FEDERAL FUNDS RATE DURING THE PERIOD COMMENCING ON
THE DATE SUCH CORRESPONDING AMOUNT WAS MADE AVAILABLE TO BORROWER AND ENDING ON
(BUT EXCLUDING) THE DATE ADMINISTRATIVE AGENT RECOVERS SUCH CORRESPONDING AMOUNT
FROM SUCH LENDER, OR (II) IF SUCH LENDER FAILS TO PAY SUCH CORRESPONDING AMOUNT
FORTHWITH UPON SUCH DEMAND, THEN FROM BORROWER, TOGETHER WITH INTEREST AT A RATE
PER ANNUM EQUAL TO THE APPLICABLE RATE FOR SUCH BORROWING DURING THE PERIOD
COMMENCING ON SUCH BORROWING DATE AND ENDING ON (BUT EXCLUDING) THE DATE
ADMINISTRATIVE AGENT RECOVERS SUCH CORRESPONDING AMOUNT FROM BORROWER.  NO
LENDER SHALL BE RESPONSIBLE FOR THE FAILURE OF ANY OTHER LENDER TO MAKE ITS PRO
RATA PART OF ANY BORROWING.

 

2.5  [INTENTIONALLY OMITTED]

 

SECTION 3                               TERMS OF PAYMENT.

 

3.1  LOAN ACCOUNTS AND PAYMENTS.

 

(A)   LOAN ACCOUNTS.

 

(I)    THE OBLIGATION PAYABLE TO EACH LENDER SHALL BE EVIDENCED BY ONE OR MORE
LOAN ACCOUNTS OR RECORDS MAINTAINED BY SUCH LENDER IN THE ORDINARY COURSE OF
BUSINESS.  THE LOAN ACCOUNTS OR RECORDS MAINTAINED BY ADMINISTRATIVE AGENT AND
EACH LENDER SHALL BE CONCLUSIVE EVIDENCE ABSENT MANIFEST ERROR OF THE AMOUNT OF
THE OBLIGATION OWING TO EACH LENDER.  ANY FAILURE TO SO RECORD OR ANY ERROR IN
DOING SO SHALL NOT, HOWEVER, LIMIT OR OTHERWISE AFFECT THE OBLIGATION OF
BORROWER HEREUNDER TO PAY ANY AMOUNT OWING TO ANY LENDER WITH RESPECT TO THE
OBLIGATION.

 

(II)   UPON THE REQUEST OF ANY LENDER MADE THROUGH ADMINISTRATIVE AGENT, THE
PRINCIPAL DEBT OF THE OBLIGATION OWING TO SUCH LENDER MAY BE EVIDENCED BY ONE OR
MORE NOTES IN ADDITION TO LOAN ACCOUNTS.  EACH SUCH NOTE SHALL BE IN
SUBSTANTIALLY THE FORM OF EXHIBIT B AND BE EXECUTED BY BORROWER AND PAYABLE TO
THE ORDER OF SUCH LENDER IN THE MAXIMUM ORIGINAL PRINCIPAL AMOUNT EQUAL TO SUCH
LENDER’S COMMITTED SUM.  EACH SUCH LENDER MAY ENDORSE ON THE SCHEDULES ANNEXED
TO ITS NOTE(S) THE DATE, AMOUNT, AND MATURITY OF EACH BORROWING MADE BY IT AND
THE AMOUNT OF EACH PAYMENT OF PRINCIPAL MADE BY BORROWER WITH RESPECT THERETO
AND EACH LENDER’S RECORD SHALL BE CONCLUSIVE ABSENT MANIFEST ERROR; PROVIDED,
HOWEVER, THAT THE FAILURE OF A LENDER TO MAKE, OR AN ERROR BY A LENDER IN
MAKING, A NOTATION THEREON WITH RESPECT TO ANY BORROWING SHALL NOT LIMIT OR
OTHERWISE AFFECT THE OBLIGATIONS OF BORROWER HEREUNDER OR UNDER ANY SUCH NOTE TO
SUCH LENDER.

 

(B)   PAYMENTS GENERALLY.  EACH PAYMENT OR PREPAYMENT ON THE OBLIGATION IS DUE
AND MUST BE PAID AT ADMINISTRATIVE AGENT’S PRINCIPAL OFFICE IN NEW YORK IN FUNDS
WHICH ARE OR WILL BE AVAILABLE FOR IMMEDIATE USE BY ADMINISTRATIVE AGENT AT OR
BEFORE 2:00 P.M. NEW YORK, NEW YORK TIME ON THE DAY DUE.  PAYMENTS MADE AFTER
2:00 P.M., NEW YORK, NEW YORK TIME SHALL BE DEEMED MADE ON THE BUSINESS DAY NEXT
FOLLOWING.  ADMINISTRATIVE AGENT SHALL PAY TO EACH LENDER ANY PAYMENT OR
PREPAYMENT TO WHICH SUCH LENDER IS ENTITLED HEREUNDER ON THE SAME DAY

 

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ADMINISTRATIVE AGENT SHALL HAVE RECEIVED THE SAME FROM BORROWER; PROVIDED THAT
SUCH PAYMENT OR PREPAYMENT IS RECEIVED BY ADMINISTRATIVE AGENT AT OR BEFORE 2:00
P.M. NEW YORK, NEW YORK TIME, AND OTHERWISE AT OR BEFORE 2:00 P.M. NEW YORK, NEW
YORK TIME ON THE BUSINESS DAY NEXT FOLLOWING.  IF AND TO THE EXTENT
ADMINISTRATIVE AGENT SHALL NOT MAKE SUCH PAYMENTS TO LENDERS WHEN DUE AS SET
FORTH IN THE PRECEDING SENTENCE, THEN SUCH UNPAID AMOUNTS SHALL ACCRUE INTEREST,
PAYABLE BY ADMINISTRATIVE AGENT, AT THE FEDERAL FUNDS RATE FROTH THE DUE DATE
UNTIL (BUT NOT INCLUDING) THE DATE ON WHICH ADMINISTRATIVE AGENT MAKES SUCH
PAYMENTS TO LENDERS.

 

3.2  INTEREST AND PRINCIPAL PAYMENTS.

 

(A)   INTEREST PAYMENTS.  INTEREST ON EACH EURODOLLAR BORROWING SHALL BE DUE AND
PAYABLE AS IT ACCRUES ON THE LAST DAY OF ITS RESPECTIVE INTEREST PERIOD AND ON
THE TERMINATION DATE, AS APPLICABLE.  INTEREST ON EACH BASE RATE BORROWING SHALL
BE DUE AND PAYABLE AS IT ACCRUES ON EACH MARCH 31, JUNE 30, SEPTEMBER 30, AND
DECEMBER 31, AND ON THE TERMINATION DATE.

 

(B)   MANDATORY PAYMENTS.

 

(i)        The Total Principal Debt is due and payable on the Termination Date.

 

(ii)       On any date of determination, if the Commitment Usage exceeds the
Total Commitment, then Borrower shall make a mandatory prepayment of the
Principal Debt in the amount of such excess, together with (i) all accrued and
unpaid interest on the principal amount so prepaid, and (ii) any Consequential
Loss arising as a result thereof.

 

(iii)      Concurrently with the receipt thereof, Borrower shall make a
mandatory prepayment of the Principal Debt, together with all accrued and unpaid
interest on the principal amount so prepaid, in an amount equal to (A) one
hundred percent (100%) of the Net Proceeds of each Asset Sale (any such
proceeds, the “Asset Sale Proceeds”) reduced by the amount of proceeds, if any,
required for the Companies to have a minimum cash balance equal to the Cash
Amount as of the date of such prepayment and (B) one hundred percent (100%) of
any proceeds received by the Companies from the incurrence of any Debt, other
than Debt permitted under Section 10.2 or solely relating to capital leases and
purchase money indebtedness permitted to be incurred pursuant to this Agreement.

 

(iv)     On the last Business Day of each month, Borrower shall make a mandatory
prepayment of the Principal Debt, together with all accrued and unpaid interest
on the principal amount so prepaid, in an amount equal to one hundred percent
(100%) of cash held at such time by the Companies reduced by the amount of
proceeds, if any, required for the Companies to have a minimum cash balance
equal to the Cash Amount as of the date of such prepayment.

 

(iv)     All mandatory prepayments hereunder shall be applied Pro Rata.

 

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(C)   VOLUNTARY PREPAYMENTS.  AFTER GIVING ADMINISTRATIVE AGENT ADVANCE
TELEPHONIC NOTICE (PROMPTLY FOLLOWED BY WRITTEN NOTICE) OF THE INTENT TO PREPAY,
BORROWER MAY VOLUNTARILY PREPAY ALL OR ANY PART OF THE PRINCIPAL DEBT FROM TIME
TO TIME AND AT ANY TIME, IN WHOLE OR IN PART, WITHOUT PREMIUM OR PENALTY;
PROVIDED THAT: (I) SUCH NOTICE MUST BE RECEIVED BY ADMINISTRATIVE AGENT AT OR
BEFORE 2:00 P.M. NEW YORK, NEW YORK TIME ON (A) THE THIRD (3RD) BUSINESS DAY
PRECEDING THE DATE OF PREPAYMENT OF A EURODOLLAR BORROWING, AND (B) THE BUSINESS
DAY OF A PREPAYMENT OF A BASE RATE BORROWING; (II) EACH SUCH PARTIAL PREPAYMENT
MUST BE IN A MINIMUM AMOUNT OF AT LEAST $5,000,000 OR A GREATER INTEGRAL
MULTIPLE OF $1,000,000 THEREOF (IF A EURODOLLAR BORROWING OR A BASE RATE
BORROWING); (III) ALL ACCRUED INTEREST ON ANY EURODOLLAR BORROWING BEING PREPAID
MUST ALSO BE PAID IN FULL, TO THE DATE-OF SUCH PREPAYMENT; AND (IV) BORROWER
SHALL PAY ANY RELATED CONSEQUENTIAL LOSS WITHIN TEN (10) DAYS AFTER DEMAND
THEREFOR.  EACH NOTICE OF PREPAYMENT SHALL SPECIFY THE PREPAYMENT DATE AND THE
TYPE OF BORROWING(S) AND AMOUNT(S) OF SUCH BORROWING(S) TO BE PREPAID AND SHALL
CONSTITUTE A BINDING OBLIGATION OF BORROWER TO MAKE A PREPAYMENT ON THE DATE
STATED THEREIN UNLESS SUCH NOTICE IS GIVEN IN CONNECTION WITH THE PAYMENT IN
FULL OF ALL BORROWINGS UNDER THIS AGREEMENT, THE TERMINATION OF THE TOTAL
COMMITMENT, AND A TERMINATION OF THIS AGREEMENT IN WHICH CASE THE PARTIES HERETO
ACKNOWLEDGE THAT SUCH PAYMENT MAY (SUBJECT TO ANY CONSEQUENTIAL LOSS) OCCUR ON A
DATE AFTER THE DATE GIVEN IN SUCH NOTICE AS A RESULT OF NORMAL DELAYS WITH
RESPECT TO SUCH PAYMENT.

 

3.3  Interest Options.  Except where specifically otherwise provided, Borrowings
shall bear interest at a rate per annum equal to the lesser of (a) the Base Rate
plus the Applicable Margin for Base Rate Borrowings or the Adjusted Eurodollar
Rate plus the Applicable Margin for Eurodollar Borrowings, in each case as
designated in accordance with the terms of this Agreement, and (b) the Maximum
Rate.  Each change in the Base Rate or the Maximum Rate, subject to the terms of
this Agreement, will become effective, without notice to Borrower or any other
Person, upon the effective date of such change.

 

3.4  Quotation of Rates.  A Responsible Officer or other appropriately
designated officer of Borrower may call Administrative Agent on or before the
date on which a Notice of Borrowing is to be delivered by Borrower in order to
receive an indication of the rates then in effect, but such indicated rates
shall neither be binding upon Administrative Agent or Lenders nor affect the
rate of interest which thereafter is actually in effect when the Notice of
Borrowing is given.

 

3.5  Default Rate.  To the extent permitted by Law, all past-due Principal Debt
and accrued interest thereon shall bear interest from maturity (stated or by
acceleration), or, in the case of past-due accrued interest, from the applicable
interest payment date, at the Default Rate until paid, regardless whether such
payment is made before or after entry of a judgment.

 

3.6  Interest Recapture.  If the designated rate applicable to any Borrowing
exceeds the Maximum Rate, then the rate of interest on such Borrowing shall be
limited to the Maximum Rate, but any subsequent reductions in such designated
rate shall not reduce the rate of interest thereon below the Maximum Rate until
the total amount of interest accrued thereon equals the amount of interest which
would have accrued thereon if such designated rate had at all times been in
effect.  In the event that at maturity (stated or by acceleration), or at final
payment of the Total Principal Debt, the total amount of interest paid or
accrued is less than the amount of interest which would have accrued if such
designated rates had at all times been in effect, then, at

 

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such time and to the extent permitted by Law, Borrower shall pay an amount equal
to the difference between (a) the lesser of the amount of interest which would
have accrued if such designated rates had at all times been in effect and the
amount of interest which would have accrued if the Maximum Rate had at all times
been in effect, and (b) the amount of interest actually paid or accrued on the
Total Principal Debt.

 

3.7  INTEREST CALCULATIONS.

 

(A)   ALL PAYMENTS OF INTEREST SHALL BE CALCULATED ON THE BASIS OF ACTUAL NUMBER
OF DAYS (INCLUDING THE FIRST (1ST) DAY BUT EXCLUDING THE LAST DAY) ELAPSED BUT
COMPUTED AS IF EACH CALENDAR YEAR CONSISTED OF 360 DAYS IN THE CASE OF A
EURODOLLAR BORROWING (UNLESS SUCH CALCULATION WOULD RESULT IN THE INTEREST ON
THE BORROWINGS EXCEEDING THE MAXIMUM RATE, IN WHICH EVENT SUCH INTEREST SHALL BE
CALCULATED ON THE BASIS OF A YEAR OF 365 OR 366 DAYS, AS THE CASE MAY BE), AND
365 OR 366 DAYS, AS THE CASE MAY BE, IN THE CASE OF A BASE RATE BORROWING.  ALL
INTEREST RATE DETERMINATIONS AND CALCULATIONS BY ADMINISTRATIVE AGENT SHALL BE
CONCLUSIVE AND BINDING ABSENT MANIFEST ERROR.

 

(B)   THE PROVISIONS OF THIS AGREEMENT RELATING TO THE CALCULATION OF THE BASE
RATE AND THE ADJUSTED EURODOLLAR RATE ARE INCLUDED ONLY FOR THE PURPOSE OF
DETERMINING THE RATE OF INTEREST OR OTHER AMOUNTS TO BE PAID HEREUNDER THAT ARE
BASED UPON SUCH RATE.

 

3.8  Maximum Rate.  Regardless of any provision contained in any Loan Document,
no Credit Party shall ever be entitled to contract for, charge, take, reserve,
receive, or apply, as interest on the Obligation, or any part thereof, any
amount in excess of the Maximum Rate, and, if any Credit Party ever does so,
then such excess shall be deemed a partial prepayment of principal and treated
hereunder as such and any remaining excess shall be refunded to Borrower.  In
determining if the interest paid or payable exceeds the Maximum Rate, Borrower
and the Credit Parties shall, to the maximum extent permitted under applicable
Law, (a) treat all Borrowings as but a single extension of credit (and the
Credit Parties and Borrower agree that such is the case and that provision
herein for multiple Borrowings is for convenience only), (b) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(c) exclude voluntary prepayments and the effects thereof, and (d) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the Obligation; provided that if the Obligation is paid and
performed in full prior to the end of the full contemplated term thereof, and if
the interest received for the actual period of existence thereof exceeds the
Maximum Amount, then the Credit Parties shall refund such excess, and, in such
event, the Credit Parties shall not, to the extent permitted by Law, be subject
to any penalties provided by any Laws for contracting for, charging, taking,
reserving, or receiving interest in excess of the Maximum Amount.

 

3.9  Interest Periods.  When Borrower requests any Eurodollar Borrowing,
Borrower may elect the interest period (each an “Interest Period”) applicable
thereto, which shall be, at Borrower’s option, one (1) month or three (3)
months, in each case to the extent available from each Lender (or other periods,
if requested by Borrower and agreed to by each Lender); provided however, that:
(a) the initial Interest Period for a Eurodollar Borrowing shall commence on the
date of such Borrowing (including the date of any Conversion thereto), and each
Interest Period occurring thereafter in respect of such Borrowing shall commence
on the day on which the next

 

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preceding Interest Period applicable thereto expires; (b) if any Interest Period
for a Eurodollar Borrowing begins on a day for which there is no numerically
corresponding Business Day in the calendar month at the end of such Interest
Period, then such Interest Period shall end on the next Business Day immediately
following what otherwise would have been such numerically corresponding day in
the calendar month at the end of such Interest Period (unless such date would be
in a different calendar month from what would have been the month at the end of
such Interest Period, or unless there is no numerically corresponding day in the
calendar month at the end of the Interest Period; whereupon, such Interest
Period shall end on the last Business Day in the calendar month at the end of
such Interest Period); and (c) no Interest Period may be chosen with respect to
any portion of the Total Principal Debt which would extend beyond the
Termination Date.

 

3.10        Conversions.  Borrower may (a) Convert a Eurodollar Borrowing on the
last day of an Interest Period to a Base Rate Borrowing, (b) Convert a Base Rate
Borrowing at any time to a Eurodollar Borrowing, and (c) Continue a Eurodollar
Borrowing by electing a new Interest Period, by giving a Notice of Conversion no
later than 3:00 p.m. New York, New York time on the third (3rd) Business Day
prior to the date of Conversion or the last day of the Interest Period, as the
case may be (in the case of a Conversion to a Eurodollar Borrowing or an
election of a new Interest Period), and no later than 12:00 p.m. New York, New
York time on the last day of the Interest Period (in the case of a Conversion to
a Base Rate Borrowing).  Administrative Agent shall timely notify each Lender
with respect to each Notice of Conversion.  Absent Borrower’s Notice of
Conversion or election of a new Interest Period, a Eurodollar Borrowing shall be
deemed Converted to one (1) month Interest Period Eurodollar borrowing effective
as of the expiration of the Interest Period applicable thereto.   
Notwithstanding the foregoing, no Borrowing shall be a Base Rate Borrowing
except pursuant to Sections 4.1, 4.2 or 4.3.

 

3.11        ORDER OF APPLICATION.

 

(A)   IF NO DEFAULT EXISTS, THEN PAYMENTS AND PREPAYMENTS OF THE OBLIGATION
SHALL BE APPLIED IN THE ORDER AND MANNER AS BORROWER MAY DIRECT IN WRITING.

 

(B)   IF A DEFAULT EXISTS (OR IF BORROWER FAILS TO GIVE DIRECTIONS AS PERMITTED
UNDER SECTION 3.11(A)), THEN ANY PAYMENT OR PREPAYMENT (INCLUDING PROCEEDS FROM
THE EXERCISE OF ANY RIGHTS) SHALL BE APPLIED TO THE OBLIGATION IN THE FOLLOWING
ORDER: (I) TO THE RATABLE PAYMENT OF ALL FEES, EXPENSES, AND INDEMNITIES FOR
WHICH THE CREDIT PARTIES HAVE NOT BEEN PAID OR REIMBURSED IN ACCORDANCE WITH THE
LOAN DOCUMENTS; (II) TO THE RATABLE PAYMENT OF ACCRUED AND UNPAID INTEREST ON
THE TOTAL PRINCIPAL DEBT; (III) TO THE RATABLE PAYMENT OF THE TOTAL PRINCIPAL
DEBT; AND (IV) TO THE PAYMENT OF THE REMAINING OBLIGATION IN THE ORDER AND
MANNER REQUIRED LENDERS DEEM APPROPRIATE.

 

(C)   SUBJECT TO THE PROVISIONS OF SECTION 13 AND PROVIDED THAT ADMINISTRATIVE
AGENT SHALL NOT IN ANY EVENT BE BOUND TO INQUIRE INTO OR TO DETERMINE THE
VALIDITY, SCOPE, OR PRIORITY OF ANY INTEREST OR ENTITLEMENT OF ANY CREDIT PARTY
AND MAY SUSPEND ALL PAYMENTS OR SEEK APPROPRIATE RELIEF (INCLUDING, WITHOUT
LIMITATION, INSTRUCTIONS FROM REQUIRED LENDERS OR AN ACTION IN THE NATURE OF
INTERPLEADER) IN THE EVENT OF ANY DOUBT OR DISPUTE AS TO ANY APPORTIONMENT OR
DISTRIBUTION CONTEMPLATED HEREBY, ADMINISTRATIVE AGENT SHALL PROMPTLY DISTRIBUTE
SUCH AMOUNTS TO EACH CREDIT PARTY IN ACCORDANCE WITH THE AGREEMENT AND THE
RELATED LOAN DOCUMENTS.

 

23

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3.12        Sharing of Payments, Etc.  If any Lender shall obtain any payment
(whether voluntary, involuntary, or otherwise, including, without limitation, as
a result of exercising its Rights under Section 3.13) which is in excess of its
ratable share of any such payment, such Lender shall purchase from the other
Lenders such participations as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of them; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, then the purchase shall be rescinded and the purchase
price restored to the extent of such recovery.  Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section 3.12
may, to the fullest extent permitted by Law, exercise all of its Rights of
payment (including the Right of offset) with respect to such participation as
fully as if such Lender were the direct creditor of Borrower in the amount of
such participation.

 

3.13        Offset.  Upon the occurrence and during the continuance of a
Default, each Credit Party shall be entitled to exercise (for the benefit of all
Lenders in accordance with Section 3.12) the Rights of offset and/or banker’s
Lien against each and every account and other property, or any interest therein,
which any Obligor may now or hereafter have with, or which is now or hereafter
in the possession of, such Credit Party to the extent of the full amount of the
Obligation; provided that if any Credit Party should exercise its Right of
offset hereunder, then such Credit Party shall thereafter promptly provide
notice of such offset to Administrative Agent and Borrower.

 

3.14        Booking Borrowings.  To the extent permitted by Law, any Lender may
make, carry, or transfer its Borrowings at, to, or for the account of any of its
branch offices or the office of any of its Affiliates; provided that no
Affiliate shall be entitled to receive any greater payment under Section 4 than
the transferor Lender would have been entitled to receive with respect to such
Borrowings.

 

3.15        Replacement of Lenders under Certain Circumstances.  If at any time
(a) Borrower becomes obligated to pay additional amounts described in Section
4.1(a) or Section 4.6 as a result of any condition described in such Sections or
any Lender ceases to make Eurodollar Borrowings pursuant to Section 4.2(b), in
any such case where such condition or circumstance is not applicable to all
Lenders, (b) any Lender becomes insolvent and its assets become subject to a
receiver, liquidator, trustee, custodian, or other Person having similar powers,
or (c) any Lender becomes a Defaulting Lender, then Borrower may, on ten (10)
Business Days’ prior written notice to Administrative Agent and such Lender,
replace such Lender by causing such Lender to (and such Lender shall be
obligated to) assign pursuant to Section 14.13(b) all of its Rights and
obligations under this Agreement to a Lender or other Eligible Assignee selected
by Borrower and reasonably acceptable to Administrative Agent for a purchase
price equal to the outstanding principal amount of such Lender’s Principal Debt
and all accrued interest and fees and other amounts payable hereunder (including
amounts payable under Section 4.5 as though such Lender was being paid instead
of being purchased), provided that (i) neither Administrative Agent nor any
Lender shall have any obligation to Borrower to find a replacement Lender or
other such entity, and (ii) in no event shall the Lender hereby replaced be
required to pay or surrender to such replacement Lender or other entity any of
the fees received by such Lender hereby replaced pursuant to this Agreement.  In
the case of a replacement of a Lender to which Borrower becomes obligated to pay
additional amounts to such Lender prior to such Lender being replaced, the
payment of such additional amounts shall be a condition to the replacement

 

24

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of such Lender.  Upon the satisfaction of all the foregoing conditions, such
Lender that is being replaced shall cease to be a “Lender” for purposes of this
Agreement, provided that Borrower shall continue to be obligated to such Lender
under Section 12.11 with respect to any indemnified liabilities arising prior to
such termination.  Borrower’s right to replace a Defaulting Lender pursuant to
this Section 3.15 is, and shall be, in addition to, and not in lieu of, all
other rights and remedies available to Borrower against such Defaulting Lender
under this Agreement or under applicable Law.

 

3.16        Extension of Termination Date.  The Termination Date as specified in
clause (a) of the definition thereof may be extended by Borrower until January
15, 2006 upon (i) delivery by Borrower to the Administrative Agent on or prior
to August [•], 2005 of an officer’s certificate of Borrower certifying that no
“default” or “event of default” under or with respect to any other Debt of the
Companies exists or would exist as of August 15, 2005 and (ii) payment by
Borrower of the Extension Fee pursuant to Section 5.7.

 

SECTION 4                               CHANGE IN CIRCUMSTANCES.

 

4.1  INCREASED COST AND REDUCED RETURN.

 

(A)   CHANGE IN LAWS.  IF, AFTER THE DATE HEREOF, THE ADOPTION OF ANY APPLICABLE
LAW, OR ANY CHANGE IN ANY APPLICABLE LAW, OR ANY CHANGE IN THE INTERPRETATION OR
ADMINISTRATION THEREOF BY ANY GOVERNMENTAL AUTHORITY CHARGED WITH THE
INTERPRETATION OR ADMINISTRATION THEREOF, OR COMPLIANCE BY ANY LENDER (OR ITS
APPLICABLE LENDING OFFICE) WITH ANY REQUEST OR DIRECTIVE (WHETHER OR NOT HAVING
THE FORCE OF LAW) OF ANY SUCH GOVERNMENTAL AUTHORITY:

 

(I)            SHALL SUBJECT SUCH LENDER (OR ITS APPLICABLE LENDING OFFICE) TO
ANY TAX, DUTY, OR OTHER CHARGE WITH RESPECT TO ANY EURODOLLAR BORROWING, ITS
NOTE (IF ANY), OR ITS OBLIGATION TO MAKE EURODOLLAR BORROWINGS, OR CHANGE THE
BASIS OF TAXATION OF ANY AMOUNTS PAYABLE TO SUCH LENDER (OR ITS APPLICABLE
LENDING OFFICE) UNDER THIS AGREEMENT OR ITS NOTE (IF ANY) IN RESPECT OF ANY
EURODOLLAR BORROWINGS (OTHER THAN TAXES IMPOSED ON THE OVERALL GROSS OR NET
INCOME OF SUCH LENDER OR FRANCHISE TAXES IMPOSED ON SUCH LENDER, IN EACH CASE BY
THE JURISDICTION IN WHICH SUCH LENDER HAS ITS PRINCIPAL OFFICE OR SUCH
APPLICABLE LENDING OFFICE);

 

(II)           SHALL IMPOSE, MODIFY, OR DEEM APPLICABLE ANY RESERVE, SPECIAL
DEPOSIT, ASSESSMENT, OR SIMILAR REQUIREMENT (OTHER THAN THE RESERVE REQUIREMENT
UTILIZED IN THE DETERMINATION OF THE ADJUSTED EURODOLLAR RATE) RELATING TO ANY
EXTENSIONS OF CREDIT OR OTHER ASSETS OF, OR ANY DEPOSITS WITH OR OTHER
LIABILITIES OR COMMITMENTS OF, SUCH LENDER, (OR ITS APPLICABLE LENDING OFFICE),
INCLUDING THE COMMITMENT OF SUCH LENDER HEREUNDER; OR

 

(III)          SHALL IMPOSE ON SUCH LENDER (OR ITS APPLICABLE LENDING OFFICE) OR
THE LONDON INTERBANK MARKET ANY OTHER CONDITION AFFECTING THIS AGREEMENT OR ITS
NOTE (IF ANY) OR ANY OF SUCH EXTENSIONS OF CREDIT OR LIABILITIES OR COMMITMENTS;

 

and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Eurodollar

 

25

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Borrowings or to reduce any sum received or receivable by such Lender (or its
Applicable Lending Office) under this Agreement with respect to any Eurodollar
Borrowings, then Borrower shall pay to such Lender from time to time as
specified by the affected Lender such amount or amounts as will compensate such
Lender for such increased cost or reduction.  If any Lender requests
compensation by Borrower under this Section 4.1(a), then Borrower may, by notice
to such Lender (with a copy to Administrative Agent), suspend the obligation of
such Lender to make or Continue Eurodollar Borrowings, or Convert all Eurodollar
Borrowings into Base Rate Borrowings, until the event or condition giving rise
to such request ceases to be in effect (in which case the provisions of Section
4.4 shall be applicable); provided that such suspension shall not affect the
Right of such Lender to receive the compensation so requested.

 

(B)   CAPITAL ADEQUACY.  IF, AFTER THE DATE HEREOF, ANY LENDER SHALL HAVE
DETERMINED THAT THE ADOPTION OF ANY APPLICABLE GOVERNMENTAL REQUIREMENT
REGARDING CAPITAL ADEQUACY OR ANY CHANGE THEREIN OR IN THE INTERPRETATION OR
ADMINISTRATION THEREOF BY ANY GOVERNMENTAL AUTHORITY CHARGED WITH THE
INTERPRETATION OR ADMINISTRATION THEREOF, OR ANY REQUEST OR DIRECTIVE REGARDING
CAPITAL ADEQUACY (WHETHER OR NOT HAVING THE FORCE OF LAW) OF ANY SUCH
GOVERNMENTAL AUTHORITY, HAS OR WOULD HAVE THE EFFECT OF REDUCING THE RATE OF
RETURN ON THE CAPITAL OF SUCH LENDER OR ANY CORPORATION CONTROLLING SUCH LENDER
AS A CONSEQUENCE OF SUCH LENDER’S OBLIGATIONS HEREUNDER TO A LEVEL BELOW THAT
WHICH SUCH LENDER OR SUCH CORPORATION COULD HAVE ACHIEVED BUT FOR SUCH ADOPTION,
CHANGE, REQUEST, OR DIRECTIVE (TAKING INTO CONSIDERATION ITS POLICIES WITH
RESPECT TO CAPITAL ADEQUACY), THEN FROM TIME TO TIME UPON DEMAND BORROWER SHALL
PAY TO SUCH LENDER SUCH ADDITIONAL AMOUNT OR AMOUNTS AS WILL COMPENSATE SUCH
LENDER FOR SUCH REDUCTION.

 

(c) Notice.  Each Lender shall promptly notify Borrower and Administrative Agent
of any event of which it has knowledge, occurring after the date hereof, which
will entitle such Lender to compensation pursuant to this Section 4.1 and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Lender, be otherwise materially disadvantageous to it.  Any
Lender claiming compensation under this Section 4.1 shall furnish to Borrower
and Administrative Agent a certificate setting forth the additional amount or
amounts to be paid to it hereunder and shall include in reasonable detail the
basis for the demand for additional compensation, which certificate shall be
conclusive in the absence of manifest error.  In determining such amount, such
Lender may use any reasonable averaging and attribution methods.  Although no
Lender shall have any liability to any Credit Party or any Company for its
failure to give the notice required by this Section 4.1(c), Borrower shall not
be obligated to pay to any Credit Party any amounts under this Section 4.1 that
arise, accrue, or are imposed more than one hundred and eighty (180) days before
any such notice to the extent it is applicable to those amounts.

 

4.2  Limitation on Types of Borrowings.  If on or prior to the first (1st) day
of any Interest Period for any Eurodollar Borrowing:

 

(A)   ADMINISTRATIVE AGENT DETERMINES (WHICH DETERMINATION SHALL BE CONCLUSIVE)
THAT BY REASON OF CIRCUMSTANCES AFFECTING THE RELEVANT MARKET, ADEQUATE AND
REASONABLE MEANS DO NOT EXIST FOR ASCERTAINING THE EURODOLLAR RATE FOR SUCH
INTEREST PERIOD; OR

 

26

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(B)   REQUIRED LENDERS DETERMINE (WHICH DETERMINATION SHALL BE CONCLUSIVE) AND
NOTIFY ADMINISTRATIVE AGENT THAT THE ADJUSTED EURODOLLAR RATE WILL NOT
ADEQUATELY AND FAIRLY REFLECT THE COST TO LENDERS OF FUNDING EURODOLLAR
BORROWINGS FOR SUCH INTEREST PERIOD;

 

then Administrative Agent shall give Borrower prompt notice thereof specifying
the relevant amounts or periods, and so long as such condition remains in
effect, Lenders shall be under no obligation to make additional Eurodollar
Borrowings, Continue any Eurodollar Borrowings, or to Convert any Base Rate
Borrowings to Eurodollar Borrowings and Borrower shall, on the last day(s) of
the then-current Interest Period(s) for the outstanding Eurodollar Borrowings,
either prepay such Borrowings or Convert such Borrowings into Base Rate
Borrowings in accordance with the terms of this Agreement.

 

4.3  Illegality.  Notwithstanding any other provision of this Agreement, in the
event that it becomes unlawful for any Lender or its Applicable Lending Office
to make, maintain, or fund Eurodollar Borrowings hereunder, then such Lender
shall promptly notify Administrative Agent and Borrower thereof and such
Lender’s obligation to make or Continue Eurodollar Borrowings and to Convert
Base Rate Borrowings into Eurodollar Borrowings shall be suspended until such
time as such Lender may again make, maintain, and fund Eurodollar Borrowings (in
which case the provisions of Section 4.4 shall be applicable).

 

4.4  Treatment of Affected Loans.  If the obligation of any Lender to make or
Continue Eurodollar Borrowings or to Convert Base Rate Borrowings into
Eurodollar Borrowings shall be suspended pursuant to Sections 4.1, 4.2, or 4.3,
then such Lender’s Eurodollar Borrowings shall be automatically Converted into
Base Rate Borrowings on the last day(s) of the then current Interest Period(s)
for all Eurodollar Borrowings (or, in the case of a Conversion required by
Section 4.3, on such earlier date as such Lender may specify to Borrower with a
copy to Administrative Agent) and, unless and until such Lender gives notice as
provided below that the circumstances specified in Sections 4.1, 4.2, or 4.3
that gave rise to such Conversion no longer exist:

 

(A)   TO THE EXTENT THAT SUCH LENDER’S EURODOLLAR BORROWINGS HAVE BEEN SO
CONVERTED, ALL PAYMENTS AND PREPAYMENTS OF PRINCIPAL THAT WOULD OTHERWISE BE
APPLIED TO SUCH LENDER’S EURODOLLAR BORROWINGS SHALL BE APPLIED INSTEAD TO ITS
BASE RATE BORROWINGS; AND

 

(B)   ALL BORROWINGS THAT WOULD OTHERWISE BE MADE OR CONTINUED BY SUCH LENDER AS
EURODOLLAR BORROWINGS SHALL BE MADE OR CONTINUED INSTEAD AS BASE RATE
BORROWINGS, AND ALL BORROWINGS OF SUCH LENDER THAT WOULD OTHERWISE BE CONVERTED
INTO EURODOLLAR BORROWINGS SHALL BE CONVERTED INSTEAD INTO (OR SHALL REMAIN AS)
BASE RATE BORROWINGS.

 

If such Lender gives notice to Borrower (with a copy to Administrative Agent)
that the circumstances specified in Sections 4.1, 4.2, or 4.3 that gave rise to
the Conversion of such Lender’s Eurodollar Borrowings pursuant to this Section
4.4 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Borrowings made by
other Lenders are outstanding, then such Lender’s Base Rate Borrowings shall be
automatically Converted, on the first (1st) day(s) of the next succeeding
Interest Period(s) for such outstanding Eurodollar Borrowings, to the extent
necessary so that, after

 

27

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giving effect thereto, all Eurodollar Borrowings held by Lenders are held Pro
Rata (as to principal amounts, Types, and Interest Periods).

 

4.5  Compensation.  Upon the request of any Lender, Borrower shall pay to such
Lender such amount or amounts as shall be sufficient (in the reasonable opinion
of such Lender) to compensate it for any loss, cost, or expense (herein called a
“Consequential Loss”) incurred by it as a result of:

 

(A)   ANY PAYMENT, PREPAYMENT, OR CONVERSION OF A EURODOLLAR BORROWING FOR ANY
REASON (INCLUDING, WITHOUT LIMITATION, THE ACCELERATION OF THE OBLIGATION
PURSUANT TO SECTION 12.1) ON A DATE OTHER THAN THE LAST DAY OF THE INTEREST
PERIOD FOR SUCH BORROWING; OR

 

(B)   ANY FAILURE BY BORROWER FOR ANY REASON (INCLUDING, WITHOUT LIMITATION, THE
FAILURE OF ANY CONDITION PRECEDENT SPECIFIED IN SECTION 7.2 TO BE SATISFIED) TO
BORROW, CONVERT, CONTINUE, OR PREPAY A EURODOLLAR BORROWING ON THE DATE FOR SUCH
BORROWING, CONVERSION, CONTINUATION, OR PREPAYMENT SPECIFIED IN THE RELEVANT
BORROWING NOTICE.

 

4.6  TAXES.

 

(A)   ANY AND ALL PAYMENTS BY BORROWER TO OR FOR THE ACCOUNT OF ANY CREDIT PARTY
HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT SHALL BE MADE FREE AND CLEAR OF AND
WITHOUT DEDUCTION FOR ANY AND ALL PRESENT OR FUTURE TAXES ARISING AFTER THE DATE
HEREOF, EXCLUDING, IN THE CASE OF EACH CREDIT PARTY, TAXES BASED ON OR MEASURED
BY ITS GROSS OR NET INCOME, AND FRANCHISE TAXES IMPOSED ON IT, BY THE
JURISDICTION UNDER THE LAWS OF WHICH SUCH CREDIT PARTY (OR ITS APPLICABLE
LENDING OFFICE) IS ORGANIZED OR ANY POLITICAL SUBDIVISION THEREOF (SUCH INCOME
AND FRANCHISE TAXES BEING “EXCLUDED TAXES”).  IF BORROWER SHALL BE REQUIRED BY
LAW TO DEDUCT ANY TAXES (OTHER THAN EXCLUDED TAXES) FROM OR IN RESPECT OF ANY
SUM PAYABLE UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT TO ANY CREDIT PARTY,
THEN (I) THE SUM PAYABLE SHALL BE INCREASED AS NECESSARY SO THAT AFTER MAKING
ALL REQUIRED DEDUCTIONS (INCLUDING DEDUCTIONS APPLICABLE TO ADDITIONAL SUMS
PAYABLE UNDER THIS SECTION 4.6) SUCH CREDIT PARTY RECEIVES AN AMOUNT EQUAL TO
THE SUM IT WOULD HAVE RECEIVED HAD NO SUCH DEDUCTIONS BEEN MADE, (II) BORROWER
SHALL MAKE SUCH DEDUCTIONS, (III) BORROWER SHALL PAY THE FULL AMOUNT DEDUCTED TO
THE RELEVANT TAXATION AUTHORITY OR OTHER AUTHORITY IN ACCORDANCE WITH ALL LAWS,
AND (IV) BORROWER SHALL, UPON THE REQUEST OF ADMINISTRATIVE AGENT, FURNISH TO
ADMINISTRATIVE AGENT, AT ITS ADDRESS REFERRED TO IN SECTION 14.3, THE ORIGINAL
OR A CERTIFIED COPY OF A RECEIPT EVIDENCING PAYMENT THEREOF.

 

(B)   IN ADDITION, BORROWER AGREES TO PAY ANY AND ALL PRESENT OR FUTURE STAMP OR
DOCUMENTARY TAXES AND ANY OTHER EXCISE OR PROPERTY TAXES OR CHARGES OR SIMILAR
LEVIES WHICH ARISE FROM ANY PAYMENT MADE UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR FROM THE EXECUTION OR DELIVERY OF, OR OTHERWISE WITH RESPECT TO,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (HEREINAFTER REFERRED TO AS “OTHER
TAXES”).

 

(C)   BORROWER AGREES TO INDEMNIFY EACH CREDIT PARTY FOR THE FULL AMOUNT OF
TAXES (OTHER THAN EXCLUDED TAXES) AND OTHER TAXES (INCLUDING, WITHOUT
LIMITATION, ANY TAXES (OTHER THAN EXCLUDED TAXES) OR OTHER TAXES IMPOSED OR
ASSERTED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 4.6) PAID BY
SUCH CREDIT PARTY (AS THE CASE MAY BE) AND ANY LIABILITY (INCLUDING PENALTIES,
INTEREST, AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO.  IF ANY
CREDIT PARTY

 

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RECEIVES A REFUND IN RESPECT OF ANY TAXES OR OTHER TAXES IN WHICH IT HAS BEEN
INDEMNIFIED BY BORROWER PURSUANT TO THIS SECTION 4.6, THEN SUCH CREDIT PARTY
SHALL PROMPTLY NOTIFY BORROWER OF SUCH REFUND AND SHALL PROMPTLY, UPON RECEIPT,
REPAY SUCH REFUND TO BORROWER.

 

(D)   EACH LENDER ORGANIZED UNDER THE LAWS OF A JURISDICTION OUTSIDE THE UNITED
STATES, ON OR PRIOR TO THE DATE OF ITS EXECUTION AND DELIVERY OF THIS AGREEMENT
IN THE CASE OF EACH LENDER LISTED ON THE SIGNATURE PAGES HEREOF AND ON OR PRIOR
TO THE DATE ON WHICH IT BECOMES A LENDER IN THE CASE OF EACH OTHER LENDER, AND
FROM TIME TO TIME THEREAFTER IF REQUESTED IN WRITING BY BORROWER OR
ADMINISTRATIVE AGENT (BUT ONLY SO LONG AS SUCH LENDER REMAINS LAWFULLY ABLE TO
DO SO), SHALL PROVIDE BORROWER AND ADMINISTRATIVE AGENT WITH (I) INTERNAL
REVENUE SERVICE FORM 1001 OR 4224, AS APPROPRIATE, OR ANY SUCCESSOR FORM
PRESCRIBED BY THE INTERNAL REVENUE SERVICE, CERTIFYING THAT SUCH LENDER IS
ENTITLED TO BENEFITS UNDER AN INCOME TAX TREATY TO WHICH THE UNITED STATES IS A
PARTY WHICH REDUCES THE RATE OF WITHHOLDING TAX ON PAYMENTS OF INTEREST OR
CERTIFYING THAT THE INCOME RECEIVABLE PURSUANT TO THIS AGREEMENT IS EFFECTIVELY
CONNECTED WITH THE CONDUCT OF A TRADE OR BUSINESS IN THE UNITED STATES, (II)
INTERNAL REVENUE SERVICE FORM W-8 OR W-9, AS APPROPRIATE, OR ANY SUCCESSOR FORM
PRESCRIBED BY THE INTERNAL REVENUE SERVICE, AND (III) ANY OTHER FORM OR
CERTIFICATE REQUIRED BY ANY TAXING AUTHORITY (INCLUDING ANY CERTIFICATE REQUIRED
BY SECTIONS 871(H) AND 881(C) OF THE CODE), CERTIFYING THAT SUCH LENDER IS
ENTITLED TO AN EXEMPTION FROM OR A REDUCED RATE OF TAX ON PAYMENTS PURSUANT TO
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

 

(E)   FOR ANY PERIOD WITH RESPECT TO WHICH A LENDER HAS FAILED TO PROVIDE
BORROWER AND ADMINISTRATIVE AGENT WITH THE APPROPRIATE FORM PURSUANT TO SECTION
4.6(D) (UNLESS SUCH FAILURE IS DUE TO A CHANGE IN LAW OCCURRING SUBSEQUENT TO
THE DATE ON WHICH A FORM ORIGINALLY WAS REQUIRED TO BE PROVIDED), SUCH LENDER
SHALL NOT BE ENTITLED TO INDEMNIFICATION UNDER SECTIONS 4.6(A) OR (B) WITH
RESPECT TO TAXES IMPOSED BY THE UNITED STATES; PROVIDED, HOWEVER, THAT SHOULD A
LENDER, WHICH IS OTHERWISE EXEMPT FROM OR SUBJECT TO A REDUCED RATE OF
WITHHOLDING TAX, BECOME SUBJECT TO TAXES (OTHER THAN EXCLUDED TAXES) BECAUSE OF
ITS FAILURE TO DELIVER A FORM REQUIRED HEREUNDER, BORROWER SHALL TAKE SUCH STEPS
AS SUCH LENDER SHALL REASONABLY REQUEST TO ASSIST SUCH LENDER TO RECOVER SUCH
TAXES.

 

(F)    IF BORROWER IS REQUIRED TO PAY ADDITIONAL AMOUNTS TO OR FOR THE ACCOUNT
OF ANY LENDER PURSUANT TO THIS SECTION 4.6, THEN SUCH LENDER WILL AGREE TO USE
REASONABLE EFFORTS TO CHANGE THE JURISDICTION OF ITS APPLICABLE LENDING OFFICE
SO AS TO ELIMINATE OR REDUCE ANY SUCH ADDITIONAL PAYMENT WHICH MAY THEREAFTER
ACCRUE IF SUCH CHANGE, IN THE JUDGMENT OF SUCH LENDER, IS NOT OTHERWISE
DISADVANTAGEOUS TO SUCH LENDER.

 

(G)   WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER AGREEMENT OF BORROWER
HEREUNDER, THE AGREEMENTS AND OBLIGATIONS OF BORROWER CONTAINED IN THIS SECTION
4.6 SHALL SURVIVE THE TERMINATION OF THE TOTAL COMMITMENT AND THE PAYMENT IN
FULL OF THE OBLIGATION.

 

SECTION 5                               FEES.

 

5.1  Treatment of Fees.  Except as otherwise provided by Law, the fees described
in this Section 5: (a) do not constitute compensation for the use, detention, or
forbearance of money; (b) are in addition to, and not in lieu of, interest and
expenses otherwise described in this Agreement; (c) shall be payable in
accordance with Section 3.1; (d) shall be non-refundable; (e)

 

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shall, to the fullest extent permitted by Law, bear interest, if not paid when
due, at the Default Rate; and (f) shall be calculated on the basis of actual
number of days (including the first day but excluding the last day) elapsed, but
computed as if each calendar year consisted of 365 or 366 days, as the case may
be.

 

5.2  [INTENTIONALLY OMITTED]

 

5.3  [INTENTIONALLY OMITTED]

 

5.4  [INTENTIONALLY OMITTED]

 

5.5  [INTENTIONALLY OMITTED]

 

5.6  Exchange Fee.  Borrower shall pay to Administrative Agent on the Execution
Date an exchange fee of $1.15 million.

 

5.7  Termination Date.  In connection with the extension of the Termination Date
pursuant to Section 3.16, Borrower shall pay Administrative Agent the Extension
Fee.

 

SECTION 6                               GUARANTIES.

 

6.1  POI Guaranty.  As an inducement to the Credit Parties to enter into this
Agreement, Borrower shall cause POI to unconditionally guarantee in favor of the
Credit Parties the full payment and performance of the Obligation pursuant to
the POI Guaranty.

 

6.2  Subsidiary Guaranty.  As an inducement to the Credit Parties to enter into
this Agreement, Borrower shall cause each Material Subsidiary to unconditionally
guarantee in favor of the Credit Parties the full payment and performance of the
Obligation pursuant to the Subsidiary Guaranty or an addendum thereto in the
form attached to the Subsidiary Guaranty; provided that upon the sale or
dissolution of any Material Subsidiary otherwise permitted by this Agreement and
the other Loan Documents, Administrative Agent shall, at the request of Borrower
and so long as no Default exists or would result therefrom, release such
Material Subsidiary from the Subsidiary Guaranty.

 

6.3  Other Guaranties.  As an inducement to the Credit Parties to enter into
this Agreement, Borrower shall cause each Other Required Guarantor to
unconditionally guarantee in favor of the Credit Parties the full payment and
performance of the Obligation pursuant to a guaranty in form and substance
reasonably acceptable to Administrative Agent.  “Other Required Guarantor”
means, as of any date, any Person (other than POI or a Subsidiary Guarantor)
that is an Affiliate of any Company that has, as of such date, guaranteed the
payment or performance of any Debt of POI, Borrower, or any other Company
exceeding $25,000,000 individually or in the aggregate.

 

SECTION 7                               CONDITIONS PRECEDENT.

 

7.1  [INTENTIONALLY OMITTED]

 

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7.2  Conditions to all Borrowings.  The obligations of Lenders to make all
Borrowings (including the initial Borrowing) are subject to the following
conditions precedent:

 

(A)   NOTICE OF BORROWING.  ADMINISTRATIVE AGENT SHALL HAVE RECEIVED, IN
ACCORDANCE WITH THE PROVISIONS OF SECTIONS 2.1 AND 2.4, AN ORIGINALLY EXECUTED
NOTICE OF BORROWING.

 

(B)   REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS.  AS OF THE DATE
OF SUCH BORROWING, THE REPRESENTATIONS AND WARRANTIES IN LOAN DOCUMENTS ARE
TRUE, CORRECT, AND COMPLETE IN ALL MATERIAL RESPECTS (UNLESS THEY SPEAK TO A
SPECIFIC DATE OR ARE BASED ON FACTS WHICH HAVE CHANGED BY TRANSACTIONS EXPRESSLY
CONTEMPLATED OR PERMITTED BY THIS AGREEMENT).

 

(C)   NO DEFAULT.  NO UNMATURED DEFAULT, DEFAULT, OR MATERIAL ADVERSE EVENT
EXISTS OR WOULD BE CAUSED BY THE MAKING OF SUCH BORROWING.

 

(D)   NO INJUNCTION OR RESTRAINING ORDER.  NO ORDER, JUDGMENT, OR DECREE OF ANY
GOVERNMENTAL AUTHORITY SHALL PURPORT TO ENJOIN OR RESTRAIN ANY LENDER FROM
MAKING THE BORROWING TO BE MADE BY IT.

 

Each condition precedent in this Agreement is material to the transactions
contemplated in this Agreement, and time is of the essence in respect of each
thereof.  Subject to the prior approval of Required Lenders, Lenders may fund
any Borrowing, without all conditions being satisfied, but, to the extent
permitted by Law, the same shall not be deemed to be a waiver of the requirement
that each such condition precedent be satisfied as a prerequisite for any
subsequent funding or issuance, unless Required Lenders specifically waive each
such item in writing.

 

SECTION 8          REPRESENTATIONS AND WARRANTIES.  Borrower represents and
warrants to the Credit Parties as of the Closing Date as follows:

 

8.1  Purpose of Credit Facility.  Borrower will use (or will loan such proceeds
to the Companies to so use) all proceeds of Borrowings for general working
capital and other lawful corporate purposes (including Permitted Acquisitions). 
No Company is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying any
“margin stock” within the meaning of Regulation U.  No part of the proceeds of
any Borrowing will be used, directly or indirectly, for a purpose which violates
any Law, including, without limitation, the provisions of Regulations T, U, or X
(as enacted by the Board of Governors of the Federal Reserve System, as
amended).  “Margin Stock” (as defined in Regulation U) constitutes less than
twenty-five percent (25%) of those assets of the Companies that are subject to
any limitation on sale, pledge, or similar restrictions hereunder.

 

8.2  Existence, Good Standing, Authority, and Authorizations.  Each Company is
duly organized, validly existing, and in good standing under the Laws of its
jurisdiction of organization (such jurisdictions as of the Execution Date being
identified on Schedule 8.2).  Each Company is duly qualified to transact
business and is in good standing in each jurisdiction where the nature and
extent of its business and properties require the same except to the extent that
the failure to so qualify could not be a Material Adverse Event.  Each Company
possesses all the Authorizations, franchises, permits, licenses, certificates of
compliance, and approvals and grants of authority necessary or required in the
conduct of its respective business(es), and the same are valid, binding,
enforceable, and subsisting without any defaults thereunder or enforceable

 

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adverse limitations thereon and are not subject to any proceedings or claims
opposing the issuance, development, or use thereof or contesting the validity
thereof, except to the extent that the failure to have such Authorizations,
franchise, permit, license, or certificates of compliance, approvals, and grants
of authority, failure to maintain the validity thereof, or where such default
pursuant to the terms thereof, could not be a Material Adverse Event.  No
Authorization, consent, approval, waiver, license, or formal exemptions from,
nor any filing, declaration, or registration with, any Governmental Authority
(federal, state, or local), or non-governmental entity, under the terms of
contracts or otherwise, is required by reason of or in connection with the
execution and performance of the Loan Documents by each Obligor except for (a)
Authorizations, consents, approvals, waivers, and licenses that have been
obtained, or (b) consents under immaterial contractual obligations in which the
failure to obtain such consents could not be a Material Adverse Event.

 

8.3  Subsidiaries; Capital Stock.  The Companies have no Subsidiaries except (a)
Subsidiaries as of the Execution disclosed on Schedule 8.3, and (b) Subsidiaries
formed or acquired after the Execution Date as a result of transactions
permitted by the Loan Documents.  All of the outstanding Stock of each
Subsidiary is duly authorized, validly issued, fully paid, and nonassessable
and, as of the Execution Date, are owned of record and beneficially as set forth
on Schedule 8.3, free and clear of any Liens, restrictions, claims, or Rights of
another Person, other than Permitted Liens.  Except as set forth in Schedule
8.3, as of the Execution Date, no Company has outstanding any warrant, option,
or other Right of any Person to acquire any of its Stock.

 

8.4  Authorization and Contravention.  The execution and delivery by each
Obligor of each Loan Document to which it is a party and the performance by such
Obligor of its obligations thereunder (a) are within the corporate power of such
Obligor, (b) have been duly authorized by all necessary corporate action on the
part of such Obligor, (c) require no action by or in respect of, or filing with,
any Governmental Authority, which action or filing has not been taken or made on
or prior to the Closing Date (or if later, the date of execution and delivery of
such Loan Document), (d) will not violate any provision of the Constituent
Documents of any Company, (e) will not violate any provision of Law applicable
to any Company, other than such violations which individually or collectively
could not be a Material Adverse Event, (f) will not violate any material written
or oral agreements, contracts, commitments, or understandings to which any
Company is a party, other than such violations which could not be a Material
Adverse Event, or (g) will not result in the creation or imposition of any Lien
on any material asset of any Company.

 

8.5  Binding Effect.  Upon execution and delivery by all parties thereto, each
Loan Document will constitute a legal, valid, and binding obligation of each
Obligor that is a party thereto, enforceable against each such Obligor in
accordance with its terms, except as enforceability may be limited by applicable
Debtor Relief Laws and general principles of equity.

