Exhibit 10.4


EXECUTION


INTERCREDITOR AGREEMENT


This INTERCREDITOR AGREEMENT (“Agreement”),
is dated as of April 2, 2007, and entered into by and among BEAR STEARNS CORPORATE LENDING INC. (“BSCL”), in its capacity as administrative
agent for the First Lien Obligations (as defined below) (and including its
successors and assigns from time to time, the “First
Lien Agent”), WELLS FARGO BANK, N.A.,
in its capacity as trustee for the Second Lien Obligations (as defined below)
(and including its successors and assigns from time to time, the “Second Lien Trustee”), PROTECTION ONE ALARM MONITORING, INC., a Delaware
corporation (the “Company”), and PROTECTION ONE, INC.
(“Holdings”).  Capitalized terms used in this Agreement have
the meanings set forth in Section 1 below.


RECITALS


The Company, Holdings,  the lenders
and agents party thereto, BEAR, STEARNS & CO.
INC. (“Bear Stearns”), as sole lead
arranger and sole bookrunner, Bear Stearns and LEHMAN
BROTHERS INC. (“Lehman Brothers”),
as initial joint lead arrangers and initial joint bookrunners, and BSCL,  as First Lien Agent, entered into that certain Amended and
Restated Credit Agreement, dated as of April 26, 2006, providing for a
revolving credit facility and term loan (as amended by that certain Amendment
to Amended and Restated Credit Agreement, dated as of the date hereof, among
the Company, Holdings, the lenders and agents party thereto, Bear Stearns,
Lehman Brothers and BSCL, and as further amended, restated, supplemented,
modified, replaced or refinanced from time to time, the “First Lien Credit Agreement”);


The Company, Holdings, the lenders and agents party
thereto, and Wells Fargo Bank, N.A.,  as Second Lien
Trustee, have entered into that certain Indenture, dated as of the date hereof,
providing for 12% second lien notes (as amended, restated, supplemented,
modified, replaced or refinanced from time to time, the “Second Lien Indenture”);


Pursuant to (i) that certain First Lien Guarantee, dated as of April
18, 2005, Holdings guaranteed the First Lien Obligations (the “First Lien Holdings Guarantee”) and each domestic
subsidiary of the Company (such domestic subsidiaries of the Company, the “Original Subsidiary Guarantors”) guaranteed the First Lien
Obligations (the “First Lien Original Subsidiary Guarantee”),
(ii) that certain Assumption Agreement, dated as of the date hereof, Integrated Alarm Services Group Inc. (“IASG”),
and each domestic subsidiary of IASG (the “IASG Entities” and,
together with the Original Subsidiary Guarantors, the “Subsidiary
Guarantors”) have agreed to guarantee the First Lien Obligations
(the “First Lien IASG Guarantee” and,
together with the First Lien Original Subsidiary Guarantee, the “First Lien Subsidiary Guarantee”), and (iii) that certain
Second Lien Guarantee dated as of the date hereof, Holdings has agreed to
guarantee the Second Lien Obligations (the “Second Lien Holdings
Guarantee”) and the Subsidiary Guarantors have agreed to guarantee
the Second Lien Obligations (the “Second Lien Subsidiary
Guarantee”);













The obligations of the Company under the First Lien Credit Agreement
and any Specified Hedge Agreements with any Qualified Counterparty, the
obligations of Holdings under the First Lien Holdings Guarantee and the
obligations of each of the Subsidiary Guarantors under its First Lien
Subsidiary Guarantee are secured on a first priority basis by liens on
substantially all the assets of the Company, Holdings and the Subsidiary
Guarantors, respectively, pursuant to the terms of the First Lien Collateral
Documents;


The obligations of the Company under the Second Lien Indenture, the
obligations of Holdings under the Second Lien Holdings Guarantee and the
obligations of each of the Subsidiary Guarantors under its Second Lien
Subsidiary Guarantee will be secured on a second priority basis by liens on
substantially all the assets of the Company, Holdings and the Subsidiary
Guarantors, respectively, pursuant to the terms of the Second Lien Collateral
Documents;


The First Lien Loan Documents and the Second Lien Documents provide,
among other things, that the parties thereto shall set forth in this Agreement
their respective rights and remedies with respect to the Collateral; and


In order to induce the First Lien Agent and the First Lien Claimholders
to consent to the Grantors incurring the Second Lien Obligations, the Second
Lien Trustee on behalf of the Second Lien Claimholders has agreed to the
intercreditor and other provisions set forth in this Agreement.


AGREEMENT


In consideration of the foregoing, the mutual covenants and obligations
herein set forth and for other good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:


SECTION 1.  Definitions.


