Exhibit 10.1


 


Guaranty


 


This Guaranty, dated as of April 26,
2010 (this “Guaranty”), by GTCR Fund IX/A, L.P. (the “Guarantor”)
is in favor of Protection One, Inc., a Delaware corporation (the “Company”).  Reference is hereby made to the Agreement and
Plan of Merger (the “Merger Agreement”), dated as of April 26,
2010, among the Company, Protection Holdings, LLC, a Delaware limited liability
company (“Parent”), and Protection Acquisition Sub, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent (“Acquisition
Sub”).  Capitalized terms used herein
but not otherwise defined shall have the meanings ascribed to them in the
Merger Agreement.


 


1.             Guaranty.  To induce Company to enter into the Merger
Agreement, the Guarantor, intending to be legally bound, hereby absolutely,
irrevocably and unconditionally guarantees to the Company the payment by Parent
and Acquisition Sub of the Parent Termination Fee and other reimbursement and
indemnification obligations under the Merger Agreement and costs of collection
(including attorneys’ fees) associated with enforcing the Company’s rights
hereunder (the “Guaranteed Obligations”); provided, however,
that the maximum aggregate amount payable by the Guarantor under this Guaranty
shall in no event exceed the full amount of the Parent Termination Fee plus
$2,000,000.


 


2.            Terms of
Guaranty.


 


(a)           This Guaranty is one
of payment, not collection, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against Parent or Acquisition Sub or any other
person or whether Parent or Acquisition Sub or any other person are joined in
any such action or actions.


 


(b)           If Parent fails to
discharge its Guaranteed Obligations when due, then all of the Guarantor’s
liabilities to the Company hereunder in respect of such Guaranteed Obligations
shall, at the Company’s option, become immediately due and payable and the
Company may at any time and from time to time, at the Company’s option, and so
long as Parent has failed to perform any of its Guaranteed Obligations, take
any and all actions available hereunder or under applicable Law to collect any
of the Guarantor’s liabilities hereunder in respect of such Guaranteed
Obligations.


 


(c)           All payments
hereunder shall be made in lawful money of the United States, in immediately
available funds.  The Guarantor promises
and undertakes to make all payments hereunder free and clear of any deduction,
offset, defense, claim or counterclaim of any kind.


 


(d)           The liability of the
Guarantor under this Guaranty shall, to the fullest extent permitted under
applicable law, be absolute, irrevocable and unconditional irrespective of:


 

















 


(i)            the value,
genuineness, validity, regularity, illegality or enforceability of the Merger
Agreement, the Financing Commitments, or any other agreement or instrument
referred to herein, other than by reason of fraud by the Company;


 


(ii)           any change in the
corporate existence, structure or ownership of Parent, Acquisition Sub, or any
other person now or hereafter liable with respect to the Guaranteed Obligations
or otherwise interested in the transactions contemplated by the Merger
Agreement;


 


(iii)          any insolvency,
bankruptcy, reorganization or other similar proceeding affecting Parent or
Acquisition Sub, or any other person now or hereafter liable with respect to
the Guaranteed Obligations or otherwise interested in the transactions
contemplated by the Merger Agreement, or any of their assets;


 


(iv)          the existence of any
claim, set-off or other right that the Guarantor may have at any time against
Parent, Acquisition Sub or the Company, whether in connection with any
Guaranteed Obligation or otherwise; or


 


(v)           any other act or
omission that may or might in any manner or to any extent vary the risk of the
Guarantor or otherwise operate as a discharge of the Guarantor as a matter of
law or equity.