 

8.6  Financial Statements.  The Current Financials were prepared in accordance
with GAAP (except as disclosed therein) and present fairly, in all material
respects, the consolidated financial condition, results of operations, and cash
flows of the Companies as of and for the portion of the fiscal year ending on
the date or dates thereof (subject only to normal year-end audit adjustments). 
There were no material liabilities, direct or indirect, fixed or contingent, of
the Companies as of the date or dates of the Current Financials which are
required under GAAP

 

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to be reflected therein or in the notes thereto, and are not so reflected. 
Except for (i) transactions directly related to, or specifically contemplated
by, the Loan Documents and (ii) changes disclosed to the Administrative Agent on
or prior to the Execution Date, there have been no material changes in the
consolidated financial condition of the Companies from that shown in the Current
Financials after such date which could be a Material Adverse Event, nor has any
Company incurred any liability (including, without limitation, any liability
under any Environmental Law), direct or indirect, fixed or contingent, after
such date which could be a Material Adverse Event.

 

8.7  Litigation, Claims, Investigations.  Except as disclosed in Borrower’s Form
10-Ks and Form 10-Qs filed with the Securities and Exchange Commission as of the
date hereof, no Company is subject to, or aware of the threat of, any Litigation
which could reasonably be expected to be determined adversely to any Company,
and, if so adversely determined, could (individually or collectively with other
Litigation) be a Material Adverse Event.  There are no outstanding orders or
judgments for the payment of money in excess of $25,000,000 (individually or
collectively) and not paid or covered by insurance or indemnified in a manner
reasonably acceptable to Administrative Agent, or any warrant of attachment,
sequestration, or similar proceeding against the assets of any Company having a
value (individually or collectively) of $25,000,000 or more which is not either
(a) stayed on appeal, or (b) being contested in good faith by appropriate
proceedings diligently conducted, and against which reserves or other provisions
required by GAAP have been made.  Except as disclosed in Borrower’s Form 10-Ks
and Form 10-Qs filed with the Securities and Exchange Commission as of the date
hereof, there are no formal complaints, suits, claims, investigations, or
proceedings initiated at or by any Governmental Authority pending or, to
Borrower’s knowledge, threatened by or against any Company which, if adversely
determined, could be a Material Adverse Event, nor any judgments, decrees, or
orders of any Governmental Authority outstanding against any Company that could
be a Material Adverse Event.

 

8.8  Taxes.  All Tax returns of each Company required to be filed have been
filed (or extensions have been granted) prior to delinquency, except for any
such returns for which the failure to so file could not be a Material Adverse
Event, and all Taxes imposed upon each Company which are due and payable have
been paid prior to delinquency, other than Taxes (a) that are being contested in
good faith by appropriate proceedings diligently conducted, and against which
reserves or other provisions required by GAAP have been made, or (b) for which
nonpayment thereof could not be a Material Adverse Event.

 

8.9  Environmental Matters.  No Company (a) knows of any environmental condition
or circumstance, such as the presence or Release of any Hazardous Substance, on
any property presently or previously owned or leased by any Company that could
be a Material Adverse Event, (b) knows of any violation by any Company of any
Environmental Law, except for such violations that could not be a Material
Adverse Event, or (c) knows that any Company is under any obligation to remedy
any violation of any Environmental Law, except for such obligations that could
not be a Material Adverse Event.

 

8.10        Employee Benefit Plans.  (a)  No Employee Plan has incurred an
accumulated funding deficiency, as defined in Section 302 of ERISA and Section
412 of the Code, (b) neither Borrower nor any ERISA Affiliate has incurred
material liability which is currently due and

 

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remains unpaid beyond the due date thereof under Title IV of ERISA to the PBGC
or to an Employee Plan in connection with any such Employee Plan, (c) neither
Borrower nor any ERISA Affiliate has withdrawn in whole or in part from
participation in a Multiemployer Plan as to which there is any material
unsatisfied liability (whether or not assessed), (d) Borrower has not engaged in
any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975
of the Code) which could be a Material Adverse Event, and (e) no Reportable
Event has occurred which is likely to result in the termination of an Employee
Plan.

 

8.11        Properties; Liens.  Each Company has good and indefeasible title
with respect to all its material real property and good and sufficient title
with respect to all its material personal property reflected on the Current
Financials, except for property that (a) that is obsolete, or (b) has been
disposed of in the ordinary course of business or as otherwise permitted by the
Loan Documents.  Except for Permitted Liens, there is no Lien on any material
property of any Company.

 

8.12        Government Regulations.  No Company is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, or any other Law (other than Regulations T, U,
and X of the Board of Governors of the Federal Reserve System) which regulates
the incurrence of Debt.

 

8.13        Material Agreements.  No Company is a party to any agreement,
contract, or instrument or is subject to any corporate restriction that is or
could be a Material Adverse Event.

 

8.14        Labor Matters.  There are no actual or, to Borrower’s knowledge,
threatened strikes, labor disputes, slow downs, walkouts, or other concerted
interruptions of operations by the employees of any Company that could be a
Material Adverse Event.  Hours worked by and payment made to employees of the
Companies have not been in violation of the Fair Labor Standards Act or any
other applicable Law dealing with such matters, other than any such violations
which could not, individually or collectively, be a Material Adverse Event.  All
payments due from any Company on account of employee health and welfare
insurance have been paid or accrued as a liability on its books, other than any
such non-payment which could not, individually or collectively, be a Material
Adverse Event.

 

8.15        Solvency.  At the time of each Borrowing hereunder, each Company is
(and after giving effect to the transactions contemplated by the Loan Documents,
will be) Solvent.

 

8.16        Intellectual Property.  Each Company owns or has sufficient and
legally enforceable rights to use all material licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications, and
trade names necessary to continue to conduct its businesses as heretofore
conducted by it, now conducted by it, and now proposed to be conducted by it
other than those in which the failure to obtain or to apply for could not be a
Material Adverse Event.  Each Company is conducting its business without
infringement or claim of infringement of any license, patent, copyright, service
mark, trademark, trade name, trade secret, or other intellectual property right
of others, other than any such infringements or claims which, if successfully
asserted against and determined adversely to any Company, could not,
individually or collectively, be a Material Adverse Event.

 

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8.17        Compliance with Laws.  No Company is in violation of any Laws, other
than such violations which could not, individually or collectively, be a
Material Adverse Event.  No Company has received notice alleging any
non-compliance with any Laws, except for such non-compliance which no longer
exists or which could not be a Material Adverse Event.

 

8.18        Full Disclosure.  There is no material fact or condition relating to
the Loan Documents or the financial condition, business, or property of any
Company which could be a Material Adverse Event and which has not been related,
in writing, to Administrative Agent.  All written information heretofore
furnished by any Company to any Credit Party in connection with the Loan
Documents was, and all such information hereafter furnished by any Company to
any Credit Party will be, true and accurate in all material respects, or in the
case of projections, based on reasonable estimates and assumptions on the date
as of which such information is dated or certified.

 

8.19        [INTENTIONALLY OMITTED]

 

8.20        Senior Debt.  The Obligation (and each Borrowing comprising the
Obligation) constitutes “Senior Indebtedness” and “Guarantor Senior
Indebtedness” under the terms of the Senior Subordinated Note Indenture and the
Subordinated Note Indenture.

 

SECTION 9          AFFIRMATIVE COVENANTS.  Borrower covenants and agrees to
perform, observe, and comply with each of the following covenants, from the
Execution Date until the payment in full of the Obligation (other than
contingent indemnity obligations of the Borrower pursuant to Section 12.11):

 

9.1  Use of Proceeds.  Borrower shall use the proceeds of Borrowings only for
the purposes set forth in Section 8.1.

 

9.2  Books and Records.  Borrower shall, and shall cause each other Company to,
maintain books, records, and accounts necessary to prepare all Financial
Statements in accordance with GAAP.

 

9.3  Items to be Furnished.  Borrower shall cause the following to be furnished
to Administrative Agent (with sufficient copies for each Lender):

 

(A)   ANNUAL FINANCIAL STATEMENTS.  PROMPTLY AFTER PREPARATION, AND NO LATER
THAN ONE HUNDRED AND TWENTY (120) DAYS AFTER THE LAST DAY OF EACH FISCAL YEAR OF
POI, FINANCIAL STATEMENTS SHOWING THE CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE COMPANIES, AS OF, AND FOR THE YEAR ENDED ON, SUCH
DAY, EACH ACCOMPANIED BY:

 

(I)            THE OPINION OF A FIRM OF NATIONALLY-RECOGNIZED INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS, BASED ON AN AUDIT USING GENERALLY ACCEPTED
AUDITING STANDARDS, THAT SUCH FINANCIAL STATEMENTS WERE PREPARED IN ACCORDANCE
WITH GAAP AND PRESENT FAIRLY THE CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANIES IN ALL MATERIAL RESPECTS; AND

 

(II)           A COMPLIANCE CERTIFICATE.

 

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(B)   PERIODIC FINANCIAL STATEMENTS.  PROMPTLY AFTER PREPARATION, AND NO LATER
THAN SIXTY (60) DAYS AFTER THE LAST DAY OF EACH FISCAL QUARTER OF THE COMPANIES,
FINANCIAL STATEMENTS SHOWING THE CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CALCULATED FOR THE COMPANIES FOR SUCH FISCAL QUARTER AND FOR THE
PERIOD FROM THE BEGINNING OF THE THEN-CURRENT FISCAL YEAR TO, SUCH LAST DAY,
ACCOMPANIED BY A COMPLIANCE CERTIFICATE WITH RESPECT TO SUCH FINANCIAL
STATEMENTS.

 

(C)   BUDGET.  ON OR PRIOR TO MARCH 31 OF EACH FISCAL YEAR OF THE COMPANIES, THE
CONSOLIDATED FINANCIAL BUDGET FOR THE COMPANIES FOR SUCH FISCAL YEAR.

 

(D)   NOTICES OF LITIGATION, DEFAULTS, ETC.  NOTICE, PROMPTLY AFTER BORROWER
KNOWS OR HAS REASON TO KNOW OF (I) THE EXISTENCE AND STATUS OF ANY LITIGATION
WHICH COULD, IF ADVERSELY DETERMINED, REASONABLY BE EXPECTED TO BE A MATERIAL
ADVERSE EVENT, OR OF ANY ORDER OR JUDGMENT FOR THE PAYMENT OF MONEY WHICH
(INDIVIDUALLY OR COLLECTIVELY) IS IN EXCESS OF $25,000,000, OR ANY WARRANT OF
ATTACHMENT, SEQUESTRATION, OR SIMILAR PROCEEDING AGAINST THE ASSETS OF ANY
COMPANY HAVING A VALUE (INDIVIDUALLY OR COLLECTIVELY) OF $25,000,000 AND NOT
COVERED BY INSURANCE OR INDEMNIFIED IN A MANNER REASONABLY ACCEPTABLE TO
ADMINISTRATIVE AGENT, (II) ANY MATERIAL CHANGE IN ANY MATERIAL FACT OR
CIRCUMSTANCE REPRESENTED OR WARRANTED IN ANY LOAN DOCUMENT, (III) AN UNMATURED
DEFAULT OR DEFAULT SPECIFYING THE NATURE THEREOF AND WHAT ACTION BORROWER OR ANY
OTHER COMPANY HAS TAKEN, IS TAKING, OR PROPOSES TO TAKE WITH RESPECT THERETO,
(IV) THE RECEIPT BY ANY COMPANY OF NOTICE OF ANY VIOLATION OR ALLEGED VIOLATION
OF ANY ENVIRONMENTAL LAW, WHICH VIOLATION OR ALLEGED VIOLATION COULD
INDIVIDUALLY OR COLLECTIVELY WITH OTHER SUCH VIOLATIONS OR ALLEGATIONS, BE A
MATERIAL ADVERSE EVENT, OR (V) (A) THE OCCURRENCE OF A REPORTABLE EVENT THAT,
ALONE OR TOGETHER WITH ANY OTHER REPORTABLE EVENT, COULD REASONABLY BE EXPECTED
TO RESULT IN LIABILITY OF ANY COMPANY TO THE PBGC IN AN AGGREGATE AMOUNT
EXCEEDING $25,000,000; (B) ANY EXPRESSED STATEMENT IN WRITING ON THE PART OF THE
PBGC OF ITS INTENTION TO TERMINATE ANY EMPLOYEE PLAN OR PLANS; (C) BORROWER’S OR
AN ERISA AFFILIATE’S BECOMING OBLIGATED TO FILE WITH THE PBGC A NOTICE OF
FAILURE TO MAKE A REQUIRED INSTALLMENT OR OTHER PAYMENT WITH RESPECT TO AN
EMPLOYEE PLAN; OR (D) THE RECEIPT BY BORROWER OR AN ERISA AFFILIATE FROM THE
SPONSOR OF A MULTIEMPLOYER PLAN OF EITHER A NOTICE CONCERNING THE IMPOSITION OF
WITHDRAWAL LIABILITY IN AN AGGREGATE AMOUNT EXCEEDING $25,000,000 OR OF THE
IMPENDING TERMINATION OR REORGANIZATION OF SUCH MULTIEMPLOYER PLAN.

 

(E)   SEC FILINGS.  PROMPTLY AFTER THE FILING THEREOF, A TRUE, CORRECT, AND
COMPLETE COPY OF EACH FORM 10-K, FORM 10-Q, AND FORM 8-K FILED BY OR ON BEHALF
OF ANY COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(F)    CHANGE IN RATINGS.  PROMPTLY UPON THE RECEIPT OF NOTICE THEREOF, AND IN
ANY EVENT WITHIN FIVE (5) BUSINESS DAYS AFTER ANY CHANGE IN THE MOODY’S RATING
OR THE S & P RATING, NOTICE OF SUCH CHANGE.

 

(G)   OTHER INFORMATION.  PROMPTLY UPON REQUEST THEREFOR BY ANY CREDIT PARTY,
SUCH INFORMATION (NOT OTHERWISE REQUIRED TO BE FURNISHED UNDER THE LOAN
DOCUMENTS) RESPECTING THE BUSINESS AFFAIRS, ASSETS, AND LIABILITIES OF THE
COMPANIES, AND SUCH OPINIONS, CERTIFICATIONS, AND DOCUMENTS, IN ADDITION TO
THOSE MENTIONED IN THIS AGREEMENT, AS REASONABLY REQUESTED (OTHER THAN
PRIVILEGED AND CONFIDENTIAL COMMUNICATIONS BETWEEN ANY COMPANY AND ITS LEGAL
ADVISORS).

 

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9.4  Inspections.  Borrower shall, and shall cause each other Company to, upon
reasonable prior notice and during normal business hours, allow Administrative
Agent (or its Representatives) to inspect any of their properties, to review
reports, files, and other records and, if reasonably requested, to make and take
away copies thereof, to conduct tests or investigations, and to discuss any of
their affairs, conditions, and finances with other directors, officers,
employees, other representatives, and independent accountants of the Companies,
from time to time, during normal business hours; provided that Administrative
Agent shall notify such Company and Borrower prior to any contacts with such
accountants and give such Company and Borrower the reasonable opportunity to
participate in such discussions.

 

9.5  Taxes.  Borrower shall, and shall cause each other Company to (a) promptly
pay when due any and all Taxes other than Taxes (i) the applicability, amount,
or validity of which is being contested in good faith by appropriate proceedings
diligently conducted, and against which reserves or other provisions required by
GAAP have been made, and in respect of which levy and execution of any lien
securing same have been and continue to be stayed, and (ii) in which the failure
to so pay could not be a Material Adverse Event, and (b) notify Administrative
Agent immediately if the Internal Revenue Service or any other taxing authority
commences or notifies any Company of its intention to commence an audit or
investigation with respect to any taxes of any kind due or alleged to be due
from any Company.

 

9.6  Maintenance of Existence, Assets, and Business.  Except as otherwise
permitted by Section 10.11, Borrower shall, and shall cause each other Company
to, at all times: (a) maintain its existence and good standing in the
jurisdiction of its organization and its authority to transact business in all
other jurisdictions where the failure to so maintain its authority to transact
business could be a Material Adverse Event; (b) maintain all licenses, permits,
and franchises necessary for its business where the failure to so maintain could
be a Material Adverse Event; (c) keep all of its material assets which are
useful in and necessary to its business in good working order and condition
(ordinary wear and tear excepted) and make all necessary repairs thereto and
replacements thereof; and (d) do all things necessary to obtain, renew, extend,
and continue in effect all Authorizations which may at any time and from time to
time be necessary for the Companies to operate their businesses in compliance
with applicable Law, where the failure to so renew, extend, or continue in
effect could be a Material Adverse Event.

 

9.7  Insurance.  Borrower shall, and shall cause each other Company to, maintain
with financially sound, responsible, and reputable insurance companies or
associations insurance concerning its properties and businesses against
casualties and contingencies and of types and in amounts (and with co-insurance
and deductibles) as is customary in the case of similar businesses.  At
Administrative Agent’s request, Borrower shall, and shall cause each Company to,
promptly deliver to Administrative Agent evidence of insurance for each policy
of insurance and evidence of payment of all premiums.

 

9.8  Preservation and Protection of Rights.  Borrower shall, and shall cause
each other Company to, perform such acts and duly authorize, execute,
acknowledge, deliver, file, and record any additional agreements, documents,
instruments, and certificates as Administrative Agent or Required Lenders may
reasonably deem necessary or appropriate in order to preserve and protect the
Rights of the Credit Parties under any Loan Document.

 

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9.9  Environmental Laws.  Borrower shall, and shall cause each other Company to
(a) conduct its business so as to comply in all material respects with all
applicable Environmental Laws and shall promptly take corrective action to
remedy any material non-compliance with any Environmental Law, and (b) promptly
investigate and remediate any known Release or threatened Release of any
Hazardous Substance on any property owned by any Company or at any facility
operated by any Company to the extent and degree necessary to comply in all
material respects with all applicable Environmental Laws.

 

9.10        [INTENTIONALLY OMITTED]

 

9.11        Compliance with Laws.  Borrower shall, and shall cause each other
Company to, comply with the provisions of any Laws applicable to it, or any
material written or oral agreement, contract, commitment, or understanding to
which it is a party, if such non-compliance alone, or when aggregated with all
other such violations, could reasonably be expected to be a Material Adverse
Event.

 

9.12        After-Acquired Subsidiaries.  Borrower shall, and shall cause each
other Company to, cause each Material Subsidiary acquired or formed after the
Closing Date (an “After-Acquired Subsidiary”) to execute and deliver to
Administrative Agent, within thirty (30) days following the acquisition or
formation thereof, counterpart signature pages to the Subsidiary Guaranty and to
provide to Administrative Agent (a) certified copies of such After-Acquired
Subsidiary’s Constituent Documents, together with a good standing certificate,
from the Secretary of State of the state of its incorporation, and (b) an
officer’s certificate of such After-Acquired Subsidiary certifying (i) its
Constituent Documents, (ii) resolutions of its Board of Directors approving and
authorizing the execution, delivery, and performance of the Loan Documents to be
executed by such After-Acquired Subsidiary, and (iii) signatures and incumbency
of its officers executing the Loan Documents to be executed by such
After-Acquired Subsidiary.

 

9.13        Other Required Guarantors.  Borrower shall cause each Other Required
Guarantor to execute and deliver to Administrative Agent, within thirty (30)
days after the execution of any guaranty required by Section 6.3, (a) certified
copies of such Other Required Guarantor’s Constituent Documents, together with a
good standing certificate, from the Secretary of State of the state of its
incorporation, and (b) an officer’s certificate of such Other Required Guarantor
certifying (i) its Constituent Documents, (ii) resolutions of its Board of
Directors approving and authorizing the execution, delivery, and performance of
the Loan Documents to be executed by such Other Required Guarantor, and (iii)
signatures and incumbency of its officers executing the Loan Documents to be
executed by such Other Required Guarantor.

 

SECTION 10        NEGATIVE COVENANTS.  Borrower covenants and agrees to perform,
observe, and comply with each of the following covenants, from the Execution
Date until the payment in full of the Obligation (other than contingent
indemnity obligations of the Borrower pursuant to Section 12.11):

 

10.1        Employee Benefit Plans.  Borrower shall not, and shall not permit
any ERISA Affiliate to, directly or indirectly, engage in any “prohibited
transaction” (as defined in Section 406

 

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of ERISA or Section 4975 of the Code), and the Companies, and their respective
ERISA Affiliates shall not, directly or indirectly, (a) incur any “accumulated
funding deficiency” as such term is defined in Section 302 of ERISA with respect
to any Employee Plan, (b) permit any Employee Plan to be subject to involuntary
termination proceedings pursuant to Title IV of ERISA, or (c) fully or partially
withdraw from any Multiemployer Plan, if such prohibited transaction,
accumulated funding deficiency, termination proceeding; or withdrawal could
reasonably be expected to be a Material Adverse Event.

 

10.2        Debt of Foreign Subsidiaries.  Borrower shall not permit any Foreign
Subsidiary to, directly or indirectly, create, incur, guarantee, assume, or
suffer to exist any Debt or any direct, indirect, fixed, or contingent liability
for any Debt other than (a) Debt payable to any Company, [(b) Capital Leases of
C.E.T., S.A. existing on Closing Date and any refinancings, renewals, or
extensions thereof (without any increase in the principal amount thereof)], and
(c) in addition to the Debt permitted by clauses (a) and (b) above, other Debt
in an aggregate principal amount for all Foreign Subsidiaries not to exceed
$25,000,000 at any time outstanding.

 

10.3        Liens.  Borrower shall not, and shall not permit any other Company
to, directly or indirectly, create, incur, or suffer or permit to be created or
incurred or to exist any Lien upon any of its assets, except the following
(“Permitted Liens”):

 

(I)            PLEDGES OR DEPOSITS MADE TO SECURE PAYMENT OF WORKER’S
COMPENSATION, OR TO PARTICIPATE IN ANY FUND IN CONNECTION WITH WORKER’S
COMPENSATION, UNEMPLOYMENT INSURANCE, PENSIONS, OR OTHER SOCIAL SECURITY
PROGRAMS;

 

(II)           PLEDGES OR DEPOSITS MADE TO SECURE PERFORMANCE OF BIDS, TENDERS,
INSURANCE OR OTHER CONTACTS (OTHER THAN FOR THE REPAYMENT OF BORROWED MONEY), OR
LEASES, OR TO SECURE STATUTORY OBLIGATIONS, SURETY OR APPEAL BONDS, OR
INDEMNITY, PERFORMANCE, OR OTHER SIMILAR BONDS AS ALL SUCH LIENS ARISE IN THE
ORDINARY COURSE OF BUSINESS OF THE COMPANIES;

 

(III)          ENCUMBRANCES CONSISTING OF ZONING RESTRICTIONS, EASEMENTS,
RIGHTS-OF-WAY, COVENANTS, MINOR EXCEPTIONS TO TITLE, OR OTHER RESTRICTIONS ON
THE USE OF REAL PROPERTY, NONE OF WHICH IMPAIR IN ANY MATERIAL RESPECT THE USE
OF SUCH PROPERTY BY THE PERSON IN QUESTION IN THE OPERATION OF ITS BUSINESS, AND
NONE OF WHICH IS VIOLATED BY EXISTING OR PROPOSED STRUCTURES OR LAND USE (WHERE
SUCH VIOLATION COULD BE A MATERIAL ADVERSE EVENT);

 

(IV)          LIENS OF LANDLORDS OR OF MORTGAGEES OF LANDLORDS ON FIXTURES AND
MOVABLE PROPERTY LOCATED ON PREMISES LEASED IN THE ORDINARY COURSE OF BUSINESS;

 

(V)           CLAIMS AND LIENS FOR TAXES (A) THAT ARE NOT DUE AND PAYABLE, OR
(B) IN WHICH THE APPLICABILITY, AMOUNT, OR VALIDITY OF WHICH IS BEING CONTESTED
IN GOOD FAITH BY APPROPRIATE PROCEEDINGS DILIGENTLY CONDUCTED, AND AGAINST WHICH
RESERVES OR OTHER PROVISIONS REQUIRED BY GAAP HAVE BEEN MADE AND LEVY AND
EXECUTION THEREON HAVE BEEN STAYED AND CONTINUE TO BE STAYED;

 

(VI)          CLAIMS AND LIENS OF MECHANICS, MATERIALMEN, WAREHOUSEMEN,
CARRIERS, LANDLORDS, OR OTHER LIKE LIENS IN WHICH (A) THE AMOUNTS DUE THEREUNDER
ARE NOT OVERDUE FOR A PERIOD OF MORE THAN THIRTY (30) DAYS, OR (B) THE
APPLICABILITY, AMOUNT, OR VALIDITY OF WHICH IS BEING CONTESTED IN GOOD FAITH BY
APPROPRIATE PROCEEDINGS DILIGENTLY CONDUCTED,

 

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and against which reserves or other provisions required by GAAP have been made
and levy and execution thereon have been stayed and continue to be stayed;

 

(VII)         LIENS IN EXISTENCE ON THE DATE HEREOF LISTED ON SCHEDULE 10.3,
SECURING DEBT EXISTING AS OF THE EXECUTION DATE AND ANY REFINANCINGS, RENEWALS,
OR EXTENSIONS THEREOF (WITHOUT ANY INCREASE IN THE PRINCIPAL AMOUNT THEREOF);

 

(VIII)        LIENS ON ASSETS ACQUIRED PURSUANT TO A PERMITTED ACQUISITION
SECURING DEBT OF ANY COMPANY ASSUMED IN CONNECTION WITH SUCH PERMITTED
ACQUISITION NOT TO EXCEED FIFTEEN PERCENT (15%) OF THE AGGREGATE CONSIDERATION
FOR SUCH PERMITTED ACQUISITION;

 

(IX)           ANY INTEREST OR TITLE OF A LESSOR UNDER ANY LEASE ENTERED INTO BY
ANY COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS AND COVERING ONLY THE ASSETS
SO LEASED;

 

(X)            ANY OBLIGATIONS OR DUTIES AFFECTING ANY OF THE PROPERTIES OF ANY
COMPANY TO ANY MUNICIPALITY OR PUBLIC AUTHORITY WITH RESPECT TO ANY FRANCHISE,
GRANT, LICENSE, OR PERMIT WHICH DO NOT MATERIALLY IMPAIR THE USE OF SUCH
PROPERTY FOR THE PURPOSES FOR WHICH IT IS HELD;

 

(XI)           LIENS IMPOSED BY OPERATION OF LAW WITH RESPECT TO ANY JUDGMENTS
OR ORDERS NOT CONSTITUTING A DEFAULT;

 

(XII)          LIENS OF LANDLORDS OR OF MORTGAGEES OF LANDLORDS ON FIXTURES AND
MOVABLE PROPERTY LOCATED ON PREMISES LEASED IN THE ORDINARY COURSE OF BUSINESS;

 

(XIII)         LIENS ARISING FROM PRECAUTIONARY UNIFORM COMMERCIAL CODE
FINANCING STATEMENT FILINGS WITH RESPECT TO OPERATING LEASES ENTERED INTO BY ANY
COMPANY IN THE ORDINARY COURSE OF BUSINESS;

 

(XIV)        LICENSES, LEASES, OR SUBLEASES PERMITTED HEREUNDER GRANTED TO
OTHERS NOT INTERFERING IN ANY MATERIAL RESPECT WITH THE BUSINESS OF ANY COMPANY;

 

(XV)         LIENS IN FAVOR OF BANKING INSTITUTIONS ARISING BY OPERATION OF LAW
ENCUMBERING DEPOSITS (INCLUDING THE RIGHT OF SETOFF) HELD BY SUCH BANKING
INSTITUTION INCURRED IN THE ORDINARY COURSE OF BUSINESS AND WHICH ARE WITHIN THE
GENERAL PARAMETERS CUSTOMARY IN THE BANKING INDUSTRY; AND

 

(XVI)        LIENS NOT OTHERWISE PERMITTED BY THIS SECTION 10.3 PROVIDED THAT
THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE OBLIGATIONS SECURED THEREBY
DOES NOT EXCEED $25,000,000 IN THE AGGREGATE AT ANY TIME OUTSTANDING.

 

10.4        Transactions with Affiliates.  Borrower shall not, and shall not
permit any other Company to, enter into any transaction with any of its
Affiliates, other than transactions upon fair and reasonable terms not
materially less favorable than such Company could obtain or could become
entitled to in an arm’s-length transaction with a Person that was not its
Affiliate; provided, however, that the Companies shall be entitled to make the
following payments and/or enter into the following transactions:

 

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(A)   THE PAYMENT OF REASONABLE AND CUSTOMARY FEES AND REIMBURSEMENT OF EXPENSES
PAYABLE TO DIRECTORS OF ANY COMPANY;

 

(B)   THE EMPLOYMENT ARRANGEMENTS WITH RESPECT TO THE PROCUREMENT OF SERVICES OF
DIRECTORS, OFFICERS, AND EMPLOYEES IN THE ORDINARY COURSE OF BUSINESS AND THE
PAYMENT OF REASONABLE FEES IN CONNECTION THEREWITH;

 

(C)   THE TRANSACTIONS, AGREEMENTS, AND ARRANGEMENTS CONTEMPLATED BY THE
EXCHANGE AGREEMENT; AND

 

(D)   ANY OTHER TRANSACTION BETWEEN AFFILIATES OTHERWISE EXPRESSLY PERMITTED BY
THIS AGREEMENT.

 

10.5        COMPLIANCE WITH DOCUMENTS.  BORROWER SHALL NOT, AND SHALL NOT PERMIT
ANY OTHER COMPANY TO, (A) VIOLATE THE PROVISIONS OF ITS CONSTITUENT DOCUMENTS,
OR (B) MODIFY, REPEAL, REPLACE, OR AMEND ANY PROVISION OF ITS CONSTITUENT
DOCUMENTS, IN EACH CASE WHERE SUCH ACTION COULD BE A MATERIAL ADVERSE EVENT.

 

10.6        FISCAL YEAR AND ACCOUNTING METHODS .  BORROWER SHALL NOT, AND SHALL
NOT PERMIT ANY OTHER COMPANY TO, CHANGE ITS FISCAL YEAR FOR BOOK ACCOUNTING
PURPOSES; PROVIDED THAT POI AND BORROWER MAY CHANGE THEIR RESPECTIVE FISCAL YEAR
WITH THE PRIOR WRITTEN CONSENT OF ADMINISTRATIVE AGENT, SUCH CONSENT NOT TO BE
UNREASONABLY WITHHELD.

 

10.7        NEW BUSINESS.  BORROWER SHALL NOT, AND SHALL NOT PERMIT ANY OTHER
COMPANY (OTHER THAN SUBSIDIARIES OF POI THAT IN THE AGGREGATE CONTRIBUTE FIVE
PERCENT (5%) OR LESS OF THE CONSOLIDATED TOTAL ASSETS OF THE COMPANIES AS OF THE
LAST DAY OF THE IMMEDIATELY PRECEDING FISCAL YEAR OF THE COMPANIES) TO, DIRECTLY
OR INDIRECTLY, PERMIT OR SUFFER TO EXIST ANY MATERIAL CHANGE IN THE TYPE OF
BUSINESSES IN WHICH IT IS ENGAGED FROM THE BUSINESSES OF THE COMPANIES AS
CONDUCTED ON THE EXECUTION DATE OR REASONABLE EXTENSIONS THEREOF.

 

10.8        LOANS, ADVANCES, AND INVESTMENTS.  BORROWER SHALL NOT, AND SHALL NOT
PERMIT ANY OTHER COMPANY TO, MAKE ANY LOAN, ADVANCE, EXTENSION OF CREDIT, OR
CAPITAL CONTRIBUTION TO, MAKE ANY INVESTMENT IN, OR PURCHASE OR COMMIT TO
PURCHASE ANY STOCK OR EVIDENCES OF DEBT OF, OR INTERESTS IN, ANY OTHER PERSON,
OTHER THAN: (A) READILY MARKETABLE, DIRECT, FULL FAITH AND CREDIT OBLIGATIONS OF
THE UNITED STATES OF AMERICA, OR OBLIGATIONS GUARANTEED BY THE FULL FAITH AND
CREDIT OF THE UNITED STATES OF AMERICA, MATURING WITHIN NOT MORE THAN ONE YEAR
FROM THE DATE OF ACQUISITION; (B) SHORT TERM CERTIFICATES OF DEPOSIT AND TIME
DEPOSITS, WHICH MATURE WITHIN ONE YEAR FROM THE DATE OF ISSUANCE AND WHICH ARE
FULLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION; (C) COMMERCIAL PAPER
MATURING IN 365 DAYS OR LESS FROM THE DATE OF ISSUANCE AND RATED EITHER “P-1” BY
MOODY’S, OR “A-1” BY S & P; (D) DEBT INSTRUMENTS OF A DOMESTIC ISSUER WHICH
MATURE IN ONE (1) YEAR OR LESS AND WHICH ARE RATED “A” OR BETTER BY MOODY’S OR S
& P ON THE DATE OF ACQUISITION OF SUCH INVESTMENT; (E) DEMAND DEPOSIT ACCOUNTS
WHICH ARE MAINTAINED IN THE ORDINARY COURSE OF BUSINESS; (F) PERMITTED
ACQUISITIONS; (G) TRADE ACCOUNTS RECEIVABLE WHICH ARE FOR GOODS FURNISHED OR
SERVICES RENDERED IN THE ORDINARY COURSE OF BUSINESS AND ARE PAYABLE IN
ACCORDANCE WITH CUSTOMARY TRADE TERMS; (H) INVESTMENTS BY THE COMPANIES IN
DOMESTIC SUBSIDIARIES AS OF THE EXECUTION DATE AND FORMED IN ACCORDANCE WITH THE
TERMS OF THIS AGREEMENT; (I) LOANS AND ADVANCES BY THE COMPANIES TO THEIR
RESPECTIVE DIRECTORS, OFFICERS, AND

 

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EMPLOYEES IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $2,500,000 IN THE
AGGREGATE AT ANY TIME OUTSTANDING; (J) LOANS, ADVANCES, OR INVESTMENTS EXISTING
ON THE EXECUTION DATE AND LISTED ON SCHEDULE 10.8, AND EXTENSIONS, RENEWALS,
MODIFICATIONS, RESTATEMENTS, OR REPLACEMENTS THEREOF; (K) INVESTMENTS CONSISTING
OF DEBT OF ANY COMPANY TO ANY OTHER COMPANY; (L) PROMISSORY NOTES AND OTHER
SIMILAR NON-CASH CONSIDERATION RECEIVED BY ANY COMPANY IN CONNECTION WITH THE
DISPOSITIONS PERMITTED BY SECTION 10.11; (M) INVESTMENTS IN FINANCIAL HEDGE
AGREEMENTS; (N) INVESTMENTS RECEIVED IN CONNECTION WITH THE BANKRUPTCY OR
REORGANIZATION OR SUPPLIERS AND CUSTOMERS IN SETTLEMENT OF DELINQUENT
OBLIGATIONS OF, AND OTHER DISPUTES WITH, CUSTOMERS AND SUPPLIERS ARISING IN THE
ORDINARY COURSE OF BUSINESS; [(O) INVESTMENTS OF (I) THE COMPANIES (OTHER THAN
FOREIGN SUBSIDIARIES) IN FOREIGN SUBSIDIARIES IN AN AGGREGATE AMOUNT NOT TO
EXCEED AT ANY ONE TIME OUTSTANDING FIFTEEN PERCENT (15%) OF THE CONSOLIDATED
TOTAL ASSETS OF THE COMPANIES DETERMINED IN ACCORDANCE WITH GAAP FOR THE MOST
RECENT FISCAL YEAR (WITHOUT REGARD TO ANY WRITE DOWN OR WRITE UP THEREOF)], AND
(II) FOREIGN SUBSIDIARIES IN OTHER FOREIGN SUBSIDIARIES; AND (P) IN ADDITION TO
THE FOREGOING, OTHER INVESTMENTS BY THE COMPANIES IN AN AGGREGATE AMOUNT NOT
EXCEEDING FIVE PERCENT (5%) OF THE CONSOLIDATED TOTAL ASSETS OF THE COMPANIES
DETERMINED IN ACCORDANCE WITH GAAP FOR THE MOST RECENT FISCAL YEAR (WITHOUT
REGARD TO ANY WRITE DOWN OR WRITE UP THEREOF).

 

10.9        DISTRIBUTIONS AND SUBORDINATED DEBT PAYMENTS.

 

(a) Distributions. Borrower shall not, and shall not permit any other Company
to, directly or indirectly declare, make, or pay any Distributions, other than
(i) Distributions declared, made, or paid by any Company wholly in the form of
its capital Stock, and (ii) Distributions by any Company to Borrower and (iii)
Distributions from any Subsidiary of POI to POI the proceeds of which:

 

(A)          shall be applied by POI directly to pay out-of-pocket expenses, for
administrative, legal, and accounting services provided by third parties that
are reasonable and customary and incurred in the ordinary course of business for
such professional services, or to pay franchise fees and similar costs;

 

(B)           will be used to repurchase the Stock of POI in order to fulfill
the obligations of any Company under an employee Stock purchase plan or similar
plan covering employees of any Company as from time to time in effect;

 

(C)           will be used to pay taxes of the Companies as part of a
consolidated, combined, or unitary tax filing group or of the separate
operations of POI; or

 

(D)          will be used to make investments in, or loans to, any Subsidiary of
POI otherwise permitted pursuant to this Agreement.

 

(b) Subordinated Debt. Borrower shall not, and shall not permit any other
Company to pay, prepay, redeem, defease, or repurchase any Subordinated Debt
when it violates the subordination provisions thereof, provided that so long as
no Default exists Borrower may refinance Subordinated Debt with the proceeds of
other Subordinated Debt and, provided further that Borrower may repurchase
Senior Subordinated Notes pursuant to any “Change of Control Offer” required to
be made pursuant Section 4.13 of the Senior Subordinated Notes Indenture.

 

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10.10      RESTRICTIONS ON COMPANIES.  BORROWER SHALL NOT, AND SHALL NOT PERMIT
ANY OTHER COMPANY TO, ENTER INTO OR PERMIT TO EXIST ANY MATERIAL ARRANGEMENT OR
AGREEMENT (OTHER THAN THE LOAN DOCUMENTS AND, SOLELY WITH RESPECT TO FOREIGN
SUBSIDIARIES, THE AGREEMENTS EVIDENCING THE DEBT PERMITTED BY SECTION 10.2)
WHICH DIRECTLY OR INDIRECTLY PROHIBITS ANY SUBSIDIARY OF BORROWER FROM (I)
DECLARING, MAKING, OR PAYING, DIRECTLY OR INDIRECTLY, ANY DISTRIBUTION TO
BORROWER, (II) PAYING ANY DEBT OWED TO BORROWER, (III) MAKING LOANS, ADVANCES,
OR INVESTMENTS TO BORROWER, OR (IV) TRANSFERRING ANY OF ITS PROPERTY OR ASSETS
TO BORROWER.

 

10.11      SALE OF ASSETS.  BORROWER SHALL NOT, AND SHALL NOT PERMIT ANY OTHER
COMPANY TO, SELL, ASSIGN, TRANSFER, OR OTHERWISE DISPOSE OF ANY OF ITS ASSETS,
OTHER THAN (A) SALES OF INVENTORY AND EQUIPMENT LEASES [(INCLUDING, WITHOUT
LIMITATION, EQUIPMENT LEASES ORIGINATED OR ACQUIRED BY C.E.T., S.A. OR ITS
SUBSIDIARIES)] IN THE ORDINARY COURSE OF BUSINESS, (B) THE SALE, DISCOUNT OR
TRANSFER OF DELINQUENT ACCOUNTS RECEIVABLE IN THE ORDINARY COURSE OF BUSINESS
FOR PURPOSES OF COLLECTION, (C) SALES OF IMMATERIAL ASSETS FOR CONSIDERATION NOT
LESS THAN FAIR MARKET VALUE THEREOF, (D) DISPOSITIONS OF OBSOLETE ASSETS AND
ASSETS NO LONGER USEFUL IN THE RESPECTIVE BUSINESSES OF THE COMPANIES, (E)
TRANSFERS RESULTING FROM ANY CASUALTY OR CONDEMNATION OF PROPERTY OR ASSETS, (F)
LICENSES OR SUBLICENSES OF INTELLECTUAL PROPERTY AND GENERAL INTANGIBLES AND
LICENSES, LEASES OR SUBLEASES OF OTHER PROPERTY IN EACH CASE IN THE ORDINARY
COURSE OF BUSINESS AND THAT DO NOT MATERIALLY INTERFERE WITH THE BUSINESS OF ANY
COMPANY, [(G) LICENSES GRANTED PURSUANT TO THE TRADEMARK LICENSE AGREEMENT,] AND
(H) OTHER ASSET SALES DURING ANY FISCAL YEAR OF THE COMPANIES IN AN AGGREGATE
AMOUNT NOT EXCEEDING (OTHER THAN WITH THE CONSENT OF ADMINISTRATIVE AGENT) TEN
PERCENT (10%) OF THE CONSOLIDATED TOTAL ASSETS OF THE COMPANIES DETERMINED IN
ACCORDANCE WITH GAAP FOR THE MOST RECENT FISCAL YEAR (WITHOUT REGARD TO ANY
WRITE DOWN OR WRITE UP THEREOF).

 

10.12      MERGERS AND DISSOLUTIONS; SALE OF CAPITAL STOCK.  BORROWER SHALL NOT,
AND SHALL NOT PERMIT ANY OTHER COMPANY TO, DIRECTLY OR INDIRECTLY, MERGE OR
CONSOLIDATE WITH ANY OTHER PERSON, OTHER THAN (A) AS A RESULT OF A PERMITTED
ACQUISITION, (B) MERGERS OR CONSOLIDATIONS INVOLVING BORROWER IF BORROWER IS THE
SURVIVING ENTITY, AND (C) MERGERS AMONG WHOLLY-OWNED COMPANIES; PROVIDED THAT IN
ANY MERGER INVOLVING BORROWER (INCLUDING A PERMITTED ACQUISITION EFFECTED AS A
MERGER), BORROWER MUST BE THE SURVIVING ENTITY, AND, IN ANY MERGER INVOLVING ANY
OTHER COMPANY (INCLUDING A PERMITTED ACQUISITION EFFECTED AS A MERGER), A
COMPANY MUST BE THE SURVIVING ENTITY.  BORROWER SHALL NOT, AND SHALL NOT PERMIT
ANY OTHER COMPANY TO, LIQUIDATE, WIND UP, OR DISSOLVE (OR SUFFER ANY LIQUIDATION
OR DISSOLUTION), OTHER THAN LIQUIDATIONS, WIND UPS, OR DISSOLUTIONS INCIDENT TO
MERGERS PERMITTED UNDER THIS SECTION 10.12.

 

10.13      FINANCIAL COVENANTS.  AS CALCULATED ON A CONSOLIDATED BASIS FOR THE
COMPANIES:

 

(a) Leverage Ratio. Borrower shall not permit the Leverage Ratio, as of the last
day of any fiscal quarter of the Companies, to be greater than 5.75 to 1.0.

 

(b) Interest Coverage. Borrower shall not permit the Interest Coverage Ratio, as
of the last day of any fiscal quarter of the Companies, to be less than 2.10 to
1.0.

 

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SECTION 11        DEFAULT.  The term “Default” means the occurrence of any one
or more of the following events:

 

11.1        PAYMENT OF OBLIGATION.

 

(A)   THE FAILURE OR REFUSAL OF BORROWER TO PAY ANY OF THE OBLIGATION (OTHER
THAN PRINCIPAL) WHEN IT BECOMES DUE AND PAYABLE UNDER THE LOAN DOCUMENTS AND
SUCH FAILURE SHALL CONTINUE FOR FIVE (5) DAYS AFTER SUCH PAYMENT BECAME DUE.

 

(b)           The failure or refusal of Borrower to pay any principal of the
Obligation when it becomes due and payable under the Loan Documents.

 

11.2        COVENANTS.

 

(A)   THE FAILURE OR REFUSAL OF BORROWER (AND, IF APPLICABLE, ANY OTHER MATERIAL
COMPANY) TO PUNCTUALLY AND PROPERLY PERFORM, OBSERVE, AND COMPLY WITH ANY
COVENANT, AGREEMENT, OR CONDITION CONTAINED IN ANY SECTION 9.3 OR SECTION 10.

 

(B)   THE FAILURE OR REFUSAL OF BORROWER (AND, IF APPLICABLE, ANY OTHER MATERIAL
COMPANY) TO PUNCTUALLY AND PROPERLY PERFORM, OBSERVE, AND COMPLY WITH ANY
COVENANT, AGREEMENT, OR CONDITION CONTAINED IN ANY LOAN DOCUMENT (OTHER THAN THE
COVENANTS TO PAY THE OBLIGATION AND THE COVENANTS IN (A) PRECEDING) AND, IF SUCH
FAILURE IS CAPABLE OF BEING CURED WITHIN THE APPROPRIATE TIME, THEN SUCH FAILURE
SHALL CONTINUE FOR THIRTY (30) DAYS AFTER THE EARLIER TO OCCUR OF THE DATE (I)
ANY RESPONSIBLE OFFICER KNOWS OF, OR (II) BORROWER RECEIVES NOTICE FROM
ADMINISTRATIVE AGENT OF, SUCH FAILURE OR REFUSAL.

 

11.3        DEBTOR RELIEF.  ANY MATERIAL COMPANY (A) SHALL NOT BE SOLVENT, (B)
FAILS TO PAY ITS DEBTS GENERALLY AS THEY BECOME DUE, (C) VOLUNTARILY SEEKS,
CONSENTS TO, OR ACQUIESCES IN THE BENEFIT OF ANY DEBTOR RELIEF LAW, OTHER THAN
AS A CREDITOR OR CLAIMANT, OR (D) BECOMES A PARTY TO OR IS MADE THE SUBJECT OF
ANY PROCEEDING PROVIDED FOR BY ANY DEBTOR RELIEF LAW, OTHER THAN AS A CREDITOR
OR CLAIMANT, THAT COULD SUSPEND OR OTHERWISE ADVERSELY AFFECT THE RIGHTS OF ANY
CREDIT PARTY GRANTED IN THE LOAN DOCUMENTS (UNLESS, IN THE EVENT SUCH PROCEEDING
IS INVOLUNTARY, THE PETITION INSTITUTING SAME IS DISMISSED WITHIN SIXTY (60)
DAYS AFTER ITS FILING).

 

11.4        JUDGMENTS AND ATTACHMENTS.  ANY MATERIAL COMPANY FAILS, WITHIN SIXTY
(60) DAYS AFTER ENTRY, TO PAY, BOND, OR OTHERWISE DISCHARGE ANY JUDGMENT OR
ORDER FOR THE PAYMENT OF MONEY IN EXCESS OF $25,000,000 (INDIVIDUALLY OR
COLLECTIVELY) AND NOT PAID OR COVERED BY INSURANCE OR INDEMNIFIED IN A MANNER
REASONABLY ACCEPTABLE TO ADMINISTRATIVE AGENT, OR ANY WARRANT OF ATTACHMENT,
SEQUESTRATION, OR SIMILAR PROCEEDING AGAINST ANY MATERIAL COMPANY’S ASSETS
HAVING A VALUE (INDIVIDUALLY OR COLLECTIVELY) OF $25,000,000 WHICH IS NOT STAYED
ON APPEAL.

 

11.5        MISREPRESENTATION.  ANY REPRESENTATION OR WARRANTY MADE BY ANY
COMPANY CONTAINED IN ANY LOAN DOCUMENT SHALL AT ANY TIME PROVE TO HAVE BEEN
INCORRECT IN ANY MATERIAL RESPECT WHEN MADE.

 

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11.6        CHANGE OF CONTROL.

 

POI SHALL CEASE TO OWN, DIRECTLY OR INDIRECTLY, ONE HUNDRED PERCENT (100%) OF
THE VOTING CONTROL (DIRECTLY OR INDIRECTLY) OF BORROWER.

 

11.7        Default Under Other Debt and Agreements.

 

(A)   THE OCCURRENCE OF ANY “DEFAULT” OR “EVENT OF DEFAULT” OR OTHER BREACH
WHICH REMAINS UNCURED AFTER THE EXPIRATION OF ANY PERIOD OF GRACE, NOTICE, OR
RIGHT TO CURE, IF ANY, OR UNWAIVED ON ANY DATE OF DETERMINATION UNDER OR WITH
RESPECT TO THE SENIOR NOTES OR ANY SUBORDINATED DEBT; OR

 

(B)   THE TRUSTEE WITH RESPECT TO, OR ANY HOLDER OF, THE SENIOR NOTES OR ANY
SUBORDINATED DEBT SHALL EFFECTIVELY DECLARE ALL OR ANY PORTION OF SUCH DEBT OR
OBLIGATION THEREUNDER DUE AND PAYABLE PRIOR TO THE STATED MATURITY THEREOF; OR

 

(C)   ANY MATERIAL COMPANY FAILS TO PAY WHEN DUE (AFTER LAPSE OF ANY APPLICABLE
GRACE PERIODS) ANY DEBT OF SUCH MATERIAL COMPANY (OTHER THAN THE OBLIGATION) IN
EXCESS (INDIVIDUALLY OR COLLECTIVELY) OF $25,000,000.

 

11.8        Employee Benefit Plans.

 

(A)   A “REPORTABLE EVENT” OR “REPORTABLE EVENTS,” OR A FAILURE TO MAKE A
REQUIRED INSTALLMENT OR OTHER PAYMENT (WITHIN THE MEANING OF SECTION 412(N)(1)
OF THE CODE), SHALL HAVE OCCURRED WITH RESPECT TO ANY EMPLOYEE PLAN OR EMPLOYEE
PLANS THAT IS REASONABLY EXPECTED TO RESULT IN LIABILITY OF BORROWER TO THE PBGC
OR TO A PLAN IN AN AGGREGATE AMOUNT EXCEEDING $25,000,000; OR

 

(B)   BORROWER OR ANY ERISA AFFILIATE HAS PROVIDED TO ANY AFFECTED PARTY A SIXTY
(60) DAY NOTICE OF INTENT TO TERMINATE AN EMPLOYEE PLAN PURSUANT TO A DISTRESS
TERMINATION IN ACCORDANCE WITH SECTION 4041(C) OF ERISA IF THE LIABILITY
REASONABLY EXPECTED TO BE INCURRED AS A RESULT OF SUCH TERMINATION WILL EXCEED
$25,000,000; OR

 

(C)   A TRUSTEE SHALL BE APPOINTED BY A UNITED STATES DISTRICT COURT TO
ADMINISTER ANY EMPLOYEE PLAN; OR

 

(D)   THE PBGC SHALL INSTITUTE PROCEEDINGS (INCLUDING GIVING NOTICE OF INTENT
THEREOF) TO TERMINATE ANY EMPLOYEE PLAN; OR

 

(E)   (I)  BORROWER OR ANY ERISA AFFILIATE SHALL HAVE BEEN NOTIFIED BY THE
SPONSOR OF A MULTIEMPLOYER PLAN THAT IT HAS INCURRED WITHDRAWAL LIABILITY
(WITHIN THE MEANING OF SECTION 4201 OF ERISA) TO SUCH MULTIEMPLOYER PLAN, (II)
BORROWER OR SUCH ERISA AFFILIATE DOES NOT HAVE REASONABLE GROUNDS FOR CONTESTING
SUCH WITHDRAWAL LIABILITY OR IS NOT CONTESTING SUCH WITHDRAWAL LIABILITY IN A
TIMELY AND APPROPRIATE MANNER AND (III) THE AMOUNT OF SUCH WITHDRAWAL LIABILITY
SPECIFIED IN SUCH NOTICE, WHEN AGGREGATED WITH ALL OTHER AMOUNTS REQUIRED TO BE
PAID TO MULTIEMPLOYER PLANS IN CONNECTION WITH WITHDRAWAL LIABILITIES
(DETERMINED AS OF THE DATE OR DATES OF SUCH NOTIFICATION), EXCEEDS $25,000,000;
OR

 

(F)    BORROWER OR ANY ERISA AFFILIATE SHALL HAVE BEEN NOTIFIED BY THE SPONSOR
OF A MULTIEMPLOYER PLAN THAT SUCH MULTIEMPLOYER PLAN IS IN REORGANIZATION OR IS
BEING TERMINATED,

 

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WITHIN THE MEANING OF TITLE IV OF ERISA, IF SOLELY AS A RESULT OF SUCH
REORGANIZATION OR TERMINATION THE AGGREGATE ANNUAL CONTRIBUTIONS OF BORROWER AND
ITS ERISA AFFILIATES TO ALL MULTIEMPLOYER PLANS THAT ARE THEN IN REORGANIZATION
OR HAVE BEEN OR ARE BEING TERMINATED HAVE BEEN OR WILL BE INCREASED OVER THE
AMOUNTS REQUIRED TO BE CONTRIBUTED TO SUCH MULTIEMPLOYER PLANS FOR THEIR MOST
RECENTLY COMPLETED PLAN YEARS BY AN AMOUNT EXCEEDING $25,000,000.

 

11.9        Validity and Enforceability of Loan Documents.  Any Loan Document
shall, at any time after its execution and delivery and for any reason, cease to
be in full force and effect in any material respect or be declared to be null
and void (other than in accordance with the terms hereof or thereof) and, if
such invalidity is capable of being cured without materially disadvantaging any
Credit Party, Borrower fails to cure such invalidity within thirty (30) days
after Borrower receives written notice from Administrative Agent of such
invalidity, or the validity or enforceability thereof shall be contested by any
Company party thereto or any Company shall deny in writing that it has any or
any further liability or obligations under any Loan Document to which it is a
party.

 

11.10      Environmental Liability.  If any event or condition shall occur or
exist with respect to any activity or substance regulated under the
Environmental Law and as a result of such event or condition, any Company shall
have incurred or in the opinion of the banks be reasonably likely to incur a
liability in excess of $25,000,000 liability during any consecutive twelve (12)
month period.

 

SECTION 12        RIGHTS AND REMEDIES.

 

12.1        Remedies Upon Default.

 

(A)   IF A DEFAULT EXISTS UNDER SECTION 11.3(C) OR 11.3(D), THEN THE COMMITMENT
TO EXTEND CREDIT HEREUNDER SHALL AUTOMATICALLY TERMINATE AND THE ENTIRE UNPAID
BALANCE OF THE OBLIGATION SHALL AUTOMATICALLY BECOME DUE AND PAYABLE WITHOUT ANY
ACTION OR NOTICE OF ANY KIND WHATSOEVER.