1.1          Defined Terms.  As used in this Agreement, the following
terms shall have the following meanings:


“Affiliate” shall
mean, as to any Person, any other Person that, directly or indirectly, is in
control of, is controlled by, or is under common control with, such
Person.  For purposes of this definition,
“control” of a Person means the power,
directly or indirectly, either to (a) vote 10% or more of the securities having
ordinary voting power for the election of directors (or persons performing
similar functions) of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.


“Agreement” shall
mean this Intercreditor Agreement, as amended, restated, renewed, extended,
supplemented or otherwise modified from time to time.



 2
 









“Bankruptcy Code”
shall mean Title 11 of the United States Code entitled “Bank­ruptcy,” as
now and hereafter in effect, or any successor statute.


“Bankruptcy Law”
shall mean the Bankruptcy Code and any similar federal, state or foreign law
for the relief of debtors.


“Bear Stearns” shall have the
meaning set forth in the Recitals to this Agreement.


“BSCL” shall have the meaning
set forth in the Preamble to this Agreement.


“Business Day”
shall mean a day other than a Saturday, Sunday or other day on which commercial
banks in New York City are authorized or required by law to close.


“Cap Amount” shall have the
meaning set forth in the definition of “First Lien Obligation.”


“Collateral” shall
mean all property of the Grantors, now owned or hereafter acquired, constituting
both First Lien Collateral and Second Lien Collateral.


“Company” shall
have the meaning set forth in the Recitals to this Agreement.


“Comparable Second Lien Collateral
Document” shall mean, in relation to any Collateral subject
to any Lien created under any First Lien Collateral Document, the Second Lien
Document which creates a Lien on the same Collateral, granted by the same
Grantor.


“DIP Financing”
shall have the meaning set forth in Section 6.1.


“Discharge of First Lien Obligations”
shall mean, except to the extent otherwise expressly provided
in Section 5.5:


(a)           payment in full in
cash of the principal of and interest (including interest accruing on or after
the commencement of any Insolvency or Liquidation Proceeding, whether or not
such interest would be an allowed claim in such Insolvency or Liquidation
Proceeding), on all Indebtedness outstanding under the First Lien Loan
Documents and constituting First Lien Obligations;


(b)           payment in full in
cash of all other First Lien Obligations that are due and payable or otherwise
accrued and owing at or prior to the time such principal and interest are paid;


(c)           termination or
expiration of all commitments, if any, of all First Lien Lenders to extend
credit that would constitute First Lien Obligations; and



 3
 









(d)           termination,
back-stopping or cash collateralization (in an amount equal to 102% of the
aggregate face amount) of all letters of credit issued under the First Lien
Loan Documents and constituting First Lien Obligations.


“Disposition” shall
have the meaning set forth in Section 5.1(a)(2).


“Exigent Circumstances” shall
mean (a) the commencement of an Insolvency or Liquidation Proceeding by or
against any or all of the Grantors, (b) the acceleration (other than by the
First Lien Claimholders) of Indebtedness of a Grantor having an aggregate
principal amount of at least $15,000,000, (c) an exercise by any Person (other
than the First Lien Claimholders) of enforcement rights or remedies with
respect to any Collateral or (d) any other event or circumstance that the First
Lien Agent or the other First Lien Claimholders believes, in its or their sole
discretion, could materially and imminently threaten its or their ability to
realize upon Collateral, including fraudulent removal, concealment or abscondment
thereof, or destruction or material waste thereof.


“First Lien Agent”  shall have the meaning set forth in the
Preamble to this Agreement.


“First Lien Claimholders” shall
mean, at any relevant time, the holders of First Lien Obligations at that time,
including the First Lien Lenders, the First Lien Agent and the other agents
under the First Lien Loan Documents and the First Lien Qualified
Counterparties.


“First Lien Collateral”
shall mean all property of the Grantors, now owned or hereafter acquired, upon
which a Lien is purported to be created by any First Lien Collateral Document.


“First Lien Collateral Documents”
shall mean the Collateral Documents (as defined in the First Lien Credit
Agreement) and any other agreement, document or instrument pursuant to which a
Lien is granted securing any First Lien Obligations or under which such Lien is
perfected or rights or remedies with respect to such Liens are governed.


“First Lien Credit Agreement”
shall have the meaning set forth in the Recitals to this Agreement.


“First Lien Holdings Guarantee”
shall have the meaning set forth in the Recitals to this Agreement.


“First Lien IASG Guarantee”
shall have the meaning set forth in the Recitals to this Agreement.


“First Lien Lenders”
shall mean the “Lenders” under and as defined in the First Lien Loan Documents.


“First Lien Loan Documents”
shall mean the First Lien Credit Agreement and the other Loan Documents (as
defined in the First Lien Credit Agreement) and each of the other agreements,
documents and instruments providing for or evidencing any other



 4
 









First Lien Obligation, and any other document or
instrument executed or delivered at any time in connection with any First Lien
Obligations, including any intercreditor or joinder agreement among holders of
First Lien Obligations, in each case as each may be amended, replaced,
restated, supplemented, modified, renewed or extended from time to time in
accordance with the provisions of this Agreement.