 


(e)           The Guarantor hereby
waives any and all notice of the creation, renewal, extension or accrual of any
of the Guaranteed Obligations and notice of or proof of reliance by the Company
upon this Guaranty or acceptance of this Guaranty.  The Guaranteed Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred in
reliance upon this Guaranty, and all dealings between Parent, Acquisition Sub
or the Guarantor, on the one hand, and the Company, on the other, shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this Guaranty.  When pursuing its
rights and remedies hereunder against the Guarantor, the Company shall be under
no obligation to pursue such rights and remedies it may have against Parent or
Acquisition Sub or any other person for the Guaranteed Obligations or any right
of offset with respect thereto, and any failure by the Company to pursue such
other rights or remedies or to collect any payments from Parent or Acquisition
Sub or any such other person or to realize upon or to exercise any such right
of offset, and any release by the Company of Parent or Acquisition Sub or any
such other person or any right of offset, shall not relieve the Guarantor of
any liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Company.


 


(f)            The Company shall
not be obligated to file any claim relating to any Guaranteed Obligation in the
event that Parent or Acquisition Sub 


 


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becomes
subject to a bankruptcy, reorganization or similar proceeding, and the failure
of the Company to so file shall not affect the Guarantor’s obligations
hereunder.  In the event that any payment
to the Company in respect of any Guaranteed Obligation is rescinded or must
otherwise be returned for any reason whatsoever, the Guarantor shall remain
liable hereunder with respect to the Guaranteed Obligation as if such payment
had not been made.


 


(g)           The Guarantor
reserves the right to assert defenses which Parent or Acquisition Sub may have
to payment of any Guaranteed Obligation.


 


3.             Waiver of Acceptance,
Presentment; Etc.  The
Guarantor, to the fullest extent permitted by Law, irrevocably waives
acceptance hereof, diligence, grace, protest, presentment, demand, notice of
non-payment or any notice not provided for herein.  Guarantor acknowledges that it will receive
substantial direct and indirect benefits from the transactions contemplated by
the Merger Agreement and that the waivers set forth in this Guaranty are
knowingly made in contemplation of such benefits.


 


4.             No Recourse; Sole Remedy.  Notwithstanding the fact that the Guarantor
may be a partnership, by its acceptance of the benefits of this Guaranty, the
Company acknowledges and agrees that neither it nor any of its former, current
or future direct or indirect equity holders, controlling persons, stockholders,
directors, officers, employees, members, managers, agents, affiliates, or any
former, current or future direct or indirect equity holder, controlling person,
stockholder, director, officer, employee, member, manager, general or limited
partner, affiliate, agent or assignee of any of the foregoing, has any right of
recovery under this Guaranty against, and no liability under this Guaranty
shall attach to, the former, current or future direct or indirect equity holders,
controlling persons, stockholders, directors, officers, employees, members,
managers, agents, affiliates, general or limited partners or assignees of the
Guarantor, of Parent, of Acquisition Sub or of any former, current or future
direct or indirect equity holder, controlling person, stockholder, director,
officer, employee, member, manager, general or limited partner, affiliate,
agent or assignee of any of the foregoing (collectively, but not including the
Guarantor, Parent or Acquisition Sub, each an “Affiliate”), whether
based on contract, tort or strict liability, and whether by or through
attempted piercing of the corporate or partnership veil, by or through a claim
by or on behalf of Parent or Acquisition Sub against an Affiliate, the
Guarantor, Parent or Acquisition Sub (including a claim to enforce the Equity
Commitment Letter), by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute, regulation or applicable Law,
or otherwise).  Other than pursuant to
the Confidentiality Agreement, solely with respect to the parties thereto,
recourse against the Guarantor under this Guaranty shall be the sole and
exclusive remedy of the Company and all of its affiliates against the Guarantor
and any of its Affiliates (other than against Parent or Acquisition Sub) in
respect of any liabilities or obligations arising under, or in connection with,
the Merger Agreement or the transactions contemplated thereby.  The Company hereby covenants and agrees that
it shall not institute, and shall cause its respective affiliates not to
institute, any proceeding or bring any other claim arising under, or in
connection with, the Merger Agreement or the transactions contemplated thereby,
against the Guarantor or any of its Affiliates (other than against Parent or 


 