 

(B)   IF ANY DEFAULT EXISTS, THEN ADMINISTRATIVE AGENT MAY WITH THE CONSENT OF
REQUIRED LENDERS (AND, SUBJECT TO THE TERMS OF SECTION 13, SHALL UPON THE
REQUEST OF REQUIRED LENDERS) DO ANY ONE OR MORE OF THE FOLLOWING: (I) IF THE
MATURITY OF THE OBLIGATION HAS NOT ALREADY BEEN ACCELERATED UNDER SECTION
12.1(A), THEN DECLARE THE ENTIRE UNPAID BALANCE OF THE OBLIGATION, OR ANY PART
THEREOF, IMMEDIATELY DUE AND PAYABLE, WHEREUPON IT SHALL BE DUE AND PAYABLE;
(II) TERMINATE THE COMMITMENTS OF LENDERS TO EXTEND CREDIT HEREUNDER; (III)
REDUCE ANY CLAIM TO JUDGMENT; (IV) TO THE EXTENT PERMITTED BY LAW, EXERCISE (OR
REQUEST EACH LENDER TO, AND EACH LENDER SHALL BE ENTITLED TO, EXERCISE) THE
RIGHTS OF OFFSET OR BANKER’S LIEN AGAINST THE INTEREST OF ANY COMPANY IN AND TO
EVERY ACCOUNT AND OTHER PROPERTY OF ANY COMPANY WHICH ARE IN THE POSSESSION OF
ANY CREDIT PARTY TO THE EXTENT OF THE FULL AMOUNT OF THE OBLIGATION (TO THE
EXTENT PERMITTED BY LAW, BORROWER BEING DEEMED DIRECTLY OBLIGATED TO EACH CREDIT
PARTY IN THE FULL AMOUNT OF THE OBLIGATION FOR SUCH PURPOSES); PROVIDED,
HOWEVER, SUCH CREDIT PARTY SHALL THEREAFTER PROMPTLY NOTIFY BORROWER AND
ADMINISTRATIVE AFTER ANY SUCH OFFSET AND THE APPLICATION MADE BY SUCH LENDER;
AND (V) EXERCISE ANY AND ALL OTHER LEGAL OR EQUITABLE RIGHTS AFFORDED BY THE
LOAN DOCUMENTS, THE LAWS OF THE STATE OF NEW YORK, OR ANY OTHER APPLICABLE
JURISDICTION AS ADMINISTRATIVE AGENT SHALL DEEM APPROPRIATE, OR OTHERWISE,
INCLUDING, BUT NOT LIMITED TO, THE

 

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RIGHT TO BRING SUIT OR OTHER PROCEEDINGS BEFORE ANY GOVERNMENTAL AUTHORITY
EITHER FOR SPECIFIC PERFORMANCE OF ANY COVENANT OR CONDITION CONTAINED IN ANY OF
THE LOAN DOCUMENTS OR IN AID OF THE EXERCISE OF ANY RIGHT GRANTED TO ANY CREDIT
PARTY IN ANY OF THE LOAN DOCUMENTS.

 

12.2        Company Waivers.  To the extent permitted by Law, the Companies and
Guarantors hereby waive presentment and demand for payment, protest, notice of
intention to accelerate, notice of acceleration, and notice of protest and
nonpayment, and agree that their respective liability with respect to the
Obligation (or any part thereof) shall not be affected by any renewal or
extension in the time of payment of the Obligation (or any part thereof), by any
indulgence, or by any release or change in any security for the payment of the
Obligation (or any part thereof).

 

12.3        Performance by Administrative Agent.  If any covenant, duty, or
agreement of any Company is not performed in accordance with the terms of the
Loan Documents, while a Default exists, then Administrative Agent may, at its
option (but subject to the approval of Required Lenders), perform or attempt to
perform such covenant, duty, or agreement on behalf of such Company.  In such
event, any amount expended by Administrative Agent in such performance or
attempted performance shall be payable by the Obligors, jointly and severally,
to Administrative Agent on demand, shall become part of the Obligation, and
shall bear interest at the Default Rate from the date of such expenditure by
Administrative Agent until paid.  Notwithstanding the foregoing, it is expressly
understood that Administrative Agent does not assume, and shall never have,
except by its express written consent, any liability or responsibility for the
performance of any covenant, duty, or agreement of any Company.

 

12.4        Delegation of Duties and Rights.  The Credit Parties may perform any
of their duties or exercise any of their Rights under the Loan Documents by or
through their respective Representatives.

 

12.5        Not in Control.  Nothing in any Loan Document shall, or shall be
deemed to (a) give any Credit Party the Right to exercise control over the
assets (including real property), affairs, or management of any Company, (b)
preclude or interfere with compliance by any Company with any Law, or (c)
require any act or omission by any Company that may be harmful to Persons or
property.  Any “Material Adverse Event” or other materiality qualifier in any
representation, warranty, covenant, or other provision of any Loan Document is
included for credit documentation purposes only and shall not, and shall not be
deemed to, mean that any Credit Party acquiesces in any non-compliance by any
Company with any Law or document, or that any Credit Party does not expect any
Company to promptly, diligently, and continuously carry out all appropriate
removal, remediation, and termination activities required or appropriate in
accordance with all Environmental Laws.  The Credit Parties have no fiduciary
relationship with or fiduciary duty to any Company arising out of or in
connection with the Loan Documents, and the relationship between the Credit
Parties, on the one hand, and the Companies, on the other hand, in connection
with the Loan Documents is solely that of debtor and creditor.  The power of the
Credit Parties under the Loan Documents is limited to the Rights provided in the
Loan Documents, which Rights exist solely to assure payment and performance of
the Obligation and may be exercised in a manner calculated by the Credit Parties
in their respective good faith business judgment.

 

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12.6        Course of Dealing.  The acceptance by any Credit Party at any time
and from time to time of partial payment on the Obligation shall not be deemed
to be a waiver of any Default then existing.  No waiver by any Credit Party of
any Default shall be deemed to be a waiver of any other then-existing or
subsequent Default.  No delay or omission by any Credit Party in exercising any
Right under the Loan Documents shall impair such Right or be construed as a
waiver thereof or any acquiescence therein, nor shall any single or partial
exercise of any such Right preclude other or further exercise thereof, or the
exercise of any other Right under the Loan Documents or otherwise.

 

12.7        Cumulative Rights.  All Rights available to the Credit Parties under
the Loan Documents are cumulative of and in addition to all other Rights granted
to the Credit Parties at law or in equity, whether or not the Obligation is due
and payable and whether or not the Credit Parties have instituted any suit for
collection, foreclosure, or other action in connection with the Loan Documents.

 

12.8        Application of Proceeds.  Any and all proceeds ever received by any
Credit Party from the exercise of any Rights pertaining to the Obligation shall
be applied to the Obligation in the order and manner set forth in Section 3.11.

 

12.9        Certain Proceedings.  Borrower will promptly execute and deliver, or
cause the execution and delivery of, all applications, certificates,
instruments, registration statements, and all other documents and papers any
Credit Party may reasonably request in connection with the obtaining of any
consent, approval, registration, qualification, permit, license, or
Authorization of any Governmental Authority or other Person necessary or
appropriate for the effective exercise of any Rights under the Loan Documents. 
Because Borrower agrees that the Credit Parties’ remedies at Law for failure of
Borrower to comply with the provisions of this Section 12.9 would be inadequate
and that such failure would not be adequately compensable in damages, Borrower
agrees that the covenants of this Section 12.9 may be specifically enforced.

 

12.10      Expenditures by Lenders.  Borrower shall promptly pay within fifteen
(15) Business Days after request therefor (a) all reasonable costs, fees, and
expenses paid or incurred by Administrative Agent, incident to any Loan Document
(including, but not limited to, the reasonable fees and expenses of counsel to
Administrative Agent in connection with the negotiation, preparation, delivery,
execution, coordination, and administration of the Loan Documents and any
related amendment, waiver, or consent), and (b) all reasonable costs and
expenses of each Credit Party incurred by such Credit Party in connection with
the enforcement of the obligations of any Obligor arising under the Loan
Documents (including, without limitation, costs and expenses incurred in
connection with any workout or bankruptcy) or the exercise of any Rights arising
under the Loan Documents (including, but not limited to, reasonable attorneys’
fees including court costs and other costs of collection), all of which shall be
a part of the Obligation and shall bear interest at the Default Rate from the
date due until the date repaid.

 

12.11      Indemnification.  BORROWER SHALL, AND SHALL CAUSE EACH OTHER COMPANY
TO, INDEMNIFY AND HOLD HARMLESS EACH CREDIT PARTY AND EACH OF THEIR RESPECTIVE
AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS, AND ADVISORS (EACH, AN

 

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“INDEMNIFIED PARTY”) FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES,
LIABILITIES, COSTS, AND EXPENSES SUBJECT TO THE LIMITATIONS, IF ANY, SET FORTH
IN SECTION 12.10 (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES)
THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNIFIED PARTY, IN
EACH CASE ARISING OUT OF OR IN CONNECTION WITH OR BY REASON OF (INCLUDING,
WITHOUT LIMITATION, IN CONNECTION WITH ANY INVESTIGATION, LITIGATION, OR
PROCEEDING OR PREPARATION OF DEFENSE IN CONNECTION THEREWITH) THE LOAN
DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, OR THE ACTUAL OR
PROPOSED USE OF THE PROCEEDS OF THE BORROWINGS (INCLUDING ANY OF THE FOREGOING
ARISING FROM THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY), EXCEPT TO THE
EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE IS FOUND IN A
FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE
RESULTED FROM SUCH INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. 
NO INDEMNIFIED PARTY MAY SEEK INDEMNIFICATION HEREUNDER FOR LIABILITIES OR
EXPENSES OWED TO ANY COMPANY, TO THE EXTENT SUCH LIABILITIES OR EXPENSES ARISE
OUT OF SUCH INDEMNIFIED PARTY’S BREACH OF THIS AGREEMENT AS DETERMINED IN A
FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION.  IN THE
CASE OF AN INVESTIGATION, LITIGATION OR OTHER PROCEEDING TO WHICH THE INDEMNITY
IN THIS SECTION 12.11 APPLIES, SUCH INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT
SUCH INVESTIGATION, LITIGATION OR PROCEEDING IS BROUGHT BY BORROWER, ITS
DIRECTORS, SHAREHOLDERS OR CREDITORS OR AN INDEMNIFIED PARTY OR ANY OTHER PERSON
OR ANY INDEMNIFIED PARTY IS OTHERWISE A PARTY THERETO.  BORROWER AND EACH OTHER
COMPANY AGREE NOT TO ASSERT ANY CLAIM AGAINST ANY INDEMNIFIED PARTY ON ANY
THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES
ARISING OUT OF OR OTHERWISE RELATING TO THE LOAN DOCUMENTS, ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN, OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS
OF THE BORROWINGS.  WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER AGREEMENT OF
BORROWER HEREUNDER, THE AGREEMENTS AND OBLIGATIONS OF BORROWER CONTAINED IN THIS
SECTION 12.11 SHALL SURVIVE THE PAYMENT IN FULL OF THE BORROWINGS AND ALL OTHER
AMOUNTS PAYABLE UNDER THIS AGREEMENT.  NOTWITHSTANDING THE FOREGOING, BORROWER
SHALL HAVE NO OBLIGATION HEREUNDER TO ANY INDEMNIFIED PARTY WITH RESPECT TO ANY
AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS, AND EXPENSES THAT ARE
ATTRIBUTABLE TO ANY HAZARDOUS MATERIALS THAT ARE FIRST USED, MANUFACTURED,
EMITTED, GENERATED, TREATED, LOCATED, RELEASED, STORED, OR DISPOSED OF ON ANY
REAL PROPERTY OWNED, OPERATED, OR LEASED BY A COMPANY AND ANY VIOLATION OF
ENVIRONMENTAL LAWS, WHICH IN EITHER CASE, FIRST OCCUR ON OR WITH RESPECT TO SUCH
REAL PROPERTY AFTER THE PROPERTY IS TRANSFERRED TO ANY OF THE INDEMNIFIED
PARTIES OR THEIR SUCCESSORS BY FORECLOSURE SALE, DEED IN LIEU OF FORECLOSURE, OR
SIMILAR TRANSFER, EXCEPT TO THE

 

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EXTENT SUCH MANUFACTURE, EMISSION, RELEASE, GENERATION, TREATMENT, STORAGE,
RELEASE, OR DISPOSAL OR VIOLATION IS ACTUALLY CAUSED BY A COMPANY.

 

SECTION 13        AGREEMENT AMONG LENDERS.

 

13.1        Administrative Agent.

 

(A)   APPOINTMENT.  EACH LENDER HEREBY APPOINTS POI ACQUISITION (AND POI
ACQUISITION HEREBY ACCEPTS SUCH APPOINTMENT) AS ITS NOMINEE AND AGENT, IN ITS
NAME AND ON ITS BEHALF: (I) TO ACT AS NOMINEE FOR AND ON BEHALF OF SUCH LENDER
IN AND UNDER ALL LOAN DOCUMENTS; (II) TO ARRANGE THE MEANS WHEREBY THE FUNDS OF
LENDERS ARE TO BE MADE AVAILABLE TO BORROWER UNDER THE LOAN DOCUMENTS; (III) TO
TAKE SUCH ACTION AS MAY BE REQUESTED BY ANY LENDER UNDER THE LOAN DOCUMENTS
(WHEN SUCH LENDER IS ENTITLED TO MAKE SUCH REQUEST UNDER THE LOAN DOCUMENTS AND
AFTER SUCH REQUESTING LENDER HAS OBTAINED THE CONCURRENCE OF SUCH OTHER LENDERS
AS MAY BE REQUIRED UNDER THE LOAN DOCUMENTS); (IV) TO RECEIVE ALL DOCUMENTS AND
ITEMS TO BE FURNISHED TO LENDERS UNDER THE LOAN DOCUMENTS; (V) TO TIMELY
DISTRIBUTE, AND ADMINISTRATIVE AGENT AGREES TO SO DISTRIBUTE, TO EACH LENDER ALL
MATERIAL INFORMATION, REQUESTS, DOCUMENTS, AND ITEMS RECEIVED FROM ANY COMPANY
UNDER THE LOAN DOCUMENTS; (VI) TO PROMPTLY DISTRIBUTE TO EACH LENDER ITS RATABLE
PART OF EACH PAYMENT OR PREPAYMENT (WHETHER VOLUNTARY, AS PROCEEDS OF COLLATERAL
UPON OR AFTER FORECLOSURE, AS PROCEEDS OF INSURANCE THEREON, OR OTHERWISE) IN
ACCORDANCE WITH THE TERMS OF THE LOAN DOCUMENTS; (VII) TO DELIVER TO THE
APPROPRIATE PERSONS REQUESTS, DEMANDS, APPROVALS, AND CONSENTS RECEIVED FROM
LENDERS; AND (VIII) TO EXECUTE, ON BEHALF OF LENDERS, SUCH RELEASES OR OTHER
DOCUMENTS OR INSTRUMENTS AS ARE PERMITTED BY THE LOAN DOCUMENTS OR AS DIRECTED
BY LENDERS FROM TIME TO TIME; PROVIDED, HOWEVER, ADMINISTRATIVE AGENT SHALL NOT
BE REQUIRED TO TAKE ANY ACTION WHICH EXPOSES ADMINISTRATIVE AGENT TO PERSONAL
LIABILITY OR WHICH IS CONTRARY TO THE LOAN DOCUMENTS OR APPLICABLE LAW.

 

(B)   SUCCESSOR AGENT.  ADMINISTRATIVE AGENT MAY RESIGN AT ANY TIME AS
ADMINISTRATIVE AGENT UNDER THE LOAN DOCUMENTS BY GIVING WRITTEN NOTICE THEREOF
TO LENDERS AND MAY BE REMOVED AS ADMINISTRATIVE AGENT UNDER THE LOAN DOCUMENTS
AT ANY TIME WITH CAUSE BY REQUIRED LENDERS.  SHOULD THE INITIAL OR ANY SUCCESSOR
ADMINISTRATIVE AGENT EVER CEASE TO BE A PARTY HERETO OR SHOULD THE INITIAL OR
ANY SUCCESSOR ADMINISTRATIVE AGENT EVER RESIGN OR BE REMOVED AS ADMINISTRATIVE
AGENT, THEN REQUIRED LENDERS SHALL ELECT THE SUCCESSOR ADMINISTRATIVE AGENT FROM
AMONG LENDERS (OTHER THAN THE RESIGNING ADMINISTRATIVE AGENT).  IF NO SUCCESSOR
ADMINISTRATIVE AGENT SHALL HAVE BEEN SO APPOINTED BY REQUIRED LENDERS, WITHIN
THIRTY (30) DAYS AFTER THE RETIRING ADMINISTRATIVE AGENT’S GIVING OF NOTICE OF
RESIGNATION OR REQUIRED LENDERS’ REMOVAL OF THE RETIRING ADMINISTRATIVE AGENT,
THEN THE RETIRING ADMINISTRATIVE AGENT MAY, ON BEHALF OF LENDERS, APPOINT A
SUCCESSOR ADMINISTRATIVE AGENT, WHICH SUCCESSOR ADMINISTRATIVE AGENT SHALL,
UNLESS A PAYMENT DEFAULT EXISTS, BE REASONABLY ACCEPTABLE TO BORROWER. UPON THE
ACCEPTANCE OF ANY APPOINTMENT AS ADMINISTRATIVE AGENT UNDER THE LOAN DOCUMENTS
BY A SUCCESSOR ADMINISTRATIVE AGENT, SUCH SUCCESSOR ADMINISTRATIVE AGENT SHALL
THEREUPON SUCCEED TO AND BECOME VESTED WITH ALL THE RIGHTS OF THE RETIRING
ADMINISTRATIVE AGENT, AND THE RETIRING ADMINISTRATIVE AGENT SHALL BE DISCHARGED
FROM ITS DUTIES AND OBLIGATIONS OF ADMINISTRATIVE AGENT UNDER THE LOAN
DOCUMENTS, AND EACH LENDER SHALL EXECUTE SUCH DOCUMENTS AS ANY LENDER MAY
REASONABLY REQUEST TO REFLECT SUCH CHANGE IN AND UNDER THE LOAN DOCUMENTS. 
AFTER ANY RETIRING ADMINISTRATIVE AGENT’S RESIGNATION OR REMOVAL AS
ADMINISTRATIVE AGENT UNDER THE LOAN

 

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DOCUMENTS, THE PROVISIONS OF THIS SECTION 13 SHALL INURE TO ITS BENEFIT AS TO
ANY ACTIONS TAKEN OR OMITTED TO BE TAKEN BY IT WHILE IT WAS ADMINISTRATIVE AGENT
UNDER THE LOAN DOCUMENTS.

 

(C)   RIGHTS AS LENDER.  ADMINISTRATIVE AGENT, IN ITS CAPACITY AS A LENDER,
SHALL HAVE THE SAME RIGHTS UNDER THE LOAN DOCUMENTS AS ANY OTHER LENDER AND MAY
EXERCISE THE SAME AS THOUGH IT WERE NOT ACTING AS ADMINISTRATIVE AGENT; THE TERM
“LENDER’’ SHALL, UNLESS THE CONTEXT OTHERWISE INDICATES, INCLUDE ADMINISTRATIVE
AGENT; AND ANY RESIGNATION, OR REMOVAL OF BY ADMINISTRATIVE AGENT HEREUNDER
SHALL NOT IMPAIR OR OTHERWISE AFFECT ANY RIGHTS WHICH IT HAS OR MAY HAVE IN ITS
CAPACITY AS AN INDIVIDUAL LENDER.  EACH LENDER AND BORROWER AGREE THAT
ADMINISTRATIVE AGENT IS NOT A FIDUCIARY FOR LENDERS OR FOR BORROWER BUT SIMPLY
IS ACTING IN THE CAPACITY DESCRIBED HEREIN TO ALLEVIATE ADMINISTRATIVE BURDENS
FOR BOTH BORROWER AND LENDERS, THAT ADMINISTRATIVE AGENT HAS NO DUTIES OR
RESPONSIBILITIES TO LENDERS OR BORROWER EXCEPT THOSE EXPRESSLY SET FORTH HEREIN,
AND THAT ADMINISTRATIVE AGENT IN ITS CAPACITY AS A LENDER HAS ALL RIGHTS OF ANY
OTHER LENDER.

 

(D)   OTHER ACTIVITIES.  ADMINISTRATIVE AGENT AND ITS AFFILIATES MAY NOW OR
HEREAFTER BE ENGAGED IN ONE OR MORE LOAN, LETTER OF CREDIT, LEASING, OR OTHER
FINANCING TRANSACTIONS WITH ANY COMPANY, ACT AS TRUSTEE OR DEPOSITARY FOR ANY
COMPANY, OR OTHERWISE BE ENGAGED IN OTHER TRANSACTIONS WITH ANY COMPANY
(COLLECTIVELY, THE “OTHER ACTIVITIES”) NOT THE SUBJECT OF THE LOAN DOCUMENTS. 
WITHOUT LIMITING THE RIGHTS OF LENDERS SPECIFICALLY SET FORTH IN THE LOAN
DOCUMENTS, ADMINISTRATIVE AGENT AND ITS AFFILIATES SHALL NOT BE RESPONSIBLE TO
ACCOUNT TO LENDERS FOR SUCH OTHER ACTIVITIES, AND NO LENDER SHALL HAVE ANY
INTEREST IN ANY OTHER ACTIVITIES, ANY PRESENT OR FUTURE GUARANTIES BY OR FOR THE
ACCOUNT OF ANY COMPANY WHICH ARE NOT CONTEMPLATED OR INCLUDED IN THE LOAN
DOCUMENTS, ANY PRESENT OR FUTURE OFFSET EXERCISED BY ADMINISTRATIVE AGENT AND
ITS AFFILIATES IN RESPECT OF SUCH OTHER ACTIVITIES, ANY PRESENT OR FUTURE
PROPERTY TAKEN AS SECURITY FOR ANY SUCH OTHER ACTIVITIES, OR ANY PROPERTY NOW OR
HEREAFTER IN THE POSSESSION OR CONTROL OF ADMINISTRATIVE AGENT OR ITS AFFILIATES
WHICH MAY BE OR BECOME SECURITY FOR THE OBLIGATIONS OF ANY COMPANY ARISING UNDER
THE LOAN DOCUMENTS BY REASON OF THE GENERAL DESCRIPTION OF INDEBTEDNESS SECURED
OR OF PROPERTY CONTAINED IN ANY OTHER AGREEMENTS, DOCUMENTS OR INSTRUMENTS
RELATED TO ANY SUCH OTHER ACTIVITIES; PROVIDED THAT IF ANY PAYMENTS IN RESPECT
OF SUCH GUARANTIES OR SUCH PROPERTY OR THE PROCEEDS THEREOF SHALL BE APPLIED TO
REDUCTION OF THE OBLIGATIONS OF ANY OBLIGOR ARISING UNDER THE LOAN DOCUMENTS,
THEN EACH LENDER SHALL BE ENTITLED TO SHARE IN SUCH APPLICATION RATABLY.

 

13.2        Expenses.  Upon demand by Administrative Agent, each Lender shall
pay its Pro Rata Part of any reasonable expenses (including, without limitation,
court costs, reasonable attorneys’ fees, and other costs of collection) incurred
by Administrative Agent in connection with any of the Loan Documents if and to
the extent Administrative Agent does not receive reimbursement therefor from
other sources within 60 days after incurred (other than expenses incurred as a
result of Administrative Agent’s gross negligence or willful misconduct);
provided that each Lender shall be entitled to receive its Pro Rata Part of any
reimbursement for such expenses, or part thereof, which Administrative Agent
subsequently receives from such other sources.

 

13.3        Proportionate Absorption of Losses.  Except as otherwise provided in
the Loan Documents, nothing in the Loan Documents shall be deemed to give any
Lender any advantage over any other Lender insofar as the Obligation arising
under the Loan Documents is concerned,

 

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or to relieve any Lender from absorbing its Pro Rata Part of any losses
sustained with respect to the Obligation (except to the extent such losses
result from unilateral actions or inactions of any Lender that are not made in
accordance with the terms and provisions of the Loan Documents).

 

13.4        Delegation of Duties; Reliance.  Administrative Agent may perform
any of its duties or exercise any of its Rights under the Loan Documents by or
through its Representatives.  Administrative Agent and its Representatives shall
(a) be entitled to rely upon (and shall be protected in relying upon) any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telecopy, telegram, telex or teletype message, statement, order, or other
documents or conversation believed by it or them to be genuine and correct and
to have been signed or made by the proper Person and, with respect to legal
matters, upon opinion of counsel selected by Administrative Agent, (b) be
entitled to deem and treat each Lender as the owner and holder of the Principal
Debt owed to such Lender for all purposes until, subject to Section 14.13,
written notice of the assignment or transfer thereof shall have been given to
and received by Administrative Agent (and any request, authorization, consent,
or approval of any Lender shall be conclusive and binding on each subsequent
holder, assignee, or transferee of the Principal Debt owed to such Lender or
portion thereof until such notice is given and received), (c) not be deemed to
have notice of the occurrence of an Unmatured Default or Default unless a
responsible officer of Administrative Agent, who handles matters associated with
the Loan Documents and transactions thereunder, has received written notice from
a Lender or Borrower and stating that such notice is a “Notice of Default,” and
(d) be entitled to consult with legal counsel (including counsel for Borrower),
independent accountants, and other experts selected by Administrative Agent and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts.

 

13.5        Limitation of Liability.

 

(A)   EXCULPATION.  NEITHER ADMINISTRATIVE AGENT NOR ANY OF ITS REPRESENTATIVES
SHALL BE LIABLE FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY IT OR THEM UNDER
THE LOAN DOCUMENTS IN GOOD FAITH AND REASONABLY BELIEVED BY IT OR THEM TO BE
WITHIN THE DISCRETION OR POWER CONFERRED UPON IT OR THEM BY THE LOAN DOCUMENTS
OR BE RESPONSIBLE FOR THE CONSEQUENCES OF ANY ERROR OF JUDGMENT, EXCEPT FOR
FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT; AND NEITHER THE ADMINISTRATIVE
AGENT NOR ANY OF ITS REPRESENTATIVES HAS A FIDUCIARY RELATIONSHIP WITH ANY
LENDER BY VIRTUE OF THE LOAN DOCUMENTS (PROVIDED THAT NOTHING HEREIN SHALL
NEGATE THE OBLIGATION OF ADMINISTRATIVE AGENT TO ACCOUNT FOR FUNDS RECEIVED BY
IT FOR THE ACCOUNT OF ANY LENDER).

 

(B)   INDEMNITY.  UNLESS INDEMNIFIED TO ITS SATISFACTION AGAINST LOSS, COST,
LIABILITY, AND EXPENSE, ADMINISTRATIVE AGENT SHALL NOT BE COMPELLED TO DO ANY
ACT UNDER THE LOAN DOCUMENTS OR TO TAKE ANY ACTION TOWARD THE EXECUTION OR
ENFORCEMENT OF THE POWERS THEREBY CREATED OR TO PROSECUTE OR DEFEND ANY SUIT IN
RESPECT OF THE LOAN DOCUMENTS.  IF ADMINISTRATIVE AGENT REQUESTS INSTRUCTIONS
FROM LENDERS OR REQUIRED LENDERS, AS THE CASE MAY BE, WITH RESPECT TO ANY ACT OR
ACTION (INCLUDING, BUT NOT LIMITED TO, ANY FAILURE TO ACT) IN CONNECTION WITH
ANY LOAN DOCUMENT, SUCH ADMINISTRATIVE AGENT SHALL BE ENTITLED (BUT SHALL NOT BE
REQUIRED) TO REFRAIN (WITHOUT INCURRING ANY LIABILITY TO ANY PERSON BY SO
REFRAINING) FROM SUCH ACT OR ACTION UNLESS AND UNTIL IT HAS RECEIVED SUCH
INSTRUCTIONS.  EXCEPT WHERE ACTION OF REQUIRED LENDERS OR ALL LENDERS IS
REQUIRED IN THE LOAN DOCUMENTS, ADMINISTRATIVE AGENT MAY ACT HEREUNDER IN ITS
OWN DISCRETION WITHOUT REQUESTING INSTRUCTIONS.  IN NO EVENT, HOWEVER, SHALL
ADMINISTRATIVE AGENT OR ANY OF ITS

 

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REPRESENTATIVES BE REQUIRED TO TAKE ANY ACTION WHICH IT OR THEY DETERMINE COULD
INCUR FOR IT OR THEM CRIMINAL OR ONEROUS CIVIL LIABILITY.  WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, NO LENDER SHALL HAVE ANY RIGHT OF ACTION AGAINST
ADMINISTRATIVE AGENT AS A RESULT OF ADMINISTRATIVE AGENT’S ACTING OR REFRAINING
FROM ACTING HEREUNDER IN ACCORDANCE WITH THE INSTRUCTIONS OF REQUIRED LENDERS
(OR ALL LENDERS IF REQUIRED IN THE LOAN DOCUMENTS).

 

(C)   RELIANCE.  ADMINISTRATIVE AGENT SHALL NOT BE RESPONSIBLE IN ANY MANNER TO
ANY LENDER OR ANY PARTICIPANT FOR, AND EACH LENDER REPRESENTS AND WARRANTS THAT
IT HAS NOT RELIED UPON ADMINISTRATIVE AGENT IN RESPECT OF, (I) THE
CREDITWORTHINESS OF ANY COMPANY AND THE RISKS INVOLVED TO SUCH LENDER, (II) THE
EFFECTIVENESS, ENFORCEABILITY, GENUINENESS, VALIDITY, OR THE DUE EXECUTION OF
ANY LOAN DOCUMENT, (III) ANY REPRESENTATION, WARRANTY, DOCUMENT, CERTIFICATE,
REPORT, OR STATEMENT MADE THEREIN OR FURNISHED THEREUNDER OR IN CONNECTION
THEREWITH, (IV) THE EXISTENCE, PRIORITY, OR PERFECTION OF ANY LIEN, IF ANY, NOW
OR HEREAFTER GRANTED OR PURPORTED TO BE GRANTED UNDER ANY LOAN DOCUMENT, OR (V)
OBSERVATION OF OR COMPLIANCE WITH ANY OF THE TERMS, COVENANTS, OR CONDITIONS OF
ANY LOAN DOCUMENT ON THE PART OF ANY COMPANY.  EACH LENDER AGREES TO INDEMNIFY
ADMINISTRATIVE AGENT AND ITS REPRESENTATIVES AND HOLD THEM HARMLESS FROM AND
AGAINST (BUT LIMITED TO SUCH LENDER’S PRO RATA PART OF) ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
REASONABLE EXPENSES, AND REASONABLE DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER WHICH MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY THEM IN ANY
WAY RELATING TO OR ARISING OUT OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR
OMITTED BY THEM UNDER THE LOAN DOCUMENTS (INCLUDING ANY OF THE FOREGOING ARISING
FROM THE NEGLIGENCE OF ADMINISTRATIVE AGENT OR ITS REPRESENTATIVES), TO THE
EXTENT ADMINISTRATIVE AGENT AND ITS REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH
AMOUNTS BY ANY COMPANY (PROVIDED THAT NEITHER ADMINISTRATIVE AGENT NOR ANY OF
ITS REPRESENTATIVES SHALL NOT HAVE THE RIGHT TO BE INDEMNIFIED HEREUNDER FOR ITS
OR THEIR OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT).

 

13.6        Default.  Upon the occurrence and continuance of a Default, Lenders
agree to promptly confer in order that Required Lenders or Lenders, as the case
may be, may agree upon a course of action for the enforcement of the Rights of
Lenders; and Administrative Agent shall be entitled to refrain from taking any
action (without incurring any liability to any Person for so refraining) unless
and until Administrative Agent shall have received instructions from Required
Lenders.  All rights of action under this Agreement and the other Loan Documents
and all rights to any collateral, if any, hereunder may be enforced by
Administrative Agent and any suit or proceeding instituted by Administrative
Agent in furtherance of such enforcement shall be brought in their respective
names as Administrative Agent without the necessity of joining as plaintiffs or
defendants any other Credit Party, and the recovery of any judgment shall be for
the benefit of the Credit Parties subject to the expenses of Administrative
Agent.  In actions with respect to any property of any Company, Administrative
Agent is acting for the ratable benefit of each Credit Party.  Any and all
agreements to subordinate (whether made heretofore or hereafter) other
indebtedness or obligations of any Company to the Obligation shall be construed
as being for the ratable benefit of each Credit Party.

 

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13.7        Limitation of Liability.  To the extent permitted by Law, (a)
Administrative Agent (acting in its agent capacity) shall not incur any
liability to any other Credit Party or Participant except for acts or omissions
resulting from its own fraud, gross negligence or wilful misconduct, and (b) no
Credit Party shall incur any liability to any other Person for any act or
omission of any other Credit Party or any Participant.

 

13.8        Relationship of Lenders.  Nothing herein shall be construed as
creating a partnership or joint venture among the Credit Parties.

 

13.9        Benefits of Agreement.  Except for the representations and covenants
in Sections 13.1(a), 13.1(b), and 13.1(d) in favor of Borrower, none of the
provisions of this Section 13 shall inure to the benefit of any Company or any
other Person other than the Credit Parties; consequently, no Company or any
other Person shall be entitled to rely upon, or to raise as a defense, in any
manner whatsoever, the failure of any Credit Party to comply with such
provisions.

 

13.10      [Intentionally Omitted]

 

13.11      Obligations Several.  The obligations of Lenders hereunder are
several, and each Lender hereunder shall not be responsible for the obligations
of the other Lenders hereunder, nor will the failure of one Lender to perform
any of its obligations hereunder relieve the other Lenders from the performance
of their respective obligations hereunder.

 

SECTION 14        MISCELLANEOUS.

 

14.1        Headings.  The headings, captions, and arrangements used in any of
the Loan Documents are, unless specified otherwise, for convenience only and
shall not be deemed to limit, amplify, or modify the terms of the Loan
Documents, nor affect the meaning thereof.

 

14.2        Nonbusiness Days.  In any case where any payment or action is due
under any Loan Document on a day which is not a Business Day, such payment or
action may be delayed until the next-succeeding Business Day, but interest and
fees shall continue to accrue in respect of any payment to which it is
applicable until such payment is in fact made; provided that if, in the case of
any such payment in respect of a Eurodollar Borrowing, the next-succeeding
Business Day is in the next calendar month, then such payment shall be made on
the next-preceding Business Day.

 

14.3        Communications.  Unless specifically otherwise provided, whenever
any Loan Document requires or permits any consent, approval, notice, request, or
demand from one party to another, such communication must be in writing (which
may be by telex or telecopy) to be effective and shall be deemed to have been
given (a) if by telex, when transmitted to the telex number, if any, for such
party, and the appropriate answer back is received, (b) if by telecopy, when
transmitted to the telecopy number for such party (and all such communications
sent by telecopy shall be confirmed promptly thereafter by personal delivery or
mailing in accordance with the provisions of this Section 14.3; provided that
any requirement in this parenthetical shall not affect the date on which such
telecopy shall be deemed to have been delivered), (c) if by mail, on the third
(3rd) Business Day after it is enclosed in an envelope, properly addressed to
such party, properly stamped, sealed, and deposited in the appropriate official
postal service, or

 

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(d) if by any other means, when actually delivered to such party.  Until changed
by notice pursuant hereto, the address (and telex and telecopy numbers, if any)
for Borrower and each Credit Party is set forth on Schedule 2.1.

 

14.4        Form and Number of Documents.  Each agreement, document, instrument,
or other writing to be furnished under any provision of this Agreement must be
in form and substance and in such number of counterparts as may be reasonably
satisfactory to Administrative Agent and its counsel.

 

14.5        Confidentiality.  Each Credit Party agrees to keep confidential any
information furnished or made available to it by Borrower pursuant to this
Agreement; provided that nothing herein shall prevent any Credit Party from
disclosing such information (a) to any other Credit Party or any Affiliate of
any Credit Party, or any officer, director, employee, agent, or advisor of any
Credit Party or Affiliate of any Credit Party (provided that any such Affiliate
shall be deemed to agree to and shall be bound by the provisions of this Section
14.5), (b) to any other Person if reasonably incidental to the administration of
the credit facility provided herein, (c) as required by any Law, (d) upon the
order of any court or administrative agency, (e) upon the request or demand of
any regulatory agency or authority, (f) that is or becomes available to the
public or that is or becomes available to any Credit Party other than as a
result of a disclosure by any Credit Party prohibited by this Agreement, (g) in
connection with any litigation to which such Credit Party or any of its
Affiliates may be a party, (h) to the extent necessary in connection with the
exercise of any remedy under this Agreement or any other Loan Document, and (i)
subject to provisions substantially similar to those contained in this Section
14.5, to any actual or proposed Participant or assignee.

 

14.6        Survival.  All covenants, agreements, undertakings, representations,
and warranties made in any of the Loan Documents shall survive all closings
under the Loan Documents and, except as otherwise indicated, shall not be
affected by any investigation made by any party.  Unless otherwise specifically
stated, all rights of, and provisions relating to, reimbursement and
indemnification of any Credit Party shall survive termination of this Agreement
and payment in full of the Obligation.

 

14.7        Governing Law.  THE LAWS OF THE STATE OF NEW YORK AND OF THE UNITED
STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES TO THE LOAN
DOCUMENTS AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THE
LOAN DOCUMENTS.

 

14.8        Invalid Provisions.  If any provision in any Loan Document is held
to be illegal, invalid, or unenforceable, then such provision shall be fully
severable; the appropriate Loan Document shall be construed and enforced as if
such provision had never comprised a part thereof; and the remaining provisions
thereof shall remain in full force and effect and shall not be affected by such
provision or by its severance therefrom.  Each Credit Party and each Company
party to such Loan Document agree to negotiate, in good faith, the terms of a
replacement provision as similar to the severed provision as may be possible and
be legal, valid, and enforceable.

 

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14.9        Entirety.  THE RIGHTS AND OBLIGATIONS OF THE COMPANIES AND THE
CREDIT PARTIES SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS,
AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN SUCH PARTIES ARE
SUPERSEDED BY AND MERGED INTO SUCH WRITINGS.  THIS AGREEMENT (AS AMENDED IN
WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY ANY
COMPANY AND/OR ANY CREDIT PARTY (TOGETHER WITH ALL COMMITMENT LETTERS AND FEE
LETTERS AS THEY RELATED TO THE PAYMENT OF FEES AFTER THE CLOSING DATE) REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. 
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

14.10      Jurisdiction; Venue; Service of Process; Jury Trial.  EACH PARTY
HERETO, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY (A)
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN NEW YORK, NEW YORK, AND AGREES AND CONSENTS THAT SERVICE OF
PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR IN
CONNECTION WITH THE LOAN DOCUMENTS AND THE OBLIGATION BY SERVICE OF PROCESS AS
PROVIDED BY NEW YORK LAW, (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN
DOCUMENTS AND THE OBLIGATION BROUGHT IN ANY SUCH COURT, (C) IRREVOCABLY WAIVES
ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, (D) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES
THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, AT ITS
ADDRESS SET FORTH HEREIN, (E) IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING
AGAINST ANY PARTY HERETO ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS
OR THE OBLIGATION SHALL BE BROUGHT IN ONE OF THE AFOREMENTIONED COURTS, AND (F)
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.  The scope of
each of the foregoing, waivers is intended to be all-encompassing of any and all
disputes that may be filed in any court and that relate to the subject matter of
this transaction, including, without limitation, contract claims, tort claims,
breach of duty claims and all other common law and statutory claims.  The
Companies and each other party to this Agreement acknowledge that this waiver is
a material inducement to the agreement of each party hereto to enter into a
business relationship, that each has already relied on this waiver in entering
into this Agreement, and each will continue to rely on each of such waivers in
related future dealings.  The Companies and each other party to this Agreement
warrant and represent that they have reviewed these waivers with their legal
counsel, and that they knowingly and voluntarily agree to each such waiver
following consultation with legal counsel.  THE WAIVERS IN THIS

 

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SECTION 14.10 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, SUPPLEMENTS, AND REPLACEMENTS TO OR OF THIS OR ANY OTHER LOAN
DOCUMENT.  In the event of Litigation, this Agreement may be filed as a written
consent to a trial by the court.

 

14.11      Amendments, Consents, Conflicts, and Waivers.

 

(A)   EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED, (I) THIS AGREEMENT MAY ONLY BE
AMENDED, MODIFIED OR WAIVED BY AN INSTRUMENT IN WRITING EXECUTED JOINTLY BY
BORROWER AND REQUIRED LENDERS, AND, IN THE CASE OF ANY MATTER AFFECTING
ADMINISTRATIVE AGENT (EXCEPT REMOVAL OF ADMINISTRATIVE AGENT AS PROVIDED IN
SECTION 13) BY ADMINISTRATIVE AGENT, AND MAY ONLY BE SUPPLEMENTED BY DOCUMENTS
DELIVERED OR TO BE DELIVERED IN ACCORDANCE WITH THE EXPRESS TERMS HEREOF, AND
(II) THE OTHER LOAN DOCUMENTS MAY ONLY BE THE SUBJECT OF AN AMENDMENT,
MODIFICATION, OR WAIVER IF BORROWER AND REQUIRED LENDERS, AND, IN THE CASE OF
ANY MATTER AFFECTING ADMINISTRATIVE AGENT (EXCEPT AS SET FORTH ABOVE),
ADMINISTRATIVE AGENT, HAVE APPROVED SAME.

 

(B)   ANY AMENDMENT TO OR CONSENT OR WAIVER UNDER THIS AGREEMENT OR ANY LOAN
DOCUMENT WHICH PURPORTS TO ACCOMPLISH ANY OF THE FOLLOWING MUST BE BY AN
INSTRUMENT IN WRITING EXECUTED BY BORROWER AND EXECUTED (OR APPROVED, AS THE
CASE MAY BE) BY EACH LENDER AFFECTED THEREBY, AND, IN THE CASE OF ANY MATTER
AFFECTING ADMINISTRATIVE AGENT, BY ADMINISTRATIVE AGENT: (I) EXTENDS THE DUE
DATE OR REDUCES THE AMOUNT OF ANY SCHEDULED PAYMENT OF THE OBLIGATION OR ANY
SCHEDULED REDUCTION OF THE TOTAL COMMITMENT BEYOND THE DATE SPECIFIED IN THE
LOAN DOCUMENTS; (II) REDUCES THE INTEREST RATE OR DECREASES THE AMOUNT OF
INTEREST, FEES, OR OTHER SUMS PAYABLE TO THE CREDIT PARTIES HEREUNDER (EXCEPT
SUCH REDUCTIONS AS ARE CONTEMPLATED BY THIS AGREEMENT AND REDUCTIONS IN THE
INTEREST RATE AS A RESULT OF THE WAIVER OF THE PAYMENT OF INTEREST AT THE
DEFAULT RATE); (III) CHANGES THE DEFINITION OF “APPLICABLE MARGIN” (OTHER THAN
CHANGES HAVING THE EFFECT OF INCREASING SUCH APPLICABLE MARGIN) OR “TOTAL
COMMITMENT;” OR (IV) CHANGES THIS CLAUSE (B).  WITHOUT THE CONSENT OF SUCH
LENDER, NO LENDER’S “COMMITTED SUM” MAY BE INCREASED.

 

(C)   ANY AMENDMENT TO OR CONSENT OR WAIVER UNDER THIS AGREEMENT OR ANY LOAN
DOCUMENT WHICH PURPORTS TO ACCOMPLISH ANY OF THE FOLLOWING MUST BE BY AN
INSTRUMENT IN WRITING EXECUTED BY BORROWER AND EXECUTED (OR APPROVED, AS THE
CASE MAY BE) BY EACH LENDER, AND, IN THE CASE OF ANY MATTER AFFECTING
ADMINISTRATIVE AGENT, BY ADMINISTRATIVE AGENT: (I) CHANGES THE DEFINITION OF
“PRO RATA,” “PRO RATA PART,” “REQUIRED LENDERS,” OR “TERMINATION DATE;” (II)
EXCEPT AS OTHERWISE PERMITTED BY ANY LOAN DOCUMENT, WAIVES COMPLIANCE WITH,
AMENDS, OR RELEASES (IN WHOLE OR IN PART) ANY GUARANTY OR RELEASES (IN WHOLE OR
IN PART) OR WAIVES THE REQUIREMENT TO PROVIDE ANY GUARANTY OR ANY COLLATERAL, IF
ANY, FOR THE OBLIGATION EXCEPT TO THE EXTENT EXPRESSLY PERMITTED HEREIN OR IN
ANY OTHER LOAN DOCUMENT; (III) CHANGES THIS CLAUSE (C) OR ANY OTHER MATTER
SPECIFICALLY REQUIRING THE CONSENT OF ALL LENDERS HEREUNDER; OR (IV)
SUBORDINATES ANY OF THE OBLIGATION TO ANY OTHER DEBT OF THE COMPANIES.  WITHOUT
THE CONSENT OF SUCH LENDER, NO LENDER’S “COMMITTED SUM” MAY BE INCREASED.

 

(D)   ANY CONFLICT OR AMBIGUITY BETWEEN THE TERMS AND PROVISIONS HEREIN AND
TERMS AND PROVISIONS IN ANY OTHER LOAN DOCUMENT SHALL BE CONTROLLED BY THE TERMS
AND PROVISIONS HEREIN.

 

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(E)   NO COURSE OF DEALING NOR ANY FAILURE OR DELAY BY ANY CREDIT PARTY OR ANY
OF ITS REPRESENTATIVES WITH RESPECT TO EXERCISING ANY RIGHT OF ANY CREDIT PARTY
HEREUNDER SHALL OPERATE AS A WAIVER THEREOF.  A WAIVER MUST BE IN WRITING AND
SIGNED BY ADMINISTRATIVE AGENT AND REQUIRED LENDERS (OR BY ALL LENDERS, IF
REQUIRED HEREUNDER) TO BE EFFECTIVE, AND SUCH WAIVER WILL BE EFFECTIVE ONLY IN
THE SPECIFIC INSTANCE AND FOR THE SPECIFIC PURPOSE FOR WHICH IT IS GIVEN.

 

(F)    NOTWITHSTANDING THE FOREGOING, ANY INCREASE IN THE INTEREST RATE OR
AMOUNT OF INTEREST, FEES, OR OTHER SUMS PAYABLE TO THE CREDIT PARTIES MAY BE
AGREED TO BY ADMINISTRATIVE AGENT AND BORROWER WITHOUT THE PRIOR WRITTEN CONSENT
OF ANY LENDER.

 

14.12      Multiple Counterparts.  This Agreement may be executed in a number of
identical counterparts, each of which shall be deemed an original for all
purposes and all of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart.  It is not necessary that each Lender
execute the same counterpart so long as identical counterparts are executed by
Borrower, each Lender, and Administrative Agent.  This Agreement shall become
effective when counterparts hereof shall have been executed and delivered to
Administrative Agent by each Lender, Administrative Agent, and Borrower, or,
when Administrative Agent shall have received telecopied, telexed, or other
evidence satisfactory to it that such party has executed and is delivering to
Administrative Agent a counterpart hereof.

 

14.13      Successors and Assigns; Assignments and Participations.

 

(A)   THIS AGREEMENT SHALL BE BINDING UPON, AND INURE TO THE BENEFIT OF THE
PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, EXCEPT THAT (I)
BORROWER MAY NOT, DIRECTLY OR INDIRECTLY, ASSIGN OR TRANSFER, OR ATTEMPT TO
ASSIGN OR TRANSFER, ANY OF ITS RIGHTS, DUTIES OR OBLIGATIONS UNDER ANY LOAN
DOCUMENTS WITHOUT THE EXPRESS WRITTEN CONSENT OF ALL LENDERS, AND (II) EXCEPT AS
PERMITTED UNDER THIS SECTION 14.13, NO LENDER MAY TRANSFER, PLEDGE, ASSIGN, SELL
ANY PARTICIPATION IN, OR OTHERWISE ENCUMBER ITS PORTION OF THE OBLIGATION.

 

(B)   EACH LENDER MAY ASSIGN TO ONE OR MORE ELIGIBLE ASSIGNEES ALL OR A PORTION
OF ITS RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(INCLUDING, WITHOUT LIMITATION, ALL OR A PORTION OF ITS BORROWINGS AND ITS
NOTES, IF ANY); PROVIDED, HOWEVER, THAT:

 

(I)            EACH SUCH ASSIGNMENT SHALL BE TO AN ELIGIBLE ASSIGNEE;

 

(II)           EXCEPT IN THE CASE OF AN ASSIGNMENT TO ANOTHER LENDER OR AN
ASSIGNMENT OF ALL OF A LENDER’S RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS, ANY SUCH PARTIAL ASSIGNMENT SHALL BE IN AN AMOUNT NOT
LESS THAN $1,000,000;

 

(III)          EACH SUCH ASSIGNMENT BY A LENDER SHALL BE OF A CONSTANT, AND NOT
VARYING, PERCENTAGE OF ALL OF ITS RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT;

 

(IV)          THE PARTIES TO SUCH ASSIGNMENT SHALL EXECUTE AND DELIVER TO
ADMINISTRATIVE AGENT FOR ITS ACCEPTANCE (SUCH ACCEPTANCE NOT TO BE UNREASONABLY
WITHHELD) AN ASSIGNMENT AND ACCEPTANCE AGREEMENT IN THE FORM OF EXHIBIT F
HERETO, TOGETHER WITH ANY NOTES SUBJECT TO SUCH ASSIGNMENT AND A PROCESSING FEE
OF $3,500.

 

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Upon execution, delivery, and acceptance of such Assignment and Acceptance
Agreement, the assignee thereunder shall be a party hereto and, to the extent of
such assignment, have the obligations, Rights, and benefits of a Lender under
the Loan Documents and the assigning Lender shall, to the extent of such
assignment, relinquish its rights and be released from its obligations under the
Loan Documents.  Upon the consummation of any assignment pursuant to this
Section, but only upon the request of the assignor or assignee made through
Administrative Agent, Borrower shall issue appropriate Notes upon request to the
assignor and the assignee, reflecting such Assignment and Acceptance.  If the
assignee is not incorporated under the laws of the United States of America or a
state thereof, then it shall deliver to Borrower and Administrative Agent
certification as to exemption from deduction or withholding of Taxes in
accordance with Section 4.6(d).

 

(C)   ADMINISTRATIVE AGENT SHALL MAINTAIN AT ITS ADDRESS REFERRED TO IN SECTION
14.3 A COPY OF EACH ASSIGNMENT AND ACCEPTANCE AGREEMENT DELIVERED TO AND
ACCEPTED BY IT AND A REGISTER FOR THE RECORDATION OF THE NAMES AND ADDRESSES OF
LENDERS AND THE COMMITMENT, AND PRINCIPAL AMOUNT OF THE BORROWINGS OWING TO,
EACH LENDER FROM TIME TO TIME (THE “REGISTER”).  THE ENTRIES IN THE REGISTER
SHALL BE CONCLUSIVE AND BINDING FOR ALL PURPOSES, ABSENT MANIFEST ERROR, AND
BORROWER, ADMINISTRATIVE AGENT AND LENDERS MAY TREAT EACH.  PERSON WHOSE NAME IS
RECORDED IN THE REGISTER AS A LENDER HEREUNDER FOR ALL PURPOSES OF THE LOAN
DOCUMENTS.  THE REGISTER SHALL BE AVAILABLE FOR INSPECTION BY BORROWER OR ANY
LENDER AT ANY REASONABLE TIME AND FROM TIME TO TIME UPON REASONABLE PRIOR
NOTICE.  UPON THE CONSUMMATION OF ANY ASSIGNMENT IN ACCORDANCE WITH THIS SECTION
14.13, SCHEDULE 2.1 SHALL AUTOMATICALLY BE DEEMED AMENDED (TO THE EXTENT
REQUIRED) BY ADMINISTRATIVE AGENT TO REFLECT THE NAME, ADDRESS, AND RESPECTIVE
COMMITTED SUMS OF THE ASSIGNOR AND ASSIGNEE.

 

(D)   UPON ITS RECEIPT OF AN ASSIGNMENT AND ACCEPTANCE AGREEMENT EXECUTED BY THE
PARTIES THERETO, TOGETHER WITH ANY NOTES, IF ANY, SUBJECT TO SUCH ASSIGNMENT AND
PAYMENT OF THE PROCESSING FEE, ADMINISTRATIVE AGENT SHALL, IF SUCH ASSIGNMENT
AND ACCEPTANCE HAS BEEN COMPLETED AND IS IN SUBSTANTIALLY THE FORM OF EXHIBIT F
HERETO, (I) ACCEPT SUCH ASSIGNMENT AND ACCEPTANCE AGREEMENT, (II) RECORD THE
INFORMATION CONTAINED THEREIN IN THE REGISTER, AND (III) GIVE PROMPT NOTICE
THEREOF TO THE PARTIES THERETO.