“First Lien Mortgages”
shall mean a collective reference to each mortgage, deed of trust and other
document or instrument under which any Lien on real property owned by any
Grantor is granted to secure any First Lien Obligations or under which rights
or remedies with respect to any such Liens are governed.


“First Lien Obligations” shall
mean, subject to the next sentence, all Obligations outstanding under the First
Lien Credit Agreement and the other First Lien Loan Documents, including:


(a)           Specified Hedge
Agreements entered into with any First Lien Qualified Counterparties; plus


(b)           other additional
Obligations designated by the Company and the First Lien Agent as “Obligations”
under the First Lien Loan Documents.  “First
Lien Obligations” shall include all interest accrued or accruing (or which
would, absent commencement of an Insolvency or Liquidation Proceeding, accrue)
after commencement of an Insolvency or Liquidation Proceeding in accordance
with the rate specified in the relevant First Lien Loan Document whether or not
the claim for such interest is allowed as a claim in such Insolvency or
Liquidation Proceeding.  To the extent
any payment with respect to the First Lien Obligations (whether by or on behalf
of any Grantor, as proceeds of security, enforcement of any right of set off or
otherwise) is declared to be fraudulent or preferential in any respect, set
aside or required to be paid to a debtor in possession, trustee, receiver or
similar person, then the obligation or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.


Notwithstanding the foregoing, unless otherwise agreed to by the Second
Lien Claimholders whose consent is so required under the Second Lien Documents,
if the sum of: (1) Indebtedness constituting principal outstanding under the
First Lien Credit Agreement and the other First Lien Documents; plus (2)
the aggregate face amount of any letters of credit issued but not reimbursed
under the First Lien Credit Agreement, is in excess of $375,000,000 in the
aggregate (the “Cap Amount”), then
only that portion of such Indebtedness and such aggregate face amount of
letters of credit equal to the Cap Amount shall be included in First Lien
Obligations and interest and reimbursement obligations with respect to such
Indebtedness and letters of credit shall only constitute First Lien Obligations
to the extent related to Indebtedness and face amounts of letters of credit
included in the First Lien Obligations.


“First Lien Obligations Amount” shall have the meaning set forth in Section
5.1(e).



 5
 









“First Lien Original Subsidiary
Guarantee” shall have the meaning set forth in the Recitals
to this Agreement.


“First Lien Subsidiary Guarantee”
shall have the meaning set forth in the Recitals to this Agreement.


“Governmental Authority”
shall mean any nation or government, any state or other political subdivision
thereof, any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative functions of or pertaining to government,
any securities exchange and any self-regulatory organization (including the
National Association of Insurance Commissioners).


“Grantors” shall
mean the Company, Holdings, each of the Subsidiary Guarantors and each other Person
that has or may from time to time hereafter execute and deliver a First Lien
Collateral Document or a Second Lien Collateral Document as a 

“grantor” or “pledgor” (or the equivalent thereof).


“Hedge Agreements”  shall mean any agreement with
respect to any swap, forward, future or derivative transaction or option or
similar agreement involving, or settled by reference to, one or more rates,
currencies, commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk
or value or any similar transaction or any combination of these transactions; provided
that no phantom stock, option or similar plan providing for payments only on
account of services provided by current or former directors, officers,
employees or consultants of the Company or the Subsidiaries shall be a Hedge
Agreement.


“Holdings” shall
have the meaning set forth in the Recitals to this Agreement.


“IASG” shall have
the meaning set forth in the Recitals to this Agreement.


“IASG Entities”
shall have the meaning set forth in the Recitals to this Agreement.


“Indebtedness”
shall mean and includes all Obligations that constitute “Indebtedness” within
the meaning of the First Lien Credit Agreement or the Second Lien Indenture, as
applicable.


“Insolvency or Liquidation Proceeding”
shall mean:


(a)           any voluntary or
involuntary case or proceeding under the Bankruptcy Code with respect to any
Grantor;


(b)           any other voluntary
or involuntary insolvency, reorganization or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding with respect to any Grantor or with respect to a material portion of
any Grantor’s assets;



 6
 









(c)           any liquidation,
dissolution, reorganization or winding up of any Grantor whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy; or


(d)           any assignment for
the benefit of creditors or any other marshalling of assets and liabilities of
any Grantor.


“Lehman Brothers” shall have the
meaning set forth in the Recitals to this Agreement.


“Lien” shall mean
any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge or other security interest or
any preference, priority or other security agreement or preferential
arrangement with respect to property of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
capital lease having substantially the same economic effect as any of the
foregoing).


“Lien Enforcement Action” shall
have the meaning set forth in Section 3.1(a).


“New Agent” shall
have the meaning set forth in Section 5.5.


“New First Lien Debt Notice” shall have the meaning set forth in Section
5.5.