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Acquisition Sub) except for claims against
the Guarantor under this Guaranty for up to the amount of the Guaranteed
Obligations and except for claims in respect of the Confidentiality Agreement
solely with respect to the parties thereto. 
Nothing set forth in this Guaranty shall affect or be construed to
affect any liability of Parent or Acquisition Sub to the Company or shall
confer or give or shall be construed to confer or give to any person other than
the Company any rights or remedies against 
the Guarantor. The Guarantor hereby covenants and agrees that it shall
not institute, and shall cause its respective Affiliates not to institute, any
proceeding asserting that this Guaranty is illegal, invalid or unenforceable in
accordance with its terms.  The Company
acknowledges that the Guarantor is agreeing to enter into this Guaranty in
reliance on the provisions set forth in this Section 4, and the
Guarantor acknowledges that the Company is agreeing to enter into the Merger
Agreement in reliance on this Guaranty. 
For all purposes of this Guaranty, pursuit of a claim against a person
by the Company or any of its controlled affiliates shall be deemed a pursuit of
a claim by the Company.  A person shall
be deemed to have pursued a claim against another person if such first person
brings legal action against such other person, adds such other person to an
existing legal proceeding, or otherwise asserts a legal claim of any nature against
such other person.  This Section 4
shall survive termination of this Guaranty.


 


5.             Subrogation.  Unless and until all amounts payable by the
Guarantor under this Guaranty shall have been paid in full in immediately
available funds, (i) the Guarantor hereby unconditionally waives any
rights that it may now have or hereafter acquire against Parent or Acquisition
Sub that arise from the existence, payment, performance, or enforcement of the
Guarantor’s obligations under or in respect of this Guaranty or any other
agreement in connection therewith, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification and
any right to participate in any claim or remedy against Parent or Acquisition
Sub (including any right that would result in the Guarantor being deemed a
creditor of Parent or Acquisition Sub pursuant to this Guaranty under the
United States Bankruptcy Code), whether or not such claim, remedy or right
arises in equity or under contract, statute or common Law, including, without
limitation, the right to take or receive from Parent or Acquisition Sub,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim, remedy or right, and (ii) the
Guarantor shall not exercise any such rights. If any amount shall be paid to
the Guarantor in violation of the immediately preceding sentence at any time
prior to the payment in full in immediately available funds of all amounts
payable under this Guaranty, such amount shall be received and held in trust
for the benefit of the Company, shall be segregated from other property and
funds of the Guarantor and shall forthwith be promptly paid or delivered to the
Company in the same form as so received (with any necessary endorsement or
assignment) to be credited and applied to all amounts payable by the Guarantor
under this Guaranty.


 


6.             Continuing Guaranty.  This Guaranty may not be revoked or
terminated and shall remain in full force and effect until the indefeasible
payment and satisfaction in full of the Guaranteed Obligations, shall be
binding upon the Guarantor, its successors and assigns, and shall inure to the
benefit of, and be enforceable by, the Company and its respective successors, transferees
and assigns.  Notwithstanding the 


 


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foregoing, this Guaranty shall terminate and
the Guarantor shall have no further rights or obligations under this Guaranty
as of the earlier of (i) the Effective Time and (ii) the end of three
(3) months following of the date on which the Merger Agreement is
terminated in accordance with its terms, except in connection with a claim for
payment of any Guaranteed Obligation presented by the Company to Parent or the
Guarantor during such three-month period. 
Notwithstanding the foregoing, in the event that the Company or any of
its controlled affiliates asserts in any litigation or other proceeding that
the provisions of Section 1 hereof limiting the Guarantor’s liability
to the Parent Termination Fee or the provisions of Section 4 hereof
or this Section 6 are illegal, invalid or unenforceable in whole or
in part, or asserting any theory of liability against any Affiliate or, other
than its right to recover from the Guarantor for up to the amount of the
Guaranteed Obligations (subject to limitations described herein), the Guarantor
or Parent,  then (i) the obligations
of the Guarantor under this Guaranty shall terminate ab initio
and be null and void, and (ii) neither the Guarantor nor any Affiliate
shall have any liability to the Company with respect to the transactions
contemplated by the Merger Agreement or under this Guaranty; provided, that the
foregoing shall not affect the right of the Company to assert any claim under
the Confidentiality Agreement against the other parties thereto.