 

(E)   SUBJECT TO THE PROVISIONS OF THIS SECTION AND IN ACCORDANCE WITH
APPLICABLE LAW, ANY LENDER MAY, IN THE ORDINARY COURSE OF ITS COMMERCIAL BANKING
BUSINESS AND IN ACCORDANCE WITH APPLICABLE LAW, AT ANY TIME SELL TO ONE OR MORE
PERSONS (EACH A “PARTICIPANT”) PARTICIPATING INTERESTS IN ITS PORTION OF THE
OBLIGATION.  IN THE EVENT OF ANY SUCH SALE TO A PARTICIPANT, (I) SUCH LENDER
SHALL REMAIN A “LENDER” UNDER THIS AGREEMENT AND THE PARTICIPANT SHALL NOT
CONSTITUTE A “LENDER” HEREUNDER, (II) SUCH LENDER’S OBLIGATIONS UNDER THIS
AGREEMENT SHALL REMAIN UNCHANGED, (III) SUCH LENDER SHALL REMAIN SOLELY
RESPONSIBLE FOR THE PERFORMANCE THEREOF, (IV) SUCH LENDER SHALL REMAIN THE
HOLDER OF ITS SHARE OF THE PRINCIPAL DEBT FOR ALL PURPOSES UNDER THIS AGREEMENT,
(V) BORROWER AND ADMINISTRATIVE AGENT SHALL CONTINUE TO DEAL SOLELY AND DIRECTLY
WITH SUCH LENDER IN CONNECTION WITH SUCH LENDER’S RIGHTS AND OBLIGATIONS UNDER
THE LOAN DOCUMENTS, AND (VI) SUCH LENDER SHALL BE SOLELY RESPONSIBLE FOR ANY
WITHHOLDING TAXES OR ANY FLING OR REPORTING REQUIREMENTS RELATING TO SUCH
PARTICIPATION AND SHALL HOLD BORROWER AND ADMINISTRATIVE AGENT AND THEIR
RESPECTIVE SUCCESSORS, PERMITTED ASSIGNS, OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, AND REPRESENTATIVES HARMLESS AGAINST THE SAME.  PARTICIPANTS SHALL HAVE
NO RIGHTS UNDER THE LOAN DOCUMENTS, OTHER THAN CERTAIN VOTING RIGHTS AS PROVIDED
BELOW.  SUBJECT

 

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TO THE FOLLOWING, EACH LENDER SHALL BE ENTITLED TO OBTAIN (ON BEHALF OF ITS
PARTICIPANTS) THE BENEFITS OF SECTION 4 WITH RESPECT TO ALL PARTICIPATIONS IN
ITS PART OF THE OBLIGATION OUTSTANDING FROM TIME TO TIME SO LONG AS BORROWER
SHALL NOT BE OBLIGATED TO PAY ANY AMOUNT IN EXCESS OF THE AMOUNT THAT WOULD BE
DUE TO SUCH LENDER UNDER SECTION 4 CALCULATED AS THOUGH NO PARTICIPATION HAVE
BEEN MADE.  NO LENDER SHALL SELL ANY PARTICIPATING INTEREST UNDER WHICH THE
PARTICIPANT SHALL HAVE ANY RIGHTS TO APPROVE ANY AMENDMENT, MODIFICATION, OR
WAIVER OF ANY LOAN DOCUMENT, EXCEPT TO THE EXTENT SUCH AMENDMENT, MODIFICATION,
OR WAIVER EXTENDS THE DUE DATE FOR PAYMENT OF ANY AMOUNT IN RESPECT OF PRINCIPAL
(OTHER THAN MANDATORY PREPAYMENTS), INTEREST, OR FEES DUE UNDER THE LOAN
DOCUMENTS, REDUCES THE INTEREST RATE OR THE AMOUNT OF PRINCIPAL OR FEES
APPLICABLE TO THE OBLIGATION (EXCEPT SUCH REDUCTIONS AS ARE CONTEMPLATED BY THIS
AGREEMENT), OR RELEASES ANY MATERIAL GUARANTY OR ALL OR ANY SUBSTANTIAL PORTION
OF ANY COLLATERAL, IF ANY, FOR THE OBLIGATION UNDER THE LOAN DOCUMENTS (EXCEPT
SUCH RELEASES AS ARE CONTEMPLATED BY THIS AGREEMENT); PROVIDED THAT IN THOSE
CASES WHERE A PARTICIPANT IS ENTITLED TO THE BENEFITS OF SECTION 4 OR A LENDER
GRANTS RIGHTS TO ITS PARTICIPANTS TO APPROVE AMENDMENTS TO OR WAIVERS OF THE
LOAN DOCUMENTS RESPECTING THE MATTERS PREVIOUSLY DESCRIBED IN THIS SENTENCE,
SUCH LENDER MUST INCLUDE A VOTING MECHANISM IN THE RELEVANT PARTICIPATION
AGREEMENT OR AGREEMENTS, AS THE CASE MAY BE, WHEREBY A MAJORITY OF SUCH LENDER’S
PORTION OF THE OBLIGATION (WHETHER HELD BY SUCH LENDER OR PARTICIPANT) SHALL
CONTROL THE VOTE FOR ALL OF SUCH LENDER’S PORTION OF THE OBLIGATION.  EXCEPT IN
THE CASE OF THE SALE OF A PARTICIPATING INTEREST TO ANOTHER LENDER, THE RELEVANT
PARTICIPATION AGREEMENT SHALL NOT PERMIT THE PARTICIPANT TO TRANSFER, PLEDGE,
ASSIGN, SELL PARTICIPATIONS IN, OR OTHERWISE ENCUMBER ITS PORTION OF THE
OBLIGATION, UNLESS THE CONSENT OF THE TRANSFERRING LENDER (WHICH CONSENT WILL
NOT BE UNREASONABLY WITHHELD) HAS BEEN OBTAINED.

 

(F)    NOTWITHSTANDING ANY OTHER PROVISION SET FORTH IN THIS AGREEMENT, ANY
LENDER MAY AT ANY TIME ASSIGN AND PLEDGE ALL OR ANY PORTION OF ITS BORROWINGS
AND ANY NOTES TO ANY FEDERAL RESERVE BANK AS COLLATERAL SECURITY PURSUANT TO
REGULATION A AND ANY OPERATING CIRCULAR ISSUED BY SUCH FEDERAL RESERVE BANK.  NO
SUCH ASSIGNMENT SHALL RELEASE THE ASSIGNING LENDER FROM ITS OBLIGATIONS
HEREUNDER.

 

(G)   ANY LENDER MAY FURNISH ANY INFORMATION CONCERNING THE COMPANIES IN THE
POSSESSION OF SUCH LENDER FROM TIME TO TIME TO ELIGIBLE ASSIGNEES AND
PARTICIPANTS (INCLUDING PROSPECTIVE ELIGIBLE ASSIGNEES AND PARTICIPANTS).

 

14.14      Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances.  The obligations of each Company under the Loan Documents shall
remain in full force and effect until termination of the Total Commitment and
payment in full of the Principal Debt and of all interest, fees, and other
amounts of the Obligation then due and owing, except that the indemnification
and payment obligations set forth in Sections 4, 12, and 14, and any other
provisions under the Loan Documents expressly intended to survive by the terms
hereof or by the terms of the applicable Loan Documents, shall survive such
termination.  If at any time any payment of the Obligation is rescinded or must
be otherwise restored or returned upon the insolvency, bankruptcy, or
reorganization of any Company or otherwise, then the obligations of each Company
under the Loan Documents with respect to such payment shall be reinstated as
though such payment had been due but not made at such time.

 

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14.15      Designated Senior Indebtedness.  Borrower hereby designates the
Obligation (and all Borrowings comprising the Obligation) as “Designated Senior
Indebtedness” for purposes of the Senior Subordinated Note Indenture and the
Subordinated Note Indenture.

 

 

[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]

 

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SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
PROTECTION ONE ALARM MONITORING, INC., AS BORROWER,
POI ACQUISITION, L.L.C., AS ADMINISTRATIVE AGENT,
AND
THE LENDERS NAMED HEREIN

 

EXECUTED as of the day and year first above written.

 

 

 

PROTECTION ONE ALARM MONITORING INC., a
Delaware corporation, as Borrower

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

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SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
PROTECTION ONE ALARM MONITORING, INC., AS BORROWER,
POI ACQUISITION, L.L.C., AS ADMINISTRATIVE AGENT,
AND
THE LENDERS NAMED HEREIN

 

 

 

POI ACQUISITION, L.L.C.,

 

as Administrative Agent and a Lender

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

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SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
PROTECTION ONE ALARM MONITORING, INC., AS BORROWER,
POI ACQUISITION, L.L.C., AS ADMINISTRATIVE AGENT,
AND
THE LENDERS NAMED HEREIN

 

 

 

QUADRANGLE MASTER FUNDING LTD.,

 

as a Lender

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

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EXHIBIT A-1

 

COMPLIANCE CERTIFICATE

 

This Compliance Certificate is executed and delivered by Protection One Alarm
Monitoring, Inc., a Delaware corporation (“Borrower”), to POI Acquisition,
L.L.C., as Administrative Agent (“Administrative Agent”), pursuant to Section
9.3 of that certain Amended and Restated Credit Agreement dated as of [•], 2005,
as amended, between Borrower, Administrative Agent, and the Lenders defined
therein (as modified, amended, renewed, extended, or restated from time to time,
the “Credit Agreement”). Capitalized terms used herein shall, unless otherwise
indicated, have the respective meanings set forth in the Credit Agreement. The
undersigned hereby certifies to the Credit Parties as follows:

 

1.             The undersigned is an officer of Borrower in the position set
forth under my signature below.

 

2.             I have reviewed the activities of the Companies during the most
recently ended fiscal quarter of the Companies.

 

3.             Each Company has performed and complied with all agreements and
conditions contained in the Credit Agreement that are required to be performed
or complied with by such Company.

 

4.             As of the date hereof, all of the representations and warranties
of the Companies contained in the Credit Agreement and in each of the Loan
Documents are true and correct in all material respects (except to the extent
that they speak to a specific date or are, based on facts which have changed as
a result of events, occurrences, or transactions expressly contemplated or
otherwise permitted by the Credit Agreement).

 

5.             No Unmatured Default or Default exists.

 

6.             The consolidated Financial Statements of the Companies attached
to this certificate were prepared in accordance with GAAP, and present fairly in
all material respects the consolidated financial condition and results of
operations of the Companies as of, and for the (three (3), six (6), or nine (9)
months, or fiscal year) ended on,                      ,         the (“Subject
Period’) [(subject only to normal year-end audit adjustments)].

 

7.             The following covenant computations, together with the supporting
schedules attached hereto, are true and correct:

 

--------------------------------------------------------------------------------

 

 

(a)

Leverage Ratio.

 

 

 

 

 

 

 

 

 

 

 

Consolidated Debt

 

$

 

(1)

 

 

 

 

 

 

 

 

Consolidated EBITDA (See Schedule 1)

 

 

(2)

 

 

 

 

 

 

 

 

Ratio of (1) to (2)

 

 

 

 

 

 

 

 

 

 

 

Maximum Permitted

 

5.75 to 1.0

 

 

 

 

 

 

 

 

(b)

Interest Coverage Ratio.

 

 

 

 

 

 

 

 

 

 

 

Consolidated EBITDA (See  Schedule 1)

 

$

 

(1)

 

 

 

 

 

 

 

 

Interest Expense

 

 

(2)

 

 

 

Ratio of (1) to (2)

 

 

 

 

 

 

 

 

 

 

 

Minimum Required

 

2.10 to 1.0

 

 

 

Date:

 

 

 

 

 

 

PROTECTION ONE ALARM MONITORING, INC.,

 

a Delaware corporation

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

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EXHIBIT B

 

REVOLVING CREDIT NOTE

 

$                      

 

New York, New York

As of [•], 2005

 

1.     FOR VALUE RECEIVED, PROTECTION ONE ALARM MONITORING, INC., a Delaware
corporation (“Maker”), hereby unconditionally promises to pay to the order of
                                  (“Payee”) or its registered assigns, at the
address of Administrative Agent (defined below) set forth in the Credit
Agreement defined below, the sum of                      Dollars ($
                   ) (or, if less, so much thereof as may be advanced), in
lawful money of the United States of America.  Capitalized terms not defined
herein shall have the meaning assigned to those terms in the Credit Agreement.

 

2.     The unpaid principal amount of, and accrued unpaid interest on, this Note
from time to time outstanding shall be due and payable in accordance with the
Credit Agreement.

 

3.     The unpaid principal balance advanced and outstanding hereunder shall
bear interest from the date of advance until maturity at the rate per annum
provided in the Credit Agreement that is selected by Maker pursuant to the
Credit Agreement.  The interest rate specified in this section is subject to
adjustment under the circumstances described in the Credit Agreement.  Interest
shall be computed in the manner provided in the Credit Agreement.

 

4.     Notwithstanding any provision contained in this Note or any other
document executed or delivered in connection with this Note or in connection
with the Credit Agreement, Payee shall never be deemed to have contracted for or
be entitled to receive, collect, or apply as interest on this Note, any amount
in excess of the maximum rate of interest permitted to be charged by applicable
law, and, if Payee ever receives, collects, or applies as interest any such
excess, then the amount that would be excessive interest shall be applied to
reduce the unpaid principal balance of this Note, and, if the principal balance
of this Note is paid in full by that application, then any remaining excess
shall promptly be paid to Maker.  In determining whether the interest paid or
payable under any specific contingency exceeds the highest lawful rate, Maker
and Payee shall, to the maximum extent permitted under applicable law, (a)
characterize any non-principal payment (other than payments expressly designated
as interest payments hereunder) as an expense or fee rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) spread the
total amount of interest throughout the entire contemplated term of this Note so
that the interest rate is uniform throughout that term.

 

5.     This Note has been executed and delivered pursuant to that certain
Amended and Restated Credit Agreement (as modified, amended, renewed, extended,
or restated from time to time, the “Credit Agreement”) dated as of [•], 2005,
executed by and between Maker, POI Acquisition L.L.C., as Administrative Agent
(together with any successor or assigns, the “Administrative Agent”), and the
Lenders defined therein, and is one of the “Notes” referred to therein, and the
holder of this Note is entitled to the benefits provided in the Credit
Agreement.  Reference is hereby made to the Credit Agreement for a statement of
(a) the obligation of Payee to advance funds hereunder, (b) the prepayment
rights and obligations of Maker, and (c) the events upon which the maturity of
this Note may be accelerated.

 

--------------------------------------------------------------------------------

 

6.     Except as expressly provided in the Credit Agreement, Maker and all
sureties, endorsers, guarantors and other parties ever liable for payment of any
sums payable pursuant to the terms of this Note, jointly and severally waive
demand, presentment for payment, protest, notice of protest, notice of
acceleration, notice of intent to accelerate, diligence in collection, the
bringing of any suit against any party, and any notice of or defense on account
of any extensions, renewals, partial payments, or changes in any manner of or in
this Note or in any of its terms, provisions, and covenants, or any releases or
substitutions of any security, or any delay, indulgence, or other act of any
trustee or any holder hereof, whether before or after maturity.

 

7.     All Borrowings made by Payee, the respective Interest Periods thereof (if
applicable), and all repayments of the principal thereof may be recorded by
Payee and, before any transfer hereof, endorsed by Payee on the schedule
attached hereto, or on a continuation of the schedule attached to and a part
hereof; provided that the failure of Payee to record any endorsement shall not
affect the obligation of Maker hereunder or under the Credit Agreement.

 

8.     This Note is being executed and delivered, and is intended to be
performed in the State of New York (without regard to conflicts of law
principles).  Except to the extent that the laws of the United States may apply
to the terms hereof, the substantive laws of the State of New York (without
regard to conflicts of law principles) shall govern the validity, construction,
enforcement, and interpretation of this Note.

 

 

PROTECTION ONE ALARM MONITORING, INC.,

 

a Delaware corporation

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

--------------------------------------------------------------------------------

 

EXHIBIT C-1

 

FORM OF NOTICE OF BORROWING

 

1.     Submission Pursuant To Credit Agreement.  This Notice of Borrowing is
executed and delivered by Protection One Alarm Monitoring, Inc., a Delaware
corporation (“Borrower”), to POI Acquisition, L.L.C., as Administrative Agent
(the “Administrative Agent”), pursuant to Section 2.4(a) of that certain Amended
and Restated Credit Agreement dated as of [•], 2005, between Borrower,
Administrative Agent, and the Lenders defined therein (as modified, amended,
renewed, extended, or restated from time to time, the “Credit Agreement”). 
Capitalized terms used herein shall, unless otherwise indicated, have the
respective meanings set forth in the Credit Agreement.

 

2.     Request For Borrowing.  Borrower hereby requests that Lenders make a
Borrowing to Borrower pursuant to the Credit Agreement as follows:

 

(A)

Date of Borrowing*

 

(B)

Amount of Borrowing**

 

(C)

Type of Borrowing***

 

(D)

For a Eurodollar Borrowing, the Interest Period and the last day thereof****

 

 

3.     Representations, Warranties and Certifications.  Borrower hereby
represents, warrants, and certifies to the Credit Parties that, as of the date
of, and after giving effect to, the Borrowing requested herein:

 

(a)   the Borrowing will not cause the Total Principal Debt to exceed the Total
Commitment;

 

(b)   no Unmatured Default or Default exists;

 

(c)   the representations and warranties of a continuing nature contained in the
Credit Agreement and each of the other Loan Documents are true and correct in
all material respects (except to the extent that they speak to a specific date
or are based on facts which have changed as a result of events, occurrences, or
transactions expressly contemplated or otherwise permitted by the Credit
Agreement), with the same force and effect as though made on and as of the date
of the Borrowing; and

 

(d)   no Material Adverse Event has occurred since the date of the quarterly and
audited annual financial statements most recently delivered by Borrower to
Lenders pursuant to Section 9.3 of the Credit Agreement.

 

4.     Proceeds of Borrowing.  Administrative Agent is authorized to deposit the
proceeds of the Borrowing requested hereby to:
                                                            .

 

--------------------------------------------------------------------------------

 

5.     Execution Authorized.  This Notice of Borrowing is executed on
                   , 20    , by a Responsible Officer.  The undersigned, in such
capacity as a Responsible Officer of Borrower and not individually, hereby
certifies each and every matter contained herein to be true and correct.

 

 

PROTECTION ONE ALARM MONITORING, INC.,

 

a Delaware corporation

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

--------------------------------------------------------------------------------

*                                         Must be a Business Day occurring prior
to the Termination Date and (a) must be at least three (3) Business Days
following receipt by Administrative Agent of this Notice of Borrower for any
Eurodollar Borrowing, and (b) must be at least one (1) Business Days following
receipt by Administrative Agent of this Notice of Borrower for any Base Rate
Borrowing.

 

**                                  Not less than (a) $5,000,000, (b) a greater
integral multiple of $1,000,000 or (c) the unborrowed balance of the Total
Commitment.

 

***                           Eurodollar Borrowing or Base Rate Borrowing.  No
Borrowing shall be a Base Rate Borrowing except pursuant to Sections 4.1, 4.2 or
4.3 of the Credit Agreement.

 

****                    1 or 3 months, or other periods requested by Borrower to
the extent available from Lenders — in no event may the Interest Period end
after the Termination Date.

 

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EXHIBIT C-2

 

FORM OF NOTICE OF CONVERSION/CONTINUATION

 

1.     Submission Pursuant To Credit Agreement.  This Notice of Conversion is
executed and delivered by Protection One Alarm Monitoring, Inc., a Delaware
corporation (“Borrower”), to POI Acquisition, L.L.C., as Administrative Agent
(the “Administrative Agent”), pursuant to Section 2.4(a) of that certain Amended
and Restated Credit Agreement dated as of [•],2005, between Borrower,
Administrative Agent, and the Lenders defined therein (as modified, amended,
renewed, extended, or restated from time to time, the “Credit Agreement”). 
Capitalized terms used herein shall, unless otherwise indicated, have the
respective meanings set forth in the Credit Agreement.

 

2.     Conversion Request.  The undersigned hereby gives you notice pursuant to
Section 3.10 of the Credit Agreement that it elects to convert a Borrowing under
the Credit Agreement from one Type to another Type or elects a new Interest
Period for an existing Eurodollar Borrowing, and in that connection sets forth
below the terms on which such election is requested to be made:

 

(A)

Date of conversion or last day of applicable Interest Period*

 

(B)

Principal amount of existing Borrowing being converted or continued**

 

(C)

New Type of Borrowing selected (or Type of Borrowing continued)***

 

(D)

For conversion to, or continuation of, a Eurodollar Borrowing, Interest Period
selected and the last day thereof****

 

 

3.     Representations, Warranties and Certifications.  Borrower hereby
represents, warrants, and certifies to the Credit Parties that, as of the date
of, and after giving effect to, the Borrowing requested herein:

 

(a)   no Unmatured Default or Default exists; and

 

(b)   the representations and warranties of a continuing nature contained in the
Credit Agreement and each of the other Loan Documents are true and correct in
all material respects (except to the extent that they speak to a specific date
or are based on facts which have changed as a result of events, occurrences, or
transactions expressly contemplated or otherwise permitted by the Credit
Agreement), with the same force and effect as though made on and as of the date
of the Borrowing.

 

4.     Execution Authorized.  This Notice of Borrowing is executed on
                      , 20     , by a Responsible Officer.  The undersigned, in
such capacity as a Responsible Officer of

 

--------------------------------------------------------------------------------

 

Borrower and not individually, hereby certifies each and every matter contained
herein to be true and correct.

 

 

PROTECTION ONE ALARM MONITORING, INC.,

 

a Delaware corporation

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

--------------------------------------------------------------------------------

*                                         Must be a Business Day at least (a)
three (3) Business Days following receipt by Administrative Agent of this Notice
of Conversion from a Base Rate Borrowing to a Eurodollar Rate Borrowing or a
continuation of a Eurodollar Rate Borrowing for an additional Interest Period,
and (b) one (l) Business Day following receipt by Administrative Agent of this
Notice of Conversion for a conversion from a Eurodollar Rate Borrowing to a Base
Rate Borrowing.

 

**                                  Not less than $5,000,000 or a greater
integral multiple of $1,000,000 (if a Eurodollar Rate Borrowing).

 

***                           Eurodollar Rate Borrowing or Base Rate Borrowing. 
No Borrowing shall be a Base Rate Borrowing except pursuant to Sections 4.1, 4.2
or 4.3 of the Credit Agreement.

 

****                    1 or 3 months, or other periods requested by Borrower to
the extent available from Lenders – in no event may the Interest Period end
after the Termination Date.

 

--------------------------------------------------------------------------------

 

EXHIBIT D-1

 

FORM OF POI GUARANTY

 

UNCONDITIONAL GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT is executed as of [•], 2005, by PROTECTION ONE, INC., a
Delaware corporation (“Guarantor”) for the benefit of the Credit Parties defined
below.

 

R E C I T A L S:

 

1.     Protection One Alarm Monitoring, Inc., a Delaware corporation
(“Borrower”), may be indebted to the Credit Parties pursuant to that certain
Amended and Restated Credit Agreement dated of even date herewith (herein
referred to, together with all amendments, modifications, restatements, or
supplements thereof, as the “Credit Agreement”), by and between Borrower, POI
Acquisition, L.L.C. (“Administrative Agent”), as Administrative Agent, and the
Lenders defined therein (Administrative Agent and the Lenders, together with
their respective successors and assigns are herein called the “Credit Parties”).

 

2.     Capitalized terms used herein shall, unless otherwise indicated, have the
respective meanings set forth in the Credit Agreement.

 

3.     The Credit Parties are not willing to make loans under the Credit
Agreement or otherwise extend credit to Borrower unless Guarantor
unconditionally guarantees payment of all present and future indebtedness and
obligations of Borrower to the Credit Parties under the Credit Agreement and the
Loan Documents.

 

4.     Guarantor will benefit from the Credit Parties’ extension of credit to
Borrower.

 

NOW, THEREFORE, as an inducement to the Credit Parties to enter into the Credit
Agreement and to make loans to Borrower thereunder, and to extend such credit to
Borrower as the Credit Parties may from time to time agree to extend, and for
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, Guarantor hereby guarantees payment of the
Guaranteed Debt (hereinafter defined) as more specifically described herein
below in Section 1.3 and hereby agrees as follows:

 

SECTION 1

 

NATURE AND SCOPE OF GUARANTY

 

1.1  Definition of Guaranteed Debt.  As used herein, the term “Guaranteed Debt”
means the Obligation.

 

1.2  Guaranteed Debt Not Reduced by Offset.  The Guaranteed Debt, and the
liabilities and obligations of Guarantor to the Credit Parties hereunder, shall
not be reduced, discharged, or released because or by reason of any existing or
future offset, claim, or defense of Borrower, or any other party, against any
Credit Party or against payment of the Guaranteed Debt, whether such offset,
claim, or defense arises in connection with the Guaranteed Debt (or the
transactions

 

--------------------------------------------------------------------------------

 

creating the Guaranteed Debt) or otherwise (other than the defense of the
payment in full of the Obligation).  Without limiting the foregoing or
Guarantor’s liability hereunder, to the extent that any Credit Party advances
funds or extends credit to Borrower, and does not receive payments or benefits
thereon in the amounts and at the times required or provided by the Credit
Agreement and the other Loan Documents, Guarantor is absolutely liable to make
such payments to (and confer such benefits on) such Credit Party, on a timely
basis.

 

1.3  Guaranty of Obligation.  Guarantor hereby irrevocably and unconditionally
guarantees to the Credit Parties (a) the due and punctual payment of the
Guaranteed Debt, and (b) the timely performance of all other obligations now or
hereafter owed by Borrower to the Credit Parties under the Credit Agreement. 
Guarantor hereby irrevocably and unconditionally covenants and agrees that it is
liable for the Guaranteed Debt as primary obligor.

 

1.4  Nature of Guaranty.  This Guaranty Agreement is intended to be an
irrevocable, absolute, continuing guaranty of payment and is not a guaranty of
collection.  This Guaranty Agreement may not be revoked by Guarantor, provided,
however, if, according to applicable law, it shall ever be determined or held
that a guarantor under a continuing guaranty such as this Guaranty Agreement
shall have the absolute right, notwithstanding the express agreement of such a
guarantor otherwise, to revoke such guaranty as to Guaranteed Debt which has
then not yet arisen, then Guarantor may deliver to Administrative Agent written
notice that Guarantor will not be liable hereunder for any Guaranteed Debt
created, incurred, or arising after the giving of such notice, and such notice
will be effective as to Guarantor from and after (but not before) such times as
said written notice is actually delivered to and received by and receipted for
in writing by Administrative Agent, provided that such notice shall not in
anywise affect, impair, or limit the liability and responsibility of any other
person or entity with respect to any Guaranteed Debt theretofore existing or
thereafter existing, arising, renewed, extended, or modified; provided, further,
that such notice shall not affect, impair, or release the liability and
responsibility of Guarantor with respect to Guaranteed Debt created, incurred,
or arising prior to the receipt of such notice by Administrative Agent as
aforesaid, or in respect of any renewals, extensions, or modifications of such
Guaranteed Debt, or in respect of interest or costs of collection thereafter
incurred on or with respect to such Guaranteed Debt, or with respect to
attorneys’ fees thereafter becoming payable hereunder with respect to such
Guaranteed Debt, and shall continue to be effective with respect to any
Guaranteed Debt arising or created after any attempted revocation by Guarantor. 
The fact that at any time or from time to time the Guaranteed Debt may be
increased, reduced, or paid in full shall not release, discharge, or reduce the
obligation of Guarantor with respect to indebtedness or obligations of Borrower
to the Credit Parties thereafter incurred (or other Guaranteed Debt thereafter
arising) under the Credit Agreement, the Notes, or otherwise.  This Guaranty
Agreement may be enforced by the Credit Parties and any subsequent holder of the
Guaranteed Debt and shall not be discharged by the assignment or negotiation of
all or part of the Guaranteed Debt.

 

1.5  Payment by Guarantor.  If all or any part of the Guaranteed Debt shall not
be punctually paid when due, whether at maturity or earlier by acceleration or
otherwise, then Guarantor shall, immediately upon demand by Administrative
Agent, and without presentment, protest, notice of protest, notice of
nonpayment, notice of intention to accelerate or acceleration, or any other
notice whatsoever, pay in lawful money of the United States of America, the
amount due on the Guaranteed Debt to Administrative Agent, for the benefit of
the Credit Parties, at

 

--------------------------------------------------------------------------------

 

Administrative Agent’s principal office in New York, New York.  Such demand(s)
may be made at any time coincident with or after the time for payment of all or
part of the Guaranteed Debt, and may be made from time to time with respect to
the same or different items of Guaranteed Debt.  Such demand shall be deemed
made, given, and received in accordance with Section 5.2 hereof.

 

1.6  Payment of Expenses.  In the event that Guarantor should breach or fail to
timely perform any provisions of this Guaranty Agreement, then Guarantor shall,
immediately upon demand by Administrative Agent, pay to Administrative Agent,
for the benefit of the Credit Parties, all costs and expenses (including court
costs and reasonable attorneys’ fees) incurred by the Credit Parties in the
enforcement hereof or the preservation of the Credit Parties’ rights hereunder. 
The covenant contained in this Section 1.6 shall survive the payment of the
Guaranteed Debt.

 

1.7  No Duty to Pursue Others.  It shall not be necessary for any Credit Party
(and Guarantor hereby, waives any rights which Guarantor may have to require any
Credit Party), in order to enforce such payment by Guarantor, first to (a)
institute suit or exhaust its remedies against Borrower or others liable on the
Guaranteed Debt or any other person, (b) enforce the Credit Parties’ rights
against any security which shall ever have been given to secure the Guaranteed
Debt, (c) enforce the Credit Parties’s rights against any other guarantors of
the Guaranteed Debt, (d) join Borrower or any others liable on the Guaranteed
Debt in any action seeking to enforce this Guaranty Agreement, (e) exhaust any
remedies available to the Credit Parties against any security which shall ever
have been given to secure the Guaranteed Debt, or (e) resort to any other means
of obtaining payment of the Guaranteed Debt.  The Credit Parties shall not be
required to mitigate damages or take any other action to reduce, collect, or
enforce the Guaranteed Debt.  Further, Guarantor expressly waives each and every
right to which it may be entitled by virtue of the suretyship law of the State
of New York.

 

1.8  Waiver of Notices, etc.  Guarantor agrees to the provisions of the Credit
Agreement, the Notes, and the other Loan Documents, and hereby waives notice of
(a) any loans or advances made by any Credit Party to Borrower, (b) acceptance
of this Guaranty Agreement, (c) any amendment or extension of the Credit
Agreement, the Notes, the other Loan Documents, or any other instrument or
document pertaining to all or any part of the Guaranteed Debt, (d) the execution
and delivery by Borrower and any Credit Party of any other loan or credit
agreement or of Borrower’s execution and delivery of any promissory notes or
other documents in connection therewith, (e) the occurrence of any Default or
Unmatured Default, (f) any Credit Party’s transfer or disposition of the
Guaranteed Debt, or any part thereof, (g) sale or foreclosure (or posting or
advertising for sale or foreclosure) of any collateral for the Guaranteed Debt,
(h) protest, proof of nonpayment, or default by Borrower, or (i) any other
action at any time taken or omitted by any Credit Party, and, generally, all
demands and notices of every kind in connection with this Guaranty Agreement,
the Credit Agreement, the Notes, the other Loan Documents, and any documents or
agreements evidencing, securing, or relating to any of the Guaranteed Debt and
the obligations hereby guaranteed.

 

1.9  Effect of Bankruptcy, Other Matters.  In the event that, pursuant to any
insolvency, bankruptcy, reorganization, receivership, or other debtor relief
law, or any judgment, order, or decision thereunder, or for any other reason,
(a) any Credit Party must rescind or restore any

 

--------------------------------------------------------------------------------

 

payment, or any part thereof, received by such Credit Party in satisfaction of
the Guaranteed Debt, as set forth herein, any prior release or discharge from
the terms of this Guaranty Agreement given to Guarantor by such Credit Party
shall be without effect, and this Guaranty Agreement shall remain in full force
and effect, or (b) Borrower shall cease to be liable to the Credit Parties for
any of the Guaranteed Debt (other than by reason of the indefeasible payment in
full thereof by Borrower), the obligations of Guarantor under this Guaranty
Agreement shall remain in full force and effect.  It is the intention of the
Credit Parties and Guarantor that Guarantor’s obligations hereunder shall not be
discharged except by Guarantor’s performance of such obligations and then only
to the extent of such performance.  Without limiting the generality of the
foregoing, it is the intention of the Credit Parties and Guarantor that the
filing of any bankruptcy or similar proceeding by or against Borrower or any
other person or party obligated on any portion of the Guaranteed Debt shall not
affect the obligations of Guarantor under this Guaranty Agreement or the rights
of the Credit Parties under this Guaranty Agreement, including, without
limitation, the right or ability of the Credit Parties to pursue or institute
suit against Guarantor for the entire Guaranteed Debt.

 

1.10        Loan Documents.  By execution hereof Guarantor covenants and agrees
that certain representations and warranties set forth in the Loan Documents are
applicable to Guarantor, and Guarantor reaffirms that each such representation
and warranty is true and correct.  Guarantor acknowledges and agrees that this
Guaranty is subject to the offset provisions of the Loan Documents in favor of
the Credit Parties.  If the Credit Agreement shall cease to remain in effect for
any reason whatsoever during any period and any part of the Guaranteed Debt
remains unpaid, then the terms, covenants, and agreements incorporated herein by
reference shall nevertheless continue in full force and effect as obligations of
Guarantor under this Guaranty.  Guarantor shall take, or refrain from taking, as
the case may be, each action that is necessary to be taken or not taken, as the
case may be, so that no Unmatured Default or Default is caused by the failure to
take or refrain from taking such action, as the case may be.

 

SECTION 2

 

ADDITIONAL EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTOR’S OBLIGATIONS

 

Guarantor hereby consents and agrees to each of the following, and agrees that
Guarantor’s obligations under this Guaranty Agreement shall not be released,
diminished, impaired, reduced, or adversely affected by any of the following,
and waives any common law, equitable, statutory, or other rights (including
without limitation rights to notice) which Guarantor might otherwise have as a
result of or in connection with any of the following:

 

2.1  Modifications, etc.  Any renewal, extension, increase, modification,
alteration, or rearrangement of all or any part of the Guaranteed Debt, or of
the Credit Agreement, the Notes, or any other Loan Document;

 

2.2  Adjustment, etc.  Any adjustment, indulgence, forbearance, or compromise
that might be granted or given by any Credit Party to Borrower or Guarantor;

 

--------------------------------------------------------------------------------

 

2.3  Condition, Composition or Structure of Borrower or Guarantor.  The
insolvency, bankruptcy, arrangement, adjustment, composition, structure,
liquidation, disability, dissolution, or lack of power of Borrower or any other
party at anytime liable for the payment of all or part of the Guaranteed Debt;
or any dissolution of Borrower or Guarantor, or any sale, lease, or transfer of
any or all of the assets of Borrower or Guarantor, or any changes in name,
business, location, composition, structure, or changes in the shareholders,
partners, or members (whether by accession, secession, cessation, death,
dissolution, transfer of assets, or other matter) of Borrower or Guarantor; or
any reorganization of Borrower or Guarantor.

 

2.4  Invalidity of Guaranteed Debt.  The invalidity, illegality, or
unenforceability of all or any part of the Guaranteed Debt, or any document or
agreement executed in connection with the Guaranteed Debt, for any reason
whatsoever, including without limitation the fact that (a) the Guaranteed Debt,
or any part thereof, exceeds the amount permitted by law, (b) the act of
creating the Guaranteed Debt or any part thereof is ultra vires, (c) the
officers or representatives executing the Credit Agreement, the Notes, the other
Loan Documents, or other documents or otherwise creating the Guaranteed Debt
acted in excess of their authority, (d) the Guaranteed Debt violates applicable
usury laws, (e) Borrower has valid defenses, claims, or offsets (whether at law,
in equity, or by agreement) which render the Guaranteed Debt wholly or partially
uncollectible from Borrower (other than the defense of the payment in full of
the Guaranteed Debt), (f) the creation, performance, or repayment of the
Guaranteed Debt (or the execution, delivery, and performance of any document or
instrument representing part of the Guaranteed Debt or executed in connection
with the Guaranteed Debt, or given to secure the repayment of the Guaranteed
Debt) is illegal, uncollectible, or unenforceable, or (g) the Credit Agreement,
the Notes, the other Loan Documents, or other documents or instruments
pertaining to the Guaranteed Debt have been forged or otherwise are irregular or
not genuine or authentic.

 

2.5  Release of Obligors.  Any full or partial release of the liability of
Borrower on the Guaranteed Debt or any part thereof, or of any co-guarantors, or
any other person or entity now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee, or assure the payment of the Guaranteed Debt or any part thereof, it
being recognized, acknowledged and agreed by Guarantor that Guarantor may be
required to pay the Guaranteed Debt in full without assistance or support of any
other party, and Guarantor has not been induced to enter into this Guaranty
Agreement on the basis of a contemplation, belief, understanding, or agreement
that other parties will be liable to perform the Guaranteed Debt, or that the
Credit Parties will look to other parties to perform the Guaranteed Debt;
notwithstanding the foregoing, Guarantor does not hereby waive or release
(expressly or impliedly) any rights of subrogation, reimbursement, or
contribution which it may have, after payment in full of the Guaranteed Debt,
against others liable on the Guaranteed Debt; Guarantor’s rights of subrogation
and reimbursement are, however, subordinate to the rights and claims of the
Credit Parties;

 

2.6  Other Security.  The taking or accepting of any other security, collateral,
or guaranty, or other assurance of payment, for all or any part of the
Guaranteed Debt;

 

2.7  Release of Collateral, etc.  Any release, surrender, exchange,
subordination, deterioration, waste, loss, or impairment (including without
limitation negligent, willful, unreasonable, or unjustifiable impairment) of any
collateral, property, or security, at any time

 

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existing in connection with, or assuring or securing payment of, all or any part
of the Guaranteed Debt;

 

2.8  Care and Diligence.  The failure of any Credit Party or any other party to
exercise diligence or reasonable care or act, fail to act, or comply with any
duty in the administration, preservation, protection, enforcement, sale,
application, disposal, or other handling or treatment of all or any part of the
Guaranteed Debt or any collateral, property, or security at any time securing
any portion thereof, including, without limiting the generality of the
foregoing, the failure to conduct any foreclosure or other remedy fairly, in a
commercially reasonable manner, or in such a way so as to obtain the best
possible price or a favorable price or otherwise act or fail to act;

 

2.9  Status of Liens.  The fact that any collateral, security, security
interest, or lien contemplated or intended to be given, created, or granted as
security for the repayment of the Guaranteed Debt shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other security interest or lien, it being recognized and agreed by Guarantor
that Guarantor is not entering into this Guaranty Agreement in reliance on, or
in contemplation of the benefits of, the validity, enforceability,
collectibility, or value of any of the collateral for the Guaranteed Debt;
notwithstanding the foregoing, Guarantor does not hereby waive or release
(expressly or impliedly) any right to be subrogated to the rights of the Credit
Parties in any collateral or security for the Guaranteed Debt after payment in
full of the Guaranteed Debt; Guarantor’s rights of subrogation are, however,
subordinate to the rights, claims, liens, and security interests of the Credit
Parties;

 

2.10        Offset.  Any existing or future right of offset, claim, or defense
of Borrower against the Credit Parties, or any other party, or against payment
of the Guaranteed Debt, whether such right of offset, claim, or defense arises
in connection with the Guaranteed Debt (or the transactions creating the
Guaranteed Debt) or otherwise;

 

 

2.11        Merger.  The reorganization, merger, or consolidation of Borrower or
Guarantor into or with any other corporation or entity;

 

2.12        Preference.  Any payment by Borrower to any Credit Party is held to
constitute a preference under bankruptcy laws, or for any reason any Credit
Party is required to refund such payment or pay such amount to Borrower or
someone else; or

 

2.13        Other Actions Taken or Omitted.  Any other action taken or omitted
to be taken with respect to the Credit Agreement, the Guaranteed Debt, or the
security and collateral therefor, whether or not such action or omission
prejudices Guarantor or increases the likelihood or risk that Guarantor will be
required to pay the Guaranteed Debt pursuant to the terms hereof; it is the
unambiguous and unequivocal intention of Guarantor that Guarantor shall be
obligated to pay the Guaranteed Debt when due, notwithstanding any occurrence,
circumstance, event, action, or omission whatsoever, whether contemplated or
uncontemplated, and whether or not otherwise or particularly described herein,
except for the full and final payment and satisfaction of the Guaranteed Debt.

 

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SECTION 3

 

REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into the Credit Agreement and extend
credit to Borrower, Guarantor represents and warrants to the Credit Parties
that:

 

3.1  Benefit.  Guarantor has received, or will receive, direct or indirect
benefit from the making of this Guaranty Agreement and the Guaranteed Debt and
this Guaranty Agreement is in the best interests of Guarantor;

 

3.2  Familiarity and Reliance.  Guarantor is familiar with, and has
independently reviewed books and records regarding, the financial condition of
Borrower; however, Guarantor is not relying on such financial condition as an
inducement to enter into this Guaranty Agreement;

 

3.3  No Representation by the Credit Parties.  No Credit Party or any other
party has made any representation, warranty, or statement to Guarantor in order
to induce Guarantor to execute this Guaranty Agreement;

 

3.4  Guarantor’s Financial Condition.  As of the date hereof, and after giving
effect to this Guaranty Agreement and the contingent obligation evidenced
hereby, Guarantor is, and will be, Solvent;

 

3.5  Legality.  The execution, delivery, and performance by Guarantor of this
Guaranty Agreement and the consummation of the transactions contemplated
hereunder (a) have been duly authorized by all necessary corporate action of
Guarantor, and (b) do not, and will not, contravene or conflict with any law,
statute, or regulation whatsoever to which Guarantor is subject or constitute a
default (or an event which with notice or lapse of time or both would constitute
a default) under, or result in the breach of, any indenture, mortgage, deed of
trust, charge, lien, or any contract, agreement, or other instrument to which
Guarantor is a party or which may be applicable to Guarantor or any of its
assets, or violate any provisions of its Constituent Documents; this Guaranty
Agreement is a legal and binding obligation of Guarantor and is enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency, or other
laws of general application relating to the enforcement of creditors’ rights;
and

 

3.6  Survival.  All representations and warranties made by Guarantor herein
shall survive the execution hereof.

 

SECTION 4

 

SUBORDINATION OF CERTAIN INDEBTEDNESS

 

4.1  Subordination of Guarantor Claims.  As used herein, the term “Guarantor
Claims” shall mean all debts and liabilities of Borrower to Guarantor, whether
such debts and liabilities now exist or are hereafter incurred or arise, or
whether the obligations of Borrower thereon be direct, contingent, primary,
secondary, several, joint and several, or otherwise, and irrespective of whether
such debts or liabilities be evidenced by note, contract, open account, or
otherwise,

 

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and irrespective of the person or persons in whose favor such debts or
liabilities may, at their inception, have been, or may hereafter be created, or
the manner in which they have been or may hereafter be acquired by Guarantor. 
The Guarantor Claims shall include without limitation all rights and claims of
Guarantor against Borrower (arising as a result of subrogation or otherwise) as
a result of Guarantor’s payment of all or a portion of the Guaranteed Debt. 
Until the Guaranteed Debt shall be paid and satisfied in full and Guarantor
shall have performed all of its obligations hereunder, if a Default exists, then
Guarantor shall not receive or collect, directly or indirectly, from Borrower or
any other party any amount upon the Guarantor Claims.

 

4.2  Claims in Bankruptcy.  In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief, or other insolvency proceedings
involving Borrower as debtor, the Credit Parties shall have the right to prove
its claim in any such proceeding so as to establish its rights hereunder and
receive directly from the receiver, trustee, or other court custodian dividends
and payments which would otherwise be payable upon Guarantor Claims.  Guarantor
hereby assigns such dividends and payments to the Credit Parties.  Should any
Credit Party receive, for application upon the Guaranteed Debt, any such
dividend or payment which is otherwise payable to Guarantor, and which, as
between Borrower and Guarantor, shall constitute a credit upon the Guarantor
Claims, then upon payment to the Credit Parties in full of the Guaranteed Debt,
Guarantor shall become subrogated to the rights of the Credit Parties to the
extent that such payments to the Credit Parties on the Guarantor Claims have
contributed toward the liquidation of the Guaranteed Debt, and such subrogation
shall be with respect to that proportion of the Guaranteed Debt which would have
been unpaid if the Credit Parties had not received dividends or payments upon
the Guarantor Claims.

 

4.3  Payments Held in Trust.  In the event that, notwithstanding Sections 4.1
and 4.2 above, Guarantor should receive any funds, payment, claim, or
distribution which is prohibited by such Sections, then Guarantor agrees to hold
in trust for the Credit Parties, in kind, all funds, payments, claims, or
distributions so received, and agrees that it shall have absolutely no dominion
over such funds, payments, claims, or distributions so received except to pay
them promptly to Administrative Agent, for the benefit of the Credit Parties,
and Guarantor covenants promptly to pay upon demand the same to Administrative
Agent, for the benefit of the Credit Parties.

 

4.4  Liens Subordinate.  Guarantor agrees that any liens, security interests,
judgment liens, charges, or other encumbrances upon Borrower’s assets securing
payment of the Guarantor Claims shall be and remain inferior and subordinate to
any liens, security interests, judgment liens, charges, or other encumbrances
upon Borrower’s assets securing payment of the Guaranteed Debt, regardless of
whether such encumbrances in favor of Guarantor or the Credit Parties presently
exist or are hereafter created or attach.  Without the prior written consent of
Administrative Agent, Guarantor shall not (a) exercise or enforce any creditor’s
right it may have against Borrower, or (b) foreclose, repossess, sequester, or
otherwise take steps or institute any action or proceedings (judicial or
otherwise, including, without limitation, the commencement of, or joinder in,
any liquidation, bankruptcy, rearrangement, debtor’s relief, or insolvency
proceeding) to enforce any liens, mortgages, deeds of trust, security interest,
collateral rights, judgments, or other encumbrances on assets of Borrower held
by Guarantor.

 

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4.5  Notation of Records.  All promissory notes, accounts receivable ledgers, or
other evidences of the Guarantor Claims accepted by or held by Guarantor shall,
at the request of Administrative Agent, contain a specific written notice
thereon that the indebtedness evidenced thereby is subordinated under the terms
of this Guaranty Agreement.

 

SECTION 5

 

MISCELLANEOUS

 

5.1  Waiver.  No failure to exercise, and no delay in exercising, on the part of
any Credit Party, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right.  The rights of the Credit
Parties hereunder shall be in addition to all other rights provided by law.  No
modification or waiver of any provision of this Guaranty Agreement, nor consent
to departure therefrom, shall be effective unless in writing and no such consent
or waiver shall extend beyond the particular case and purpose involved.  No
notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar, or other instances without such notice
or demand.

 

5.2  Notices.  Any notices or other communications required or permitted to be
given by this Guaranty Agreement shall be made in accordance with, and shall be
deemed given, as provided in Section 14.3 of the Credit Agreement, to the party
to whom such notice or communication is directed, to the address of such party
as follows:

 

Guarantor:

 

Protection One, Inc.

6225 North Highway 161

Suite 400

Irving, Texas 75038

Attention:                        

 

Credit Parties:

 

POI Acquisition, L.L.C.

375 Park Avenue

New York, NY

Attention: David Tanner

 

Any party may change its address for purposes of this Guaranty Agreement by
giving notice of such change to the other party pursuant to this Section 5.2.

 

5.3  Governing Law.  This Guaranty Agreement has been prepared, and is intended
to be performed in the State of New York, and the substantive laws of such state
shall govern the validity, construction, enforcement, and interpretation of this
Guaranty Agreement.  For purposes of this Guaranty Agreement and the resolution
of disputes hereunder, Guarantor hereby irrevocably submits and consents to, and
waives any objection to, the non-exclusive jurisdiction

 

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of the courts of the State of New York located in New York, New York and of the
federal court located in the Southern Judicial District of New York.

 

5.4  Invalid Provisions.  If any provision of this Guaranty Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Guaranty Agreement, such provision shall be fully
severable and this Guaranty Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Guaranty Agreement, and the remaining provisions of this Guaranty Agreement
shall remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance from this Guaranty
Agreement, unless such continued effectiveness of this Guaranty Agreement, as
modified, would be contrary to the basic understandings and intentions of the
parties as expressed herein.

 

5.5  Entirety and Amendments.  This Guaranty Agreement embodies the entire
agreement between the parties and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof, and this Guaranty
Agreement may be amended only by an instrument in writing executed by an
authorized officer of the party against whom such amendment is sought to be
enforced.

 

5.6  Parties Bound; Assignment.  This Guaranty Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors,
assigns, and legal representatives; provided, however, that Guarantor may not,
without the prior written consent of Administrative Agent, assign any of its
rights, powers, duties, or obligations hereunder.

 

5.7  Headings.  Section headings are for convenience of reference only and shall
in no way affect the interpretation of this Guaranty Agreement.

 

5.8  Rights and Remedies.  If Guarantor becomes liable for any indebtedness
owing by Borrower to the Credit Parties, by endorsement or otherwise, other than
under this Guaranty Agreement, then such liability shall not be in any manner
impaired or affected hereby and the rights of the Credit Parties hereunder shall
be cumulative of any and all other rights that the Credit Parties (or any of
them) may ever have against Guarantor.  The exercise by the Credit Parties of
any right or remedy hereunder or under any other instrument, or at law or in
equity, shall not preclude the concurrent or subsequent exercise of any other
right or remedy.

 

5.9  WAIVER OF TRIAL BY JURY.  GUARANTOR HEREBY WAIVES ITS RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY
AGREEMENT.  THIS WAIVER IS IRREVOCABLE AND SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, MODIFICATIONS, RENEWALS, EXTENSIONS, OR SUPPLEMENTS TO THIS GUARANTY
AGREEMENT.  IN THE EVENT OF LITIGATION, THIS GUARANTY AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO TRIAL BY THE COURT.

 

5.10        Conflicts.  In the event of a conflict between the terms and
conditions of this Guaranty Agreement and the terms and conditions of the Credit
Agreement, the terms and conditions of the Credit Agreement shall control.

 

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EXECUTED as of the day and year first above written.

 

 

GUARANTOR:

 

 

 

PROTECTION ONE, INC., a Delaware corporation

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

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EXHIBIT D-2

 

FORM OF SUBSIDIARY GUARANTY

 

UNCONDITIONAL GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT is executed as of [•], 2005, by EACH OF THE SUBSIDIARIES
OF PROTECTION ONE ALARM MONITORING, INC., a Delaware corporation (“Borrower”),
LISTED ON SCHEDULE 1 ATTACHED HERETO or who become a party hereto pursuant to
Section 5.11 below (each a “Guarantor” and collectively, “Guarantors”) for the
benefit of the Credit Parties defined below.

 

R E C I T A L S:

 

1.     Borrower may from time to time be indebted to the Credit Parties pursuant
to that certain Amended and Restated Credit Agreement dated of even date
herewith (herein referred to, together with all amendments, modifications,
restatements, or supplements thereof, as the “Credit Agreement”), by and between
Borrower, POI Acquisition, L.L.C. (“Administrative Agent”), as Administrative
Agent, and the Lenders defined therein (Administrative Agent and the Lenders,
together with their respective successors and assigns are herein called the
“Credit Parties”).

 

2.     Capitalized terms used herein shall, unless otherwise indicated, have the
respective meanings set forth in the Credit Agreement.

 

3.     The Credit Parties are not willing to make loans under the Credit
Agreement or otherwise extend credit to Borrower unless Guarantors
unconditionally guarantee payment of all present and future indebtedness and
obligations of Borrower to the Credit Parties under the Credit Agreement and the
Loan Documents.

 

4.     Each Guarantor will, directly or indirectly, benefit from the Credit
Parties’ extension of credit to Borrower.

 

NOW, THEREFORE, as an inducement to the Credit Parties to enter into the Credit
Agreement and to make loans to Borrower thereunder, and to extend such credit to
Borrower as the Credit Parties may from time to time agree to extend, and for
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, Guarantors hereby jointly and severally guarantee
payment of the Guaranteed Debt (hereinafter defined) as more specifically
described herein below in Section 1.3 and hereby agree as follows:

 

SECTION 1

 

NATURE AND SCOPE OF GUARANTY

 

1.1          Definition of Guaranteed Debt.  As used herein, the term
“Guaranteed Debt” means the Obligation.

 

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1.2          Guaranteed Debt Not Reduced by Offset.  The Guaranteed Debt, and
the liabilities and obligations of Guarantors to the Credit Parties hereunder,
shall not be reduced, discharged, or released because or by reason of any
existing or future offset, claim, or defense of Borrower, or any other party,
against any Credit Party or against payment of the Guaranteed Debt, whether such
offset, claim, or defense arises in connection with the Guaranteed Debt (or the
transactions creating the Guaranteed Debt) or otherwise (other than the defense
of the payment in full of the Obligation).  Without limiting the foregoing or
Guarantors’ liability hereunder, to the extent that any Credit Party advances
funds or extends credit to Borrower, and does not receive payments or benefits
thereon in the amounts and at the times required or provided by the Credit
Agreement and the other Loan Documents, Guarantors are absolutely liable,
jointly and severally, to make such payments to (and confer such benefits on)
such Credit Party, on a timely basis.

 

1.3          Guaranty of Obligation.  Guarantors hereby irrevocably and
unconditionally guarantee, jointly and severally, to the Credit Parties (a) the
due and punctual payment of the Guaranteed Debt, and (b) the timely performance
of all other obligations now or hereafter owed by Borrower to the Credit Parties
under the Credit Agreement.  Each Guarantor hereby irrevocably and
unconditionally covenants and agrees that it is liable for the Guaranteed Debt
as primary obligor.

 

1.4          Nature of Guaranty. This Guaranty Agreement is intended to be an
irrevocable, absolute, continuing guaranty of payment and is not a guaranty of
collection.  This Guaranty Agreement may not be revoked by any Guarantor;
provided, however, if, according to applicable law, it shall ever be determined
or held that a guarantor under a continuing guaranty such as this Guaranty
Agreement shall have the absolute right, notwithstanding the express agreement
of such a guarantor otherwise, to revoke such guaranty as to Guaranteed Debt
which has then not yet arisen, then any Guarantor may deliver to Administrative
Agent written notice that such Guarantor will not be liable hereunder for any
Guaranteed Debt created, incurred, or arising after the giving of such notice,
and such notice will be effective as to such Guarantor from and after (but not
before) such times as said written notice is actually delivered to and received
by and receipted for in writing by Administrative Agent; provided that such
notice shall not in anywise affect, impair, or limit the liability and
responsibility of any other person or entity with respect to any Guaranteed Debt
theretofore existing or thereafter existing, arising, renewed, extended, or
modified; provided, further, that such notice shall not affect, impair, or
release the liability and responsibility of such Guarantor with respect to
Guaranteed Debt created, incurred, or arising prior to the receipt of such
notice by Administrative Agent as aforesaid, or in respect of any renewals,
extensions, or modifications of such Guaranteed Debt, or in respect of interest
or costs of collection thereafter incurred on or with respect to such Guaranteed
Debt, or with respect to attorneys’ fees thereafter becoming payable hereunder
with respect to such Guaranteed Debt, and shall continue to be effective with
respect to any Guaranteed Debt arising or created after any attempted revocation
by any Guarantor.  The fact that at any time or from time to time the Guaranteed
Debt may be increased, reduced, or paid in full shall not release, discharge, or
reduce the obligation of Guarantors with respect to indebtedness or obligations
of Borrower to the Credit Parties thereafter incurred (or other Guaranteed Debt
thereafter arising) under the Credit Agreement, the Notes, or otherwise.  This
Guaranty Agreement may be enforced by the Credit Parties and any subsequent
holder of the Guaranteed Debt and shall not be discharged by the assignment or
negotiation of all or part of the Guaranteed Debt.

 

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1.5          Payment by Guarantors.  If all or any part of the Guaranteed Debt
shall not be punctually paid when due, whether at maturity or earlier by
acceleration or otherwise, then Guarantors shall, immediately upon demand by
Administrative Agent, and without presentment, protest, notice of protest,
notice of nonpayment, notice of intention to accelerate or acceleration, or any
other notice whatsoever, pay in lawful money of the United States of America,
the amount due on the Guaranteed Debt to Administrative Agent, for the benefit
of the Credit Parties, at Administrative Agent’s principal office in New York,
New York.  Such demand(s) may be made at any time coincident with or after the
time for payment of all or part of the Guaranteed Debt, and may be made from
time to time with respect to the same or different items of Guaranteed Debt. 
Such demand shall be deemed made, given, and received in accordance with Section
5.2 hereof.