“Obligations” shall
mean all obligations of every nature of each Grantor from time to time owed to
any agent or trustee, the First Lien Claimholders, the Second Lien Claimholders
or any of them or their respective Affiliates under the First Lien Loan
Documents, the Second Lien Documents or Specified Hedge Agreements, whether for
principal, interest or payments for early termination of Specified Hedge
Agreements, reimbursement obligations, fees, expenses, indemnification or
otherwise and all guarantees of any of the foregoing.


“Option Event” shall mean (a)
the acceleration of the maturity of the First Lien Obligations or (b) the
taking of action by the First Lien Claimholders to sell or foreclose upon all
or substantially all of the Collateral.


“Original Subsidiary Guarantors”
shall have the meaning set forth in the Recitals to this Agreement.


“Person” shall mean
an individual, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.


“Pledged Collateral”
shall have the meaning set forth in Section 5.4.


“Qualified Counterparty” shall mean, with respect to any
Specified Hedge Agreement, any counterparty thereto that, at the time such
Specified Hedge Agreement was



 7
 









entered into, was a First Lien Lender, an Agent under
and as defined in the First Lien Credit Agreement or an Affiliate of a First
Lien Lender or such an Agent.


“Recovery” shall
have the meaning set forth in Section 6.5.


“Refinance” shall mean,
in respect of any Indebtedness, to refinance, extend, renew, defease, amend,
modify, supplement, restructure, replace, refund or repay, or to issue other
Indebtedness, in exchange or replacement for, such Indebtedness in whole or in
part.  “Refinanced”
and “Refinancing” shall have
correlative meanings.


“Second Lien Claimholders”
shall mean, at any relevant time, the holders of Second Lien Obligations at
that time, including the Second Lien Holders, the Second Lien Trustee and any
other agents under the Second Lien Documents and the Second Lien Qualified
Counterparties.


“Second Lien Collateral”
shall mean all property of the Grantors, now owned or hereafter acquired, upon
which a Lien is purported to be created by any Second Lien Collateral Document.


“Second Lien Collateral Documents”
shall mean the Collateral Documents (as defined in the Second Lien Indenture)
and any other agreement, document or instrument pursuant to which a Lien is
granted securing any Second Lien Obligations or under which such Lien is
perfected or rights or remedies with respect to such Liens are governed.


“Second Lien Documents”
shall mean the Second Lien Indenture and the other Second Priority Documents
(as defined in the Second Lien Indenture) and each of the other agreements, documents
and instruments providing for or evidencing any other Second Lien Obligation,
and any other document or instrument executed or delivered at any time in
connection with any Second Lien Obligations, including any intercreditor or
joinder agreement among holders of Second Lien Obligations to the extent such
are effective at the relevant time, as each may be amended, replaced, restated,
supplemented, modified, renewed or extended from time to time in accordance
with the provisions of this Agreement.


“Second Lien Holders”
shall mean the “Holders” under and as defined in the Second Lien Indenture.


“Second Lien Holdings Guarantee”
shall have the meaning set forth in the Recitals to this Agreement.


“Second Lien Indenture”
shall have the meaning set forth in the Recitals to this Agreement.


“Second Lien Mortgages”
shall mean a collective reference to each mortgage, deed of trust and any other
document or instrument under which any Lien on real property owned by any
Grantor is granted to secure any Second Lien Obligations or under which rights
or remedies with respect to any such Liens are governed.



 8
 









“Second Lien Obligations”
shall mean all Obligations outstanding under the Second Lien Indenture and the
other Second Lien Documents.  “Second
Lien Obligations” shall include all interest accrued or accruing (or which
would, absent commencement of an Insolvency or Liquidation Proceeding, accrue)
after commencement of an Insolvency or Liquidation Proceeding in accordance
with the rate specified in the relevant Second Lien Document whether or not the
claim for such interest is allowed as a claim in such Insolvency or Liquidation
Proceeding.  To the extent any payment
with respect to the Second Lien Obligations (whether by or on behalf of any
Grantor, as proceeds of security, enforcement of any right of set off or
otherwise) is declared to be fraudulent or preferential in any respect, set
aside or required to be paid to a debtor in possession, trustee, receiver or
similar person, then the obligation or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.


“Second Lien Obligations Amount”
shall have the meaning set forth in Section 5.1(e).


“Second Lien Subsidiary Guarantee”
shall have the meaning set forth in the Recitals to this Agreement.


“Second Lien Trustee”  shall have the meaning set forth in the
Preamble to this Agreement.


“Specified Hedge Agreement”  shall mean any Hedge Agreement (a) entered
into by (i) the Company or any of its Subsidiaries and (ii) any Qualified
Counterparty and (b) that has been designated by such Qualified Counterparty
and the Company, by notice to the First Lien Agent, as a Specified Hedge
Agreement.