 


7.             Entire Agreement; Third
Party Beneficiaries.  This
Guaranty, together with the Merger Agreement and the Support Agreements,
constitutes the entire agreement with respect to the subject matter hereof and
supersedes any and all prior discussions, negotiations, proposals,
undertakings, understandings and agreements, whether written or oral, among
Parent, Acquisition Sub and the Guarantor or any of their Affiliates on the one
hand, and the Company or any of its affiliates on the other hand.  This Guaranty is not intended to and shall
not confer upon any person other than the parties hereto and the Affiliates of
Guarantor, as provided in Section 4, any rights or remedies
hereunder.


 


8.             Amendments and Waivers.  No amendment or waiver of any provision of
this Guaranty will be valid and binding unless it is in writing and signed, in
the case of an amendment, by the Guarantor and the Company, or in the case of
waiver, by the party against whom the waiver is to be effective.  No waiver by any party of any breach or
violation of, or default under, this Guaranty, whether intentional or not, will
be deemed to extend to any prior or subsequent breach, violation or default
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.  No delay or
omission on the part of any party in exercising any right, power or remedy
under this Guaranty will operate as a waiver thereof.  The Company shall not have any obligation to
proceed at any time or in any manner against, or exhaust any or all of the
Company’s rights against, Parent or any other person now or hereafter liable
for any Guaranteed Obligations or interested in the transactions contemplated
by the Merger Agreement prior to proceeding against the Guarantor hereunder.


 


9.             Counterparts.  This Guaranty may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.  This Guaranty will become effective when duly
executed by each party hereto.


 


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10.           Notices.  All notices, requests, demands, claims and
other communications required or permitted to be delivered, given or otherwise
provided under this Guaranty must be in writing and must be delivered, given or
otherwise provided:


 


(a)           by hand (in which
case, it will be effective upon delivery);


 


(b)           by facsimile (in
which case, it will be effective upon receipt of confirmation of good
transmission); or


 


(c)           by overnight
delivery by a nationally recognized courier service (in which case, it will be
effective on the next business day after being deposited with such courier
service);


 


in each case, to the address (or facsimile
number) listed below (or to such other address or facsimile number as a party
may designate by notice to the other parties):


 


if to the Guarantor, to it at:


 


	
  GTCR Fund IX/A, L.P.

  c/o GTCR Golder Rauner, LLC

  300 N. LaSalle Street

  Suite 5600

  Chicago, Illinois 60654

  
	
  Phone:

  	
  (312) 382-2200

  
	
  Fax:

  	
  (312) 382-2201

  
	
  E-mail:

  	
  ddonnini@GTCR.COM

  
	
  Attention:

  	
  David A. Donnini

  



 


with a copy to:


 


	
  Latham & Watkins LLP

  885 Third Avenue

  New York, New York 10022

  
	
  Phone:

  	
  (212) 906-1200

  
	
  Fax:

  	
  (212) 751-4864

  
	
  E-mail:

  	
  ted.sonnenschein@lw.com

  adel.aslanifar@lw.com

  
	
  Attention:

  	
  Edward Sonnenschein

  M. Adel Aslani-Far

  



 


if to the Company, to it at:


 


	
  Protection One, Inc.

  1035 N. Third Street, Suite 101

  Lawrence, Kansas 66044

  
	
  Attention:

  	
  General Counsel 

  
	
  Fax:

  	
  (877) 326-9360

  



 


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with a copy to:


 


	
  Kirkland & Ellis LLP

  300 N. LaSalle Street

  Chicago, Illinois  60654

  
	
  Attention:

  	
  R. Scott Falk, P.C.

  
	
   

  	
  Roger D. Rhoten

  
	
  Fax:

  	
  (312) 862-2200

  



 


11.           GOVERNING
LAW AND VENUE; WAIVER OF JURY TRIAL.


 