 

1.6          Payment of Expenses.  In the event that any Guarantor should breach
or fail to timely perform any provisions of this Guaranty Agreement, then
Guarantors shall, immediately upon demand by Administrative Agent, pay to
Administrative Agent, for the benefit of the Credit Parties, all costs and
expenses (including court costs and reasonable attorneys’ fees) incurred by the
Credit Parties in the enforcement hereof or the preservation of the Credit
Parties’ rights hereunder.  The covenant contained in this Section 1.6 shall
survive the payment of the Guaranteed Debt.

 

1.7          No Duty to Pursue Others.  It shall not be necessary for any Credit
Party (and Guarantors hereby waive any rights which Guarantors may have to
require any Credit Party), in order to enforce such payment by any Guarantor,
first to (a) institute suit or exhaust its remedies against Borrower or others
liable on the Guaranteed Debt or any other person, (b) enforce the Credit
Parties’ rights against any security which shall ever have been given to secure
the Guaranteed Debt, (c) enforce the Credit Parties’ rights against any other
Guarantor or any other guarantors of the Guaranteed Debt, (d) join Borrower, any
other Guarantor, or any others liable on the Guaranteed Debt in any action
seeking to enforce this Guaranty Agreement, (e) exhaust any remedies available
to the Credit Parties against any security which shall ever have been given to
secure the Guaranteed Debt, or (e) resort to any other means of obtaining
payment of the Guaranteed Debt.  The Credit Parties shall not be required to
mitigate damages or take any other action to reduce, collect, or enforce the
Guaranteed Debt.  Further, each Guarantor expressly waives each and every right
to which any Guarantor may be entitled by virtue of the suretyship law of the
State of New York.

 

1.8          Waiver of Notices, etc.  Each Guarantor agrees to the provisions of
the Credit Agreement, the Notes, and the other Loan Documents, and hereby waives
notice of (a) any loans or advances made by any Credit Party to Borrower, (b)
acceptance of this Guaranty Agreement, (c) any amendment or extension of the
Credit Agreement, the Notes, the other Loan Documents, or any other instrument
or document pertaining to all or any part of the Guaranteed Debt, (d) the
execution and delivery by Borrower and any Credit Party of any other loan or
credit agreement or of Borrower’s execution and delivery of any promissory notes
or other documents in connection therewith, (e) the occurrence of any Default or
Unmatured Default, (f) any Credit Party’s transfer or disposition of the
Guaranteed Debt, or any part thereof, (g) sale or foreclosure (or posting or
advertising for sale or foreclosure) of any collateral for the Guaranteed Debt,
(h) protest, proof of nonpayment, or default by Borrower, (i) the release of any
other Guarantor, or (j) any other action at any time taken or omitted by any
Credit Party, and, generally, all demands

 

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and notices of every kind in connection with this Guaranty Agreement, the Credit
Agreement, the Notes, the other Loan Documents, and any documents or agreements
evidencing, securing, or relating to any of the Guaranteed Debt and the
obligations hereby guaranteed.

 

1.9          Effect of Bankruptcy, Other Matters.  In the event that, pursuant
to any insolvency, bankruptcy, reorganization, receivership, or other debtor
relief law, or any judgment, order, or decision thereunder, or for any other
reason, (a) any Credit Party must rescind or restore any payment, or any part
thereof, received by such Credit Party in satisfaction of the Guaranteed Debt,
as set forth herein, any prior release or discharge from the terms of this
Guaranty Agreement given to any Guarantor by such Credit Party shall be without
effect, and this Guaranty Agreement shall remain in full force and effect, or
(b) Borrower shall cease to be liable to the Credit Parties for any of the
Guaranteed Debt (other than by reason of the indefeasible payment in full
thereof by Borrower), then the obligations of each Guarantor under this Guaranty
Agreement shall remain in full force and effect.  It is the intention of the
Credit Parties and Guarantors that Guarantors’ obligations hereunder shall not
be discharged except by Guarantor’s performance of such obligations and then
only to the extent of such performance.  Without limiting the generality of the
foregoing, it is the intention of the Credit Parties and Guarantors that the
filing of any bankruptcy or similar proceeding by or against Borrower or any
other person or party obligated on any portion of the Guaranteed Debt shall not
affect the obligations of Guarantors under this Guaranty Agreement or the rights
of the Credit Parties under this Guaranty Agreement, including, without
limitation, the right or ability of the Credit Parties to pursue or institute
suit against any Guarantor for the entire Guaranteed Debt.

 

1.10        Limitation.  It is the intention of Guarantors and the Credit
Parties that the amount of the Guaranteed Debt shall be in, but not in excess
of, the maximum amount permitted by fraudulent conveyance, fraudulent transfer,
or other similar laws applicable to Guarantors.  Accordingly, notwithstanding
anything to the contrary contained in this Guaranty Agreement or any other
agreement or instrument executed in connection with the payment of any of the
Guaranteed Debt, the amount of the Guaranteed Debt shall be limited to that
amount which after giving effect thereto would not (a) render any Guarantor
insolvent, (b) result in the fair saleable value of the assets of any Guarantor
being less than the amount required to pay its debts and other liabilities
(including contingent liabilities) as they mature, or (c) leave any Guarantor
with unreasonably small capital to carry out its business as now conducted and
as proposed to be conducted, including its capital needs, as such concepts
described in (a), (b), and (c) herein are determined under applicable law, if
the obligations of such Guarantor hereunder would otherwise be set aside,
terminated, annulled, or avoided for such reason by a court of competent
jurisdiction in a proceeding actually pending before such court.

 

1.11        Loan Documents.  By execution hereof each Guarantor covenants and
agrees that certain representations and warranties set forth in the Loan
Documents are applicable to each Guarantor, and each Guarantor reaffirms that
each such representation and warranty is true and correct.  Each Guarantor
acknowledges and agrees that this Guaranty is subject to the offset provisions
of the Loan Documents in favor of the Credit Parties.  If the Credit Agreement
shall cease to remain in effect for any reason whatsoever during any period and
any part of the Guaranteed Debt remains unpaid, then the terms, covenants, and
agreements incorporated herein by reference shall nevertheless continue in full
force and effect as obligations of each Guarantor under this Guaranty. 
Guarantor shall take, or refrain from taking, as the case may be, each action

 

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that is necessary to be taken or not taken, as the case may be, so that no
Unmatured Default or Default is caused by the failure to take or refrain from
taking such action, as the case may be.

 

SECTION 2

 

ADDITIONAL EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTORS’ OBLIGATIONS

 

Guarantors hereby consent and agree to each of the following, and agree that
Guarantors’ obligations under this Guaranty Agreement shall not be released,
diminished, impaired, reduced, or adversely affected by any of the following,
and waives any common law, equitable, statutory, or other rights (including
without limitation rights to notice) which Guarantors might otherwise have as a
result of or in connection with any of the following:

 

2.1          Modifications, etc.  Any renewal, extension, increase,
modification, alteration, or rearrangement of all or any part of the Guaranteed
Debt, or of the Credit Agreement, the Notes, or any other Loan Document;

 

2.2          Adjustment, etc.  Any adjustment, indulgence, forbearance, or
compromise that might be granted or given by any Credit Party to Borrower or any
Guarantor,

 

2.3          Condition, Composition or Structure of Borrower or Guarantors.  The
insolvency, bankruptcy, arrangement, adjustment, composition, structure,
liquidation, disability, dissolution, or lack of power of Borrower, any
Guarantor, or any other party at any time liable for the payment of all or part
of the Guaranteed Debt; or any dissolution of Borrower or any Guarantor, or any
sale, lease, or transfer of any or all of the assets of Borrower or any
Guarantor, or any changes in name, business, location, composition, structure,
or changes in the shareholders, partners, or members (whether by accession,
secession, cessation, death, dissolution, transfer of assets, or other matter)
of Borrower or any Guarantor; or any reorganization of Borrower or any
Guarantor;

 

2.4          Invalidity of Guaranteed Debt.  The invalidity, illegality, or
unenforceability of all or any part of the Guaranteed Debt, or any document or
agreement executed in connection with the Guaranteed Debt, for any reason
whatsoever, including without limitation the fact that (a) the Guaranteed Debt,
or any part thereof, exceeds the amount permitted by law, (b) the act of
creating the Guaranteed Debt or any part thereof is ultra vires, (c) the
officers or representatives executing the Credit Agreement, the Notes, the other
Loan Documents, or other documents or otherwise creating the Guaranteed Debt
acted in excess of their authority, (d) the Guaranteed Debt violates applicable
usury laws, (e) Borrower has valid defenses, claims, or offsets (whether at law,
in equity, or by agreement) which render the Guaranteed Debt wholly or partially
uncollectible from Borrower (other than the defense of the payment in full of
the Guaranteed Debt), (f) the creation, performance, or repayment of the
Guaranteed Debt (or the execution, delivery, and performance of any document or
instrument representing part of the Guaranteed Debt or executed in connection
with the Guaranteed Debt, or given to secure the repayment of the Guaranteed
Debt) is illegal, uncollectible, or unenforceable, or (g) the Credit Agreement,
the Notes, the other Loan Documents, or other documents or instruments
pertaining to the Guaranteed Debt have been forged or otherwise are irregular or
not genuine or authentic.

 

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2.5          Release of Obligors.  Any full or partial release of the liability
of Borrower on the Guaranteed Debtor any part thereof, or of any co-guarantors,
or any other person or entity now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee, or assure the payment of the Guaranteed Debt or any part thereof, it,
being recognized, acknowledged and agreed by Guarantors that Guarantors may be
required to pay the Guaranteed Debt in full without assistance or support of any
other party, and Guarantors have not been induced to enter into this Guaranty
Agreement on the basis of a contemplation, belief, understanding, or agreement
that other parties will be liable to perform the Guaranteed Debt, or that the
Credit Parties will look to other parties to perform the Guaranteed Debt;
notwithstanding the foregoing, Guarantors do not hereby waive or release
(expressly or impliedly) any rights of subrogation, reimbursement, or
contribution which they may have, after payment in full of the Guaranteed Debt,
against others liable on the Guaranteed Debt; Guarantors’ rights of subrogation
and reimbursement are, however, subordinate to the rights and claims of the
Credit Parties;

 

2.6          Other Security.  The taking or accepting of any other security,
collateral, or guaranty, or other assurance of payment, for all or any part of
the Guaranteed Debt;

 

2.7          Release of Collateral, etc.  Any release, surrender, exchange,
subordination, deterioration, waste, loss, or impairment (including without
limitation negligent, willful, unreasonable, or unjustifiable impairment) of any
collateral, property, or security, at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Debt;

 

2.8          Care and Diligence.  The failure of any Credit Party or any other
party to exercise diligence or reasonable care or act, fail to act, or comply
with any duty in the administration, preservation, protection, enforcement, sale
application, disposal, or other handling or treatment of all or any part of the
Guaranteed Debt or any collateral, property, or security at any time securing
any portion thereof, including, without limiting the generality of the
foregoing, the failure to conduct any foreclosure or other remedy fairly, in a
commercially reasonable manner, or in such a way so as to obtain the best
possible price or a favorable price or otherwise act or fail to act;

 

2.9          Status of Liens.  The fact that any collateral, security, security
interest, or lien contemplated or intended to be given, created, or granted as
security for the repayment of the Guaranteed Debt shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other security interest or lien, it being recognized and agreed by Guarantors
that Guarantors are not entering into this Guaranty Agreement in reliance on, or
in contemplation of the benefits of, the validity, enforceability,
collectibility, or value of any of the collateral for the Guaranteed Debt;
notwithstanding the foregoing, Guarantors do not hereby waive or release
(expressly or impliedly) any right to be subrogated to the rights of the Credit
Parties in any collateral or security for the Guaranteed Debt after payment in
full of the Guaranteed Debt; Guarantors’ rights of subrogation are, however,
subordinate to the rights, claims, liens, and security interests of the Credit
Parties;

 

2.10        Offset.  Any existing or future right of offset, claim, or defense
of Borrower against the Credit Parties, or any other party, or against payment
of the Guaranteed Debt,

 

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whether such right of offset, claim, or defense arises in connection with the
Guaranteed Debt (or the transactions creating the Guaranteed Debt) or otherwise;

 

2.11        Merger.  The reorganization, merger, or consolidation of Borrower or
any Guarantor into or with any other corporation or entity;

 

2.12        Preference.  Any payment by Borrower to any Credit Party is held to
constitute a preference under bankruptcy laws, or for any reason any Credit
Party is required to refund such payment or pay such amount to Borrower or
someone else; or

 

2.13        Other Actions Taken or Omitted.  Any other action taken or omitted
to be taken with respect to the Credit Agreement, the Guaranteed Debt, or the
security and collateral therefor, whether or not such action or omission
prejudices Guarantors or increases the likelihood or risk that Guarantors will
be required to pay the Guaranteed Debt pursuant to the terms hereof; it is the
unambiguous and unequivocal intention of Guarantors that Guarantors shall be
obligated to pay the Guaranteed Debt when due, notwithstanding any occurrence,
circumstance, event, action, or omission whatsoever, whether contemplated or
uncontemplated, and whether or not otherwise or particularly described herein,
except for the full and final payment and satisfaction of the Guaranteed Debt.

 

SECTION 3

 

REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into the Credit Agreement and extend
credit to Borrower, each Guarantor represents and warrants to the Credit Parties
that:

 

3.1          Benefit.  Guarantor has received, or will receive, direct or
indirect benefit from the making of this Guaranty Agreement and the Guaranteed
Debt and this Guaranty Agreement is in the best interests of Guarantor;

 

3.2          Familiarity and Reliance.  Each Guarantor is familiar with, and has
independently reviewed books and records regarding, the financial condition of
Borrower; however, no Guarantor is relying on such financial condition as an
inducement to enter into this Guaranty Agreement;

 

3.3          No Representation by the Credit Parties.  No Credit Party or any
other party has made any representation, warranty, or statement to any Guarantor
in order to induce any Guarantor to execute this Guaranty Agreement;

 

3.4          Guarantors’ Financial Condition.  As of the date hereof, and after
giving effect to this Guaranty Agreement and the contingent obligation evidenced
hereby, each Guarantor is, and will be, Solvent.

 

3.5          Legality.  The execution, delivery, and performance by each
Guarantor of this Guaranty Agreement and the consummation of the transactions
contemplated hereunder (a) have been duly authorized by all necessary action of
each Guarantor, and (b) do not, and will not, contravene or conflict with any
law, statute, or regulation whatsoever to which any Guarantor is

 

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subject or constitute a default (or an event which with notice or lapse of time
or both would constitute a default) under, or result in the breach of, any
indenture, mortgage, deed of trust, charge, lien, or any contract, agreement, or
other instrument to which any Guarantor is a party or which may be applicable to
any Guarantor or any of its assets, or violate any provisions of its Constituent
Documents; this Guaranty Agreement is a legal and binding obligation of each
Guarantor and is enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditors’ rights;

 

3.6          Credit Agreement.  The representations and warranties in the Credit
Agreement with respect to each Guarantor are true and correct; and

 

3.7          Survival.  All representations and warranties made by Guarantors
herein shall survive the execution hereof.

 

SECTION 4

 

SUBORDINATION OF CERTAIN INDEBTEDNESS

 

4.1          Subordination of Guarantor Claims.  As used herein, the term
“Guarantor Claims” shall mean all debts and liabilities of Borrower to any
Guarantor, whether such debts and liabilities now exist or are hereafter
incurred or arise, or whether the obligations of Borrower thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or liabilities be evidenced by note,
contract, open account, or otherwise, and irrespective of the person or persons
in whose favor such debts or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by any Guarantor.  The Guarantor Claims shall include without
limitation all rights and claims of each Guarantor against Borrower (arising as
a result of subrogation or otherwise) as a result of any Guarantor’s payment of
all or a portion of the Guaranteed Debt.  Until the Guaranteed Debt shall be
paid and satisfied in full and Guarantors shall have performed all of their
obligations hereunder, if a Default exists, then Guarantors shall not receive or
collect, directly or indirectly, from Borrower or any other party any amount
upon the Guarantor Claims.

 

4.2          Claims in Bankruptcy.  In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief, or other insolvency proceedings
involving Borrower as debtor, the Credit Parties shall have the right to prove
its claim in any such proceeding so as to establish its rights hereunder and
receive directly from the receiver, trustee, or other court custodian dividends
and payments which would otherwise be payable upon Guarantor Claims.  Each
Guarantor hereby assigns such dividends and payments to the Credit Parties. 
Should any Credit Party receive, for application upon the Guaranteed Debt, any
such dividend or payment which is otherwise payable to any Guarantor, and which,
as between Borrower and such Guarantor, shall constitute a credit upon the
Guarantor Claims, then upon payment to the Credit Parties in full of the
Guaranteed Debt, such Guarantor shall become subrogated to the rights of the
Credit Parties to the extent that such payments to the Credit Parties on the
Guarantor Claims have contributed toward the liquidation of the Guaranteed Debt,
and such subrogation shall be with respect to that proportion of the Guaranteed
Debt which would have been unpaid if the Credit Parties had not received
dividends or payments upon the Guarantor Claims.

 

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4.3          Payments Held in Trust.  In the event that, notwithstanding
Sections 4.1 and 4.2 above, any Guarantor should receive any funds, payment,
claim, or distribution which is prohibited by such Sections, then such Guarantor
agrees to hold in trust for the Credit Parties, in kind, all funds, payments,
claims, or distributions so received, and agrees that it shall have absolutely
no dominion over such funds, payments, claims, or distributions so received
except to pay them promptly to Administrative Agent, for the benefit of the
Credit Parties, and such Guarantor covenants promptly to pay upon demand the
same to Administrative Agent, for the benefit of the Credit Parties.

 

4.4          Liens Subordinate.  Each Guarantor agrees that any liens, security
interests, judgment liens, charges, or other encumbrances upon Borrower’s assets
securing payment of the Guarantor Claims shall be and remain inferior and
subordinate to any liens, security interests, judgment liens, charges, or other
encumbrances upon Borrower’s assets securing payment of the Guaranteed Debt,
regardless of whether such encumbrances in favor of such Guarantor or the Credit
Parties presently exist or are hereafter created or attached.  Without the prior
written consent of Administrative Agent, no Guarantor shall (a) exercise or
enforce any creditor’s right it may have against Borrower, or (b) foreclose,
repossess, sequester, or otherwise take steps or institute any action or
proceedings (judicial or otherwise, including, without limitation, the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor’s relief, or insolvency proceeding) to enforce any liens, mortgages,
deeds of trust, security interest, collateral rights, judgments, or other
encumbrances on assets of Borrower held by any Guarantor.

 

4.5          Notation of Records.  All promissory notes, accounts receivable
ledgers, or other evidences of the Guarantor Claims accepted by or held by each
Guarantor shall, at the request of Administrative Agent, contain a specific
written notice thereon that the indebtedness evidenced thereby is subordinated
under the terms of this Guaranty Agreement.

 

SECTION 5

 

MISCELLANEOUS

 

5.1          Waiver.  No failure to exercise, and no delay in exercising, on the
part of any Credit Party, any right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right.  The rights of the Credit
Parties hereunder shall be in addition to all other rights provided by law.  No
modification or waiver of any provision of this Guaranty Agreement, nor consent
to departure therefrom, shall be effective unless in writing and no such consent
or waiver shall extend beyond the particular case and purpose involved.  No
notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar, or other instances without such notice
or demand.

 

5.2          Notices.  Any notices or other communications required or permitted
to be given by this Guaranty Agreement shall be made in accordance with, and
shall be deemed given, as provided in Section 14.3 of the Credit Agreement to
the party to whom such notice or communication is directed, to the address of
such party as follows:

 

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Guarantors:

 

c/o Protection One Alarm Monitoring, Inc.
6225 North Highway 161
Suite 400
Irving, Texas 75038
Attention:                         

 

Credit Parties:

 

POI Acquisition, L.L.C.
375 Park Avenue
New York, NY
Attention: David Tanner

 

Any party may change its address for purposes of this Guaranty Agreement by
giving notice of such change to the other party pursuant to this Section 5.2.

 

5.3          Governing Law.  This Guaranty Agreement has been prepared, and is
intended to be performed in the State of New York, and the substantive laws of
such state shall govern the validity, construction, enforcement, and
interpretation of this Guaranty Agreement.  For purposes of this Guaranty
Agreement and the resolution of disputes hereunder, each Guarantor hereby
irrevocably submits and consents to, and waives any objection to, the
non-exclusive jurisdiction of the courts of the State of New York located in New
York, New York and of the federal court located in the Southern Judicial
District of New York.

 

5.4          Invalid Provisions.  If any provision of this Guaranty Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Guaranty Agreement, such provision shall be
fully severable and this Guaranty Agreement shall be construed and enforced as
if such illegal, invalid, or unenforceable provision had never comprised a part
of this Guaranty Agreement, and the remaining provisions of this Guaranty
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Guaranty Agreement, unless such continued effectiveness of this Guaranty
Agreement, as modified, would be contrary to the basic understandings and
intentions of the parties as expressed herein.

 

5.5          Entirety and Amendments.  This Guaranty Agreement embodies the
entire agreement between the parties and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof, and this Guaranty
Agreement may be amended only by an instrument in writing executed by an
authorized officer of the party against whom such amendment is sought to be
enforced.

 

5.6          Parties Bound; Assignment.  This Guaranty Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns, and legal representatives; provided, however, that no
Guarantor may, without the prior written consent of Administrative Agent, assign
any of its rights, powers, duties, or obligations hereunder.

 

5.7          Headings.  Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Guaranty Agreement.

 

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5.8          Rights and Remedies.  If any Guarantor becomes liable for any
indebtedness owing by Borrower to the Credit Parties, by endorsement or
otherwise, other than under this Guaranty Agreement, then such liability shall
not be in any manner impaired or affected hereby and the rights of the Credit
Parties hereunder shall be cumulative of any and all other rights that the
Credit Parties (or any of them) may ever have against such Guarantor.  The
exercise by the Credit Parties of any right or remedy hereunder or under any
other instrument, or at law or in equity, shall not preclude the concurrent or
subsequent exercise of any other right or remedy.

 

5.9          WAIVER OF TRIAL BY JURY.  EACH GUARANTOR HEREBY WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS GUARANTY AGREEMENT.  THIS WAIVER IS IRREVOCABLE AND SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, MODIFICATIONS, RENEWALS, EXTENSIONS, OR
SUPPLEMENTS TO THIS GUARANTY AGREEMENT.  IN THE EVENT OF LITIGATION, THIS
GUARANTY AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO TRIAL BY THE COURT.

 

5.10        Conflicts.  In the event of a conflict between the terms and
conditions of this Guaranty Agreement and the terms and conditions of the Credit
Agreement, the terms and conditions of the Credit Agreement shall control.

 

5.11        Additional Guarantors.  The initial Guarantors hereunder shall be
each of the Subsidiaries of Borrower that are signatories hereto and that are
listed on Schedule 1 attached hereto.  From time to time subsequent to the time
hereof, additional Subsidiaries of Borrower may become parties hereto as
additional Guarantors (each an “Additional Guarantor”) by executing a
counterpart of this Guaranty Agreement in the form of Exhibit A attached
hereto.  Upon delivery of any such counterpart to Administrative Agent, notice
of which is hereby waived by Guarantors, each such Additional Guarantor shall be
a Guarantor and shall be a party hereto as if such Additional Guarantor were an
original signatory hereof.  Each Guarantor expressly agrees that its obligations
arising hereunder shall not be affected or diminished by the addition or release
of any other Guarantor hereunder, or by any election by Administrative Agent not
to cause any Subsidiary of Borrower to become an Additional Guarantor
hereunder.  This Guaranty Agreement shall be fully effective as to any Guarantor
that is or becomes a party hereto regardless of whether any such person becomes
or fails to become or ceases to be a Guarantor hereunder.

 

5.12        Release of Guarantors.  Pursuant to Section 6.2 of the Credit
Agreement any Guarantor may be released from its obligations under this Guaranty
Agreement by Administrative Agent’s execution of a Release of Guaranty in the
form of Exhibit B attached hereto.  Each Guarantor expressly agrees that its
obligations arising hereunder shall not be affected or diminished by the release
of any other Guarantor hereunder.

 

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EXECUTED as of the day and year first above written.

 

 

 

GUARANTORS:

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

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EXHIBIT A [to Form of Subsidiary Guaranty]

 

COUNTERPART TO SUBSIDIARY GUARANTY

 

In witness whereof, the undersigned Additional Guarantor has caused this
Guaranty Agreement to be executed and delivered by its officer thereunto duly
authorized as of                                                     , 20      .

 

 

 

 

 

 

[NAME OF ADDITIONAL GUARANTOR]

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

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EXHIBIT B [to Form of Subsidiary Guaranty]

 

FORM OF RELEASE OF GUARANTOR

 

In witness whereof, the undersigned Administrative Agent, for itself and on
behalf of each of the Credit Parties (defined below), hereby releases and
discharges
                                                                         from
any and all obligations and liabilities of                                  to
the Credit Parties under that certain Unconditional Guaranty Agreement dated as
of                         , 2005, executed by the Subsidiaries of Protection
One Alarm Monitoring, Inc., a                                  corporation,
described therein in favor of the Credit Parties defined therein.

 

 

POI ACQUISITION, L.L.C., as Administrative Agent

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

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EXHIBIT F

 

FORM OF ASSIGNMENT AND ACCEPTANCE

 

This Assignment and Acceptance (the “Assignment and Acceptance.”) is made as of
                                            , 200       (the “Effective Date”),
between                                (“Assignor”) and (“Assignee”).

 

Reference is made to that certain Credit Agreement dated as of [•], 2005 (as
modified, amended, renewed, extended, or restated from time to time, the “Credit
Agreement”) among Protection One Alarm Monitoring, Inc., a Delaware corporation
(“Borrower”), POI Acquisition, L.L.C., as Administrative Agent (the
“Administrative Agent”), and the Lenders defined therein.  This Assignment and
Acceptance is executed and delivered pursuant to, and as contemplated in, the
Credit Agreement.  Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Credit Agreement.

 

Assignor and Assignee hereby covenant and agree as follows:

 

1.     Assignor hereby sells and assigns to Assignee, and Assignee hereby
purchases and assumes from Assignor, $                               of
Assignor’s Committed Sum and Principal Debt, representing a Pro Rata Part of the
Total Commitment and Total Principal Debt of       % as of the Effective Date. 
The foregoing interest for all events and circumstances shall be deemed such
Assignee’s Pro Rata Part (in addition to any other Pro Rata Part of Assignee, if
any) in the Total Commitment, the Total Principal Debt, the Loan Documents, and
all payments made to or received from Borrower pursuant to the Loan Documents
and is subject to the terms and conditions provided in the Loan Documents.

 

2.     Assignor (a) hereby represents and warrants to Assignee that Assignor is
the legal and beneficial owner of the Pro Rata Part being assigned by it
hereunder and such interest is free and clear of any adverse claim, and (b)
hereby represents and warrants that as of the date hereof the Pro Rata Part in
the Total Commitment and the Total Principal Debt being assigned hereunder is
    % without giving effect to assignments that are not yet effective.

 

3.     Assignee hereby confirms and acknowledges that, except as specifically
set forth herein, Assignor: (a) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Documents, or the execution, legality,
validity, enforceability, genuineness, sufficiency, or value of the Loan
Documents, or any other instrument or document furnished pursuant thereto; (b)
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of Borrower or any other person or entity which is a
party to any of the Loan Documents (collectively, “Other Party”); and (c) makes
no representation or warranty and assumes no responsibility with respect to the
performance or observance by Borrower or any Other Party of any of its
obligations under any of the Loan Documents or any other instrument or document
furnished pursuant thereto.

 

4.     Assignee hereby: (a) confirms that it has received a copy of the Loan
Documents, together with such other documents and information as it has deemed
appropriate to make its

 

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own credit analysis and decision to enter into this Assignment and Acceptance;
and (b) agrees that it will, independently and without reliance upon Assignor or
any other counterparty 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 the Loan Documents.

 

5.     Assignee hereby: (a) appoints and authorizes Administrative Agent under
the Loan Documents to take such action as Administrative Agent on its behalf and
to exercise such powers under the Loan Documents as are delegated to
Administrative Agent by the terms of the Loan Documents; and (b) agrees with
Assignor for the benefit of Administrative Agent and Borrower that it will
perform all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a counterparty (including, without limitation,
the obligation to make payments pursuant to the Loan Documents) and that it
shall be liable directly to Assignor, Administrative Agent, Borrower, and, as
provided in the Credit Agreement, to each Lender for the performance of such
obligations.

 

6.     If Assignee is organized under the laws of a jurisdiction outside the
United States, it hereby represents and agrees that it has delivered or will
within three (3) days after the date of the execution of this Agreement deliver
to Assignor and Administrative Agent completed and signed copies of any forms
that may be required by the United States Internal Revenue Service in order to
certify Assignee’s exemption from United States withholding taxes with respect
to any payment or distributions made or to be made to Assignee with respect to
the Loan Documents.

 

7.     As of the Effective Date, (a) Assignee shall be a party to the Loan
Documents and, to the extent provided in this Assignment and Acceptance, have
the rights and obligations of a counterparty thereunder, and (b) Assignor shall,
to the extent provided in this Assignment and Acceptance, relinquish its rights
and be released from its obligations in the Loan Documents with respect to the
Pro Rata Share being assigned hereunder.

 

8.     Assignee hereby represents and warrants as of the Effective Date:

 

(a)   Assignee has all necessary corporate power and authority to purchase and
own the interest being assigned to it hereunder, and has all necessary corporate
power and authority to perform all its obligations with respect to this
Assignment and Acceptance;

 

(b)   The execution and delivery of this Assignment and Acceptance and all other
instruments and documents executed in connection herewith have been duly
authorized by all requisite corporate action of Assignee; and

 

(c)   No approval, authorization, order, license, or consent of, or registration
or filing with, any Governmental Authority or other person is required in
connection with this Assignment and Acceptance.

 

9.     This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.

 

10.   This Agreement may be executed in two or more counterparts each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.

 

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11.   Assignee’s address for notices and payments under the Credit Agreement and
this Assignment and Acceptance are set forth in Schedule 1 attached hereto and
made a part hereof.  Assignee may by notice in accordance with the Credit
Agreement to Assignor, Administrative Agent, and Borrower change the address or
telex number or facsimile number at which notices, communications and payments
are to be given to it.

 

 

ASSIGNOR:

 

 

 

 

 

 

 

By:

 

 

Title:

 

 

 

 

 

 

 

 

ASSIGNEE:

 

 

 

 

 

 

 

 

By:

 

 

Title:

 

 

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ACCEPTED BY ADMINISTRATIVE AGENT
THIS                    DAY OF                                 

 

 

 

ADMINISTRATIVE AGENT:

 

 

 

 

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

CONSENTED TO BY BORROWER
THIS                    DAY OF                                 

 

 

 

 

 

BORROWER

 

 

 

 

 

 

PROTECTION ONE ALARM MONITORING, INC., a
Delaware corporation

 

 

 

 

 

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

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ANNEX II

 

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
PROTECTION ONE, INC.

 

*    *    *    *
Adopted in accordance with the provisions
of §242 and §245 of the General Corporation Law
of the State of Delaware
*    *    *    *

 

The undersigned, on behalf of Protection One, Inc., a corporation duly organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware (the “Corporation”), DOES HEREBY CERTIFY as follows:

 

FIRST:                                                        The Corporation
filed its original Certificate of Incorporation with the Delaware Secretary of
State on June 21, 1991 (the “Original Certificate”) under the name of P1
Acquisition Corporation.

 

SECOND:                                        The Board of Directors of the
Corporation duly adopted resolutions in accordance with Section 242 and Section
245 of the General Corporation Law of the State of Delaware authorizing the
Corporation to amend, integrate and restate the Certificate of Incorporation of
the Corporation in its entirety to read as set forth in Exhibit A attached
hereto and made a part hereof (the “Amended and Restated Certificate”).

 

THIRD:                                                     In accordance with
Section 228, Section 242 and Section 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate was duly approved and
adopted pursuant to a written consent signed by the holders of at least a
majority of the issued and outstanding shares of capital stock entitled to vote
as a class, whether or not entitled to vote thereon, of the Corporation. Written
notice has been given to the stockholders who have not consented in writing.

 

IN WITNESS WHEREOF, the undersigned on behalf of the Corporation for the purpose
of amending and restating the Certificate of Incorporation of the Corporation
pursuant to the General Corporation Law of the State of Delaware, under
penalties of perjury does hereby declare and certify that this is the act and
deed of the Corporation and the facts stated herein are true, and accordingly
has hereunto signed this Certificate of Amended and Restated Certificate of
Incorporation this          day of                         , 2004.

 

 

 

Protection One, Inc.,
a Delaware corporation

 

 

 

 

 

By:

 

 

 

 

Name:

Eric Griffin

 

 

Title:

Secretary

 

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Exhibit A

 

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

OF

 

PROTECTION ONE, INC.

 

Pursuant to Section 245 of the General
Corporation Law of the State of Delaware

 

FIRST:  The name of the corporation is Protection One, Inc. (the “Corporation”).

 

SECOND:  The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is 1209 Orange
Street, City of Wilmington, County of New Castle 19801. The name of the
registered agent of the Corporation in the State of Delaware at such address is
The Corporation Trust Company.

 

THIRD:  The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.

 

FOURTH:  The total number of shares of all classes of stock that the Corporation
shall have the authority to issue is 155,000,000, of which 150,000,000 shall be
voting common stock, par value One Cent ($0.01) per share (“Common Stock”), and
5,000,000 shall be preferred stock, par value Ten Cents ($0.10) per share
(“Preferred Stock”).

 

The shares of Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation is hereby authorized from time
to time to designate each series, to establish the number of shares to be
included in such series, and to determine the rights, preferences and privileges
of the shares of each such series and the qualifications, limitations or
restrictions thereof, including but not limited to the determination or
alteration of the dividend rights, dividend rate, conversion rights, voting
powers and rights, rights and terms of redemption, redemption price or prices,
and the liquidation preference of any wholly unissued series of shares of
Preferred Stock, or any of them, and to increase or decrease the number of
shares of any series either prior to or subsequent to the issue of the shares of
such series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series should be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.

 

Immediately upon the filing of this Amended and Restated Certificate of
Incorporation, each share of Common Stock of the Corporation issued and
outstanding

 

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immediately prior to the filing of this Amended and Restated Certificate of
Incorporation shall immediately and without any action by the holders thereof be
combined, changed and reclassified such that each shareholder shall receive one
(1) share of Common Stock for every fifty (50) shares of Common Stock held by
his or her account at the time. If the reverse stock split described in the
immediately preceding sentence would result in the issuance of any fractional
share, the Corporation shall, in lieu of issuing any fractional share, pay cash
equal to the product of such fraction multiplied by [$        ]. (1)

 

FIFTH:  The Board of Directors is authorized to adopt, amend or repeal the
By-Laws of the Corporation.

 

SIXTH:  Meetings of stockholders shall be held at such place, within or without
the State of Delaware, as may be designated by or in the manner provided in the
By-Laws, or, if not so designated or provided, at the registered office of the
Corporation in the state of Delaware. Elections of directors need not be by
written ballot unless and to the extent that the By-Laws so provide.

SEVENTH:  No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing clause shall not apply
to any liability of a director to the extent provided by applicable law (i) for
any breach of the director’s duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit. Neither the
amendment nor repeal of this Article SEVENTH, nor the adoption of any provision
of this Amended and Restated Certificate of Incorporation inconsistent with this
Article SEVENTH, shall be effective with respect to any cause of action, suit,
claim or other matter that, but for this Article SEVENTH, would accrue or arise
prior to such amendment, repeal or adoption of an inconsistent provision.

 

EIGHTH:  Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of §291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of §279 of Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three fourths in value of the creditors or class of creditors, and/or

 

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(1)          The product of the closing price on the business day immediately
preceding the date of the filing of the Amended and Restated Charter (or, if
there is no trade on such date, the closing price on the most recent date for
which there was a trade) multiplied by 50 shall be inserted here.

3

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of the stockholders or class of stockholders of the Corporation, as the case may
be, agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.

 

NINTH:  The Corporation reserves the right to amend, alter or repeal any
provision contained in this Amended and Restated Certificate of Incorporation in
the manner now or hereafter prescribed by statute, and all rights of
stockholders herein are subject to this reservation.

 

TENTH:  The Corporation elects not to be governed by Section 203 of the General
Corporation Law of the State of Delaware.

 

*                                        
*                                        
*                                         *

 

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ANNEX III

 

TERM SHEET

FOR

PROTECTION ONE MANAGEMENT INCENTIVE PLAN

 

November 12, 2004

 

Contingent Stock Appreciation Rights

 

•                  In order to provide protection against a near-term sale of P1
at a price below the greater of (i) restructuring enterprise value of $496
million or (ii) the restructuring enterprise value based on the exercise price
of Management’s stock options (see below), Management would be granted
contingent stock appreciation rights (SARs) representing 10% of P1’s
fully-diluted equity.

 

•                  The SAR grants would occur on the closing date of the
restructuring. SAR grants would be recommended by Management and approved by the
Board. If a sale of P1 occurs before the restructuring closes, P1 agrees to
provide management with cash compensation that is equivalent in value and terms
of payment to what they would have received if the sale had occurred after the
SAR and stock option grants had occurred.

 

•                  The SARs would vest and be payable to Management upon
Quadrangle’s sale of at least 60% of its equity interest in P1 (a “Qualified
Sale”) if payment upon such sale will not result in the imposition of penalty
taxes under Code Section 409A. If a Qualified Sale occurs and does not permit
immediate payment due to Code Section 409A, the amount otherwise payable to
Management will be deposited in an interest-bearing irrevocable rabbi trust
having an independent trustee who will pay benefits to Management on the fourth
anniversary of grant. If a Qualified Sale does not occur by the fourth
anniversary of grant, and if necessary to ensure that the SARs will not be
subject to penalty taxes under Code Section 409A, the SARs would vest and be
payable on such fourth anniversary, based on an assumed common equity value of
$.15/share.

 

•                  Participant Eligibility:  To be eligible for payment under
the SAR, Management participants must be employed by P1 or a subsidiary on the
date of the grant and (i) must be so employed on the date of the Qualified Sale
or (ii) the Qualified Sale must occur within one year of a Qualifying
Termination (Termination without Cause or a Termination for Good Reason as
defined in the participant’s Employment Agreement, or by reason of sale of a
subsidiary employing the participant).

 

•                  Base Price (“Base Price”):  The “Base Price” of each SAR
would be the per share value of a share of common stock of P1 based on a total
enterprise valuation of $440 million at restructuring. The Base Price would
increase by 9% (the “Preferred Return”), compounded annually on each anniversary
of the

 

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restructuring, and prorated in the event of a sale by Quadrangle of any of its
equity interest in P1 before any such anniversary. Should Quadrangle sell less
than 60% of its equity interest in P1, only the Base Price applicable to an
equivalent percentage of Management’s SARs would be fixed based on the Preferred
Return accretion through the date of such sale.

 

•                  Exit Price (“Exit Price”):  The Exit Price is the per share
price paid for the common stock in a Qualified Sale, provided that in no event
would the Exit Price exceed the greater of (i) $0.15 (i.e., the value for a
share of common stock based on a total valuation of $496 million) or (ii) the
exercise price of Management’s stock options granted pursuant to the Stock
Option Plan described herein.

 

•                  SAR Value:  The amount payable in respect of each SAR would
be equal to the Exit Price less the Base Price.

 

•                  Upon a Qualifying Termination, Management participants would
retain their SARs for one year, after which a terminated participant’s SARs
would be reallocated to the remaining participants as determined by the most
senior remaining Management participant, subject to Board approval not to be
unreasonably withheld.

 

Stock Option Plan

 

•                  Management would be granted options for 10% of P1’s
fully-diluted equity. Option grants would be recommended by Management and
approved by the Board.

 

•                  At management’s option, the options would be granted (i) upon
restructuring at an exercise price based on the $496 million restructuring
value, or (ii) on any day within 90 days of the restructuring at an exercise
price equal to the greater of (a) the exercise price determined in (i); or (b)
the closing price of P1’s common stock on the date of grant specified by
management.

 

•                  The options would vest ratably each month during the 48
months after restructuring. Unvested options would be forfeited upon termination
of employment for any reason, including sale of a subsidiary employing the
participant, but excluding termination without Cause or for Good Reason. All
options (vested and unvested) would be forfeited upon termination for Cause.
Upon Termination without Cause or for Good Reason, (i) additional months of
vesting would be credited as follows: 12 months, less one month for each two
months elapsed from the restructuring date through the date of such termination;
(ii) unvested options would be forfeited; and (iii) vested options would be
exercisable for 1 year.

 

2

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•                  Following termination of employment, P1 would have call
rights on stock acquired through vested options until a qualified public
offering (QPO) occurs. If termination is for Cause, P1 would have the right to
repurchase shares for the exercise price paid by the employee. If termination is
for other reasons, the purchase price would be FMV as reasonably determined by
the Board, provided that terminated employees may not transfer any such shares
prior to a QPO or a Qualified Sale.

 

•                  Vesting of options will not accelerate upon a QPO.

 

Employment Agreements

 

•                  Existing employment agreements would be amended, to the
extent necessary, to conform to the terms of the incentive plan.

 

Co-Investment

 

•                  Management would have the right to invest up to $2 million,
in the aggregate, in P1 equity pari passu with Quadrangle. Any such investment
would be made pursuant to a management shareholders agreement containing
customary provisions, including tag-along, drag-along and piggy-back
registration rights. Prior to a QPO or Qualified Sale, Management would be
allowed to transfer shares for tax planning purposes, and to third parties to
the extent that Quadrangle Capital Partners (but not QDRF) sells. E.g., if QCP
sells 10% of its equity, Management can also sell 10%. Prior to a QPO or
Qualified Sale, QCP would retain a right of first refusal in respect of any
proposed third party transfer by Management.

 

Section 409A Commitment

 

Once the new Treasury regulations are published, the parties agree to cooperate
reasonably to modify the Management Incentive Plan and the Key Employee
Retention Plan, as needed, in a manner that avoids tax penalties for management.

 

3

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ANNEX IV

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into
as of               , 2005, by and among Quadrangle Master Funding Ltd, a Cayman
Islands limited company (“QDRF”), POI Acquisition, LLC, a Delaware limited
liability company (“POI Acquisition”), and Protection One, Inc., a Delaware
corporation (the “Company”), and each other Person who becomes a Holder (as
defined below) hereunder.

 

RECITALS

 

WHEREAS, (i) POI Acquisition owns two-thirds of the outstanding shares of common
stock of POI Acquisition I, Inc (“PAII”), which directly owns approximately 88%
of the outstanding shares of common stock of the Company, and QDRF owns
one-third of the outstanding shares of common stock of PAII and (ii) POI
Acquisition owns two-thirds of the lenders’ rights under a Revolving Credit
Facility with Protection One Alarm Monitoring, Inc, (“POAM”) a wholly-owned
subsidiary of the Company, dated December 21, 1998 (as modified, amended,
renewed, extended or restated from time to time, the “Credit Facility”) and QDRF
owns one-third of the lenders’ rights under the Credit Facility;

 

WHEREAS, pursuant to an exchange agreement dated as of November [    ], 2004
(the “Exchange Agreement”), in connection with discharge of certain indebtedness
under the Credit Facility, the Company will issue [    ] Common Shares (as
defined below) to POI Acquisition and [    ] Common Shares to QDRF (the
“Restructuring”); and

 

WHEREAS, the execution and delivery of this Agreement by the parties hereto is a
condition precedent to the consummation of the Restructuring.

 

NOW, THEREFORE, in consideration of the mutual promises and agreements set forth
herein and in the Exchange Agreement, and other valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:

 

SECTION 1.                                DEFINITIONS. FOR PURPOSES OF THIS
AGREEMENT, THE FOLLOWING CAPITALIZED TERMS HAVE THE FOLLOWING MEANINGS:

 

“Common Shares” means the shares of common stock, par value $0.01 per share, of
the Company.

 

“Exchange Act” means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, all as the same
shall be in effect from time to time.

 

“Holders” means POI Acquisition and QDRF and each of their respective
transferees of Registrable Securities who agrees to be bound by the provisions
of this Agreement in accordance with Section 9(g) hereof.

 

“Person” means any individual, firm, corporation, partnership, limited liability
company, trust, joint venture, governmental authority or other entity.

 

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“Prospectus” means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to such
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.

 

“Registrable Securities” means all Common Shares held as of the date hereof by
the Holders (including, without limitation, any Common Shares beneficially owned
by the Holders through their equity interests in PAII) and any Conversion
Securities as defined in Section 9(f). As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when they
have been distributed by the Holder thereof to the public pursuant to an
offering registered under the Securities Act or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force) or repurchased by the Company or any
subsidiary of the Company.

 

“Registration Statement” means any registration statement of the Company under
the Securities Act that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the related Prospectus, any preliminary
prospectus, all amendments and supplements to such registration statement
(including post-effective amendments), all exhibits and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.

 

“S-3 Eligible” means the ability of the Company to file a Registration Statement
on Form S-3 under the Securities Act.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Act” means the United States Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, all as the same shall be in
effect from time to time.

 

“Underwritten Offering” means a distribution, registered pursuant to the
Securities Act, in which securities of the Company are sold to the public
through one or more underwriters in a “firm commitment” underwriting.

 

SECTION 2.           DEMAND REGISTRATION.

 

(A)                  REQUESTS FOR REGISTRATION.

 

(I)                                     SUBJECT TO THE TERMS AND CONDITIONS SET
FORTH IN THIS AGREEMENT, EACH HOLDER WILL HAVE THE RIGHT, BY WRITTEN NOTICE
DELIVERED TO THE COMPANY (A “DEMAND NOTICE”), TO REQUEST THAT THE COMPANY
REGISTER REGISTRABLE SECURITIES HELD BY SUCH HOLDER(S) UNDER AND IN ACCORDANCE
WITH THE PROVISIONS OF THE SECURITIES ACT (A “DEMAND REGISTRATION”); PROVIDED
THAT A HOLDER MAY NOT PROVIDE A DEMAND NOTICE FOR SO LONG AS SUCH HOLDER IS ABLE
TO SELL ITS REGISTRABLE SECURITIES PURSUANT TO RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SIMILAR RULE THEN IN FORCE).

 

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(II)                                  (X) POI ACQUISITION MAY MAKE UP TO FOUR
(4) DEMAND REGISTRATIONS PURSUANT TO SECTION 2(A)(I) AND (Y) QDRF MAY MAKE UP TO
TWO (2) DEMAND REGISTRATIONS PURSUANT TO SECTION 2(A)(I) (PROVIDED, THAT QDRF
MAY MAKE UP TO TWO (2) ADDITIONAL DEMAND REGISTRATIONS IF AND FOR SO LONG AS THE
COMPANY IS S-3 ELIGIBLE), EXCEPT THAT NO DEMAND NOTICE MAY BE GIVEN PRIOR TO SIX
(6) MONTHS AFTER THE EFFECTIVENESS DATE (AS DEFINED BELOW) OF THE IMMEDIATELY
PRECEDING DEMAND REGISTRATION.

 

(B)                 FILING AND EFFECTIVENESS.

 

(I)                                     THE COMPANY WILL FILE A REGISTRATION
STATEMENT RELATING TO ANY DEMAND REGISTRATION AS PROMPTLY AS REASONABLY
PRACTICABLE (BUT IN ANY EVENT WITHIN 90 DAYS IN THE CASE OF A REGISTRATION MADE
ON FORM S-1, OR A COMPARABLE SUCCESSOR FORM, AS APPLICABLE, OR 45 DAYS IN THE
CASE OF ANY REGISTRATION MADE ON FORM S-3 OR A COMPARABLE SUCCESSOR FORM, AS
APPLICABLE) FOLLOWING THE DATE ON WHICH THE DEMAND NOTICE IS GIVEN AND WILL USE
ITS REASONABLE EFFORTS TO CAUSE THE SAME TO BE DECLARED EFFECTIVE BY THE SEC AS
SOON AS REASONABLY PRACTICABLE THEREAFTER, BUT IN ANY EVENT WILL USE ITS
REASONABLE EFFORTS TO CAUSE THE SAME TO BE DECLARED EFFECTIVE BY THE SEC WITHIN
150 DAYS THEREAFTER IN THE CASE OF ANY REGISTRATION MADE ON FORM S-1 (OR A
COMPARABLE SUCCESSOR FORM) AND WITHIN 90 DAYS THEREAFTER IN THE CASE OF ANY
REGISTRATION MADE ON FORM S-3 (OR A COMPARABLE SUCCESSOR FORM) (IN EACH SUCH
CASE, SUCH DATE BEING THE “EFFECTIVENESS DATE”).

 

(II)                                  THE COMPANY WILL USE ITS REASONABLE BEST
EFFORTS TO COMPLY WITH ALL NECESSARY PROVISIONS OF THE FEDERAL SECURITIES LAWS
IN ORDER TO KEEP EACH REGISTRATION STATEMENT RELATING TO A DEMAND REGISTRATION
EFFECTIVE FOR A PERIOD OF (I) IN THE CASE OF AN UNDERWRITTEN OFFERING, THREE (3)
MONTHS FROM ITS EFFECTIVENESS DATE, AND (II) IN THE CASE OF ANY REGISTRATION
MADE PURSUANT TO RULE 415 UNDER THE SECURITIES ACT, SIX (6) MONTHS FROM ITS
EFFECTIVENESS DATE, OR, IN ANY CASE, SUCH SHORTER PERIOD THAT WILL TERMINATE
WHEN ALL REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION STATEMENT HAVE BEEN
SOLD PURSUANT TO SUCH REGISTRATION STATEMENT (IN EACH CASE, SUCH PERIOD BEING
THE “EFFECTIVE PERIOD”), PROVIDED, HOWEVER, THAT IF ANY BLACK-OUT (AS DEFINED
BELOW) OCCURS DURING AN EFFECTIVENESS PERIOD, THEN SUCH EFFECTIVENESS PERIOD
WILL BE TOLLED FOR THE DURATION OF THE BLACK-OUT.

 

Within ten (10) business days after receipt of such Demand Notice, the Company
will serve written notice thereof (the “Notice”) to all other Holders and will,
subject to the provisions of Sections 2(c) and 3(b)(y), include in any
registration required under this Section 2 all Registrable Securities with
respect to which the Company receives written requests for inclusion therein
within fifteen (15) days after such Notice is given to the applicable Holder.
The Holder requesting such Demand Registration will be permitted to withdraw in
good faith all or part of the Registrable Securities from a Demand Registration
at any time prior to the Effectiveness Date of such Demand Registration, in
which event the Company will promptly amend or, if applicable, terminate or
withdraw the related Registration Statement (whether or not other Holders have
elected to include Registrable Securities in such Registration Statement) and,
in the event of such a withdrawal, subject to the provisions of Section 8, such
withdrawn Registration Statement shall not be considered a Demand Registration
for purposes of Section 2(a)(ii).

 

(C)                  PRIORITY ON DEMAND REGISTRATION.  NOTWITHSTANDING THE
FOREGOING AND SUBJECT TO THE RESTRICTIONS SET FORTH IN SECTION 3(B)(Y), IF THE
MANAGING UNDERWRITER OR UNDERWRITERS OF AN UNDERWRITTEN OFFERING TO WHICH SUCH
DEMAND REGISTRATION RELATES ADVISES THE

 

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Company that the total amount of Registrable Securities that the Holder or
Holders intend to include in such Demand Registration, together with any
Piggyback Shares (as defined below) requested to be included in such
registration by any other Holder(s) pursuant to Section 2(b)(ii) above or any
other Person pursuant to similar registration rights, is in the aggregate such
as to materially and adversely affect the success of such offering (including by
affecting the price per share in the offering), then the number of Registrable
Securities to be included in such Demand Registration will, if necessary, be
reduced pro rata in accordance with Section 3(b)(y) and there will be included
in such Underwritten Offering the largest number of Registrable Securities that,
in the opinion of such managing underwriter or underwriters, can be sold without
materially and adversely affecting the success of such Underwritten Offering.

 

(D)                 LIMITATIONS ON DEMAND REGISTRATION.  NOTWITHSTANDING
ANYTHING TO THE CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, THE COMPANY
WILL NOT BE REQUIRED TO EFFECT A DEMAND REGISTRATION PURSUANT TO THIS SECTION 2:

 

(I)                                     DURING THE PERIOD STARTING WITH THE DATE
OF FILING OF, AND ENDING ON THE LAST DAY OF THE EFFECTIVENESS PERIOD RELATING TO
A REGISTRATION STATEMENT IN WHICH SUCH HOLDER HAD THE RIGHT TO PARTICIPATE
PURSUANT TO SECTION 3 (OR WITH RESPECT TO WHICH SUCH HOLDER PROVIDED A DEMAND
NOTICE), INCLUDING A REGISTRATION STATEMENT IN WHICH THE MANAGING UNDERWRITER
REDUCED THE HOLDER’S PARTICIPATION PURSUANT TO SECTION 3(B); OR

 

(II)                                  IF THE COMPANY SHALL FURNISH TO HOLDERS
REQUESTING A REGISTRATION STATEMENT PURSUANT TO THIS SECTION 2 A CERTIFICATE
STATING THAT IN THE GOOD FAITH JUDGMENT OF THE BOARD OF DIRECTORS OF THE
COMPANY, SUCH REGISTRATION AND OFFERING COULD MATERIALLY INTERFERE WITH A BONA
FIDE FINANCING TRANSACTION OF THE COMPANY, INCLUDING WITHOUT LIMITATION A
PRIMARY OFFERING OF SECURITIES, OR ANY OTHER MATERIAL BUSINESS TRANSACTION OF
THE COMPANY, OR WOULD REQUIRE DISCLOSURE OF INFORMATION, THE PREMATURE
DISCLOSURE OF WHICH COULD MATERIALLY AND ADVERSELY AFFECT THE COMPANY, IN WHICH
EVENT THE COMPANY SHALL HAVE THE RIGHT TO DEFER THE FILING OR EFFECTIVENESS OF A
REGISTRATION STATEMENT FOR A PERIOD OF NOT MORE THAN ONE-HUNDRED TWENTY (120)
DAYS AFTER RECEIPT OF THE REQUEST OF A HOLDER PURSUANT TO SECTION 2; PROVIDED
THAT SUCH RIGHT TO DELAY A REQUEST SHALL BE EXERCISED BY THE COMPANY NOT MORE
THAN ONCE IN ANY CONSECUTIVE TWELVE-MONTH PERIOD.