“Standstill Period”
shall have the meaning set forth in Section 3.1.


“Subsidiary” shall
mean, as to any Person, a corporation, partnership, limited liability company
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which
is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. 
Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries”
in this Agreement shall refer to a Subsidiary or Subsidiaries of Holdings.


“Subsidiary Guarantors” shall
have the meaning set forth in the Recitals to this Agreement.


“UCC” shall mean
the Uniform Commercial Code (or any similar or equivalent legislation) as in
effect in any applicable jurisdiction.


1.2          Terms
Generally.  The definitions of terms
in this Agreement shall apply equally to the singular and plural forms of the
terms defined.  Whenever the context



 9
 









may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including”
shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have
the same meaning and effect as the word “shall.”  Unless the context requires otherwise:


(a)           any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, replaced, restated, supplemented,
modified, renewed or extended;


(b)           any reference herein
to any Person shall be construed to include such Person’s permitted successors
and assigns;


(c)           the words “herein,” “hereof”
and “hereunder,” and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof;


(d)           all references
herein to Sections shall be construed to refer to Sections of this Agreement;
and


(e)           the words “asset”
and “property” shall be construed to have the same meaning and effect and to
refer to any and all tangible and intangible assets and properties, including
cash, securities, accounts and contract rights.


SECTION 2.  Lien Priorities.


2.1          Relative
Priorities.  Notwithstanding the
date, time, method, manner or order of grant, attachment or perfection of any
Liens securing the Second Lien Obligations granted on the Collateral or of any
Liens securing the First Lien Obligations granted on the Collateral and
notwithstanding any provision of the UCC, or any other applicable law or the
Second Lien Documents or any defect or deficiencies in, or failure to perfect,
the Liens securing the First Lien Obligations or any other circumstance
whatsoever, the Second Lien Trustee, on behalf of itself and the Second Lien
Claimholders, hereby agrees that:


(a)           any Lien on
the Collateral securing any First Lien Obligations now or hereafter held by or
on behalf of the First Lien Agent or any First Lien Claimholders or any agent
or trustee therefor, regardless of how acquired, whether by grant, possession,
statute, operation of law, subrogation or otherwise, shall be senior in all
respects and prior to any Lien on the Collateral securing any Second Lien
Obligations;


(b)           any Lien on
the Collateral securing any Second Lien Obligations now or hereafter held by or
on behalf of the Second Lien Trustee, any Second Lien Claimholders or any agent
or trustee therefor regardless of how acquired, whether by grant, possession,
statute, operation of law, subrogation or otherwise, shall be junior and
subordinate in all respects to all Liens on the Collateral securing any First
Lien Obligations; and



 10















(c)           all
Liens on the Collateral securing any First Lien Obligations shall be and remain
senior in all respects and prior to all Liens on the Collateral securing any
Second Lien Obligations for all purposes, whether or not such Liens securing
any First Lien Obligations are subordinated to any Lien securing any other
obligation of the Company, any other Grantor or any other Person.


2.2          Prohibition
on Contesting Liens.  Each of the
Second Lien Trustee, for itself and on behalf of each Second Lien Claimholder, and
the First Lien Agent, for itself and on behalf of each First Lien Claimholder,
agrees that it will not (and hereby waives any right to) contest or support any
other Person in contesting, in any proceeding (including any Insolvency or
Liquidation Proceeding), the priority, perfection, validity or enforceability
of a Lien held by or on behalf of any of the First Lien Claimholders in the
First Lien Collateral or by or on behalf of any of the Second Lien Claimholders
in the Second Lien Collateral, as the case may be, or the provisions of this
Agreement; provided that nothing in this Agreement shall be construed to
prevent or impair the rights of the First Lien Agent or any First Lien
Claimholder to enforce this Agreement, including the provisions of this Agreement
relating to the priority of the Liens securing the First Lien Obligations as
provided in Sections 2.1 and 3.1.


2.3          No New Liens. 
So long as the Discharge of First Lien Obligations has not occurred,
whether or not any Insolvency or Liquidation Proceeding has been commenced by
or against the Company or any other Grantor, the parties hereto agree that the
Company shall not, and shall not permit any other Grantor to:


(a)           grant
or permit any additional Liens on any asset or property to secure any Second Lien
Obligation unless it has granted or concurrently grants a Lien on such asset or
property to secure the First Lien Obligations which shall be senior to the Lien
securing the Second Lien Obligations as provided in Section 2.1; or


(b)           grant
or permit any additional Liens on any asset or property to secure any First
Lien Obligations unless it has granted or concurrently grants a Lien on such
asset or property to secure the Second Lien Obligations which shall be junior
to the Lien securing the First Lien Obligations as provided in Section
2.1.  To the extent that the foregoing
provisions are not complied with for any reason, without limiting any other
rights and remedies available to the First Lien Agent and/or the First Lien
Claimholders, the Second Lien Trustee, on behalf of Second Lien Claimholders,
agrees that any amounts received by or distributed to any of them pursuant to
or as a result of Liens granted in contravention of this Section 2.3 shall be
subject to Section 4.2.