(a)           THIS GUARANTY SHALL
BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.  The parties hereby irrevocably submit to the
personal jurisdiction of the courts of the State of Delaware and the Federal
courts of the United States of America located in the State of Delaware solely
in respect of the interpretation and enforcement of the provisions of this
Guaranty and of the documents referred to in this Guaranty, and in respect of
the transactions contemplated hereby, and hereby waive, and agree not to
assert, as a defense in any action, suit or proceeding for the interpretation
or enforcement hereof or of any such document, that it is not subject thereto
or that such action, suit or proceeding may not be brought or is not
maintainable in said courts or that the venue thereof may not be appropriate or
that this Guaranty or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect
to such action or proceeding shall be heard and determined in such a Delaware
State or Federal court.  The parties
hereby consent to and grant any such court jurisdiction over the person of such
parties and, to the extent permitted by law, over the subject matter of such
dispute and agree that mailing of process or other papers in connection with
any such action or proceeding in the manner provided in Section 10 or in
such other manner as may be permitted by law shall be valid and sufficient
service thereof.  Guarantor shall pay all
costs and expenses (including all reasonable attorneys’ fees) incurred or paid
by the Company in the successful enforcement of this Guaranty.


 


(b)           EACH PARTY
ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
GUARANTY IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY, OR THE TRANSACTIONS
CONTEMPLATED BY THIS GUARANTY.  EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR 


 


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ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS GUARANTY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 11.


 


12.           Representations and
Warranties.  The
Guarantor hereby represents and warrants to the Company that (a) it has
all power and authority to execute, deliver and perform this Guaranty; (b) the
execution, delivery and performance of this Guaranty by the Guarantor has been
duly and validly authorized and approved by all necessary limited liability
company action, and no other proceedings or actions on the part of the
Guarantor are necessary therefor; (c) this Guaranty has been duly and
validly executed and delivered by it and constitutes a valid and legally
binding obligation of it, enforceable against the Guarantor in accordance with
its terms; (d) the execution, delivery and performance by the Guarantor of
this Guaranty do not and will not (i) violate the organizational documents
of the Guarantor, (ii) violate any applicable law or judgment or (iii) result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of any benefit under, any
Contract to which the Guarantor is a party, and (e) the Guarantor has the
financial capacity to pay and perform its obligations under this Guaranty, and
all funds necessary for the Guarantor to fulfill its Guaranteed Obligations
under this Guaranty shall be available to the Guarantor for so long as this
Guaranty shall remain in effect in accordance with Section 6
hereof.


 


13.           No Assignment.  Neither the Guarantor nor the Company may
assign its rights, interests or obligations hereunder to any other person
(except by operation of law) without the prior written consent of the Company
(in the case of an assignment by the Guarantor) or the Guarantor (in the case
of an assignment by the Company).


 


14.           Severability.  Any term or provision of this Guaranty that
is invalid or unenforceable in any situation in any jurisdiction will not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction; provided, however,
that this Guaranty may not be enforced without giving effect to the provisions
of Section 4 hereof or the limitation of the amount of the
Guaranty.  No party shall assert, and
each party shall cause its respective affiliates not to assert, that this
Guaranty or any part hereof is invalid, illegal or unenforceable.


 


15.           Headings.  The headings contained in this Guaranty are
for convenience purposes only and will not in any way affect the meaning or
interpretation hereof.


 


*              *              *              *              *


 


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IN WITNESS WHEREOF, the undersigned
have executed and delivered this Guaranty as of the date first written above.


 


	
   

  	
  GTCR
  FUND IX/A, L.P.

  
	
   

  	
   

  
	
   

  	
  By
  GTCR Partners IX, L.P., its general partner

  
	
   

  	
   

  
	
   

  	
  By
  GTCR Golder Rauner II, LLC, its general partner

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David A. Donnini

  
	
   

  	
   

  	
  Name:
  David A. Donnini

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROTECTION
  ONE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Richard Ginsburg

  
	
   

  	
   

  	
  Name:
  Richard Ginsburg

  
	
   

  	
   

  	
  Title:
  President and Chief Executive Officer

  



 


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