 

SECTION 3.           PIGGYBACK REGISTRATION.

 

(A)                  RIGHT TO PIGGYBACK.  IF AT ANY TIME THE COMPANY PROPOSES TO
FILE A REGISTRATION STATEMENT, WHETHER OR NOT FOR SALE FOR THE COMPANY’S OWN
ACCOUNT, ON A FORM AND IN A MANNER THAT WOULD ALSO PERMIT REGISTRATION OF
REGISTRABLE SECURITIES (OTHER THAN IN CONNECTION WITH A REGISTRATION STATEMENT
ON FORMS S-4 OR S-8 OR ANY SIMILAR OR SUCCESSOR FORM), THE COMPANY SHALL GIVE TO
HOLDERS HOLDING REGISTRABLE SECURITIES WRITTEN NOTICE OF SUCH PROPOSED FILING AT
LEAST THIRTY (30) DAYS BEFORE THE ANTICIPATED FILING. THE NOTICE REFERRED TO IN
THE PRECEDING SENTENCE SHALL OFFER SUCH HOLDERS THE OPPORTUNITY TO REGISTER SUCH
AMOUNT OF REGISTRABLE SECURITIES AS EACH SUCH HOLDER MAY REQUEST (A “PIGGYBACK
REGISTRATION”). SUBJECT TO SECTION 3(B), THE COMPANY WILL INCLUDE IN EACH SUCH
PIGGYBACK REGISTRATION (AND ANY RELATED QUALIFICATION UNDER STATE BLUE SKY LAWS
AND OTHER COMPLIANCE FILINGS, AND IN ANY UNDERWRITING INVOLVED THEREIN) ALL
REGISTRABLE SECURITIES WITH RESPECT TO WHICH THE COMPANY HAS RECEIVED WRITTEN
REQUESTS FOR INCLUSION THEREIN WITHIN FIFTEEN (15) DAYS AFTER THE WRITTEN NOTICE
FROM THE COMPANY IS GIVEN. EACH SUCH HOLDER WILL BE PERMITTED TO WITHDRAW ALL OR
PART OF ITS REGISTRABLE

 

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Securities from a Piggyback Registration at any time prior to the effective date
of such Piggyback Registration.

 

(B)                 PRIORITY ON PIGGYBACK REGISTRATIONS.  THE COMPANY WILL USE
ITS REASONABLE BEST EFFORTS TO CAUSE THE MANAGING UNDERWRITER OR UNDERWRITERS OF
A PROPOSED UNDERWRITTEN OFFERING TO PERMIT HOLDERS HOLDING REGISTRABLE
SECURITIES REQUESTED TO BE INCLUDED IN THE REGISTRATION FOR SUCH OFFERING TO
INCLUDE THEREIN ALL SUCH REGISTRABLE SECURITIES REQUESTED TO BE SO INCLUDED
(SUCH SECURITIES, TOGETHER WITH ANY OTHER SHARES OF THE SAME CLASS REQUESTED TO
BE INCLUDED IN SUCH REGISTRATION BY ANY OTHER PERSON PURSUANT TO SIMILAR
REGISTRATION RIGHTS, THE “PIGGYBACK SHARES”) ON THE SAME TERMS AND CONDITIONS AS
ANY SECURITIES OF THE COMPANY INCLUDED THEREIN (OTHER THAN THE INDEMNIFICATION
BY THE HOLDERS, WHICH WILL BE LIMITED AS SET FORTH IN SECTION 7(B) HEREOF AND
PROVIDED, THAT THE HOLDERS GIVE CUSTOMARY COVENANTS, REPRESENTATIONS AND
WARRANTIES). THE COMPANY SHALL COOPERATE WITH ANY SUCH HOLDER OF REGISTRABLE
SECURITIES IN ORDER TO SEEK TO LIMIT ANY REPRESENTATIONS AND WARRANTIES TO, OR
AGREEMENTS WITH, THE COMPANY OR THE UNDERWRITERS TO BE MADE BY SUCH HOLDER ONLY
TO THOSE REPRESENTATIONS, WARRANTIES OR AGREEMENTS REGARDING SUCH HOLDER, SUCH
HOLDER’S REGISTRABLE SECURITIES AND SUCH HOLDER’S INTENDED METHOD OF
DISTRIBUTION AND ANY OTHER REPRESENTATIONS REQUIRED BY LAW. NOTWITHSTANDING THE
FOREGOING, IF THE MANAGING UNDERWRITER OR UNDERWRITERS OF SUCH UNDERWRITTEN
OFFERING ADVISES THE COMPANY TO THE EFFECT THAT THE TOTAL AMOUNT OF SECURITIES
THAT SUCH HOLDERS, THE COMPANY AND ANY OTHER PERSON PROPOSE TO INCLUDE IN SUCH
UNDERWRITTEN OFFERING IS SUCH AS TO MATERIALLY AND ADVERSELY AFFECT THE SUCCESS
OF SUCH OFFERING (INCLUDING BY AFFECTING THE PRICE PER SHARE IN THE OFFERING),
THEN THE COMPANY WILL INCLUDE IN SUCH REGISTRATION:

 

(x)                                   in the case of a registration in
connection with a sale of securities for the Company’s own account, (i) first,
100% of the securities that the Company proposes to sell for its own account,
(ii) second, to the extent that the number of securities in clause (i) above is
less than the number of securities which the Company has been advised can be
sold in such offering without having the adverse effect referred to above, the
number of Piggyback Shares of each Holder and the number of Piggyback Shares
requested to be included in such offering by any other Persons pursuant to
similar registration rights, determined pro rata on the basis of the number of
Common Shares beneficially owned by each Holder requesting registration and such
other Persons requesting registration, collectively; and

 

(y)                                 in the case of a Demand Registration or
other sale of securities on account of any Person other than the Company, (i)
first, 100% of the number of Registrable Securities requested to be included in
such Demand Registration or other sale by the applicable Holder or other Person,
as the case may be, (ii) second, to the extent that the number of securities in
clause (i) above, if applicable, is less than the number of securities which the
Company has been advised can be sold in such offering without having the adverse
effect referred to in Section 2(c) above, the number of Piggyback Shares
requested to be included in such offering by any other Holder or any other
Persons pursuant to similar registration rights, determined pro rata on the
basis of the number of Common Shares beneficially owned by each such Person
requesting registration and (iii) third, to the extent that the number of
securities in clauses (i) and (ii) above is less than the number of securities
which the Company has been advised can be sold in such offering without having
the adverse effect referred to in Section 2(c) above, the securities sought to
be included by the Company in the offering.

 

5

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(C)                  RIGHT TO TERMINATE REGISTRATION.  THE COMPANY SHALL HAVE
THE RIGHT TO POSTPONE, TERMINATE OR WITHDRAW ANY REGISTRATION INITIATED BY IT
UNDER THIS SECTION 3 PRIOR TO THE EFFECTIVENESS OF SUCH REGISTRATION WHETHER OR
NOT THE HOLDERS HAVE ELECTED TO INCLUDE REGISTRABLE SECURITIES IN SUCH
REGISTRATION.

 

SECTION 4.           REGISTRATION PROCEDURES.  IN CONNECTION WITH THE COMPANY’S
REGISTRATION OBLIGATIONS PURSUANT TO, AND SUBJECT TO THE TERMS AND CONDITIONS
CONTAINED IN, SECTIONS 2 AND 3, THE COMPANY WILL USE ITS REASONABLE BEST EFFORTS
TO EFFECT SUCH REGISTRATIONS TO PERMIT THE SALE OF SUCH REGISTRABLE SECURITIES
IN ACCORDANCE WITH THE INTENDED METHOD OR METHODS OF DISPOSITION THEREOF, AND
PURSUANT THERETO THE COMPANY WILL AS EXPEDITIOUSLY AS REASONABLY PRACTICABLE,
AND IN EACH CASE TO THE EXTENT APPLICABLE:

 

(A)                  PREPARE AND FILE WITH THE SEC A REGISTRATION STATEMENT OR
REGISTRATION STATEMENTS ON ANY APPROPRIATE FORM UNDER THE SECURITIES ACT
AVAILABLE FOR THE SALE OF THE REGISTRABLE SECURITIES BY THE HOLDERS THEREOF IN
ACCORDANCE WITH THE INTENDED METHOD OR METHODS OF DISTRIBUTION THEREOF, AND USE
REASONABLE EFFORTS TO CAUSE EACH SUCH REGISTRATION STATEMENT TO BECOME EFFECTIVE
AND REMAIN EFFECTIVE AS PROVIDED HEREIN; PROVIDED, HOWEVER, THAT BEFORE FILING A
REGISTRATION STATEMENT OR PROSPECTUS OR ANY AMENDMENTS OR SUPPLEMENTS THERETO
(INCLUDING DOCUMENTS THAT WOULD BE INCORPORATED OR DEEMED TO BE INCORPORATED
THEREIN BY REFERENCE) THE COMPANY WILL FURNISH TO (I) THE HOLDERS HOLDING
REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION STATEMENT, (II) NOT MORE
THAN ONE COUNSEL CHOSEN BY HOLDERS HOLDING A MAJORITY OF THE REGISTRABLE
SECURITIES INCLUDED IN THE DEMAND NOTICE OR, IN THE CASE OF A PIGGYBACK
REGISTRATION, THE HOLDERS HOLDING A MAJORITY OF THE REGISTRABLE SECURITIES BEING
REGISTERED (“SPECIAL COUNSEL”) AND (III) THE MANAGING UNDERWRITERS, IF ANY,
COPIES OF ALL SUCH DOCUMENTS PROPOSED TO BE FILED, WHICH DOCUMENTS WILL BE
SUBJECT TO THE REVIEW OF SUCH HOLDERS, SUCH SPECIAL COUNSEL AND SUCH
UNDERWRITERS, AND THE COMPANY WILL NOT FILE ANY SUCH REGISTRATION STATEMENT OR
AMENDMENT THERETO OR ANY PROSPECTUS OR ANY SUPPLEMENT THERETO (EXCLUDING SUCH
DOCUMENTS THAT, UPON FILING, WILL BE INCORPORATED OR DEEMED TO BE INCORPORATED
BY REFERENCE THEREIN) TO WHICH THE HOLDERS HOLDING A MAJORITY OF THE REGISTRABLE
SECURITIES COVERED BY SUCH REGISTRATION STATEMENT OR THE MANAGING UNDERWRITER,
IF ANY, SHALL REASONABLY OBJECT.

 

(B)                 PREPARE AND FILE WITH THE SEC SUCH AMENDMENTS AND
POST-EFFECTIVE AMENDMENTS TO EACH REGISTRATION STATEMENT AS MAY BE NECESSARY TO
KEEP SUCH REGISTRATION STATEMENT CONTINUOUSLY EFFECTIVE FOR THE APPLICABLE
EFFECTIVENESS PERIOD SPECIFIED IN SECTION 2; CAUSE THE RELATED PROSPECTUS TO BE
SUPPLEMENTED BY ANY REQUIRED PROSPECTUS SUPPLEMENT, AND AS SO SUPPLEMENTED TO BE
FILED PURSUANT TO RULE 424 (OR ANY SIMILAR PROVISIONS THEN IN FORCE) UNDER THE
SECURITIES ACT; AND COMPLY WITH THE PROVISIONS OF THE SECURITIES ACT WITH
RESPECT TO THE DISPOSITION OF ALL SECURITIES COVERED BY SUCH REGISTRATION
STATEMENT DURING THE APPLICABLE EFFECTIVENESS PERIOD IN ACCORDANCE WITH THE
INTENDED METHODS OF DISPOSITION BY THE SELLERS THEREOF SET FORTH IN SUCH
REGISTRATION STATEMENT AS SO AMENDED OR IN SUCH PROSPECTUS AS SO SUPPLEMENTED.

 

(C)                  NOTIFY THE SELLING HOLDERS AND THE MANAGING UNDERWRITERS,
IF ANY, REASONABLY PROMPTLY, AND (IF REQUESTED BY ANY SUCH PERSON) CONFIRM SUCH
NOTICE IN WRITING, (I) WHEN A PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT OR
POST-EFFECTIVE AMENDMENT HAS BEEN FILED, AND, WITH RESPECT TO A REGISTRATION
STATEMENT OR ANY POST-EFFECTIVE AMENDMENT, WHEN THE SAME HAS BECOME EFFECTIVE,
(II) OF ANY REQUEST BY THE SEC OR ANY OTHER FEDERAL OR STATE GOVERNMENTAL
AUTHORITY FOR AMENDMENTS OR SUPPLEMENTS TO A REGISTRATION STATEMENT OR RELATED
PROSPECTUS OR FOR

 

6

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additional information, (iii) of the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose,
(iv) if at any time the representations and warranties of the Company contained
in any agreement contemplated by Section 4(l) (including any underwriting
agreement) cease to be true and correct in any material respect, (v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (vi) of the occurrence of any event that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in a
Registration Statement, Prospectus or any such document so that, in the case of
the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and, in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (vii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.

 

(D)                 USE ITS REASONABLE BEST EFFORTS TO OBTAIN THE WITHDRAWAL OF
ANY ORDER SUSPENDING THE EFFECTIVENESS OF A REGISTRATION STATEMENT, OR THE
LIFTING OF ANY SUSPENSION OF THE QUALIFICATION (OR EXEMPTION FROM QUALIFICATION)
OF ANY OF THE REGISTRABLE SECURITIES FOR SALE IN ANY JURISDICTION, AT THE
EARLIEST POSSIBLE MOMENT.

 

(E)                  FURNISH TO EACH SELLING HOLDER AND EACH MANAGING
UNDERWRITER, IF ANY, WITHOUT CHARGE, AT LEAST ONE CONFORMED COPY OF THE
REGISTRATION STATEMENT AND ANY POST-EFFECTIVE AMENDMENT THERETO (BUT EXCLUDING
SCHEDULES, ALL DOCUMENTS INCORPORATED OR DEEMED INCORPORATED THEREIN BY
REFERENCE AND ALL EXHIBITS, UNLESS REQUESTED IN WRITING BY SUCH HOLDER OR
UNDERWRITER).

 

(F)                    DELIVER TO EACH SELLING HOLDER AND THE UNDERWRITERS, IF
ANY, WITHOUT CHARGE AS MANY COPIES OF THE PROSPECTUS OR PROSPECTUSES RELATING TO
SUCH REGISTRABLE SECURITIES (INCLUDING EACH PRELIMINARY PROSPECTUS) AND ANY
AMENDMENT OR SUPPLEMENT THERETO AS SUCH PERSONS MAY REASONABLY REQUEST; AND,
SUBJECT TO SECTION 5(E), THE COMPANY HEREBY CONSENTS TO THE USE OF SUCH
PROSPECTUS OR EACH AMENDMENT OR SUPPLEMENT THERETO BY EACH OF THE SELLING
HOLDERS AND THE UNDERWRITERS, IF ANY, IN CONNECTION WITH THE OFFERING AND SALE
OF THE REGISTRABLE SECURITIES COVERED BY SUCH PROSPECTUS OR ANY AMENDMENT OR
SUPPLEMENT THERETO.

 

(G)                 PRIOR TO ANY PUBLIC OFFERING OF REGISTRABLE SECURITIES, TO
REGISTER OR QUALIFY OR COOPERATE WITH THE SELLING HOLDERS, THE UNDERWRITERS, IF
ANY, AND THEIR RESPECTIVE COUNSEL IN CONNECTION WITH THE REGISTRATION OR
QUALIFICATION (OR EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION) OF SUCH
REGISTRABLE SECURITIES FOR OFFER AND SALE UNDER THE SECURITIES OR BLUE SKY LAWS
OF SUCH JURISDICTIONS WITHIN THE UNITED STATES AS ANY SELLER OR UNDERWRITER
REASONABLY REQUESTS IN WRITING; USE ALL REASONABLE EFFORTS TO KEEP SUCH
REGISTRATION OR QUALIFICATION (OR EXEMPTION THEREFROM) EFFECTIVE DURING THE
PERIOD THE APPLICABLE REGISTRATION STATEMENT IS REQUIRED TO BE KEPT EFFECTIVE
AND DO ANY AND ALL OTHER ACTS OR THINGS NECESSARY OR ADVISABLE TO ENABLE THE
DISPOSITION IN EACH SUCH JURISDICTION OF THE REGISTRABLE SECURITIES COVERED BY
THE APPLICABLE REGISTRATION STATEMENT; PROVIDED, HOWEVER, THAT THE COMPANY WILL
NOT BE REQUIRED TO (I) QUALIFY TO DO BUSINESS IN ANY JURISDICTION WHERE IT IS
NOT THEN SO QUALIFIED, (II) CONFORM ITS

 

7

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capitalization or the composition of its assets at the time to the securities or
blue sky laws of such jurisdiction, or (iii) take any action that would subject
it to taxation or service of process in any such jurisdiction where it is not
then so subject.

 

(H)                 COOPERATE WITH THE SELLING HOLDERS AND THE MANAGING
UNDERWRITERS, IF ANY, TO FACILITATE THE TIMELY PREPARATION AND DELIVERY OF
CERTIFICATES REPRESENTING REGISTRABLE SECURITIES TO BE SOLD AND ENABLE SUCH
REGISTRABLE SECURITIES TO BE IN SUCH DENOMINATIONS AND REGISTERED IN SUCH NAMES
AS THE MANAGING UNDERWRITERS, IF ANY, SHALL REQUEST AT LEAST TWO BUSINESS DAYS
PRIOR TO ANY SALE OF REGISTRABLE SECURITIES TO THE UNDERWRITERS.

 

(I)                     UPON THE OCCURRENCE OF ANY EVENT CONTEMPLATED BY SECTION
4(C)(II), SECTION 4(C)(VI) OR 4(C)(VII), PREPARE A SUPPLEMENT OR POST-EFFECTIVE
AMENDMENT TO EACH REGISTRATION STATEMENT OR A SUPPLEMENT TO THE RELATED
PROSPECTUS OR ANY DOCUMENT INCORPORATED THEREIN BY REFERENCE OR FILE ANY OTHER
REQUIRED DOCUMENT SO THAT, AS THEREAFTER DELIVERED TO THE PURCHASERS OF THE
REGISTRABLE SECURITIES BEING SOLD THEREUNDER, SUCH PROSPECTUS WILL NOT CONTAIN
AN UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED
TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF
THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.

 

(J)                     USE ITS REASONABLE EFFORTS TO CAUSE ALL REGISTRABLE
SECURITIES COVERED BY SUCH REGISTRATION STATEMENT TO BE LISTED ON THE PRINCIPAL
SECURITIES EXCHANGE OR EXCHANGES OR QUALIFIED FOR TRADING ON THE PRINCIPAL OVER
THE COUNTER MARKET, IF ANY, ON WHICH SECURITIES ISSUED BY THE COMPANY OF THE
SAME CLASS ARE THEN LISTED OR QUALIFIED OR, IF NO SUCH SECURITIES ISSUED BY THE
COMPANY ARE THEN SO LISTED OR QUALIFIED, ON SUCH SECURITIES EXCHANGE OR OVER THE
COUNTER MARKET AS THE COMPANY SHALL DETERMINE.

 

(K)                  AS NEEDED, (I) ENGAGE AN APPROPRIATE TRANSFER AGENT AND
PROVIDE THE TRANSFER AGENT WITH PRINTED CERTIFICATES FOR THE REGISTRABLE
SECURITIES IN A FORM ELIGIBLE FOR DEPOSIT WITH THE DEPOSITORY TRUST COMPANY AND
(II) PROVIDE A CUSIP NUMBER FOR THE REGISTRABLE SECURITIES.

 

(L)                     ENTER INTO SUCH CUSTOMARY AGREEMENTS (INCLUDING, IN THE
EVENT OF AN UNDERWRITTEN OFFERING, AN UNDERWRITING AGREEMENT IN FORM, SCOPE AND
SUBSTANCE AS IS CUSTOMARY IN UNDERWRITTEN OFFERINGS) AND TAKE ALL SUCH OTHER
COMMERCIALLY REASONABLE AND CUSTOMARY ACTIONS IN CONNECTION THEREWITH (INCLUDING
IN THE EVENT OF AN UNDERWRITTEN OFFERING, THOSE REASONABLY REQUESTED BY THE
MANAGING UNDERWRITERS) IN ORDER TO FACILITATE THE DISPOSITION OF SUCH
REGISTRABLE SECURITIES AND IN SUCH CONNECTION, BUT ONLY WHERE AN UNDERWRITING
AGREEMENT IS ENTERED INTO IN CONNECTION WITH AN UNDERWRITTEN OFFERING, (I) MAKE
SUCH REPRESENTATIONS AND WARRANTIES TO THE UNDERWRITERS WITH RESPECT TO THE
BUSINESSES OF THE COMPANY AND ITS SUBSIDIARIES, THE REGISTRATION STATEMENT,
PROSPECTUS AND DOCUMENTS INCORPORATED BY REFERENCE OR DEEMED INCORPORATED BY
REFERENCE THEREIN, IF ANY, IN EACH CASE, IN FORM, SUBSTANCE AND SCOPE AS ARE
CUSTOMARILY MADE BY ISSUERS TO UNDERWRITERS IN UNDERWRITTEN OFFERINGS AND
CONFIRM THE SAME IF AND WHEN REQUESTED; (II) USE REASONABLE BEST EFFORTS TO
OBTAIN OPINIONS OF COUNSEL TO THE COMPANY AND UPDATES THEREOF, WHICH COUNSEL AND
OPINIONS (IN FORM, SCOPE AND SUBSTANCE) SHALL BE REASONABLY SATISFACTORY TO THE
MANAGING UNDERWRITERS, IF ANY, ADDRESSED TO EACH OF THE UNDERWRITERS COVERING
THE MATTERS CUSTOMARILY COVERED IN OPINIONS REQUESTED IN UNDERWRITTEN OFFERINGS
AND SUCH OTHER MATTERS AS MAY BE REASONABLY REQUESTED BY SUCH UNDERWRITERS;
(III) USE REASONABLE BEST EFFORTS TO OBTAIN “COMFORT” LETTERS AND UPDATES
THEREOF FROM THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF THE COMPANY (AND,
IF NECESSARY, ANY OTHER CERTIFIED PUBLIC

 

8

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accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or is required to
be, included in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of the
type customarily covered in “comfort” letters in connection with underwritten
offerings; and (iv) in the case of any Underwritten Offering where the proposed
maximum aggregate offering price for the Registrable Securities offered
thereunder exceeds $30 million, cause the Company’s management to be made
reasonably available for, and assist in, the marketing and disposition of such
Registrable Securities in the manner and to the extent reasonably requested by
the underwriters including, without limitation, participation by management in
customary road shows, investor conferences and other similar presentations. The
foregoing actions will be taken in connection with each closing under such
underwriting agreement as and to the extent required thereunder.

 

(M)               MAKE AVAILABLE FOR REASONABLE INSPECTION DURING NORMAL
BUSINESS HOURS BY A REPRESENTATIVE OF THE HOLDERS HOLDING REGISTRABLE SECURITIES
BEING SOLD, ANY UNDERWRITER PARTICIPATING IN ANY DISPOSITION OF REGISTRABLE
SECURITIES, AND ANY ATTORNEY OR ACCOUNTANT RETAINED BY SUCH SELLING HOLDERS OR
UNDERWRITER, ALL FINANCIAL AND OTHER RECORDS, PERTINENT CORPORATE DOCUMENTS AND
PROPERTIES OF THE COMPANY AND ITS SUBSIDIARIES, AND CAUSE THE OFFICERS,
DIRECTORS AND EMPLOYEES OF THE COMPANY AND ITS SUBSIDIARIES TO SUPPLY ALL
INFORMATION REASONABLY REQUESTED BY ANY SUCH REPRESENTATIVE, UNDERWRITER,
ATTORNEY OR ACCOUNTANT IN CONNECTION WITH SUCH REGISTRATION STATEMENT; PROVIDED,
HOWEVER, THAT ANY RECORDS, INFORMATION OR DOCUMENTS THAT ARE DESIGNATED BY THE
COMPANY IN WRITING AS CONFIDENTIAL AT THE TIME OF DELIVERY OF SUCH RECORDS,
INFORMATION OR DOCUMENTS WILL BE KEPT CONFIDENTIAL BY SUCH PERSONS UNLESS (I)
SUCH RECORDS, INFORMATION OR DOCUMENTS ARE IN THE PUBLIC DOMAIN OR OTHERWISE
PUBLICLY AVAILABLE, (II) DISCLOSURE OF SUCH RECORDS, INFORMATION OR DOCUMENTS IS
REQUIRED BY COURT OR ADMINISTRATIVE ORDER; PROVIDED, THAT SUCH HOLDER NOTIFIES
THE COMPANY OF ANY SUCH REQUIREMENT AND COOPERATES WITH THE COMPANY IN SEEKING A
PROTECTIVE OR RESTRAINING ORDER LIMITING SUCH DISCLOSURE, OR (III) DISCLOSURE OF
SUCH RECORDS, INFORMATION OR DOCUMENTS, IN THE REASONABLE OPINION OF COUNSEL TO
SUCH PERSON, AFTER CONSULTATION WITH THE COMPANY, IS OTHERWISE REQUIRED BY LAW
(INCLUDING, WITHOUT LIMITATION, PURSUANT TO THE REQUIREMENTS OF THE SECURITIES
ACT).

 

(N)                 USE ITS REASONABLE BEST EFFORTS TO COMPLY WITH ALL
APPLICABLE RULES AND REGULATIONS OF THE SEC AND MAKE GENERALLY AVAILABLE TO ITS
SECURITY HOLDERS EARNINGS STATEMENTS SATISFYING THE PROVISIONS OF SECTION 11(A)
OF THE SECURITIES ACT AND RULE 158 THEREUNDER (OR ANY SIMILAR RULE PROMULGATED
UNDER THE SECURITIES ACT) NO LATER THAN 45 CALENDAR DAYS AFTER THE END OF ANY
12-MONTH PERIOD (OR 90 CALENDAR DAYS AFTER THE END OF ANY 12-MONTH PERIOD IF
SUCH PERIOD IS A FISCAL YEAR) (I) COMMENCING AT THE END OF ANY FISCAL QUARTER IN
WHICH REGISTRABLE SECURITIES ARE SOLD TO UNDERWRITERS IN A FIRM COMMITMENT OR
BEST EFFORTS UNDERWRITTEN OFFERING, OR (II) IF NOT SOLD TO UNDERWRITERS IN SUCH
AN OFFERING, COMMENCING ON THE FIRST DAY OF THE FIRST FISCAL QUARTER OF THE
COMPANY, AFTER THE EFFECTIVE DATE OF A REGISTRATION STATEMENT, WHICH STATEMENTS
SHALL COVER SUCH 12-MONTH PERIOD.

 

SECTION 5.           CERTAIN COVENANTS.  THE COMPANY’S REGISTRATION OBLIGATIONS
TO A HOLDER SHALL BE CONDITIONED UPON COMPLIANCE WITH THE FOLLOWING:

 

(A)                  SUCH HOLDER SHALL COOPERATE WITH THE COMPANY IN CONNECTION
WITH THE PREPARATION OF THE REGISTRATION STATEMENT, AND SUCH HOLDER WILL PROVIDE
TO THE COMPANY, IN WRITING, FOR USE IN THE REGISTRATION STATEMENT, ALL
INFORMATION REGARDING SUCH HOLDER AND SUCH OTHER INFORMATION AS MAY BE NECESSARY
TO ENABLE THE COMPANY TO PREPARE THE REGISTRATION

 

9

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Statement and Prospectus covering the Registrable Securities and to maintain the
currency and effectiveness thereof;

 

(B)                 SUCH HOLDER SHALL ENTER INTO SUCH AGREEMENTS WITH THE
COMPANY AND ANY UNDERWRITER, BROKER-DEALER OR SIMILAR SECURITIES INDUSTRY
PROFESSIONAL CONTAINING REPRESENTATIONS, WARRANTIES, INDEMNITIES AND AGREEMENTS
AS ARE IN EACH CASE CUSTOMARILY ENTERED INTO AND MADE BY SELLING STOCKHOLDERS,
AND WILL CAUSE ITS COUNSEL TO GIVE ANY LEGAL OPINIONS CUSTOMARILY GIVEN, IN
SECONDARY DISTRIBUTIONS UNDER SIMILAR CIRCUMSTANCES;

 

(C)                  DURING SUCH TIME AS SUCH HOLDER MAY BE ENGAGED IN A
DISTRIBUTION OF THE REGISTRABLE SECURITIES, SUCH HOLDER WILL USE ITS BEST
EFFORTS TO COMPLY WITH ALL LAWS APPLICABLE TO SUCH DISTRIBUTION, INCLUDING, BUT
NOT LIMITED TO REGULATION M PROMULGATED UNDER THE EXCHANGE ACT, AND PURSUANT
THERETO WILL, AMONG OTHER THINGS, TO THE EXTENT APPLICABLE: (I) NOT ENGAGE IN
ANY STABILIZATION ACTIVITY IN CONNECTION WITH THE SECURITIES OF THE COMPANY IN
CONTRAVENTION OF SUCH RULES; (II) DISTRIBUTE THE REGISTRABLE SECURITIES OWNED BY
SUCH HOLDER SOLELY IN THE MANNER DESCRIBED IN THE REGISTRATION STATEMENT; (III)
CAUSE TO BE FURNISHED TO EACH UNDERWRITER, AGENT OR BROKER-DEALER TO OR THROUGH
WHOM THE REGISTRABLE SECURITIES OWNED BY SUCH HOLDER MAY BE OFFERED, OR TO THE
OFFEREE IF AN OFFER IS MADE DIRECTLY BY THE HOLDER, SUCH COPIES OF THE
PROSPECTUS (AS AMENDED AND SUPPLEMENTED TO SUCH DATE) AND DOCUMENTS INCORPORATED
BY REFERENCE THEREIN AS MAY BE REQUIRED BY SUCH UNDERWRITER, AGENT,
BROKER-DEALER OR OFFEREE; AND (IV) NOT BID FOR OR PURCHASE ANY SECURITIES OF THE
COMPANY OR ATTEMPT TO INDUCE ANY PERSON TO PURCHASE ANY SECURITIES OF THE
COMPANY OTHER THAN AS PERMITTED UNDER THE EXCHANGE ACT;

 

(D)                 UPON RECEIPT OF ANY NOTICE FROM THE COMPANY OF THE
OCCURRENCE OF ANY EVENT OF THE KIND DESCRIBED IN SECTION 4(C)(II), 4(C)(III),
4(C)(V), 4(C)(VI) OR 4(C)(VII) (“SUSPENSION NOTICE”), SUCH HOLDER WILL FORTHWITH
DISCONTINUE DISPOSITION OF SUCH REGISTRABLE SECURITIES COVERED BY SUCH
REGISTRATION STATEMENT OR PROSPECTUS (A “BLACK-OUT”) UNTIL SUCH HOLDER’S RECEIPT
OF THE COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS CONTEMPLATED BY SECTION
4(I), OR UNTIL IT IS ADVISED IN WRITING (THE “ADVICE”) BY THE COMPANY THAT THE
USE OF THE APPLICABLE PROSPECTUS MAY BE RESUMED, AND SUCH HOLDER HAS RECEIVED
COPIES OF ANY ADDITIONAL OR SUPPLEMENTAL FILINGS THAT ARE INCORPORATED OR DEEMED
TO BE INCORPORATED BY REFERENCE IN SUCH PROSPECTUS. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, THERE SHALL BE NO LIMITATION WITH REGARD TO THE NUMBER OF SUSPENSION
NOTICES THAT THE COMPANY IS ENTITLED TO GIVE HEREUNDER; PROVIDED, HOWEVER, THAT
IN EACH SUCH EVENT THE COMPANY WILL USE ITS REASONABLE BEST EFFORTS TO PROMPTLY
CURE THE EVENT GIVING RISE TO THE SUSPENSION NOTICE.

 

SECTION 6.           REGISTRATION EXPENSES.  SUBJECT TO THE PENULTIMATE SENTENCE
OF SECTION 8, ALL EXPENSES IN CONNECTION WITH ANY REGISTRATION STATEMENT, ANY
QUALIFICATION OR COMPLIANCE WITH FEDERAL OR STATE LAWS REQUIRED IN CONNECTION
THEREWITH, AND THE DISTRIBUTION OF THE REGISTRABLE SECURITIES SHALL, AS BETWEEN
THE HOLDERS AND THE COMPANY, BE BORNE AS FOLLOWS:

 

(A)                  THE COMPANY SHALL PAY AND BE RESPONSIBLE FOR (I) ALL
REGISTRATION AND FILING FEES (INCLUDING FEES AND EXPENSES FOR COMPLIANCE WITH
FEDERAL OR STATE SECURITIES LAWS OR STATE “BLUE SKY” LAWS), (II) PRINTING
EXPENSES (INCLUDING, WITHOUT LIMITATION, EXPENSES OF PRINTING CERTIFICATES FOR
REGISTRABLE SECURITIES IN A FORM ELIGIBLE FOR DEPOSIT WITH THE DEPOSITORY TRUST
COMPANY AND OF PRINTING A REASONABLE NUMBER OF PROSPECTUSES IF THE PRINTING OF
SUCH PROSPECTUSES IS REQUESTED BY THE HOLDERS HOLDING A MAJORITY OF THE
REGISTRABLE SECURITIES INCLUDED IN ANY REGISTRATION STATEMENT), (III) MESSENGER,
TELEPHONE AND DELIVERY EXPENSES INCURRED BY THE COMPANY, (IV) FEES AND
DISBURSEMENTS OF COUNSEL FOR THE COMPANY INCURRED BY

 

10

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the Company, (v) fees and disbursements of all independent certified public
accountants referred to in Section 4(l)(iii) (including the expenses of any
special audit and “comfort” letter required by or incident to such performance)
incurred by the Company, (vi) reasonable and documented fees and out-of-pocket
expenses of one Special Counsel retained by the Holders in connection with the
registration and sale of their Registrable Securities (which counsel will be
chosen by Holders holding a majority of the Registrable Securities included in a
Demand Notice or, in the case of a Piggyback Registration, the Holders holding a
majority of the Registrable Securities being registered), and (vii) reasonable
and documented underwriter fees and out-of-pocket expenses. In addition, the
Company will pay internal expenses (including without limitation all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit, the fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange on which securities of the same class issued by the Company are then
listed or for admission of any securities for quotation and an inter-dealer
quotation system, as applied and the fees and expenses of any Person, including
special experts, retained by the Company.

 

(B)                 THE HOLDERS SHALL PAY (I) ANY UNDERWRITING DISCOUNT OR
SELLING COMMISSION WITH RESPECT TO ANY SALE OF REGISTRABLE SECURITIES HELD BY
THEM PURSUANT TO THIS AGREEMENT, (II) ANY TAXES OF ANY KIND (INCLUDING, WITHOUT
LIMITATION, TRANSFER TAXES) WITH RESPECT TO ANY DISPOSITION, SALE OR TRANSFER OF
REGISTRABLE SECURITIES AND (III) ANY LEGAL, ACCOUNTING AND OTHER EXPENSES
INCURRED BY THEM, EXCEPT AS PROVIDED ABOVE WITH RESPECT TO SPECIAL COUNSEL, IN
CONNECTION WITH ANY REGISTRATION STATEMENT.

 

SECTION 7.           INDEMNIFICATION.

 

(A)                  INDEMNIFICATION BY THE COMPANY.  THE COMPANY WILL INDEMNIFY
AND HOLD HARMLESS, TO THE FULLEST EXTENT PERMITTED BY LAW, EACH HOLDER HOLDING
REGISTRABLE SECURITIES REGISTERED PURSUANT TO THIS AGREEMENT, THE OFFICERS,
DIRECTORS, PARTNERS, AGENTS AND EMPLOYEES OF EACH OF THEM, EACH PERSON WHO
CONTROLS SUCH A HOLDER (WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES ACT
OR SECTION 20 OF THE EXCHANGE ACT) AND THE OFFICERS, DIRECTORS, PARTNERS, AGENTS
AND EMPLOYEES OF ANY SUCH CONTROLLING PERSON (COLLECTIVELY, THE “HOLDER
INDEMNIFIED PARTIES”), FROM AND AGAINST ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES, COSTS (INCLUDING WITHOUT LIMITATION THE COSTS OF INVESTIGATION AND
ATTORNEYS’ FEES) AND EXPENSES (COLLECTIVELY, “LOSSES”), ARISING OUT OF OR BASED
UPON ANY UNTRUE OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT CONTAINED IN ANY
REGISTRATION STATEMENT, PROSPECTUS OR IN ANY AMENDMENT OR SUPPLEMENT THERETO OR
IN ANY PRELIMINARY PROSPECTUS, OR ARISING OUT OF OR BASED UPON ANY OMISSION OR
ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT REQUIRED TO BE STATED THEREIN
OR NECESSARY TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER
WHICH THEY WERE MADE, NOT MISLEADING, OR ANY VIOLATION BY THE COMPANY OF ANY
FEDERAL, STATE OR COMMON LAW RULE OR REGULATION APPLICABLE TO THE COMPANY AND
RELATING TO ACTION REQUIRED OF OR INACTION BY THE COMPANY IN CONNECTION WITH ANY
SUCH REGISTRATION; PROVIDED, HOWEVER, THAT THE COMPANY WILL NOT INDEMNIFY OR
HOLD HARMLESS ANY HOLDER INDEMNIFIED PARTY FROM OR AGAINST ANY SUCH LOSSES (I)
THAT ARISE OUT OF OR ARE BASED UPON, IN THE CASE OF A NON-UNDERWRITTEN OFFERING,
ANY FAILURE BY SUCH HOLDER TO GIVE ANY PURCHASER OF REGISTRABLE SECURITIES AT OR
PRIOR TO THE WRITTEN CONFIRMATION OF SUCH SALE, A COPY OF THE MOST RECENT
PROSPECTUS OR (II) IF THE UNTRUE STATEMENT, OMISSION OR ALLEGATION THEREOF UPON
WHICH SUCH LOSSES ARE BASED (X) WAS MADE IN RELIANCE UPON AND IN CONFORMITY WITH
THE INFORMATION PROVIDED IN WRITING BY OR ON BEHALF OF ANY HOLDER INDEMNIFIED
PARTY SPECIFICALLY FOR USE OR INCLUSION IN THE REGISTRATION STATEMENT OR ANY
PROSPECTUS, OR (Y) WAS MADE IN ANY PROSPECTUS USED AFTER SUCH TIME AS THE
COMPANY ADVISED SUCH HOLDER THAT THE FILING OF A POST-EFFECTIVE AMENDMENT OR

 

11

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supplement thereto was required, except the Prospectus as so amended or
supplemented, or (z) was made in any Prospectus used after such time as the
obligation of the Company hereunder to keep the Registration Statement effective
and current has expired or been suspended hereunder.

 

(B)                 INDEMNIFICATION BY HOLDERS.  IN CONNECTION WITH ANY
REGISTRATION STATEMENT IN WHICH A HOLDER IS PARTICIPATING, SUCH HOLDER WILL
FURNISH TO THE COMPANY IN WRITING SUCH INFORMATION AS THE COMPANY REASONABLY
REQUESTS FOR USE IN CONNECTION WITH ANY REGISTRATION STATEMENT, PROSPECTUS OR
PRELIMINARY PROSPECTUS AND WILL, SEVERALLY BUT NOT JOINTLY, INDEMNIFY AND HOLD
HARMLESS, TO THE FULLEST EXTENT PERMITTED BY LAW, THE COMPANY, ITS DIRECTORS AND
OFFICERS, AGENTS AND EMPLOYEES, EACH PERSON WHO CONTROLS THE COMPANY (WITHIN THE
MEANING OF SECTION 15 OF THE SECURITIES ACT AND SECTION 20 OF THE EXCHANGE ACT),
AND THE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES OF SUCH CONTROLLING PERSONS
(COLLECTIVELY, THE “COMPANY INDEMNIFIED PARTIES”), FROM AND AGAINST ALL LOSSES
ARISING OUT OF OR BASED UPON (I) ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT CONTAINED IN THE REGISTRATION STATEMENT, THE
PROSPECTUS OR IN ANY AMENDMENT OR SUPPLEMENT THERETO OR IN ANY PRELIMINARY
PROSPECTUS OR ARISING OUT OF OR BASED UPON, ANY OMISSION OR ALLEGED OMISSION TO
STATE THEREIN A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE
THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE
MADE, NOT MISLEADING, IF THE STATEMENT OR OMISSION WAS MADE IN RELIANCE UPON AND
IN CONFORMITY WITH THE INFORMATION PROVIDED IN WRITING BY OR ON BEHALF OF SUCH
HOLDER OR ANY PERSON WHO CONTROLS SUCH HOLDER SPECIFICALLY FOR USE OR INCLUSION
IN THE REGISTRATION STATEMENT OR ANY PROSPECTUS, (II) THE USE OF ANY PROSPECTUS
AFTER SUCH TIME AS THE COMPANY HAS ADVISED SUCH HOLDER THAT THE FILING OF A
POST-EFFECTIVE AMENDMENT OR SUPPLEMENT THERETO IS REQUIRED, EXCEPT THE
PROSPECTUS AS SO AMENDED OR SUPPLEMENTED, (III) THE USE OF ANY PROSPECTUS AFTER
SUCH TIME AS THE OBLIGATION OF THE COMPANY HEREUNDER TO KEEP THE REGISTRATION
STATEMENT EFFECTIVE AND CURRENT HAS EXPIRED OR BEEN SUSPENDED HEREUNDER, OR (IV)
IN THE CASE OF A NON-UNDERWRITTEN OFFERING, ANY FAILURE BY SUCH HOLDER TO GIVE
ANY PURCHASER OF REGISTRABLE SECURITIES AT OR PRIOR TO THE WRITTEN CONFIRMATION
OF SUCH SALE, A COPY OF THE MOST RECENT PROSPECTUS. IN NO EVENT WILL THE
LIABILITY OF ANY SELLING HOLDER HEREUNDER BE GREATER IN AMOUNT THAN THE DOLLAR
AMOUNT OF THE NET PROCEEDS RECEIVED BY SUCH HOLDER UPON THE SALE OF THE
REGISTRABLE SECURITIES GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION.

 

(C)                  CONDUCT OF INDEMNIFICATION PROCEEDINGS.  IF ANY PERSON
SHALL BECOME ENTITLED TO INDEMNITY HEREUNDER (AN “INDEMNIFIED PARTY”), SUCH
INDEMNIFIED PARTY SHALL GIVE PROMPT NOTICE TO THE PARTY FROM WHICH SUCH
INDEMNITY IS SOUGHT (THE “INDEMNIFYING PARTY”) OF ANY CLAIM OR OF THE
COMMENCEMENT OF ANY ACTION OR PROCEEDING WITH RESPECT TO WHICH SUCH INDEMNIFIED
PARTY SEEKS INDEMNIFICATION OR CONTRIBUTION PURSUANT HERETO; PROVIDED, HOWEVER,
THAT THE FAILURE TO SO NOTIFY THE INDEMNIFYING PARTY WILL NOT RELIEVE THE
INDEMNIFYING PARTY FROM ANY OBLIGATION OR LIABILITY EXCEPT TO THE EXTENT THAT
THE INDEMNIFYING PARTY HAS BEEN PREJUDICED MATERIALLY BY SUCH FAILURE. ALL
REASONABLE AND DOCUMENTED FEES AND EXPENSES (INCLUDING ANY REASONABLE FEES AND
EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING OR PREPARING TO DEFEND SUCH
ACTION OR PROCEEDING) WILL BE PAID TO THE INDEMNIFIED PARTY (PROVIDED
APPROPRIATE DOCUMENTATION FOR SUCH EXPENSES IS ALSO SUBMITTED WITH SUCH NOTICE),
AS INCURRED, WITHIN FIVE CALENDAR DAYS OF WRITTEN NOTICE THEREOF TO THE
INDEMNIFYING PARTY. THE INDEMNIFYING PARTY WILL NOT CONSENT TO ENTRY OF ANY
JUDGMENT OR ENTER INTO ANY SETTLEMENT OR OTHERWISE SEEK TO TERMINATE ANY ACTION
OR PROCEEDING IN WHICH ANY INDEMNIFIED PARTY IS OR COULD BE A PARTY AND AS TO
WHICH INDEMNIFICATION OR CONTRIBUTION COULD BE SOUGHT BY SUCH INDEMNIFIED PARTY
UNDER THIS SECTION 7, UNLESS SUCH JUDGMENT, SETTLEMENT OR OTHER TERMINATION
INCLUDES AS AN UNCONDITIONAL TERM THEREOF THE GIVING BY THE CLAIMANT OR
PLAINTIFF TO SUCH INDEMNIFIED PARTY OF A RELEASE, IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE INDEMNIFIED PARTY, FROM ALL LIABILITY IN RESPECT
OF SUCH

 

12

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claim or litigation for which such indemnified party would be entitled to
indemnification hereunder.

 

(D)                 CONTRIBUTION.  IF THE INDEMNIFICATION PROVIDED FOR IN THIS
SECTION 7 IS UNAVAILABLE TO AN INDEMNIFIED PARTY UNDER SECTION 7(A) OR 7(B) IN
RESPECT OF ANY LOSSES OR IS INSUFFICIENT TO HOLD SUCH INDEMNIFIED PARTY
HARMLESS, THEN EACH APPLICABLE INDEMNIFYING PARTY, IN LIEU OF INDEMNIFYING SUCH
INDEMNIFIED PARTY, WILL, SEVERALLY BUT NOT JOINTLY, CONTRIBUTE TO THE AMOUNT
PAID OR PAYABLE BY SUCH INDEMNIFIED PARTY AS A RESULT OF SUCH LOSSES, IN SUCH
PROPORTION AS IS APPROPRIATE TO REFLECT THE RELATIVE FAULT OF THE INDEMNIFYING
PARTY OR INDEMNIFYING PARTIES, ON THE ONE HAND, AND SUCH INDEMNIFIED PARTY, ON
THE OTHER HAND, IN CONNECTION WITH THE ACTIONS, STATEMENTS OR OMISSIONS THAT
RESULTED IN SUCH LOSSES AS WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS.
THE RELATIVE FAULT OF SUCH INDEMNIFYING PARTY OR INDEMNIFYING PARTIES, ON THE
ONE HAND, AND SUCH INDEMNIFIED PARTY, ON THE OTHER HAND, WILL BE DETERMINED BY
REFERENCE TO, AMONG OTHER THINGS, WHETHER ANY ACTION IN QUESTION, INCLUDING ANY
UNTRUE OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT OR OMISSION OR ALLEGED
OMISSION OF A MATERIAL FACT, HAS BEEN TAKEN OR MADE BY, OR RELATED TO
INFORMATION SUPPLIED BY, SUCH INDEMNIFYING PARTY OR INDEMNIFIED PARTY, AND THE
PARTIES’ RELATIVE INTENT, KNOWLEDGE, ACCESS TO INFORMATION AND OPPORTUNITY TO
CORRECT OR PREVENT SUCH ACTION, STATEMENT OR OMISSION. THE AMOUNT PAID OR
PAYABLE BY A PARTY AS A RESULT OF ANY LOSSES WILL BE DEEMED TO INCLUDE ANY LEGAL
OR OTHER FEES OR EXPENSES INCURRED BY SUCH PARTY IN CONNECTION WITH ANY ACTION
OR PROCEEDING.

 

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 7(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7(d), an indemnifying party that
is a selling Holder will not be required to contribute any amount in excess of
the net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such contribution obligation over the amount of any
damages that such indemnifying party has otherwise been required to pay pursuant
to Section 7(b) by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

 

The indemnity, contribution and expense reimbursement obligations of the Company
hereunder will be in addition to any liability the Company may otherwise have
hereunder or otherwise. The provisions of this Section 7 will survive any
investigation made by or on behalf of such indemnified party and shall survive
the transfer of such securities by such seller or any termination of this
Agreement.

 

SECTION 8.           UNDERWRITTEN REGISTRATIONS.  IF ANY OF THE REGISTRABLE
SECURITIES INCLUDED IN ANY DEMAND REGISTRATION ARE TO BE SOLD IN AN UNDERWRITTEN
OFFERING, THE HOLDERS HOLDING A MAJORITY OF THE REGISTRABLE SECURITIES INCLUDED
IN THE DEMAND NOTICE MAY SELECT AN INVESTMENT BANKER OR INVESTMENT BANKERS AND
MANAGER OR MANAGERS TO MANAGE THE UNDERWRITTEN OFFERING, PROVIDED THAT SUCH
INVESTMENT BANKER OR BANKERS AND MANAGERS IS (ARE) REASONABLY ACCEPTABLE TO THE
COMPANY. IF ANY PIGGYBACK REGISTRATION IS AN UNDERWRITTEN OFFERING, THE COMPANY
WILL HAVE THE EXCLUSIVE RIGHT TO SELECT THE INVESTMENT BANKER OR INVESTMENT
BANKERS AND MANAGERS TO ADMINISTER THE OFFERING. IF REQUESTED BY THE
UNDERWRITERS FOR ANY UNDERWRITTEN OFFERING IN WHICH A HOLDER PARTICIPATES AS
SELLING SHAREHOLDER, THE COMPANY SHALL ENTER INTO A CUSTOMARY UNDERWRITING
AGREEMENT WITH THE UNDERWRITERS. SUCH UNDERWRITING AGREEMENT SHALL BE

 

13

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reasonably satisfactory in form and substance to the Holders if any such Holder
is participating as a selling Holder in such Underwritten Offering and shall
contain such representations and warranties by, and such other agreements on the
part of, the Company and such other terms as are generally prevailing in
agreements of that type, including, without limitation, indemnities and
contribution agreements on substantially the same terms as those contained
herein; provided, however, that the Company shall not be required to make any
representations or warranties to any Holder with respect to written information
specifically provided by a selling Holder for inclusion in the registration
statement. Such underwriting agreement shall also contain such representations
and warranties by the participating Holders with respect to title and ownership
of shares as are customary in agreements of that type. Any Holder participating
in an Underwritten Offering may, before any Registration Statement becomes
effective, withdraw his or its Registrable Securities from inclusion therein,
should the terms of sale not be satisfactory to such Holder, however, if the
Holder who initiated the Underwritten Offering pursuant to the exercise of its
rights under Section 2 so withdraws, such registration shall be deemed to have
occurred for the purposes of Section 2(a)(ii), unless such Holder pays within 20
days after any such withdrawal, all of the out-of-pocket expenses of the Company
incurred in connection with such registration. The Company and the Holders agree
that, in connection with any Underwritten Offering hereunder, they shall agree
to any restrictions required by the underwriters on the sale of Common Shares or
other securities by such party after the completion of the Underwritten
Offering; provided, however, that the period of such restrictions shall not
exceed 90 days in connection with any offering.

 

SECTION 9.           MISCELLANEOUS.

 

(A)                  REMEDIES.  IN THE EVENT OF A BREACH BY A PARTY OF ITS
OBLIGATIONS UNDER THIS AGREEMENT, EACH OTHER PARTY, IN ADDITION TO BEING
ENTITLED TO EXERCISE ALL RIGHTS GRANTED BY LAW, INCLUDING RECOVERY OF DAMAGES,
WILL BE ENTITLED TO SPECIFIC PERFORMANCE OF ITS RIGHTS UNDER THIS AGREEMENT.
EACH PARTY AGREES THAT MONETARY DAMAGES WOULD NOT BE ADEQUATE COMPENSATION FOR
ANY LOSS INCURRED BY REASON OF A BREACH BY IT OF ANY PROVISION OF THIS AGREEMENT
AND HEREBY FURTHER AGREES THAT, IN THE EVENT OF ANY ACTION FOR SPECIFIC
PERFORMANCE IN RESPECT OF SUCH BREACH, IT WILL WAIVE THE DEFENSE THAT A REMEDY
AT LAW WOULD BE ADEQUATE.

 

(B)                 RULE 144.  THE COMPANY COVENANTS THAT (I) SO LONG AS IT
REMAINS SUBJECT TO THE REPORTING PROVISIONS OF THE EXCHANGE ACT, IT WILL USE ITS
BEST EFFORTS TO TIMELY FILE THE REPORTS REQUIRED TO BE FILED BY IT UNDER THE
SECURITIES ACT OR THE EXCHANGE ACT (INCLUDING, BUT NOT LIMITED TO, THE REPORTS
UNDER SECTIONS 13 AND 15(D) OF THE EXCHANGE ACT REFERRED TO IN SUBPARAGRAPH
(C)(1) OF RULE 144 UNDER THE SECURITIES ACT), AND (II) WILL TAKE SUCH FURTHER
ACTION AS ANY HOLDER OF REGISTRABLE SECURITIES MAY REASONABLY REQUEST IN
WRITING, ALL TO THE EXTENT REQUIRED FROM TIME TO TIME TO ENABLE SUCH HOLDER TO
SELL REGISTRABLE SECURITIES WITHOUT REGISTRATION UNDER THE SECURITIES ACT WITHIN
THE LIMITATION OF THE EXEMPTIONS PROVIDED BY (A) RULE 144 UNDER THE SECURITIES
ACT, AS SUCH RULE MAY BE AMENDED FROM TIME TO TIME, OR (B) ANY SIMILAR RULE OR
REGULATION HEREAFTER ADOPTED BY THE SEC. UPON THE REQUEST OF ANY HOLDER OF
REGISTRABLE SECURITIES, THE COMPANY WILL DELIVER TO SUCH HOLDER A WRITTEN
STATEMENT AS TO WHETHER IT HAS COMPLIED WITH SUCH REQUIREMENTS.

 

(C)                  NOMINEES FOR BENEFICIAL OWNERS.  IF REGISTRABLE SECURITIES
ARE HELD BY A NOMINEE FOR THE BENEFICIAL OWNER THEREOF, THE BENEFICIAL OWNER
THEREOF MAY, AT ITS OPTION, BE TREATED AS THE HOLDER OF SUCH REGISTRABLE
SECURITIES FOR PURPOSES OF ANY REQUEST OR OTHER ACTION BY ANY HOLDER OR HOLDERS
OF REGISTRABLE SECURITIES PURSUANT TO THIS AGREEMENT (OR ANY

 

14

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determination of any number or percentage of shares constituting Registrable
Securities held by any Holder or Holders of Registrable Securities contemplated
by this Agreement), provided that the Company shall have received assurances
reasonably satisfactory to it of such beneficial ownership.