2.4          Similar
Liens and Agreements.  The parties
hereto agree that it is their intention that the First Lien Collateral and the
Second Lien Collateral be identical.  In
furtherance of the foregoing and of Section 8.9, the parties hereto agree,
subject to the other provisions of this Agreement:


(a)           upon
request by the First Lien Agent or the Second Lien Trustee, to cooperate in
good faith (and to direct their counsel to cooperate in good faith) from time
to time in order to determine the specific items included in the First Lien
Collateral and the 



 11
 









Second Lien Collateral and the steps taken to perfect their respective
Liens thereon and the identity of the respective parties obligated under the
First Lien Loan Documents and the Second Lien Documents; and


(b)           that
the documents and agreements creating or evidencing the First Lien Collateral
and the Second Lien Collateral and guarantees for the First Lien Obligations
and the Second Lien Obligations, subject to Section 5.3(d), shall be in all
material respects the same forms of documents other than with respect to the
first lien and the second lien nature of the Obligations thereunder.


SECTION 3.  Enforcement.


3.1          Exercise
of Remedies.


(a)           Until
the Discharge of First Lien Obligations has occurred, whether or not any
Insolvency or Liquidation Proceeding has been commenced by or against the
Company or any other Grantor, the Second Lien Trustee and the Second Lien
Claimholders:


(i)            will
not exercise or seek to exercise any rights or remedies with respect to any
Collateral or take possession of, sell or otherwise realize (judicially or non
judicially) upon any of the Collateral (including, without limitation, through
the notification of account debtors or the exercise of any right of setoff or
any right under any lockbox agreement, account control agreement, landlord
waiver or bailee’s letter or similar agreement or arrangement to which the
Second Lien Trustee or any Second Lien Claimholder is a party) or institute any
action or proceeding with respect to such rights or remedies (including any
action of foreclosure) (any such action taken after the occurrence of and
during the continuance of an Event of Default under the First Lien Loan
Documents or the Second Lien Documents, as applicable, a “Lien Enforcement Action”); provided,
however, that the Second Lien Trustee may take any or all Lien
Enforcement Actions after a period of at least 180 days has elapsed since the
later of: (i) the date on which the Second Lien Trustee declared the existence
of any Event of Default (as defined in the Second Lien Indenture) under any
Second Lien Documents and demanded the repayment of all the principal amount of
any Second Lien Obligations; and (ii) the date on which the First Lien Agent
received notice from the Second Lien Trustee of such declaration of an Event of
Default, (the “Standstill Period”);
provided, further, however, that notwithstanding anything herein to the
contrary, in no event shall the Second Lien Trustee or any Second Lien
Claimholder take any Lien Enforcement Action if, notwithstanding the expiration
of the Standstill Period, the First Lien Agent or First Lien Claimholders shall
have commenced and be diligently pursuing the exercise of their rights or
remedies with respect to all or any material portion of the Collateral (prompt
notice of such exercise to be given to the Second Lien Trustee);


(ii)           will
not contest, protest or object to any foreclosure proceeding or action brought
by the First Lien Agent or any First Lien Claimholder



 12
 









or any other exercise by the First Lien Agent or any First Lien Claimholder
of any rights and remedies relating to the Collateral under the First Lien Loan
Documents or otherwise; and


(iii)          subject
to their rights under clause (a)(i) above, will not object to the forbearance
by the First Lien Agent or the First Lien Claimholders from bringing or
pursuing any foreclosure proceeding or action or any other exercise of any
rights or remedies relating to the Collateral


in the case of
each of clause (i), (ii) and (iii) above, so long as the Liens granted to
secure the Second Lien Obligations of the Second Lien Claimholders attach to
the proceeds thereof subject to the relative priorities described in Section 2.


(b)           Until
the Discharge of First Lien Obligations has occurred, whether or not any
Insolvency or Liquidation Proceeding has been commenced by or against the
Company or any other Grantor, subject to Section 3.1(a), the First Lien Agent
and the First Lien Claimholders shall have the exclusive right to enforce
rights, exercise remedies (including set-off and the right to credit bid their
debt) and, subject to Section 5.1, to make determinations regarding the release
of, disposition of, or restrictions with respect to the Collateral without any
consultation with or the consent of the Second Lien Trustee or any Second Lien
Claimholder.  The First Lien Agent shall
provide at least ten (10) Business Days notice to the Second Lien Trustee of
its intent to exercise and enforce its rights or remedies with respect to the
Collateral.  In exercising rights and
remedies with respect to the Collateral, the First Lien Agent and the First
Lien Claimholders may enforce the provisions of the First Lien Loan Documents
and exercise remedies thereunder, all in such order and in such manner as they
may determine in the exercise of their sole discretion.  Such exercise and enforcement shall include
the rights of an agent appointed by the First Lien Agent or the First Lien
Claimholders to sell or otherwise dispose of Collateral upon foreclosure, to
incur expenses in connection with such sale or disposition, and to exercise all
the rights and remedies of a secured creditor under the UCC and of a secured
creditor under Bankruptcy Laws of any applicable jurisdiction.


(c)           Notwithstanding
the foregoing, the Second Lien Trustee and any Second Lien Claimholder may:


(i)            file
a claim or statement of interest with respect to the Second Lien Obligations if
an Insolvency or Liquidation Proceeding has been commenced by or against the
Company or any other Grantor;


(ii)           take
any action (not adverse to the priority status of the Liens on the Collateral
securing the First Lien Obligations, or the rights of any First Lien Agent or
First Lien Claimholder to exercise remedies in respect thereof) in order to
create, perfect, preserve or protect its Lien on the Collateral;


(iii)          file
any necessary responsive or defensive pleadings in opposition to any motion,
claim, adversary proceeding or other pleading made by any person objecting to
or otherwise seeking the disallowance of the claims of the



 13
 









Second Lien Claimholders, including any claims secured by the
Collateral, if any, in each case in accordance with the terms of this
Agreement;


(iv)          vote
on any plan of reorganization, file any proof of claim, make other filings and
make any arguments and motions that are, in each case, in accordance with the
terms of this Agreement, with respect to the Second Lien Obligations and the
Collateral; and


(v)           exercise
any Lien Enforcement Action with respect to the Collateral after the
termination of the Standstill Period to the extent permitted by Section
3.1(a)(i).


The Second Lien Trustee, on behalf of itself and the Second Lien
Claimholders, agrees that it will not take or receive any Collateral or any
proceeds of Collateral in connection with the exercise of any Lien Enforcement
Action in its capacity as a creditor, unless and until the Discharge of First
Lien Obligations has occurred or as otherwise expressly permitted in Section
3.1(a)(i).  Without limiting the
generality of the foregoing, unless and until the Discharge of First Lien
Obligations has occurred, or as otherwise expressly permitted in Sections
3.1(a), 6.3(b) and this Section 3.1(c), the sole right of the Second Lien
Trustee and the Second Lien Claimholders with respect to the Collateral is to
hold a Lien on the Collateral pursuant to the Second Lien Collateral Documents
for the period and to the extent granted therein and to receive a share of the
proceeds thereof, if any, after the Discharge of First Lien Obligations has
occurred.


(d)           Subject
to Sections 3.1(a) and (c) and Section 6.3(b):


(i)            the
Second Lien Trustee, for itself and on behalf of the Second Lien Claimholders,
agrees that the Second Lien Trustee and the Second Lien Claimholders will not
take any action that would hinder any exercise of remedies under the First Lien
Loan Documents or is otherwise prohibited hereunder, including any sale, lease,
exchange, transfer or other disposition of the Collateral, whether by
foreclosure or otherwise;


(ii)           the
Second Lien Trustee, for itself and on behalf of the Second Lien Claimholders,
hereby waives any and all rights it or the Second Lien Claimholders may have as
a junior lien creditor or otherwise to object to the manner in which the First
Lien Agent or the First Lien Claimholders seek to enforce or collect the First
Lien Obligations or the Liens securing the First Lien Obligations granted in
any of the First Lien Collateral undertaken in accordance with this Agreement,
regardless of whether any action or failure to act by or on behalf of the First
Lien Agent or First Lien Claimholders is adverse to the interest of the Second
Lien Claimholders; and


(iii)          the
Second Lien Trustee hereby acknowledges and agrees that no covenant, agreement
or restriction contained in the Second Lien Collateral Documents or any other
Second Lien Document (other than this Agreement) shall be effective to restrict
or deemed to restrict in any way the rights



 14
 









and remedies of the First Lien Agent or the First Lien Claimholders
with respect to the Collateral as set forth in this Agreement and the First
Lien Loan Documents.


(e)           Except
as specifically set forth in Sections 3.1(a) and (d), the Second Lien Trustee
and the Second Lien Claimholders may exercise rights and remedies as unsecured
creditors against the Company or any other Grantor that has guaranteed or
granted or purported to grant Liens to secure the Second Lien Obligations in
accordance with the terms of the Second Lien Documents and applicable law; provided
that in the event that any Second Lien Claimholder becomes a judgment Lien
creditor in respect of Collateral as a result of its enforcement of its rights
as an unsecured creditor with respect to the Second Lien Obligations, such
judgment Lien shall be subject to the terms of this Agreement for all purposes
(including in relation to the First Lien Obligations) as the other Liens
securing the Second Lien Obligations are subject to this Agreement.