 

(D)                 AMENDMENTS AND WAIVERS.  THE PROVISIONS OF THIS AGREEMENT
MAY NOT BE AMENDED, MODIFIED OR SUPPLEMENTED WITHOUT THE PRIOR WRITTEN CONSENT
OF (I) THE COMPANY, (II) HOLDERS HOLDING IN EXCESS OF 50% OF THE REGISTRABLE
SECURITIES BENEFICIALLY HELD BY POI ACQUISITION AND ITS TRANSFEREES AND (III)
HOLDERS HOLDING IN EXCESS OF 50% OF THE REGISTRABLE SECURITIES BENEFICIALLY HELD
BY QDRF AND ITS TRANSFEREES. NO AMENDMENT THAT MATERIALLY ADVERSELY AFFECTS ANY
PARTICULAR HOLDER MAY BE EFFECTED TO THIS AGREEMENT WITHOUT THE CONSENT OF SUCH
HOLDER.

 

(E)                  NOTICES.  ALL NOTICES REQUIRED OR PERMITTED HEREUNDER SHALL
BE IN WRITING AND SHALL BE DEEMED EFFECTIVELY GIVEN: (I) UPON PERSONAL DELIVERY
TO THE PARTY TO BE NOTIFIED; (II) WHEN SENT BY CONFIRMED FACSIMILE IF SENT
DURING NORMAL BUSINESS HOURS OF THE RECIPIENT, IF NOT, THEN ON THE NEXT BUSINESS
DAY; (III) UPON DELIVERY IF SENT BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID; OR (IV) UPON DELIVERY IF DEPOSITED WITH A NATIONALLY
RECOGNIZED OVERNIGHT COURIER, SPECIFYING NEXT DAY DELIVERY, WITH WRITTEN
VERIFICATION OF RECEIPT. ALL COMMUNICATIONS SHALL BE SENT TO THE PARTIES AT THE
FOLLOWING ADDRESSES (OR AT SUCH OTHER ADDRESS FOR A PARTY AS SHALL BE SPECIFIED
BY LIKE NOTICE):

 

If to the Company to:

 

Protection One, Inc
1035 N. 3rd Street, Suite 101
Lawrence, Kansas 66044
Telephone:  785-575-1707
Facsimile:  785-575-1711

Attention: Darius G. Nevin

 

with a copy (which shall not constitute notice) to:

 

Kirkland & Ellis LLP
200 East Randolph Drive
Chicago, Illinois 60601
Telephone:  312-861-2000
Facsimile:   312-861-2200
Attention:  John M. Jennings

 

If to POI Acquisition:

 

c/o Quadrangle Group LLC
375 Park Avenue
New York, New York 10152
Telephone: 212-418-1700
Facsimile: 212-418-1701
Attention: David Tanner

 

15

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If to QDRF:

 

c/o Quadrangle Group LLC
375 Park Avenue
New York, New York 10152
Telephone: 212-418-1700
Facsimile: 212-418-1701
Attention: Michael Weinstock

 

in the case of notice to POI Acquisition or QDRF, with a copy (which shall not
constitute notice) to:

 

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017-3790
Telephone: 212-455-2000
Facsimile:  212-455-2502
Attention:  Alan M. Klein

 

and

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York 10019-6099

Telephone: 212-728-8000

Facsimile: 212-728-8111

Attention: Michael Kelly

 

or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.

 

(F)                    MERGER, AMALGAMATION OR CONSOLIDATION OF THE COMPANY.  IF
THE COMPANY IS A PARTY TO ANY MERGER, AMALGAMATION, OR CONSOLIDATION PURSUANT TO
WHICH THE REGISTRABLE SECURITIES ARE CONVERTED INTO OR EXCHANGED FOR SECURITIES
OR THE RIGHT TO RECEIVE SECURITIES OF ANY OTHER PERSON (“CONVERSION
SECURITIES”), THE ISSUER OF SUCH CONVERSION SECURITIES SHALL ASSUME (IN A
WRITING DELIVERED TO ALL HOLDERS) ALL OBLIGATIONS OF THE COMPANY HEREUNDER. THE
COMPANY WILL NOT EFFECT ANY MERGER, AMALGAMATION, OR CONSOLIDATION DESCRIBED IN
THE IMMEDIATELY PRECEDING SENTENCE UNLESS THE ISSUER OF THE CONVERSION
SECURITIES COMPLIES WITH THIS SECTION 9(F).

(G)                 SUCCESSORS AND ASSIGNS.  SUBJECT TO THE TERMS AND CONDITIONS
OF THE STOCKHOLDERS AGREEMENT DATED AS OF THE DATE HEREOF AMONG QDRF, POI
ACQUISITION AND THE COMPANY (THE “STOCKHOLDERS AGREEMENT”), ANY LAWFUL
TRANSFEREE (OTHER THAN PURSUANT TO AN OFFERING REGISTERED UNDER THE SECURITIES
ACT OR A SALE TO THE PUBLIC THROUGH A BROKER, DEALER OR MARKET MAKER IN
COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT (OR ANY SIMILAR RULE THEN IN
FORCE)) OF ALL OR A PORTION OF THE REGISTRABLE SECURITIES SHALL BECOME A HOLDER
HEREUNDER TO THE EXTENT IT AGREES IN WRITING TO BE BOUND BY ALL OF THE
PROVISIONS APPLICABLE HEREUNDER TO THE TRANSFERRING HOLDER (SUCH ACKNOWLEDGMENT
BEING EVIDENCED BY EXECUTION AND DELIVERY TO THE COMPANY OF A COUNTERPART AND
ACKNOWLEDGMENT SUBSTANTIALLY IN THE FORM OF EXHIBIT A).

 

16

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Subject to the requirements of this Section 9(g), this Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of the
parties hereto.

 

(H)                 PAII.  QDRF AND POI ACQUISITION AGREE TO CAUSE PAII TO
COMPLY WITH THE PROVISIONS OF THIS AGREEMENT AS IF IT WERE A HOLDER AND A PARTY
HERETO.

 

(I)                     COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ANY
NUMBER OF COUNTERPARTS, EACH OF WHICH SHALL BE AN ORIGINAL, BUT ALL OF WHICH
TOGETHER SHALL CONSTITUTE ONE INSTRUMENT.

 

(J)                     TITLES AND SUBTITLES.  THE TITLES OF THE SECTIONS AND
SUBSECTIONS OF THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY AND ARE NOT
TO BE CONSIDERED IN CONSTRUING THIS AGREEMENT.

 

(K)                  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO CONFLICTS
OF LAW PRINCIPLES.

 

(L)                     SEPARABILITY.  IN CASE ANY PROVISION OF THIS AGREEMENT
SHALL BE INVALID, ILLEGAL OR UNENFORCEABLE, THE VALIDITY, LEGALITY AND
ENFORCEABILITY OF THE REMAINING PROVISIONS SHALL NOT IN ANY WAY BE AFFECTED OR
IMPAIRED THEREBY.

 

(M)               ENTIRE AGREEMENT.  THIS AGREEMENT AND THE OTHER DOCUMENTS
DELIVERED PURSUANT HERETO AND THE STOCKHOLDERS AGREEMENT CONSTITUTE THE FULL AND
ENTIRE UNDERSTANDING AND AGREEMENT AMONG THE PARTIES WITH REGARD TO THE SUBJECTS
THERETO AND NO PARTY SHALL BE LIABLE OR BOUND TO ANY OTHER IN ANY MANNER BY ANY
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS EXCEPT AS SPECIFICALLY SET
FORTH HEREIN AND THEREIN.

 

(N)                 NO INCONSISTENT AGREEMENTS.  THE RIGHTS GRANTED TO THE
HOLDERS OF REGISTRABLE SECURITIES HEREUNDER DO NOT IN ANY WAY CONFLICT WITH AND
ARE NOT INCONSISTENT WITH ANY OTHER AGREEMENTS TO WHICH THE COMPANY IS A PARTY
OR BY WHICH IT IS BOUND. WITHOUT THE PRIOR WRITTEN CONSENT OF POI ACQUISITION
AND QDRF (IN EACH CASE, FOR SO LONG AS THEY HOLD REGISTRABLE SECURITIES),
NEITHER THE COMPANY NOR ANY HOLDER WILL, ON OR AFTER THE DATE OF THIS AGREEMENT,
ENTER INTO ANY AGREEMENT WITH RESPECT TO ITS SECURITIES WHICH CONFLICTS WITH THE
PROVISIONS HEREOF, OTHER THAN ANY LOCK-UP AGREEMENT WITH THE UNDERWRITERS IN
CONNECTION WITH ANY REGISTERED OFFERING EFFECTED HEREUNDER, PURSUANT TO WHICH
THE COMPANY SHALL AGREE NOT TO REGISTER FOR SALE, AND THE COMPANY SHALL AGREE
NOT TO SELL OR OTHERWISE DISPOSE OF, COMMON SHARES OR ANY SECURITIES CONVERTIBLE
INTO OR EXERCISABLE OR EXCHANGEABLE FOR COMMON SHARES, FOR A SPECIFIED PERIOD
FOLLOWING THE REGISTERED OFFERING.

 

[Signature page follows]

 

17

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

 

 

 

PROTECTION ONE, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

POI ACQUISITION LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

QUADRANGLE MASTER FUNDING LTD

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title:

 

 

18

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EXHIBIT A

 

REGISTRATION RIGHTS AGREEMENT
COUNTERPART AND ACKNOWLEDGMENT

 

TO:

Protection One, Inc. (the “Company”)

RE:

The Registration Rights Agreement (the “Agreement”) dated as of           ,
2005, by and among the Company and the Holders (as defined in the Agreement)

 

The undersigned hereby agrees to be bound by the terms of the Agreement as a
party to the Agreement, and shall be entitled to all benefits of the Holders (as
defined in the Agreement) and shall be subject to all obligations and
restrictions of the Holders pursuant to the Agreement, as fully and effectively
as though the undersigned had executed a counterpart of the Agreement together
with the other parties to the Agreement. The undersigned hereby acknowledges
having received and reviewed a copy of the Agreement.

 

DATED this            day of                     ,           

 

 

By:

 

Title:

 

 

 

 

 

Number of Registrable Securities:

 

--------------------------------------------------------------------------------

ANNEX V

 

SETTLEMENT AGREEMENT

Dated as of November 12, 2004

 

This Settlement Agreement is made and entered into this 12th day of November,
2004, by and among Westar Energy, Inc., a Kansas corporation (“Westar”),
Protection One, Inc., a Delaware corporation (“POI”), POI Acquisition, L.L.C., a
Delaware limited liability company (“POIA”), and POI Acquisition I, Inc., a
Delaware corporation and a wholly-owned subsidiary of POIA (“POIA Inc.”), (each
of Westar, POI, POIA and POIA Inc., a “Party” and collectively, the “Parties”).

 

RECITALS

 

A.                                   Pursuant to the Purchase Agreement dated
December 23, 2003 between POIA, Westar Industries, Inc., a wholly-owned
subsidiary of Westar (“WII”), and Westar (as amended, the “Purchase Agreement”),
POIA, through POIA Inc., purchased an aggregate of 85,291,497 shares of common
stock, par value $0.01, of POI from WII, and assumed all of WII’s rights and
obligations under the Revolving Credit Agreement dated as of December 21, 1998
(“Credit Facility”), by and among WII, POI as guarantor and Protection One Alarm
Monitoring, Inc., a Delaware corporation and wholly-owned subsidiary of POI
(“POAMI”);

 

B.                                     Under Sections 8.05 and 11.07 of the
Purchase Agreement, POIA has agreed to pay to Westar a portion of certain tax
sharing payments and to pay to Westar a portion of the Credit Facility Recovery
Value that exceeds the Threshold Amount (as each of these are defined in the
Purchase Agreement);

 

C.                                     POIA and Westar desire to (i) achieve a
final settlement of all outstanding and potential claims under Sections 8.05 and
11.07 of the Purchase Agreement and (ii) settle, by means of this Settlement
Agreement claims, to the extent explicitly provided herein, between them
relating to Sections 8.02 and 8.07 of the Purchase Agreement but excluding,
without limitation, any claims between them relating to or arising under or by
virtue of Sections 8.03, 8.04, 8.06 and 8.08 of the Purchase Agreement;

 

D.                                    Westar and POI are parties to a Tax
Sharing Agreement dated as of November 24, 1997 (the “Tax Sharing Agreement”)
which made available to POI a “Tax Sharing and Allocation Policy” adopted by
Westar as of January 1, 1994; and

 

E.                                      Westar and POI desire to terminate the
Tax Sharing Agreement and to settle, by means of this Settlement Agreement, all
claims between them relating to and arising under or by virtue of the Tax
Sharing Agreement and, in addition, to enter into mutual general releases.

 

Now, therefore, in consideration of the mutual promises herein contained, the
Parties agree as follows:

 

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ARTICLE 1.

 

DEFINITIONS

 

Section 1.01.  Definitions.

 

(a)                                  The following terms, as used herein, have
the following meanings:

 

“338(h)(10) Election” means an election under section 338(h)(10) of the Code,
and any similar election under state or local law made in connection with the
sale of the stock of POI to POIA, Inc., pursuant to the Purchase Agreement.

 

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such other
Person.

 

“Business Day” means a day, other than Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to
close.

 

“Closing Date” means the date on which the closing under the Purchase Agreement
occurred.

 

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

 

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, option, warrant, purchase right, claim or encumbrance
of any nature whatsoever in respect of such property or asset.

 

“Person” means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

 

“Pre-Closing Tax Period” means any Tax period or portion thereof, ending on or
before the Closing Date.

 

“Settlement Date” means the date of the Settlement Closing.

 

“Tax” means any tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest, penalty, addition to tax or
additional amount imposed by any governmental authority responsible for the
imposition of any such tax.

 

(b)                                 Each of the following terms is defined in
the Section set forth opposite such term:

 

Term

 

Section

 

 

 

Credit Facility

 

Recitals

Indenture

 

2.02

Notes

 

2.01

POAMI

 

Recitals

POI Release

 

4.02

 

2

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Term

 

Section

 

 

 

POIA Cash Payment

 

2.01

POIA Release

 

4.03

Purchase Agreement

 

Recitals

Purchase Price Allocation

 

Appendix I

Tax Sharing Agreement

 

Recitals

Settlement Closing

 

2.02

Westar Cash Payment

 

2.01

Westar Release

 

4.01

WII

 

Recitals

 

(c)                                  Unless specified otherwise, in this
Agreement the obligations of any Party consisting of more than one Person are
joint and several.  The words “hereof”, “herein” and “hereunder” and words of
like import used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.  The captions herein are
included for convenience of reference only and shall be ignored in the
construction or interpretation hereof.  References to Articles or Sections are
Articles or Sections of this Agreement unless otherwise specified.  Any singular
term in this Agreement shall be deemed to include the plural, and any plural
term the singular.  Whenever the words “include”, “includes” or “including” are
used in this Agreement, they shall be deemed to be followed by the words
“without limitation”, whether or not they are in fact followed by those words or
words of like import.  “Writing”, “written” and comparable terms refer to
printing, typing and other means of reproducing words (including electronic
media) in a visible form.  References to any agreement or contract are to that
agreement or contract as amended, modified or supplemented from time to time in
accordance with the terms hereof and thereof.  References to any Person include
the successors and permitted assigns of that Person.  References from or through
any date mean, unless otherwise specified, from and including or through and
including, respectively.

 

ARTICLE 2

 

SETTLEMENT OF CLAIMS; SETTLEMENT CLOSING.

 

Section 2.01.  Settlement of Claims.

 

The Parties agree that:

 

(a)                                  Westar shall pay to POI an aggregate of
$73,000,000, which will represent payment in full of all amounts due from Westar
or any Westar Affiliate to POI under the Tax Sharing Agreement.  This amount
shall consist of $26,640,000 in aggregate principal amount of POAMI’s 73/8%
Senior Notes Due 2005 (the “Notes”), which shall be valued at their face amount
plus accrued and unpaid interest thereon up to and including the Settlement Date
(such accrued and unpaid interest is $474,802.50 at November 12, 2004), and the
remainder in cash (the “Westar Cash Payment”).

 

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(b)                                 POIA shall pay to Westar an aggregate of
$32,500,000 in cash (the “POIA Cash Payment”), which will represent payment in
full of all amounts due to Westar under Sections 8.05 and 11.07 of the Purchase
Agreement.

 

Section 2.02.  Settlement Closing.

 

(a)                                  The closing of the settlement of claims
(the “Settlement Closing”) between the Parties shall take place at the offices
of Westar, 818 S. Kansas Avenue, Topeka, Kansas 66612, simultaneously with the
execution and delivery of this Settlement Agreement, on November 12, 2004.

 

(b)                                 At the Settlement Closing:

 

(i)                           Westar shall deliver to POI:

 

(A)                    the Notes by providing the Depositary, as such entity is
defined in the Indenture dated August 17, 1998 (the “Indenture”), an irrevocable
instruction to transfer to POI’s account (or the account of POI’s transferee if
such entity is identified in writing to Westar prior to the Settlement Closing)
the relevant beneficial interests in the Global Note in accordance with the
provisions of the Indenture and the Applicable Procedures thereunder and
thereafter cooperating with POI to provide notice of such transfer to POAMI so
that the transfer may be recorded in the register kept at the Trustee’s
Corporate Trust Office, as described in Section 2.03 of the Indenture.

 

(B)                      the Westar Cash Payment in immediately available funds
by wire transfer to an account designated by POI in writing prior to the
Settlement Closing.

 

(ii)                                  POIA shall deliver to Westar the POIA Cash
Payment in immediately available funds by wire transfer to an account designated
by Westar in writing prior to the Settlement Closing.

 

(c)                                  Westar’s delivery of the Notes and the
Westar Cash Payment to POI and POIA’s delivery of the POIA Cash Payment to
Westar, when completed pursuant to Section 2.02(b), shall be deemed to have
occurred simultaneously, and no delivery shall be deemed to have occurred unless
all deliveries shall be made.

 

(d)                                 Simultaneously with the deemed completion of
the deliveries described in Section 2.02(c) above, the provisions of Articles 3
and 4 below shall become effective.

 

(e)                                  Each of POIA and Westar agree that the
transactions contemplated by this Settlement Agreement were effected in full
compliance with the requirements of Section 7.06 of the Purchase Agreement.

 

(f)                                    For the avoidance of doubt, Sections 8.05
and 11.07 of the Purchase Agreement shall have no effect after the Settlement
Closing.

 

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(g)                                 For tax purposes, the amounts described in
(i) Section 2.01(a) and Section 3.02(c) shall be treated as a contribution to
capital and (ii) Section 2.01(b) shall be treated as an adjustment to the
purchase price in the manner described in Sections 8.05(c) and 11.07(b) of the
Purchase Agreement.

 

ARTICLE 3

 

TAX MATTERS.

 

Section 3.01.  Termination of Tax Sharing Agreement.  Westar and POI agree that
as of the Closing Date, the Tax Sharing Agreement shall be terminated and
neither party thereto shall have any further rights or obligations thereunder
with respect to any Tax period, including as a result of an audit or other
adjustment of a return filed with respect to any Pre-Closing Tax Period.  All
obligations under the Tax Sharing Agreement shall be deemed to have been
satisfied in full in consideration for this Settlement Agreement and the
payments to be made pursuant to this Settlement Agreement and Section 8.07 of
the Purchase Agreement shall cease to have any effect after the Settlement
Closing.  For the avoidance of doubt, this Section 3.01 shall have no effect on
the Parties’ indemnification rights and obligations under Sections 8.03 and 8.04
of the Purchase Agreement.

 

Section 3.02.  Section 338(h)(10) Election.

 

(a)                                  Westar and POIA Inc. agree to join in
making 338(h)(10) Elections for POI and each subsidiary of POI listed on
Appendix I hereto.  Such 338(h)(10) Elections shall be made in accordance with
the Purchase Price Allocation (as set forth in Appendix I) and consistent with
Treasury Regulations promulgated under Section 338(h)(10) of the Code.  Westar
and POIA Inc. agree to act in accordance with the Purchase Price Allocation in
the preparation, filing and audit of any Tax return.

 

(b)                                 For the avoidance of doubt, (i) other than
as explicitly provided in Section 3.02(a), Section 8.04(a)(ii) of the Purchase
Agreement shall survive and remain in full force and effect after the Settlement
Closing and (ii) Westar shall not be obligated to make any tax sharing payments
to POI in respect of losses generated, or treated as generated, by POI in
connection with the 338(h)(10) Election, except as set forth in Section 3.02(c)
below.

 

(c)                                  (i)  Westar agrees that if it (or any
member of a consolidated or combined filing that includes Westar) claims and
receives, with respect to any taxable period beginning after December 31, 2004,
any Tax benefits attributable to any net operating loss carryforward arising out
of the deemed sale of the assets of POI and its subsidiaries as a result of the
338(h)(10) Election, it shall pay POI an amount in cash equal to 50% of the
value of such benefits (net of any adjustments made in response to audits or
inquiries by Tax authorities and less any reasonable out-of-pocket costs
incurred after the Settlement Date, including the fees of outside attorneys and
other third party professionals, associated with obtaining such benefits,
including the costs of responding to audits or inquiries by Tax authorities). 
Westar shall determine whether to claim any such net operating loss carryforward
in good faith.

 

5

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(ii)  If Westar claims a Tax benefit described in clause (i) of this
Section 3.02(c), it shall, within 30 days of filing a return reflecting such Tax
benefit, deliver to POI a certificate executed by the CFO of Westar stating the
amount of the Tax benefit claimed (which shall include appropriate detail
regarding the basis for the calculation) and the status of any audit or inquiry
by a Taxing authority, if any, with respect to such net operating loss
carryforward for that taxable year or any prior taxable year.

 

(iii)  Payment(s) required under this Section 3.02(c) shall be due within 30
days after the expiration of the statute of limitations with respect to the
return filed for the taxable period for which the relevant benefit is claimed,
together with interest thereon.  Interest will accrue during a particular
calendar quarter (or portion thereof) at the rate per annum equal to the rate
reported in the Wall Street Journal as the “Prime Rate” in effect on the last
Business Day of the immediately preceding calendar quarter, minus 0.75%, and
shall be (x) calculated from the due date of such return to the date of payment,
(y) compounded annually and (z) computed on the basis of a 365 day year.  Westar
shall determine the amount and timing of any payment under this Section 3.02(c)
in good faith, and at the time of making any such payment, shall deliver to POI
a certificate executed by Westar’s CEO and CFO setting forth such determination
and appropriate detail regarding the basis for the calculation and the timing of
the payment.  Westar shall make available and allow POI to review all documents
relevant to such determination, including without limitation Tax returns, audit
reports issued by Tax authorities and documentation of out-of-pocket costs.

 

(iv)  Neither POIA nor POI nor any of their Affiliates shall be entitled to
participate in the preparation or audit (or any related inquiry by a Taxing
authority) of any Tax return of Westar.

 

(d)                                 Sections 8.02(a) and 8.02(b) of the Purchase
Agreement shall cease to have any effect after the Settlement Closing.

 

Section 3.03.  Amended Returns.  Westar on the one hand and POI on the other
hand, agree that, without the prior written consent of the other (which consent
shall not be unreasonably withheld), none of them nor any of their subsidiaries,
except to the extent required by law, will file any amended return, file any
claim for refund or take any other action relating to a Pre-Closing Tax Period
that could reasonably be expected to have an adverse impact on the other.

 

Section 3.04.  Refunds.  POI agrees promptly to pay to Westar all refunds of
Taxes (other than as provided in Section 3.05 below) and interest thereon
received by POI or any of its subsidiaries attributable to any Pre-Closing Tax
Period.

 

Section 3.05.  Carrybacks.  POI agrees not to carry back to any Pre-Closing Tax
Period any losses, credits or similar items arising in a taxable period
beginning after the Closing Date without the prior written consent of Westar,
provided; however, that to the extent the carryback of Tax losses, credits or
similar items is required by law, POI shall be entitled to carry back to a
Pre-Closing Tax Period any such Tax losses, credits or similar items and shall
be entitled to any refund arising therefrom (including any interest received
thereon).

 

6

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Section 3.06.  Cooperation.  Westar on the one hand and POI on the other hand
agree to furnish or cause to be furnished to each other, upon request, as
promptly as practicable, such information (including access to books and
records) and assistance relating to POI as is reasonably necessary for the
filing of any return, for the preparation of any audit, and for the prosecution
or defense of any claim, suit or proceeding relating to any proposed
adjustment.  POI agrees to retain or cause to be retained all books and records
relating to Pre-Closing Tax Periods pertinent to POI until the applicable period
for assessment under applicable law (giving effect to any and all extensions or
waivers) has expired, and to abide by or cause the abidance with all record
retention agreements entered into by POI with any taxing authority.  POI agrees
to give Westar reasonable notice prior to transferring, discarding or destroying
any such books and records relating to Tax matters and, if Westar so requests,
will allow Westar to take possession of such books and records.  Westar and POI
shall cooperate with each other in the conduct of any audit or other proceedings
in relation to Tax matters involving POI and each shall execute and deliver such
powers of attorney and other documents as are reasonably necessary to carry out
the intent of this subsection.

 

Section 3.07.  Unless explicitly provided otherwise herein, Sections 8.02(c),
8.03, 8.04, 8.06 and 8.08 shall survive and remain in full force and effect
after the Settlement Closing.

 

ARTICLE 4

 

MUTUAL GENERAL RELEASES.

 

Section 4.01.  Release by Westar of POI.

 

(a)                                  Effective as of the Settlement Closing,
Westar, on behalf of itself and Affiliates under its control, and its and their
respective successors or assigns, release and forever discharge (“Westar
Release”) POI and its subsidiaries and its and their respective directors,
officers, employees, attorneys, and agents acting in such capacities, and all
their predecessors, successors, heirs, executors, administrators,
representatives, and assigns, acting in such capacities, of and from all manner
of action and actions, cause and causes of action, suits, debts, dues, sums of
money, accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
executions, claims and demands and defenses whatsoever, including attorney’s
fees, costs, and interest, in law or in equity, whether known or unknown which
Westar or any of its successors or assigns ever had, now has, or hereafter can,
may or shall have against any such parties, from the beginning of the world to
the Settlement Date.  The Parties to this Agreement intend that this release be
construed broadly.

 

(b)                                 Westar further acknowledges that it is
represented by counsel in connection with this Settlement Agreement, that it has
in fact consulted with counsel concerning this Settlement Agreement, and that
after such consultations it fully understands the terms of this Settlement
Agreement and executes it freely and voluntarily, intending fully to be bound
hereby.

 

7

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Section 4.02.  Release by POI of Westar.

 

(a)                                  Effective as of the Settlement Closing,
POI, on behalf of itself and Affiliates under its control, and its and their
respective successors or assigns, release and forever discharge (“POI Release”)
Westar and its subsidiaries and its and their respective directors, officers,
employees, attorneys, and agents acting in such capacities, and all their
predecessors, successors, heirs, executors, administrators, representatives, and
assigns, acting in such capacities, of and from all manner of action and
actions, cause and causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
executions, claims and demands and defenses whatsoever, including attorney’s
fees, costs, and interest, in law or in equity, whether known or unknown which
POI or any of its successors or assigns ever had, now has, or hereafter can, may
or shall have against any such parties, from the beginning of the world to the
Settlement Date.  The Parties to this Agreement intend that this release be
construed broadly.

 

(b)                                 POI further acknowledges that it is
represented by counsel in connection with this Settlement Agreement, that it has
in fact consulted with counsel concerning this Settlement Agreement, and that
after such consultations it fully understands the terms of this Settlement
Agreement and executes it freely and voluntarily, intending fully to be bound
hereby.

 

Section 4.03.  Exceptions to Release.  Notwithstanding anything to the contrary
contained herein, the provisions of this Article 4 shall have no effect on
(i) the rights and remedies available to the Westar and POIA under the Purchase
Agreement, (ii) the representations, warranties, obligations or rights of the
Parties under this Settlement Agreement, or (iii) the Service Agreement, by and
between Westar and POI dated as of April 1, 1999 (as renewed, extended, modified
and amended to date) (the “Service Agreement”) and the related obligations of
POIA and Westar under Section 7.04 of the Purchase Agreement, or (iv) any alarm
monitoring or other service agreements (including card access control, CCTV and
fire and security monitoring services) among Westar or its subsidiaries, on the
one hand, and POI or its subsidiaries, on the other hand, in effect on the date
of this Agreement; provided, however, that nothing in this Article 4 shall be
held or implied to waive, affect or otherwise modify any rights, claims or
defenses that POI, Westar or their respective subsidiaries have or may have with
respect to the agreements described in subsections (i), (ii), (iii) and (iv) of
this Section 4.03.

 

ARTICLE 5

 

PARTIES’ REPRESENTATION AND WARRANTIES

 

Section 5.01.  Representations and Warranties of the Parties.

 

(a)                                  Westar represents and warrants to POI and
POIA that:

 

(i)                                     it is a corporation validly existing and
in good standing under the laws of the State of Kansas;

 

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(ii)                                  it has all corporate power and authority
to execute and deliver this Settlement Agreement and to perform its obligations
hereunder;

 

(iii)                               the execution, delivery and performance of
this Settlement Agreement by Westar, and the consummation by Westar of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Westar, including by its board of directors;

 

(iv)                              this Settlement Agreement has been duly and
validly executed and delivered by Westar and (assuming the due authorization,
execution and delivery hereof by POI and POIA) constitutes a legal, valid and
binding obligation of Westar enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity);

 

(v)                                 the execution and delivery by Westar of this
Settlement Agreement, the consummation of the transactions contemplated hereby,
and compliance by Westar with any of the provisions hereof will not conflict
with, constitute a default under or violate (x) any of the terms, conditions or
provisions of its articles of incorporation or by-laws, (y) any of the terms,
conditions or provisions of any document, agreement or other instrument to which
Westar is a party or by which its property is bound, or (z) any judgment, writ,
injunction, decree, order or ruling of any court or governmental authority
binding on it or its property;

 

(vi)                              no consent, approval, waiver, license or
authorization or other action by, or filing with, any court or governmental
agency, commission or authority is required in connection with the execution and
delivery by Westar of this Settlement Agreement, the consummation by Westar of
the transactions contemplated hereby and compliance by Westar with any of the
provisions hereof; and

 

(vii)                           Westar is the legal and beneficial owner of the
Notes, free and clear of any Liens and at the Settlement Closing will transfer
good and valid title to the Notes free and clear of any Liens.  No
representation or warranty is made hereby as to the value or priority of any
claim under or by virtue of ownership of the Notes.

 

(b)                                 POI represents and warrants to Westar that:

 

(i)                                     it is a corporation validly existing and
in good standing under the laws of the State of Delaware;

 

(ii)                                  it has all corporate power and authority
to execute and deliver this Settlement Agreement and to perform its obligations
hereunder;

 

(iii)                               the execution, delivery and performance of
this Settlement Agreement by POI, and the consummation by POI of the
transactions contemplated hereby, have been

 

9

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duly authorized by all necessary corporate action on the part of POI, including
by  its board of directors;

 

(iv)                              this Settlement Agreement has been duly and
validly executed and delivered by POI and (assuming the due authorization,
execution and delivery hereof by Westar and POIA) constitutes a legal, valid and
binding obligation of POI enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity);

 

(v)                                 the execution and delivery by POI of this
Settlement Agreement, the consummation of the transactions contemplated hereby,
and compliance by POI with any of the provisions hereof will not conflict with,
constitute a default under or violate (x) any of the terms, conditions or
provisions of its certificate of incorporation or by-laws, (y) any of the terms,
conditions or provisions of any document, agreement or other instrument to which
POI is a party or by which its property is bound, or (z) any judgment, writ,
injunction, decree, order or ruling of any court or governmental authority
binding on it or its property; and

 

(vi)                              no consent, approval, waiver, license or
authorization or other action by, or filing with, any court or governmental
agency, commission or authority is required in connection with the execution and
delivery by POI of this Agreement, the consummation by POI of the transactions
contemplated hereby and compliance by POI with any of the provisions hereof.

 

(c)                                  POIA represents and warrants to Westar
that:

 

(i)                                     it is validly constituted, validly
existing and in good standing under the laws of the State of Delaware;

 

(ii)                                  it has all necessary power and authority
to execute and deliver this Settlement Agreement and to perform its obligations
hereunder;

 

(iii)                               the execution, delivery and performance of
this Settlement Agreement by it, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by all corporate or partnership
or other similar actions on its part that are necessary to make it a valid and
binding obligation;

 

(iv)                              this Settlement Agreement has been duly and
validly executed and delivered by it and (assuming the due authorization,
execution and delivery hereof by Westar and POI) constitutes its legal, valid
and binding obligation enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity);

 

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(v)                                 the execution and delivery by it of this
Settlement Agreement, the consummation of the transactions contemplated hereby,
and compliance by it with any of the provisions hereof will not conflict with,
constitute a default under or violate (x) any of the terms, conditions or
provisions of its constitutional documents, (y) any of the terms, conditions or
provisions of any document, agreement or other instrument to which it is a party
or by which its property is bound, or (z) any judgment, writ, injunction,
decree, order or ruling of any court or governmental authority binding on it or
its property; and

 

(vi)                              no consent, approval, waiver, license or
authorization or other action by, or filing with, any court or governmental
agency, commission or authority is required in connection with the execution and
delivery by it of this Settlement Agreement, the consummation by it of the
transactions contemplated hereby and compliance by it with any of the provisions
hereof.

 

ARTICLE 6.

 

MISCELLANEOUS

 

Section 6.01.  Notices.  All notices, requests and other communications to any
Party shall be in writing (including facsimile transmission and shall be given,

 

if to POI, to:

 

Protection One, Inc.
1035 N. 3rd Street, Suite 101
Lawrence, Kansas  66112
Attention:  Darius Nevin
Facsimile No.:  (785) 575-6511

 

with a copy to:

 

Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois  60601
Attention:  Anup Sathy
Facsimile No.:  (312) 660-0641

 

if to POIA, to:

 

Quadrangle Advisors LLC
375 Park Avenue; 14th Floor

New York, NY  10152

Attention:  David A. Tanner

Facsimile No.:  (212) 418-1701

 

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with a copy to:

 

Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York  10019-6099
Attention:  Michael J. Kelly
Facsimile No.:  (212) 728-9686

 

and to:

 

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York  10019-3954
Attention:  Alan M. Klein
Facsimile No.:  (212) 455-3188

 

if to Westar, to:

 

Westar Energy, Inc.
818 S. Kansas Avenue
Topeka, Kansas  66612
Attention:  General Counsel
Facsimile No.:  (785) 575-1936

 

with a copy to:

 

Davis Polk & Wardwell
1600 El Camino Real,
Menlo Park, California  94025
Attention:  Daniel G. Kelly, Jr.
Facsimile No.:  (650) 752-3601

 

or such other address or facsimile number as such Party may hereafter specify
for the purpose by notice to the other Parties.  All such notices, requests and
other communications shall be deemed received on the date of receipt by the
recipient thereof if received prior to 5:00 p.m. in the place of receipt and
such day is a Business Day in the place of receipt.  Otherwise, any such notice,
request or communication shall be deemed not to have been received until the
next succeeding Business Day in the place of receipt.

 

Section 6.02.  No Waiver.  The failure of a Party to insist upon strict
adherence to any term of this Settlement Agreement on any occasion shall not be
considered a waiver of such Party’s rights or deprive such Party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Settlement Agreement.

 

Section 6.03.  Public Announcements.  No Party shall make any press release or
other public statement of this Agreement or the transactions contemplated hereby
prior to the Settlement Date.  After the Settlement Date, a Party shall consult
with each other Party before

 

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issuing any press release or making any other public statement with respect to
this Agreement or the transactions contemplated hereby.

 

Section 6.04.  Expenses.  Except as otherwise provided herein, all costs and
expenses incurred in connection with this Settlement Agreement shall be paid by
the Party incurring such cost or expense.

 

Section 6.05.  Governing Law.  This Settlement Agreement shall be governed by
and construed in accordance with the law of the State of Delaware, without
regard to the conflicts of law rules of such state.

 

Section 6.06.  Jurisdiction.  The Parties agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Settlement Agreement or the transactions
contemplated hereby shall be brought in any federal court located in Delaware or
any Delaware state court, so long as one of such courts shall have subject
matter jurisdiction over such suit, action or proceeding, and that any cause of
action arising out of this Settlement Agreement shall be deemed to have arisen
from a transaction of business in the State of Delaware, and each of the Parties
hereby irrevocably consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
that it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum. 
Process in any such suit, action or proceeding may be served on any Party
anywhere in the world, whether within or without the jurisdiction of any such
court.  Without limiting the foregoing, each Party agrees that service of
process on such Party as provided in Section 6.01 shall be deemed effective
service of process on such Party.

 

Section 6.07.  WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 6.08.  Amendment.  Any modification to this Settlement Agreement shall
not be valid or enforceable unless in writing and signed by all parties to this
Settlement Agreement.  It is expressly agreed that this Settlement Agreement
cannot be modified orally, by course of dealing, or by implied agreement.

 

Section 6.09.  Counterparts.  The Parties agree that this Settlement Agreement
may be executed in one or more counterparts, any one of which may not contain
the signature of more than one Party, but all such counterparts taken together
shall constitute one and the same agreement.  The Parties further agree that fax
copies of this Settlement Agreement in counterpart or otherwise bearing
signatures of Parties may be treated as executed original documents.

 

Section 6.10.  Specific Performance.  The Parties acknowledge that money damages
alone will not be adequate to remedy a breach of this Settlement Agreement. 
Each Party hereby consents to the specific performance of this Settlement
Agreement.  In the event that legal action is instituted between the Parties to
enforce this Settlement Agreement, the prevailing Party shall

 

13

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be entitled to recover from the losing party all costs and expenses of
litigation, including without limitation court costs and reasonable attorneys’
fees.

 

Section 6.11.  Entire Agreement.  This Settlement Agreement constitutes the
complete agreement between the Parties and all promises, representations,
understandings, warranties, and agreements with reference to the subject matter
of this Settlement Agreement and all inducements to the making of this
Settlement Agreement relied upon by either Party has been fully expressed in
this Settlement Agreement.  The Parties expressly acknowledge that, other than
as set out in this Settlement Agreement, they are not relying on any
representation or warranty of the other in entering into this Settlement
Agreement.

 

Section 6.12.  Further Assurances.  Each of the Parties agrees that it will
cooperate and take all actions reasonably requested in order to give full effect
to the provisions and intent of this Settlement Agreement and will execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered, to
the other Parties such instruments, agreements and other documents (including
any instruments of sale, assignment, transfer or conveyance or other documents
reasonably requested in order to effectuate the sale, assignment, transfer or
conveyance of the Notes to POI) reasonably requested in order to evidence or
effectuate the agreements described in this Settlement Agreement.

 

Section 6.13.  Successors and Assigns.  This Settlement Agreement may not be
assigned by any of the Parties hereto (whether by operation of law or otherwise)
without the prior written consent of each of the other Parties.  This Settlement
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns.

 

Section 6.14.  Limited Third Party Beneficiaries.  Other than the provisions of
Article 4, with respect to which the Persons released thereby are intended third
party beneficiaries, the provisions of this Settlement Agreement are solely for
the benefit of the Parties and are not intended to confer upon any Person any
rights or remedies hereunder and there are no other third party beneficiaries of
this Settlement Agreement.

 

14

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and year first above written.

 

 

 

WESTAR ENERGY, INC.

 

 

 

By:

/s/ Mark A. Ruelle

 

 

Name: Mark A. Ruelle

 

Title: EVP and CFO

 

 

 

 

 

PROTECTION ONE, INC.

 

 

 

By:

/s/ Darius G. Nevin

 

 

Name: Darius G. Nevin

 

Title: EVP and CFO

 

 

 

 

 

POI ACQUISITION, L.L.C.

 

 

 

By:

/s/ David A. Tanner

 

 

Name: David A. Tanner

 

Title: Member

 

 

 

 

 

POI ACQUISITION I, INC.

 

 

 

By:

/s/ David A. Tanner

 

 

Name: David A. Tanner

 

Title: President

 

--------------------------------------------------------------------------------

 

ANNEX VI

 

EXECUTION VERSION

 

POI ACQUISITION I, INC.

 

November 12, 2004

 

Protection One, Inc.

1035 North 3rd Street, Suite 101
Lawrence, Kansas 66044

Attn:               Darius G. Nevin

Executive Vice President and Chief Financial Officer

 

Dear Mr. Nevin:

 

1.                                       We refer to the:  (a) Equity Standstill
Agreement, dated as of February 17, 2004 (the “Agreement”), by and between
Protection One, Inc. (“POI”) and POI Acquisition I, Inc. (“POI Acquisition”);
(b) letter from POI Acquisition to POI, dated May 17, 2004, amending the term of
the Agreement; (c) letter from POI Acquisition to POI, dated May 24, 2004,
further amending the term of the Agreement; (d) letter from POI Acquisition to
POI, dated May 28, 2004, further amending the term of the Agreement; (e) letter
from POI Acquisition to POI, dated June 28, 2004, further amending the term of
the Agreement; (f) letter from POI Acquisition to POI, dated July 26, 2004,
further amending the term of the Agreement; (g) letter from POI Acquisition to
POI, dated August 23, 2004, further amending the term of the Agreement; (h)
letter from POI Acquisition to POI, dated September 20, 2004, further amending
the term of the Agreement; and (i) letter from POI Acquisition to POI, dated
October 18, 2004, further amending the term of the Agreement (the “Eighth Letter
Agreement”).  Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Agreement.

 

2.                                       Pursuant to section 2.02 of the
Agreement, the Agreement shall terminate and be of no further force and effect
on the Specified Date (which currently, under clause (i) of section 2.02 of the
Agreement, as amended by the Eighth Letter Agreement, is 11:59 p.m. prevailing
Eastern Time on November 15, 2004).  By this letter agreement and at your
request, we hereby agree to further amend the definition of the Specified Date
to mean the date which is the earlier of: (i) the Closing Date (as defined in
the Exchange Agreement, dated as of November 12, 2004 (the “Exchange
Agreement”), by and among POI, Protection One Alarm Monitoring, Inc., POI
Acquisition, L.L.C., POI Acquisition and Quadrangle Master Funding Ltd), (ii)
the termination of the Exchange Agreement pursuant to its terms, or (iii) the
occurrence of any Equity Standstill Termination Event.  In addition, (i)
notwithstanding section 2.01(b)(i) of the Agreement, the acquisition

 

--------------------------------------------------------------------------------

 

of shares of common stock of POI pursuant to the Restructuring (as defined in
the Exchange Agreement) shall be permitted and (ii) notwithstanding section
2.01(b)(ii) of the Agreement, POI Acquisition shall be entitled to transfer any
or all of the Shares in accordance with section 3.5 of the Exchange Agreement.
Except as otherwise provided herein, the Agreement shall remain in full force
and effect subject to the terms and provisions thereof.

 

*                                        
*                                        
*                                         *

 

--------------------------------------------------------------------------------

 

This letter agreement may be executed in counterparts.  Please confirm your
agreement with the foregoing by signing and returning to the undersigned the
duplicate copy of this letter agreement enclosed herewith.

 

Very truly yours,

 

 

 

POI ACQUISITION I, INC.

 

 

 

By:

/s/ David A. Tanner

 

Name:

David A. Tanner

 

Title:

President

 

--------------------------------------------------------------------------------

 

Agreed as of the date first written above:

 

 

 

PROTECTION ONE, INC.

 

 

 

By:

/s/ Darius G. Nevin

 

Name:

Darius G. Nevin

Title:

Executive Vice President and CFO

 

--------------------------------------------------------------------------------

ANNEX VII

 

EXECUTION VERSION

 

POI ACQUISITION, L.L.C.

QUADRANGLE MASTER FUNDING LTD

 

 

November 12, 2004

 

Protection One Alarm Monitoring, Inc.

Protection One, Inc.

Network Multi-Family Security Corporation

c/o Protection One, Inc.

1035 North 3rd Street, Suite 101
Lawrence, Kansas 66044

 

Ladies and Gentlemen:

 

1.                                       We refer to the:  (a) Credit Facility
Standstill Agreement, dated as of February 17, 2004 (the “Agreement”), among
Protection One Alarm Monitoring, Inc. (“POAM”), Protection One, Inc. (“POI”),
Network Multi-Family Security Corporation (“Network”) and POI Acquisition,
L.L.C. (“POI Acquisition”); (b) letter from Quadrangle Master Funding Ltd
(“Quadrangle”) to POAM, dated February 27, 2004, (i) advising POAM of
Quadrangle’s assumption from POI Acquisition of one-third of the obligations
under the Credit Facility; and (ii) confirming Quadrangle’s agreement to be
bound by the obligations of POI Acquisition set forth in the Agreement; (c)
letter from POI Acquisition and Quadrangle to POAM, POI and Network, dated May
17, 2004, amending the term of the Agreement (except as otherwise provided
therein); (d) letter from POI Acquisition and Quadrangle to POAM, POI and
Network, dated May 24, 2004, further amending the term of the Agreement (except
as otherwise provided therein); (e) letter from POI Acquisition and Quadrangle
to POAM, POI and Network, dated May 28, 2004, further amending the term of the
Agreement (except as otherwise provided therein); (f) letter from POI
Acquisition and Quadrangle to POAM, POI and Network, dated June 28, 2004,
further amending the term of the Agreement (except as otherwise provided
therein); (g) letter from POI Acquisition and Quadrangle to POAM, POI and
Network, dated July 26, 2004, further amending the term of the Agreement (except
as otherwise provided therein); (h) letter from POI Acquisition and Quadrangle
to POAM, POI and Network, dated August 23, 2004, further amending the term of
the Agreement (except as otherwise provided therein); (i) letter from POI
Acquisition and Quadrangle to POAM, POI and Network, dated September 20, 2004,
further extending the term of the Agreement (except as otherwise provided
therein); and (j) letter from POI Acquisition and Quadrangle to POAM, POI and
Network, dated October 18, 2004, further extending the term of the Agreement
(except as otherwise provided therein) (the “Eighth Letter Agreement”). 
Capitalized terms

 

--------------------------------------------------------------------------------

 

used but not defined herein shall have the meanings ascribed to such terms in
the Agreement.

 

2.                                       Pursuant to section 3 of the Agreement,
the Agreement shall terminate and be of no further force and effect on the Debt
Specified Date (which currently, under clause (i) of section 3 of the Agreement,
as amended by the Eighth Letter Agreement, is 11:59 p.m. prevailing Eastern Time
on November 15, 2004).  By this letter agreement and at your request, we hereby
agree to amend the definition of the Debt Specified Date to mean the date which
is the earlier of: (i) the Closing Date (as defined in the Exchange Agreement,
dated as of November 12, 2004 (the “Exchange Agreement”), by and among POI,
Protection One Alarm Monitoring, Inc., POI Acquisition I, Inc., POI Acquisition
and Quadrangle Master Funding Ltd), (ii) the termination of the Exchange
Agreement pursuant to its terms, or  (iii) the occurrence of any Termination
Event, provided that a Termination Event shall not be deemed to have occurred as
a result of any action performed or contemplated to be performed pursuant to the
Exchange Agreement or any document referenced therein.  This letter agreement
shall not apply to section 5 of the Agreement.  Except as otherwise provided
herein, the Agreement shall remain in full force and effect subject to the terms
and provisions thereof.

 

3.                                       This letter agreement may be executed
in counterparts.  Please confirm your agreement with the foregoing by signing
and returning to the undersigned the duplicate copy of this letter agreement
enclosed herewith.

 

*                                        
*                                        
*                                         *

 

--------------------------------------------------------------------------------

 

Very truly yours,

 

 

 

POI ACQUISITION, L.L.C.

 

 

 

 

 

By:

/s/ David A. Tanner

 

 

Name: David A. Tanner

 

Title:   Member

 

 

 

QUADRANGLE MASTER

 

FUNDING LTD

 

 

 

 

 

By:

/s/ Michael Weinstock

 

 

Name: Michael Weinstock

 

Title:   Member

 

 

--------------------------------------------------------------------------------

 

Agreed as of the date first written above:

 

 

 

PROTECTION ONE ALARM

 

MONITORING, INC.

 

 

 

By:

/s/ Darius G. Nevin

 

 

Name: Darius G. Nevin

 

Title:   Executive Vice President and CFO

 

 

 

 

 

PROTECTION ONE, INC.

 

 

 

 

 

By:

/s/ Darius G. Nevin

 

 

Name: Darius G. Nevin

 

Title:  Executive Vice President and CFO

 

 

 

 

 

NETWORK MULTI-FAMILY

 

SECURITY CORPORATION

 

 

 

 

 

By:

/s/ Steve Williams

 

 

Name: Steve Williams

 

Title:   President

 

 

--------------------------------------------------------------------------------

 

ANNEX VIII

 

STOCKHOLDERS AGREEMENT

 

STOCKHOLDERS AGREEMENT, dated as of [     ], 2005, by and among Quadrangle
Master Funding Ltd, a Cayman Islands limited company (together with any of its
Affiliates that receive Common Shares in a Permitted Transfer (as defined
below), “QDRF”), POI Acquisition, LLC, a Delaware limited liability company
(together with any of its Affiliates that receive Common Shares in a Permitted
Transfer, “POI Acquisition”), and Protection One, Inc., a Delaware corporation
(the “Company”).  Each of QDRF and POI Acquisition is referred to individually
as a “Stockholder” and, collectively, as the “Stockholders”.

 

WHEREAS, (i) POI Acquisition owns two-thirds of the outstanding shares of common
stock of POI Acquisition I, Inc (“PAII”), which directly owns approximately 88%
of the outstanding shares of common stock of the Company, and QDRF owns
one-third of the outstanding shares of common stock of PAII and (ii) POI
Acquisition owns two-thirds of the lenders’ rights under a Revolving Credit
Facility with Protection One Alarm Monitoring, Inc, (“POAM”) a wholly-owned
Subsidiary of the Company, dated December 21, 1998 (as modified, amended,
renewed, extended or restated from time to time, the “Credit Facility”) and QDRF
owns one-third of the lenders’ rights under the Credit Facility;

 

WHEREAS, pursuant to an exchange agreement dated as of November 12, 2004 (the
“Exchange Agreement”), in connection with discharge of certain indebtedness
under the Credit Facility, the Company will issue [     ] Common Shares (as
defined below) to POI Acquisition and [     ] Common Shares to QDRF (the
“Restructuring”); and

 

WHEREAS, in connection with the Restructuring the Company and each of the
Stockholders desire to make certain arrangements among themselves with respect
to the matters set forth herein;

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1.   Definitions (a)    As used in this Agreement, the following
capitalized terms shall have the following meanings:

 

Acquisition Designees: As defined in Section 2.1(a)(i) herein.

 

Affiliate:  When used with respect to a specified Person, another Person that
either directly or indirectly, through one or more intermediaries, Controls, or
is Controlled by, or is under common Control with, the Person specified.

 

Board of Directors:  The board of directors of the Company.

 

--------------------------------------------------------------------------------

 

Business Day:  A day other than a Saturday, Sunday, federal or New York State
holiday or other day on which commercial banks in New York City are authorized
or required by law to close.

 

Cash Equivalents:  Any of the following:

 

(1)                                  securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality of the United States (provided that the full faith and credit of
the United States is pledged in support thereof), having maturities of not more
than one year from the date of acquisition;

 

(2)                                  marketable general obligations issued by
any state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof maturing within one year from
the date of acquisition of the United States (provided that the full faith and
credit of the United States is pledged in support thereof) and, at the time of
acquisition, having a credit rating of “A” or better from either Standard &
Poor’s Ratings Services or Moody’s Investors Service, Inc.;

 

(3)                                  certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers’ acceptances having
maturities of not more than one year from the date of acquisition thereof issued
by any commercial bank the long-term debt of which is rated at the time of
acquisition thereof at least “A” or the equivalent thereof by Standard & Poor’s
Ratings Services, or “A” or the equivalent thereof by Moody’s Investors Service,
Inc., and having combined capital and surplus in excess of $500 million; or

 

(4)                                  commercial paper rated at the time of
acquisition thereof at least “A-2” or the equivalent thereof by Standard &
Poor’s Ratings Services or “P-2” or the equivalent thereof by Moody’s Investors
Service, Inc., or carrying an equivalent rating by a nationally recognized
rating agency, if both of the two named rating agencies cease publishing ratings
of investments, and in any case maturing within one year after the date of
acquisition thereof.

 

Closing:  As defined in the Exchange Agreement.

 

Common Shares:  The shares of common stock, $0.01 par value per share, of the
Company.

 

Control: The possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

 

Excluded Securities:  As defined in Section 5.2 herein.

 

Independent Person:  A person (x) who is not:  (i) a holder of more than 5% of
the outstanding Common Shares, or an officer, employee or partner of the
Company; (ii) a creditor, customer, supplier or other person who derives more
than 10% of its purchases or revenues from its activities with the Company;
(iii) a member of the immediate family of any such stockholder,

 

--------------------------------------------------------------------------------

 

officer, employee, partner, creditor, customer, supplier or other person and (y)
who does not have a relationship with the Company that may interfere with his
exercise of independence from management and the Company.

 

Listing Event:  Approval of the Company’s application to list its Common Shares
on the New York Stock Exchange or the NASDAQ Stock Market.

 

Marketable Securities: securities that are traded on an established securities
exchange, reported through an established over-the-counter trading system or
otherwise traded over-the-counter.

 

Permitted Transfer: As defined in Section 3.2.

 

Permitted Transferee: As defined in Section 3.2.

 

Person:  Any individual, partnership, limited liability company, joint venture,
syndicate, sole proprietorship, company or corporation, unincorporated
association, trust, trustee, executor, administrator or other legal personal
representative, regulatory body or agency, government or governmental agency,
authority or entity however designated or constituted.

 

POI Acquisition:  As defined in the recitals.

 

Protection One Entities:  The Company and its Subsidiaries.

 

QDRF:  As defined in the recitals.

 

QDRF Designee: As defined in Section 2.1(a)(ii) herein.

 

Registered Sale: A sale of Common Shares effected pursuant to an effective
registration statement under the Securities Act in accordance with the
Registration Rights Agreement.

 

Registration Rights Agreement:  The registration rights agreement dated as of
[•], 2005 by and among POI Acquisition, QDRF and the Company.

 

Rule 144 Sale:  A sale of Common Shares pursuant to Rule 144 promulgated under
the Securities Act (or any similar rule then in effect).

 

SEC:  The U.S. Securities and Exchange Commission or its successor.

 

Securities Act:  The U.S. Securities Act of 1933, as amended from time to time
and the rules and regulations promulgated thereunder.

 

Stockholder Designee: Any of the Acquisition Designees or the QDRF Designee.

 

Subsidiary: An entity in respect of which another entity owns, directly or
indirectly, at least a majority of the securities entitled to vote for the
election of directors or the members of a similar governing body.

 

--------------------------------------------------------------------------------

 

(B)   WHEN USED IN THIS AGREEMENT, THE TERM “INCLUDING” SHALL BE DEEMED TO MEAN
“INCLUDING, WITHOUT LIMITATION”.  THE WORDS “HEREOF,” “HEREIN” AND “HEREUNDER”
AND WORDS OF SIMILAR IMPORT WHEN USED IN THIS AGREEMENT SHALL REFER TO THIS
AGREEMENT AS A WHOLE AND NOT TO ANY PARTICULAR PROVISION OF THIS AGREEMENT, AND
ARTICLE AND SECTION REFERENCES ARE TO THIS AGREEMENT UNLESS OTHERWISE
SPECIFIED.  THE MEANINGS GIVEN TO TERMS DEFINED HEREIN SHALL BE EQUALLY
APPLICABLE TO BOTH THE SINGULAR AND PLURAL FORMS OF SUCH TERMS.

 

ARTICLE II

CORPORATE GOVERNANCE

 

Section 2.1.   Board of Directors Representation.  (a)    Effective as of the
date hereof, the Stockholders and the Company shall use their reasonable best
efforts to cause the Board of Directors to be comprised of five directors of
whom:

 

(I)                                   TWO SHALL BE DESIGNATED BY POI ACQUISITION
(THE “ACQUISITION DESIGNEES”);

 

(II)                                ONE SHALL BE DESIGNATED BY QDRF (THE “QDRF
DESIGNEE”);

 

(III)                             ONE SHALL BE RICHARD GINSBURG, PRESIDENT AND
CHIEF EXECUTIVE OFFICER OF THE COMPANY; AND

 

(iv)                              one shall be an Independent Person selected by
a majority of the other directors.

 

 

(B)   AT SUCH TIME AS POI ACQUISITION SHALL CEASE TO OWN COMMON SHARES IN AN
AMOUNT EQUAL TO AT LEAST 25% OF THE COMMON SHARES ISSUED AND OUTSTANDING AS OF
THE CLOSING, POI ACQUISITION SHALL HAVE THE RIGHT TO DESIGNATE ONE ACQUISITION
DESIGNEE RATHER THAN TWO ACQUISITION DESIGNEES PURSUANT TO SECTION 2.1(A)
ABOVE.  AT SUCH TIME AS POI ACQUISITION SHALL CEASE TO OWN COMMON SHARES IN AN
AMOUNT EQUAL TO AT LEAST 10% OF THE COMMON SHARES ISSUED AND OUTSTANDING AS OF
THE CLOSING, POI ACQUISITION SHALL CEASE TO HAVE THE RIGHT TO DESIGNATE A
DIRECTOR TO THE BOARD OF DIRECTORS PURSUANT TO SECTION 2.1(A) ABOVE.  UPON EACH
OF THE TRIGGERING EVENTS SET FORTH IN THIS SECTION 2.1(B) ABOVE, POI ACQUISITION
SHALL PROMPTLY CAUSE ONE OF ITS ACQUISITION DESIGNEES TO RESIGN FROM THE BOARD
OF DIRECTORS AND ALL COMMITTEES THEREOF.  UPON ANY SUCH RESIGNATION, THE
STOCKHOLDERS WILL USE THEIR REASONABLE BEST EFFORTS TO CAUSE THE DIRECTORS
REMAINING IN OFFICE TO EITHER DECREASE THE SIZE OF THE BOARD OF DIRECTORS TO
ELIMINATE SUCH VACANCY OR CAUSE THE VACANCY CREATED THEREBY TO BE FILLED BY A
DESIGNEE SELECTED BY A MAJORITY OF THE DIRECTORS REMAINING IN OFFICE.

 

(C)   AT SUCH TIME AS QDRF SHALL CEASE TO OWN COMMON SHARES IN AN AMOUNT EQUAL
TO AT LEAST 10% OF THE COMMON SHARES ISSUED AND OUTSTANDING AS OF THE CLOSING,
QDRF SHALL CEASE TO HAVE THE RIGHT TO DESIGNATE A DIRECTOR TO THE BOARD OF
DIRECTORS PURSUANT TO SECTION 2.1(A) ABOVE AND QDRF SHALL PROMPTLY CAUSE ITS
QDRF DESIGNEE TO RESIGN FROM THE BOARD OF DIRECTORS AND ALL COMMITTEES THEREOF. 
UPON ANY SUCH RESIGNATION, THE STOCKHOLDERS WILL USE THEIR REASONABLE BEST
EFFORTS TO CAUSE THE DIRECTORS REMAINING IN OFFICE TO EITHER DECREASE THE SIZE
OF THE

 

--------------------------------------------------------------------------------

 

BOARD OF DIRECTORS TO ELIMINATE SUCH VACANCY OR CAUSE THE VACANCY CREATED
THEREBY TO BE FILLED BY A DESIGNEE SELECTED BY A MAJORITY OF THE DIRECTORS
REMAINING IN OFFICE.

 

(D)   AT SUCH TIME AS MR. GINSBURG CEASES TO BE THE CHIEF EXECUTIVE OFFICER OF
THE COMPANY, HE SHALL NO LONGER BE ENTITLED TO SERVE AS A DIRECTOR PURSUANT TO
SECTION 2.1(A) ABOVE.  UPON ANY SUCH RESIGNATION, THE STOCKHOLDERS WILL USE
THEIR REASONABLE BEST EFFORTS TO CAUSE THE DIRECTORS REMAINING IN OFFICE TO
EITHER DECREASE THE SIZE OF THE BOARD OF DIRECTORS TO ELIMINATE SUCH VACANCY OR
CAUSE THE VACANCY CREATED THEREBY TO BE FILLED BY A DESIGNEE SELECTED BY A
MAJORITY OF THE DIRECTORS REMAINING IN OFFICE.

 

(E)   EACH STOCKHOLDER AGREES TO VOTE, OR ACT BY WRITTEN CONSENT WITH RESPECT
TO, ANY COMMON SHARES OWNED DIRECTLY OR INDIRECTLY BY IT, AT EACH ANNUAL OR
SPECIAL MEETING OF STOCKHOLDERS OF THE COMPANY AT WHICH DIRECTORS ARE TO BE
ELECTED OR TO TAKE ALL ACTIONS BY WRITTEN CONSENT IN LIEU OF ANY SUCH MEETING AS
ARE NECESSARY, AND THE COMPANY SHALL USE ITS REASONABLE BEST EFFORTS TO TAKE ALL
APPROPRIATE ACTIONS AS ARE NECESSARY, TO CAUSE THE BOARD OF DIRECTORS TO BE
COMPRISED OF THE NUMBER AND TYPE OF DIRECTORS SPECIFIED IN SECTION 2.1(A).  IN
CONJUNCTION WITH A LISTING EVENT AND EFFECTIVE IMMEDIATELY PRIOR TO THE
CONSUMMATION THEREOF, THE STOCKHOLDERS AND THE COMPANY SHALL TAKE ALL ACTION
NECESSARY AND APPROPRIATE TO RECONSTITUTE THE SIZE AND COMPOSITION OF THE BOARD
OF DIRECTORS IN ACCORDANCE WITH THE LISTING RULES OF THE APPLICABLE SECURITIES
EXCHANGE; PROVIDED, HOWEVER, THAT IN THE CASE OF ANY SUCH RECONSTITUTION OF THE
BOARD OF DIRECTORS, POI ACQUISITION SHALL REMAIN ENTITLED PURSUANT TO SECTION
2.1(A) TO DESIGNATE THE ACQUISITION DESIGNEES (SUBJECT TO SECTION 2.1(B)), QDRF
SHALL REMAIN ENTITLED TO DESIGNATE THE QDRF DESIGNEE (SUBJECT TO SECTION 2.1(C))
AND MR. GINSBURG SHALL REMAIN ENTITLED TO SERVE AS A DIRECTOR (SUBJECT TO
SECTION 2.1(D)).

 

(F)   UNTIL SUCH TIME AS POI ACQUISITION CEASES TO OWN COMMON SHARES IN AN
AMOUNT EQUAL TO AT LEAST 40% OF THE COMMON SHARES ISSUED AND OUTSTANDING AS OF
THE CLOSING, POI ACQUISITION SHALL HAVE THE RIGHT, EXERCISABLE AT ANY TIME UPON
DELIVERY OF WRITTEN NOTICE TO QDRF AND THE COMPANY, TO ELECT TO CAUSE THE BOARD
OF DIRECTORS TO BE INCREASED TO INCLUDE ONE ADDITIONAL DIRECTOR AND DESIGNATE A
NEW DIRECTOR (THE “ACQUISITION ELECTION”).  UPON MAKING THE ACQUISITION
ELECTION, THE STOCKHOLDERS (AND THEIR RESPECTIVE STOCKHOLDER DESIGNEES) AND THE
COMPANY SHALL USE THEIR REASONABLE BEST EFFORTS TO TAKE ALL APPROPRIATE ACTION
TO CAUSE THE SIZE OF THE BOARD OF DIRECTORS TO BE INCREASED TO INCLUDE A
DIRECTOR DESIGNATED BY POI ACQUISITION.  UPON MAKING THE ACQUISITION ELECTION,
(I) THE NUMBER OF ACQUISITION DESIGNEES SET FORTH IN SECTION 2.1(A)(I) SHALL BE
INCREASED BY ONE AND (II) AT SUCH TIME AS POI ACQUISITION SHALL CEASE TO OWN
COMMON SHARES IN AN AMOUNT EQUAL TO AT LEAST 40% OF THE COMMON SHARES ISSUED AND
OUTSTANDING AS OF THE CLOSING, POI ACQUISITION SHALL PROMPTLY CAUSE ONE OF ITS
ACQUISITION DESIGNEES TO RESIGN FROM THE BOARD OF DIRECTORS AND ALL COMMITTEES
THEREOF.  UPON ANY SUCH RESIGNATION, THE STOCKHOLDERS WILL USE THEIR REASONABLE
BEST EFFORTS TO CAUSE THE DIRECTORS REMAINING IN OFFICE TO EITHER DECREASE THE
SIZE OF THE BOARD OF DIRECTORS TO ELIMINATE SUCH VACANCY OR CAUSE THE VACANCY
CREATED THEREBY TO BE FILLED BY A DESIGNEE SELECTED BY A MAJORITY OF THE
DIRECTORS REMAINING IN OFFICE.

 

(G)   IF ANY STOCKHOLDER ENTITLED TO DESIGNATE DIRECTORS HEREUNDER REQUESTS IN
WRITING THAT ANY OF ITS DESIGNEES BE REMOVED AS A DIRECTOR, THE OTHER
STOCKHOLDER SHALL VOTE, OR ACT BY WRITTEN CONSENT WITH RESPECT TO, ALL COMMON
SHARES OWNED DIRECTLY OR INDIRECTLY BY SUCH OTHER STOCKHOLDER AND OTHERWISE TAKE
OR CAUSE TO BE TAKEN ALL ACTIONS NECESSARY TO REMOVE SUCH DIRECTOR

 

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DESIGNATED BY SUCH STOCKHOLDER.  UNLESS A STOCKHOLDER SHALL OTHERWISE REQUEST IN
WRITING, NO OTHER STOCKHOLDER SHALL TAKE ANY ACTION TO CAUSE THE REMOVAL OF ANY
DIRECTORS DESIGNATED BY SUCH STOCKHOLDER.  IN THE EVENT THAT A VACANCY IS
CREATED AT ANY TIME BY THE DEATH, DISABILITY, RETIREMENT, RESIGNATION OR REMOVAL
(WITH OR WITHOUT CAUSE) OF ANY DIRECTOR DESIGNATED BY A STOCKHOLDER, SO LONG AS
SUCH STOCKHOLDER HAS THE RIGHT TO DESIGNATE A REPLACEMENT DESIGNEE AT SUCH TIME,
THE COMPANY AND THE OTHER STOCKHOLDER SHALL USE THEIR REASONABLE BEST EFFORTS TO
TAKE ALL APPROPRIATE ACTION NECESSARY TO CAUSE THE VACANCY CREATED THEREBY TO BE
FILLED BY THE REPLACEMENT DESIGNATED BY SUCH STOCKHOLDER.

 

(H)   QDRF SHALL BE ENTITLED TO DESIGNATE AN EMPLOYEE, DIRECTOR OR OFFICER OF
QDRF OR ITS AFFILIATES TO SERVE AS A NONVOTING OBSERVER TO THE BOARD OF
DIRECTORS (AN “OBSERVER”) AT ANY TIME THAT QDRF OWNS AT LEAST 5% OF THE
OUTSTANDING COMMON SHARES.  THE OBSERVER SHALL BE PERMITTED TO ATTEND ALL
MEETINGS OF THE BOARD OF DIRECTORS.  THE COMPANY SHALL PROVIDE THE OBSERVER, IN
THE SAME MANNER AS PROVIDED TO DIRECTORS, NOTICE OF SUCH MEETINGS AND COPIES OF
ALL MATERIALS, FINANCIAL OR OTHERWISE, WHICH THE COMPANY PROVIDES TO ITS
DIRECTORS; PROVIDED, HOWEVER, THAT THE COMPANY MAY EXCLUDE THE OBSERVER FROM
ACCESS TO ANY MATERIALS OR FROM ANY MEETING, OR ANY PORTION OF THE FOREGOING, IF
THE COMPANY REASONABLY BELIEVES UPON ADVICE OF COUNSEL THAT SUCH EXCLUSION IS
REASONABLY NECESSARY TO PRESERVE THE ATTORNEY-CLIENT PRIVILEGE, TO PROTECT
CONFIDENTIAL OR PROPRIETARY INFORMATION OR FOR OTHER SIMILAR REASONS.

 

(I)   THE COMPANY SHALL REIMBURSE EACH STOCKHOLDER DESIGNEE AND EACH OBSERVER
FOR THEIR REASONABLE OUT-OF-POCKET EXPENSES INCURRED BY THEM FOR THE PURPOSE OF
ATTENDING MEETINGS OF THE BOARD OF DIRECTORS, THE BOARD OF DIRECTORS OF ANY
SUBSIDIARY OF THE COMPANY OR THE RESPECTIVE COMMITTEES THEREOF.

 

Section 2.2.   Bylaws.  (a)  At the first meeting of the Board of Directors
following the date of this Agreement, the Stockholders shall vote to amend the
bylaws of the Company as in effect on the date hereof to provide that, in
addition to any vote or consent of the Board of Directors or the stockholders of
the Company required by law or the Company’s certificate of incorporation, if
and for so long as QDRF retains the right to designate the QDRF Designee
pursuant to Section 2.1(a), the Company shall not take any of the following
actions without the consent of QDRF:

 

(I)                                   VOLUNTARILY INITIATE ANY BANKRUPTCY,
DISSOLUTION OR WINDING UP OR ANY ANALOGOUS PROCEEDING IN ANY JURISDICTION WITH
RESPECT TO ANY OF THE PROTECTION ONE ENTITIES;

 

(II)                                MERGE OR CONSOLIDATE WITH ANY OTHER PERSON
(OTHER THAN (I) A TRANSACTION BETWEEN THE COMPANY AND ONE OR MORE OF ITS
WHOLLY-OWNED SUBSIDIARIES, (II) A TRANSACTION SUBJECT TO THE PROVISIONS OF
SECTION 4.3 OR (III) A TRANSACTION OCCURRING MORE THAN TWO YEARS AFTER THE
CLOSING);

 

(III)                             SELL ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF
THE COMPANY; OR

 

(IV)                            OBLIGATE OR OTHERWISE COMMIT TO DO ANY OF THE
FOREGOING.

 

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(b)  If and for so long as the consent of QDRF described in Section 2.2(a) above
is required, without the prior consent of QDRF, neither the Company nor any
other Stockholder shall take any action to amend the bylaws of the Company in
any manner that would impair QDRF’s exercise of such rights.

 

(c)  For purposes of this Agreement, a Stockholder shall be deemed to own its
proportional interest of any Common Shares held by a Person beneficially owned
by such Stockholder (determined based on such Stockholder’s pro rata direct or
indirect equity interest in such Person), including, without limitation, Common
Shares held by PAII.

 

Section 2.3.   Information and Inspection Rights.  The Company shall furnish to
each Stockholder that, together with its Affiliates, owns at least 5% of the
outstanding Common Shares such information regarding the business, affairs,
prospects and financial condition of the Company and its Subsidiaries as such
Stockholder may reasonably request and shall permit such Stockholder or any of
its designated representatives to examine the books and records of the Company
and its Subsidiaries (and to make copies thereof and extracts therefrom), and to
inspect their respective facilities.

 

 

ARTICLE III

TRANSFERS

 

Section 3.1.   Transfer Restrictions.  (a)  Subject to compliance with Sections
3.3 and 3.4, QDRF may directly or indirectly offer, transfer, sell, assign,
pledge or otherwise dispose of any economic, voting or other rights in or to
(any such act, a “transfer”) all or a portion of its Common Shares at any time
(i) in a Permitted Transfer, (ii) in a transfer pursuant to Sections 4.2 or 4.3
or (iii) subject to compliance with Section 4.1, in any other transfer.

 

(B)   SUBJECT TO COMPLIANCE WITH SECTIONS 3.3 AND 3.4, POI ACQUISITION MAY
TRANSFER ALL OR A PORTION OF ITS COMMON SHARES AT ANY TIME (I) IN A PERMITTED
TRANSFER OR (II) SUBJECT TO COMPLIANCE WITH SECTION 4.2 HEREOF, IN ANY OTHER
TRANSFER.

 

Section 3.2.   Permitted Transfers; Indirect Transfers.  (a)  Notwithstanding
any other provision of this Agreement, a Stockholder may:  (i) transfer Common
Shares to an Affiliate of such Stockholder, (ii) transfer Common Shares in a
Registered Sale, (iii) transfer Common Shares in a Rule 144 Sale or (iv) in the
case of QDRF, transfer Common Shares at any time it owns less than 10% of the
outstanding Common Shares (determined prior to any such transfer) (a “Below 10%
Sale”) (each of the foregoing, a “Permitted Transfer” and each of the
transferees in a Permitted Transfer, a “Permitted Transferee”).

 

(B)   TO THE EXTENT A STOCKHOLDER OR PERMITTED TRANSFEREE DESCRIBED IN CLAUSE
(I) ABOVE IS NOT AN INDIVIDUAL OR AN ESTATE, AND A PERSON (WHICH IS NOT A
PERMITTED TRANSFEREE OF THE STOCKHOLDER OR OF SUCH PERMITTED TRANSFEREE, AS THE
CASE MAY BE) ACQUIRES CONTROL OF SUCH STOCKHOLDER OR PERMITTED TRANSFEREE, (X)
SUCH ACQUISITION OF CONTROL SHALL BE DEEMED TO BE A TRANSFER OF THE COMMON
SHARES HELD BY SUCH STOCKHOLDER OR PERMITTED TRANSFEREE SUBJECT TO THE

 

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RESTRICTIONS ON TRANSFER CONTAINED IN THIS AGREEMENT (INCLUDING, WITHOUT
LIMITATION, ARTICLES III AND IV HEREOF) AND (Y) TO THE EXTENT SUCH STOCKHOLDER
OR PERMITTED TRANSFEREE THEN HOLDS ASSETS IN ADDITION TO COMMON SHARES, THE
DETERMINATION OF THE PURCHASE PRICE DEEMED TO HAVE BEEN PAID FOR THE COMMON
SHARES HELD BY SUCH PERMITTED TRANSFEREE IN SUCH DEEMED TRANSFER FOR PURPOSES OF
THE PROVISIONS OF THIS AGREEMENT SHALL BE MADE BY THE BOARD OF DIRECTORS IN GOOD
FAITH.

 

Section 3.3.   Notice of Proposed Transfer.  No fewer than 10 days prior to any
proposed transfer of any Common Shares by a Stockholder (other than under the
circumstances described in Article IV or pursuant to a Registered Sale or a Rule
144 Sale), the Stockholder shall give written notice to the Company and the
other Stockholder of its intention to effect such transfer.  Each such notice
shall describe the manner of the proposed transfer, the proposed date of the
transfer and the number of Common Shares proposed to be transferred and, if
requested by the Company, shall be accompanied by an opinion of counsel
reasonably satisfactory to the Company to the effect that the proposed transfer
of the Common Shares may be affected without registration under the Securities
Act.

 

Section 3.4.   Validity of Transfers; Compliance with Laws, Agreement.  (a)  Any
attempt to transfer any Common Shares in violation of this Agreement shall be
null and void.  The Company shall not record on its stock transfer books or
otherwise any transfer of Common Shares in violation of the terms and conditions
set forth herein.

 

(B)   NO TRANSFER MAY BE MADE UNLESS (I) THE TRANSFER COMPLIES IN ALL RESPECTS
WITH THE APPLICABLE PROVISIONS OF THIS AGREEMENT AND (II) THE TRANSFER COMPLIES
IN ALL RESPECTS WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS, INCLUDING THE
SECURITIES ACT.

 

(C)   AS A CONDITION TO ANY TRANSFER OF COMMON SHARES (OTHER THAN PURSUANT TO A 
REGISTERED SALE OR A RULE 144 SALE OR A BELOW 10% SALE), THE TRANSFEREE SHALL
AGREE (PURSUANT TO AN AGREEMENT IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO
THE COMPANY) TO BECOME A PARTY TO THIS AGREEMENT AND SHALL HAVE SUCH RIGHTS AND
OBLIGATIONS OF ITS TRANSFEROR FOR PURPOSES OF ARTICLES III AND IV; PROVIDED,
THAT A TRANSFEREE OF COMMON SHARES PURSUANT TO CLAUSE (I) OF SECTION 3.2(A)
SHALL HAVE ALL OF THE RIGHTS AND OBLIGATIONS OF THE TRANSFEROR STOCKHOLDER; 
PROVIDED, FURTHER, THAT, IN CONNECTION WITH A TRANSFER OF AT LEAST 10% OF THE
OUTSTANDING COMMON SHARES BY A STOCKHOLDER, SUCH STOCKHOLDER MAY ALSO ASSIGN ITS
RIGHTS AND OBLIGATIONS UNDER SECTION 2.1 TO SUCH TRANSFEREE, AND IN SUCH
CIRCUMSTANCES, THE TRANSFEREE SHALL HAVE THE RIGHTS AND OBLIGATIONS OF THE
TRANSFEROR STOCKHOLDER UNDER SUCH SECTION; PROVIDED, HOWEVER, THAT SUCH
TRANSFEREE SHALL NOT BE ENTITLED TO DESIGNATE A STOCKHOLDER DESIGNEE OR AN
OBSERVER UNLESS SUCH STOCKHOLDER DESIGNEE OR OBSERVER, AS THE CASE MAY BE, IS
REASONABLY ACCEPTABLE TO THE BOARD OF DIRECTORS.

 

ARTICLE IV

RIGHT OF FIRST OFFER, TAG-ALONG SALE, DRAG-ALONG

 

Section 4.1.   Right of First Offer.  (a)  If QDRF (for purposes of this Section
4.1, a “Selling Stockholder”) proposes to transfer (unless the proposed transfer
is a Permitted Transfer or a transfer pursuant to such Selling Stockholder’s
“tag-along” rights under Section 4.2, in which case the following provisions
need not be complied with) all or any portion of its Common Shares (the number
of Common Shares proposed to be transferred by the Selling

 

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Stockholder, the “Subject Securities”), the Selling Stockholder shall deliver a
notice of intention to sell (a “Sale Notice”) to POI Acquisition (the “Offeree
Stockholder”) setting forth the number of Subject Securities proposed to be
transferred, an irrevocable offer to sell such Subject Securities to the Offeree
Stockholder and the terms and conditions pursuant to which the Selling
Stockholder is offering to sell such Subject Securities.

 

(B)   UPON RECEIPT OF A SALE NOTICE, THE OFFEREE STOCKHOLDER SHALL HAVE THE
RIGHT TO ELECT TO PURCHASE AT THE PRICE AND ON THE TERMS AND CONDITIONS STATED
IN THE SALE NOTICE, ALL, BUT NOT LESS THAN ALL, OF THE SUBJECT SECURITIES (AS
ALLOCATED AMONG THE OFFEREE STOCKHOLDER IN THEIR DISCRETION).  IN THE EVENT THAT
THE OFFEREE STOCKHOLDER ELECTS TO PURCHASE ALL OF THE SUBJECT SECURITIES, THE
OFFEREE STOCKHOLDER SHALL SO NOTIFY THE SELLING STOCKHOLDER WITHIN 20 DAYS (THE
“OPTION PERIOD”) AFTER THE RECEIPT BY SUCH PARTY OF THE SALE NOTICE.  ANY SUCH
ELECTION SHALL BE MADE BY WRITTEN NOTICE (A “NOTICE OF ELECTION”) TO THE SELLING
STOCKHOLDER.

 

(C)   IF A NOTICE OF ELECTION WITH RESPECT TO THE SUBJECT SECURITIES SHALL HAVE
BEEN DELIVERED TO THE SELLING STOCKHOLDER, THE SELLING STOCKHOLDER SHALL SELL
SUCH SUBJECT SECURITIES TO THE OFFEREE STOCKHOLDER DESIGNATED IN THE NOTICE OF
ELECTION AT THE PRICE AND ON THE TERMS AND CONDITIONS STATED IN THE SALE NOTICE.

 

(D)   THE CLOSING OF THE SALE OF SUBJECT SECURITIES TO THE OFFEREE STOCKHOLDER
SHALL TAKE PLACE AT THE OFFICES OF THE COMPANY, OR SUCH OTHER LOCATION AS THE
PARTIES TO THE SALE MAY MUTUALLY SELECT, ON A DATE THE PARTIES MAY MUTUALLY
SELECT, NO LATER THAN 30 DAYS FOLLOWING THE EXPIRATION OF THE OPTION PERIOD (OR
UPON THE EXPIRATION OF SUCH LONGER PERIOD REQUIRED TO OBTAIN ANY NECESSARY
REGULATORY APPROVALS).  AT SUCH CLOSING, THE SELLING STOCKHOLDER SHALL DELIVER A
CERTIFICATE OR CERTIFICATES FOR THE SUBJECT SECURITIES TO BE SOLD, ACCOMPANIED
BY STOCK POWERS WITH SIGNATURES GUARANTEED AND ALL NECESSARY STOCK TRANSFER
TAXES PAID AND STAMPS AFFIXED, IF NECESSARY, AGAINST RECEIPT OF THE PURCHASE
PRICE THEREFOR BY CERTIFIED OR OFFICIAL BANK CHECK OR BY WIRE TRANSFER OF
IMMEDIATELY AVAILABLE FUNDS.

 

(E)   IF THE OFFEREE STOCKHOLDER (AND/OR ITS ASSIGNEE(S)) DOES NOT ELECT TO
PURCHASE ALL OF THE SUBJECT SECURITIES BY THE END OF THE OPTION PERIOD, SUCH
SUBJECT SECURITIES MAY BE SOLD TO ANY PERSON FOR A PERIOD OF 180 DAYS FOLLOWING
THE EXPIRATION OF THE OPTION PERIOD AT A PRICE NOT LOWER THAN THE PRICE
SPECIFIED IN THE SALE NOTICE AND ON OTHER TERMS AND CONDITIONS NOT MORE
FAVORABLE TO THE PURCHASER THAN THOSE SPECIFIED IN THE SALE NOTICE.  ANY SUBJECT
SECURITIES NOT SOLD BY SUCH 180TH DAY SHALL AGAIN BE SUBJECT TO THE RESTRICTIONS
CONTAINED IN THIS SECTION 4.1.

 

(F)   THE OFFEREE STOCKHOLDER SHALL BE ENTITLED TO ASSIGN ANY OR ALL OF THEIR
RIGHTS UNDER THIS SECTION 4.1 TO ANY OTHER PERSON.

 

Section 4.2.   Tag-Along Rights.  (a)  In the event that POI Acquisition (for
purposes of this Section 4.2, a “Selling Stockholder”) proposes to transfer
(other than by way of a Permitted Transfer) all or any portion of the Common
Shares owned by such Selling Stockholder (any of the foregoing, a “Sale”), then
unless such Selling Stockholder is entitled to give and does give a Drag-Along
Notice pursuant to Section 4.3, such Selling Stockholder shall give notice (a
“Notice of Intention to Sell”) to the other Stockholder (for purposes of this
Section 4.2, the “Other Stockholder”) and the Company promptly, and in any event
not more than 10 days after the execution and delivery by all the parties
thereto of the definitive agreement

 

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relating to the Sale, setting forth in reasonable detail the terms and
conditions of such proposed Sale, including the number of Common Shares proposed
to be so transferred, the name of the third party purchaser, the proposed amount
and form of consideration.  In the event that the terms and/or conditions set
forth in the Notice of Intention to Sell are thereafter amended in any respect,
the Selling Stockholder shall give written notice (an “Amended Notice”) of the
amended terms and conditions of the proposed Sale promptly to the other
Stockholder and the Company.

 

(B)   THE OTHER STOCKHOLDER SHALL HAVE THE RIGHT, EXERCISABLE UPON WRITTEN
NOTICE TO THE SELLING STOCKHOLDER WITHIN 20 DAYS AFTER SUCH STOCKHOLDER’S
RECEIPT OF ANY NOTICE OF INTENTION TO SELL, OR, IF LATER, WITHIN 20 DAYS OF SUCH
STOCKHOLDER’S RECEIPT OF THE MOST RECENT AMENDED NOTICE, TO PARTICIPATE IN THE
PROPOSED SALE BY THE SELLING STOCKHOLDER TO THE PROPOSED PURCHASER ON THE TERMS
AND CONDITIONS SET FORTH IN SUCH NOTICE OF INTENTION TO SELL OR THE MOST RECENT
AMENDED NOTICE, AS THE CASE MAY BE (SUCH PARTICIPATION RIGHTS BEING HEREINAFTER
REFERRED TO AS “TAG-ALONG” RIGHTS).  EACH STOCKHOLDER MAY PARTICIPATE WITH
RESPECT TO THE COMMON SHARES OWNED BY SUCH STOCKHOLDER IN AN AMOUNT EQUAL TO THE
PRODUCT OBTAINED BY MULTIPLYING (I) THE AGGREGATE NUMBER OF COMMON SHARES OWNED
BY SUCH STOCKHOLDER BY (II) A FRACTION, THE NUMERATOR OF WHICH IS EQUAL TO THE
NUMBER OF COMMON SHARES PROPOSED TO BE SOLD OR TRANSFERRED BY THE SELLING
STOCKHOLDER AND THE DENOMINATOR OF WHICH IS THE AGGREGATE NUMBER OF COMMON
SHARES OWNED BY THE SELLING STOCKHOLDER.  IF THE OTHER STOCKHOLDER HAS NOT
NOTIFIED THE SELLING STOCKHOLDER OF ITS INTENT TO EXERCISE TAG-ALONG RIGHTS 20
DAYS AFTER RECEIPT OF THE NOTICE OF INTENTION TO SELL OR, IF LATER, WITHIN 20
DAYS OF RECEIPT OF AN AMENDED NOTICE, THE OTHER STOCKHOLDER SHALL BE DEEMED TO
HAVE ELECTED NOT TO EXERCISE SUCH TAG-ALONG RIGHTS WITH RESPECT TO THE SALE
CONTEMPLATED BY SUCH NOTICE OF INTENTION TO SELL OR SUCH AMENDED NOTICE, AS THE
CASE MAY BE (IN THE CASE OF AN AMENDED NOTICE, REGARDLESS OF ITS ELECTION
PURSUANT TO THE NOTICE OF INTENTION TO SELL RELATING TO SUCH SALE).  IF THE
NUMBER OF COMMON SHARES ELECTED TO BE SOLD BY THE SELLING STOCKHOLDER AND THE
OTHER STOCKHOLDER IS GREATER THAN THE NUMBER OF COMMON SHARES SPECIFIED IN THE
NOTICE OF INTENTION TO SELL, THE NUMBER OF COMMON SHARES BEING SOLD BY EACH SUCH
HOLDER SHALL BE REDUCED SUCH THAT THE APPLICABLE HOLDER SHALL BE ENTITLED TO
(AND OBLIGATED TO) SELL ONLY ITS PRO RATA PORTION OF COMMON SHARES (BASED ON THE
NUMBER OF COMMON SHARES OWNED BY SUCH HOLDER TO THE TOTAL NUMBER OF COMMON
SHARES OWNED BY ALL OF SUCH ELECTING HOLDERS).  IF A STOCKHOLDER ELECTS NOT TO
INCLUDE THE MAXIMUM NUMBER OF COMMON SHARES THAT SUCH HOLDER WOULD HAVE BEEN
PERMITTED TO INCLUDE IN A PROPOSED SALE, THE SELLING STOCKHOLDER AND THE OTHER
STOCKHOLDER MAY SELL IN THE PROPOSED SALE A NUMBER OF ADDITIONAL COMMON SHARES
OWNED BY ANY OF THEM EQUAL TO THEIR PRO RATA PORTION OF THE NUMBER OF COMMON
SHARES ELIGIBLE TO BE INCLUDED IN THE PROPOSED SALE AND NOT SO ELECTED TO BE
INCLUDED (BASED ON THE NUMBER OF COMMON SHARES OWNED BY SUCH HOLDER TO THE TOTAL
NUMBER OF COMMON SHARES OWNED BY ALL OF SUCH ELECTING HOLDERS).

 

(C)   IF THE OTHER STOCKHOLDER EXERCISES ITS RIGHTS UNDER THIS SECTION 4.2, THE
CLOSING OF THE PURCHASE OF THE COMMON SHARES WITH RESPECT TO WHICH SUCH RIGHTS
HAVE BEEN EXERCISED WILL TAKE PLACE CONCURRENTLY WITH THE CLOSING OF THE SALE OF
THE SELLING STOCKHOLDER’S COMMON SHARES TO THE PURCHASER.

 

(D)   IN CONNECTION WITH ANY SALE PURSUANT TO THIS SECTION 4.2, THE OTHER
STOCKHOLDER SHALL MAKE TO THE PURCHASER IN THE SALE THE SAME REPRESENTATIONS,
WARRANTIES, COVENANTS, INDEMNITIES AND AGREEMENTS AS THE SELLING STOCKHOLDER
MAKES IN CONNECTION WITH THE PROPOSED SALE (EXCEPT THAT IN THE CASE OF
REPRESENTATIONS, WARRANTIES, COVENANTS, INDEMNITIES AND AGREEMENTS PERTAINING
SPECIFICALLY TO THE SELLING STOCKHOLDER, A STOCKHOLDER EXERCISING ITS
“TAG-ALONG” RIGHTS SHALL MAKE THE COMPARABLE REPRESENTATIONS, WARRANTIES,
COVENANTS, INDEMNITIES AND

 

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AGREEMENTS PERTAINING SPECIFICALLY TO ITSELF); PROVIDED, THAT ALL
REPRESENTATIONS, WARRANTIES, COVENANTS AND INDEMNITIES SHALL BE MADE BY THE
SELLING STOCKHOLDER AND THE OTHER STOCKHOLDER SEVERALLY AND NOT JOINTLY.  EACH
STOCKHOLDER PARTICIPATING IN THE SALE WILL BE RESPONSIBLE FOR FUNDING ITS
PROPORTIONATE SHARE OF ANY ESCROW ARRANGEMENTS IN CONNECTION WITH THE SALE AND
FOR ITS PROPORTIONATE SHARE OF ANY WITHDRAWALS THEREFROM.  ALL FEES,
COMMISSIONS, ADJUSTMENTS TO PURCHASE PRICE, EXPENSES AND INDEMNITIES OF THE
SELLING STOCKHOLDER AND THE OTHER STOCKHOLDER THEREUNDER SHALL BE BORNE BY EACH
OF THEM ON A PRO RATA BASIS BASED ON THE NUMBER OF COMMON SHARES SOLD BY EACH OF
THEM IN SUCH SALE.

 

Section 4.3.   Drag-Along.  (a)  If (i) POI Acquisition (for purposes of this
Section 4.3, the “Selling Stockholder”) receives a bona fide offer from any
third party who is not an Affiliate of either the Company or POI Acquisition to
purchase (including a purchase by merger, consolidation or similar transaction)
100% of the Common Shares owned by the Selling Stockholder at such time, (ii) at
least 90% of the fair market value of the consideration to be received by the
Selling Stockholder in such offer is in the form of cash, Cash Equivalents or
Marketable Securities and (iii) such offer is accepted by the Selling
Stockholder, then QDRF (for purposes of this Section 4.3, the “Other
Stockholder”) hereby agrees that, if requested by the Selling Stockholder, it
will transfer to such purchaser, subject to Section 4.3(b), on the terms of the
offer so accepted by the Selling Stockholder, including time of payment, form of
consideration and adjustments to purchase price, all of its Common Shares.

 

(B)   THE SELLING STOCKHOLDER WILL GIVE NOTICE (THE “DRAG-ALONG NOTICE”) TO THE
OTHER STOCKHOLDER OF ANY PROPOSED TRANSFER GIVING RISE TO THE RIGHTS OF THE
SELLING STOCKHOLDER SET FORTH IN SECTION 4.3(A) (A “DRAG-ALONG SALE”) NOT MORE
THAN 10 DAYS AFTER THE EXECUTION AND DELIVERY BY ALL OF THE PARTIES THERETO OF
THE DEFINITIVE AGREEMENT RELATING TO THE DRAG-ALONG SALE AND, IN ANY EVENT, NO
LATER THAN 20 DAYS PRIOR TO THE CLOSING DATE FOR SUCH DRAG-ALONG SALE.  THE
DRAG-ALONG NOTICE WILL SET FORTH THE NUMBER OF COMMON SHARES PROPOSED TO BE SO
TRANSFERRED, THE NAME OF THE PURCHASER, THE PROPOSED AMOUNT AND FORM OF
CONSIDERATION, THE NUMBER OF COMMON SHARES SOUGHT AND THE OTHER TERMS AND
CONDITIONS OF THE OFFER.  THE OTHER STOCKHOLDER SHALL MAKE THE SAME
REPRESENTATIONS, WARRANTIES, COVENANTS, INDEMNITIES AND AGREEMENTS AS THE
SELLING STOCKHOLDER MAKES IN CONNECTION WITH THE DRAG-ALONG SALE (EXCEPT THAT IN
THE CASE OF REPRESENTATIONS, WARRANTIES, COVENANTS, INDEMNITIES AND AGREEMENTS
PERTAINING SPECIFICALLY TO THE SELLING STOCKHOLDER, THE OTHER STOCKHOLDER SHALL
MAKE THE COMPARABLE REPRESENTATIONS, WARRANTIES, COVENANTS, INDEMNITIES AND
AGREEMENTS PERTAINING SPECIFICALLY TO ITSELF); PROVIDED, THAT ALL
REPRESENTATIONS, WARRANTIES, COVENANTS AND INDEMNITIES SHALL BE MADE BY THE
SELLING STOCKHOLDER AND THE OTHER STOCKHOLDER SEVERALLY AND NOT JOINTLY AND
PROVIDED FURTHER THAT IN THE EVENT THAT AT THE TIME OF EXECUTION OF THE
DEFINITIVE AGREEMENT RELATING TO SUCH DRAG-ALONG SALE THE OTHER STOCKHOLDER NO
LONGER RETAINS THE RIGHT TO DESIGNATE THE QDRF DESIGNEE PURSUANT TO SECTION
2.1(A), THE OTHER STOCKHOLDER SHALL BE REQUIRED ONLY TO MAKE REPRESENTATIONS,
WARRANTIES, COVENANTS, INDEMNITIES AND AGREEMENTS PERTAINING SPECIFICALLY TO
ITSELF CONSISTENT WITH THE REPRESENTATIONS, WARRANTIES, COVENANTS, INDEMNITIES
AND AGREEMENTS PERTAINING SPECIFICALLY TO THE SELLING STOCKHOLDER.  THE OTHER
STOCKHOLDER WILL BE RESPONSIBLE FOR FUNDING ITS PROPORTIONATE SHARE OF ANY
ESCROW ARRANGEMENTS IN CONNECTION WITH THE DRAG-ALONG SALE AND FOR ITS
PROPORTIONATE SHARE OF ANY WITHDRAWALS THEREFROM.  THE OTHER STOCKHOLDER ALSO
WILL BE RESPONSIBLE FOR ITS PROPORTIONATE SHARE OF ANY FEES, COMMISSIONS,
ADJUSTMENTS TO PURCHASE PRICE

 

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AND EXPENSES IN CONNECTION WITH THE OF THE DRAG-ALONG SALE.  IF THE DRAG-ALONG
SALE IS NOT CONSUMMATED WITHIN 90 DAYS FROM THE DATE OF THE DRAG-ALONG NOTICE
(SUBJECT TO EXTENSION TO OBTAIN ANY NECESSARY REGULATORY APPROVALS), THE SELLING
STOCKHOLDER(S) MUST DELIVER ANOTHER DRAG-ALONG NOTICE IN ORDER TO EXERCISE THEIR
RIGHTS UNDER THIS SECTION 4.3 WITH RESPECT TO SUCH DRAG-ALONG SALE.

 

 

ARTICLE V

PREEMPTION

 

Section 5.1.   Preemptive Rights.  (a)  Each Stockholder shall have the right to
purchase for cash its Preemptive Right Pro Rata Share of newly issued (i) Common
Shares or (ii) options or warrants to purchase, or securities convertible into
or exchangeable for, Common Shares (“Rights” and together with Common Shares,
“POI Securities”), in each case that the Company or any Subsidiary of the
Company may from time to time propose to sell for cash.  A Stockholder’s
“Preemptive Right Pro Rata Share” shall be, at any given time, that proportion,
calculated prior to any proposed new issuance, which the number of Common Shares
owned by such Stockholder at such time bears to the total number of Common
Shares outstanding at such time.

 

(B)   IN THE EVENT THE COMPANY PROPOSES TO UNDERTAKE AN ISSUANCE FOR CASH OF POI
SECURITIES TO ANY PERSON, IT SHALL GIVE THE STOCKHOLDERS WRITTEN NOTICE (THE
“PREEMPTIVE NOTICE”) OF ITS INTENTION TO SELL POI SECURITIES FOR CASH, THE
PRICE, THE IDENTITY OF THE PURCHASER AND THE PRINCIPAL TERMS UPON WHICH THE
COMPANY PROPOSES TO ISSUE THE SAME.  SUBJECT TO SECTION 5.1(A), EACH STOCKHOLDER
SHALL HAVE TEN BUSINESS DAYS FROM THE DELIVERY DATE OF ANY PREEMPTIVE NOTICE TO
AGREE TO PURCHASE A NUMBER OF POI SECURITIES UP TO ITS PREEMPTIVE RIGHT PRO RATA
SHARE OF POI SECURITIES (IN EACH CASE CALCULATED PRIOR TO THE ISSUANCE) FOR THE
PRICE AND UPON THE TERMS SPECIFIED IN THE PREEMPTIVE NOTICE BY GIVING WRITTEN
NOTICE TO THE COMPANY AND STATING THEREIN THE NUMBER OF POI SECURITIES TO BE
PURCHASED.

 

(C)   IN THE EVENT THAT ANY STOCKHOLDER FAILS TO PURCHASE ALL OF ITS PREEMPTIVE
RIGHT PRO RATA SHARE PURSUANT TO THIS SECTION 5.1, THE COMPANY SHALL HAVE 180
DAYS AFTER THE DATE OF THE PREEMPTIVE NOTICE TO CONSUMMATE THE SALE OF THE POI
SECURITIES WITH RESPECT TO WHICH SUCH STOCKHOLDER’S PREEMPTIVE RIGHT WAS NOT
EXERCISED, AT OR ABOVE THE PRICE AND UPON TERMS NOT MORE FAVORABLE TO THE
PURCHASERS OF SUCH POI SECURITIES THAN THE TERMS SPECIFIED IN THE INITIAL
PREEMPTIVE NOTICE GIVEN IN CONNECTION WITH SUCH SALE.

 

Section 5.2.   Excluded Securities.  The parties hereby agree that the
preemption rights described in Section 5.1 shall not be exercisable with respect
to any issuance by the Company or any Subsidiary of the Company of the following
securities (“Excluded Securities”):

 

(A)   ANY ISSUANCE OF SECURITIES TO OFFICERS, EMPLOYEES, DIRECTORS OR
CONSULTANTS OF ANY PROTECTION ONE ENTITY IN CONNECTION WITH SUCH PERSON’S
EMPLOYMENT, CONSULTING OR DIRECTOR ARRANGEMENTS WITH A PROTECTION ONE ENTITY;

 

(B)   ANY ISSUANCE OF SECURITIES IN CONNECTION WITH ANY BUSINESS COMBINATION OR
ACQUISITION TRANSACTION INVOLVING ANY PROTECTION ONE ENTITY, INCLUDING ANY

 

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ISSUANCE TO THE EQUITYHOLDERS OR MANAGEMENT OF THE ENTITY THAT IS THE SUBJECT OF
SUCH BUSINESS COMBINATION OR ACQUISITION TRANSACTION; OR

 

(c)    any securities issued by the Company or a Subsidiary of the Company
pursuant to a public offering registered with the SEC.

 

ARTICLE VI

MISCELLANEOUS

 

Section 6.1.   Effectiveness and Term.  This Agreement shall terminate upon (i)
as to any Stockholder, the date when such Stockholder owns less than 1% of the
outstanding Common Shares or (ii) upon a written agreement by the Stockholders
and the Company to terminate the Agreement.

 

Section 6.2.   Recapitalizations, Exchanges, Etc., Affecting Common Shares.  The
provisions of this Agreement shall apply, to the full extent set forth herein
with respect to the Common Shares, and to any and all shares of the Company or
any successor or assign of the Company (whether by merger, consolidation, sale
of assets or otherwise) which may be issued in respect of, in exchange for, or
in substitution of the Common Shares, by reason of any stock dividend, stock
split, stock issuance, reverse stock split, combination, recapitalization,
reclassification, merger, consolidation or otherwise.  Upon the occurrence of
any of such events, amounts hereunder shall be appropriately adjusted.

 

Section 6.3.   Headings.  Headings of articles, sections and paragraphs of this
Agreement are inserted for convenience of reference only and shall not affect
the interpretation or be deemed to constitute a part hereof.

 

Section 6.4.   Severability.  In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein shall, for any reason, be held to be invalid, illegal or unenforceable,
such illegality, invalidity or unenforceability shall not affect any other
provisions of this Agreement.

 

Section 6.5.   Benefits of Agreement.  Nothing expressed by or mentioned in this
Agreement is intended or shall be construed to give any Person other than the
parties hereto and their respective successors and permitted assigns any legal
or equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of the
parties hereto and their respective successors and permitted assigns.  No
assignments of rights under this Agreement shall be permitted and any such
assignment shall be void, except an assignment to a transferee of Common Shares
of a Stockholder (other than a transferee in a Registered Sale, a Rule 144 Sale
or a Below 10% Sale) or an assignment of the Offeree Stockholder’s rights under
Section 4.1.

 

Section 6.6.   Notices.  Any notice or other communications required or
permitted hereunder shall be deemed to be sufficient and received if contained
in a written instrument

 

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delivered in person or by courier or duly sent by first class certified mail,
postage prepaid, or by facsimile addressed to such party at the address or
facsimile number set forth below:

 

(1)

If to the Company to:

 

 

 

Protection One, Inc

 

1035 N. 3rd Street, Suite 101

 

Lawrence, Kansas 66044

 

Telephone: 785-575-1707

 

Facsimile: 785-575-1711

 

Attention: Darius G. Nevin

 

 

 

with a copy (which shall not constitute notice) to:

 

 

 

Kirkland & Ellis LLP

 

200 East Randolph Drive

 

Chicago, Illinois 60601

 

Telephone: 312-861-2000

 

Facsimile:  312-861-2200

 

Attention: John M. Jennings

 

 

(2)

If to POI Acquisition:

 

 

 

c/o Quadrangle Group LLC

 

375 Park Avenue

 

New York, New York 10152

 

Telephone: 212-418-1700

 

Facsimile: 212-418-1701

 

Attention: David Tanner

 

 

(3)

If to QDRF:

 

 

 

c/o Quadrangle Group LLC

 

375 Park Avenue

 

New York, New York 10152

 

Telephone: 212-418-1700

 

Facsimile: 212-418-1701

 

Attention: Michael Weinstock

 

 

 

in the case of notice to POI Acquisition or QDRF, with a copy (which shall not
constitute notice) to:

 

 

 

Simpson Thacher & Bartlett LLP

 

425 Lexington Avenue

 

New York, New York 10017-3790

 

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Telephone: 212-455-2000

 

Facsimile: 212-455-2502

 

Attention: Alan M. Klein

 

 

 

and

 

 

 

Willkie Farr & Gallagher LLP

 

787 Seventh Avenue

 

New York, New York 10019-6099

 

Telephone: 212-728-8000

 

Facsimile: 212-728-8111

 

Attention: Michael Kelly

 

 

(4)

if to any Stockholder other than POI Acquisition or QDRF, to it at the address
set forth in the records of the Company;

 

or, in any case, at such other address or facsimile number as shall have been
furnished in writing by such party to the other parties hereto.  All such
notices, requests, consents and other communications shall be deemed to have
been received (a) in the case of personal or courier delivery, on the date of
such delivery, (b) in the case of mailing, on the fifth business day following
the date of such mailing and (c) in the case of facsimile, when received.

 

Section 6.7.   Amendments and Waivers.  (a)  Neither this Agreement nor any
provision hereof may be amended, modified, changed or discharged except by an
instrument in writing signed by each of the parties hereto.

 

(B)   NO FAILURE OR DELAY BY ANY PARTY IN EXERCISING ANY RIGHT, POWER OR
PRIVILEGE HEREUNDER SHALL OPERATE AS A WAIVER THEREOF NOR SHALL ANY SINGLE OR
PARTIAL EXERCISE THEREOF PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF OR THE
EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE.  THE RIGHTS AND REMEDIES HEREIN
PROVIDED SHALL BE CUMULATIVE AND NOT EXCLUSIVE OF ANY RIGHTS OR REMEDIES
PROVIDED BY LAW.

 

Section 6.8.   Counterparts.  This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.

 

Section 6.9.   Specific Performance.  The parties hereto intend that each of the
parties have the right to seek damages or specific performance in the event that
any other party hereto fails to perform such party’s obligations hereunder. 
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.

 

Section 6.10.   Further Assurances.  Each of the parties shall, and shall cause
their respective Affiliates to, execute such documents and perform such further
acts as may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.

 

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Section 6.11.   No Recourse.  Notwithstanding anything that may be expressed or
implied in this Agreement, the Company and each Stockholder covenant, agree and
acknowledge that no recourse under this Agreement or any documents or
instruments delivered in connection with this Agreement shall be had against any
current or future director, officer, employee, general or limited partner or
member of any Stockholder or of any Affiliate or assignee thereof, as such,
whether by the enforcement of any assessment or by any legal or equitable
proceeding, or by virtue of any statute, regulation or other applicable law, it
being expressly agreed and acknowledged that no personal liability whatsoever
shall attach to, be imposed on or otherwise be incurred by any current or future
officer, agent or employee of any Stockholder or any current or future member of
any Stockholder or any current or future director, officer, employee, partner or
member of any Stockholder or of any Affiliate or assignee thereof, as such, for
any obligation of any Stockholder under this Agreement or any documents or
instruments delivered in connection with this Agreement for any claim based on,
in respect of or by reason of such obligations or their creation.

 

Section 6.12.   Confidentiality.  Each Stockholder acknowledges that in
connection with its investment in the Company it shall receive certain
non-public, confidential proprietary information, which may include memoranda,
notes, analyses, reports, compilations or studies prepared by or on behalf of
the Company and its Subsidiaries (“Confidential Information”).  Notwithstanding
anything to the contrary contained herein, each Stockholder agrees to use the
Confidential Information only for purposes of evaluating its investment in the
Company and it shall not use such Confidential Information in connection with
any competing business or investment or disclose any such Confidential
Information to any Person, except to the extent (i) such information is already
in the public domain (other than as a result of a disclosure in breach of this
Agreement); (ii) is already known by such Stockholder from a Person under no
obligation of confidentiality to the Company at the time such information was
received by such Stockholder or is obtained by such Stockholder from a Person
under no obligation of confidentiality to the Company, (iii) the Company agrees
in writing that such information may be disclosed; or (iv) such disclosure is
required by law; provided, however, that any such disclosures be made only to
the individual or entity to whom disclosure is required by law and only after
written notice to the Company of the required disclosure.  If Confidential
Information is to be disclosed pursuant to a requirement of law, the disclosing
Stockholder agrees to cooperate with the Company if the Company should seek to
obtain an order or other reliable assurance that confidential treatment shall be
accorded to designated portions of the Confidential Information. 
Notwithstanding the foregoing, Stockholders may disclose Confidential
Information to their employees, directors, shareholders, partners, members,
agents and representatives who have a need to know of such information in
connection with such Stockholder’s investment in or the management of the
Company; provided, that such Persons agree to be bound by the terms of this
Section 6.13, and such Stockholder shall be liable for any breach of the
Stockholder’s obligations by such Persons.

 

Section 6.13.   APPLICABLE LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

Section 6.14.   Jurisdiction; No Jury Trial.  The parties hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction of the courts of
the State of New

 

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York for any actions, suits or proceedings arising out of or relating to this
Agreement and the transactions contemplated hereby (and agree not to commence
any action, suit or proceeding relating thereto except in such courts, and
further agree that service of any process, summons, notice or document by U.S.
registered mail to its address set forth above shall be effective service of
process for any action, suit or proceeding brought against such party in any
such court).  The parties hereby irrevocably and unconditionally waive any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in the courts of the
State of New York, and hereby further irrevocably and unconditionally waive and
agree not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum. 
THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER IN ANY MATTERS ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.

 

Section 6.15.   Entire Agreement.  This Agreement, together with the
Registration Rights Agreement and the Exchange Agreement constitutes the entire
agreement between the parties with respect to the subject mater of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.

 

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

 

 

PROTECTION ONE, INC.

 

 

 

By:

 

 

 

Name:

 

Title:

 

 

 

POI ACQUISITION LLC

 

 

 

By:

 

 

 

Name:

 

Title:

 

 

 

QUADRANGLE MASTER FUNDING LTD

 

 

 

By:

 

 

 

Name:

 

Title:

 

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