(f)            Except
as specifically set forth in Sections 3.1(a) and (d), nothing in this Agreement
shall prohibit the receipt by the Second Lien Trustee or any Second Lien
Claimholders of the required payments of interest, principal and other amounts
owed in respect of the Second Lien Obligations so long as such receipt is not
the direct or indirect result of the exercise by the Second Lien Trustee or any
Second Lien Claimholders of rights or remedies as a secured creditor (including
set-off) or enforcement in contravention of this Agreement of any Lien
held by any of them.  Nothing in this
Agreement impairs or otherwise adversely affects any rights or remedies the First
Lien Agent or the First Lien Claimholders may have with respect to the First
Lien Collateral.


SECTION
4.  Payments.


4.1          Application
of Proceeds.  So long as the
Discharge of First Lien Obligations has not occurred, whether or not any
Insolvency or Liquidation Proceeding has been commenced by or against the
Company or any other Grantor, all Collateral or proceeds thereof received in
connection with the sale or other disposition of, or collection or realization
on, such Collateral upon the exercise of any Lien Enforcement Action by the
First Lien Agent or First Lien Claimholders, shall be applied first by the
First Lien Agent to the First Lien Obligations in such order as specified in
the relevant First Lien Loan Documents. 
Upon the Discharge of First Lien Obligations, any remaining Collateral
or proceeds thereof shall be delivered to the Second Lien Trustee in the same
form as received, with any necessary endorsements or as a court of competent
jurisdiction may otherwise direct to be applied by the Second Lien Trustee to
the Second Lien Obligations in such order as specified in the Second Lien
Collateral Documents.


4.2          Payments
Over.  So long as the Discharge of
First Lien Obligations has not occurred, whether or not any Insolvency or
Liquidation Proceeding has been commenced by or against the Company or any
other Grantor, any Collateral or proceeds thereof (including assets or proceeds
subject to Liens referred to in the final sentence of Section 2.3) received by
the Second Lien Trustee or any Second Lien Claimholders in connection with the
exercise of any Lien Enforcement Action (including set-off) relating to
the Collateral in contravention of this Agreement shall be segregated and held
in trust and forthwith paid over to the First Lien Agent for the benefit of the
First Lien Claimholders in



 15
 









the same form as received, with any necessary
endorsements or as a court of competent jurisdiction may otherwise direct.  The First Lien Agent is hereby authorized to
make any such endorsements as agent for the Second Lien Trustee or any such
Second Lien Claimholders.  This
authorization is coupled with an interest and is irrevocable until the
Discharge of First Lien Obligations.


SECTION
5.  Other Agreements.


 


5.1          Releases.               (a)  If in connection with the exercise of any
Lien Enforcement Action by the First Lien Agent provided for in Section 3.1,
the First Lien Agent, for itself or on behalf of any of the First Lien
Claimholders, releases any of its Liens on any part of the Collateral or
releases Holdings or any Subsidiary Guarantor from its obligations under its
guarantee of the First Lien Obligations, then the Liens, if any, of the Second
Lien Trustee, for itself or for the benefit of the Second Lien Claimholders, on
such Collateral, and the obligations of Holdings or such Subsidiary Guarantor,
as the case may be, under its guarantee of the Second Lien Obligations, shall
be automatically, unconditionally and simultaneously released without any
action on the part of the Second Lien Trustee or any Second Lien Claimholder; provided
that the Lien securing the Second Lien Obligations shall remain on the proceeds
of such Collateral released or disposed of. 
The Second Lien Trustee, for itself or on behalf of any such Second Lien
Claimholders, promptly shall execute and deliver to the First Lien Agent or
such Subsidiary Guarantor such termination statements, releases and other
documents as the First Lien Agent, Holdings or such Subsidiary Guarantor may
request to effectively confirm such release.


(b)           If
in connection with any sale, lease, exchange, transfer or other disposition of
any Collateral (collectively, a “Disposition”)
permitted under the terms of both the First Lien Loan Documents and the Second
Lien Documents (other than in connection with the exercise of Lien Enforcement
Actions by the First Lien Agent in respect of the Collateral), the First Lien
Agent, for itself or on behalf of any of the First Lien Claimholders, releases
any of its Liens on any part of the Collateral, or releases Holdings or any
Subsidiary Guarantor from its obligations under its guarantee of the First Lien
Obligations, in each case other than (A) in connection with the Discharge of
First Lien Obligations or (B) after the occurrence and during the continuance
of any Event of Default under the Second Lien Indenture, then the Liens, if
any, of the Second Lien Trustee, for itself or for the benefit of the Second
Lien Claimholders, on such Collateral, and the obligations of Holdings or such
Subsidiary Guarantor, as the case may be, under its guarantee of the Second
Lien Obligations, shall be automatically, unconditionally and simultaneously
released without any action on the part of the Second Lien Trustee or any
Second Lien Claimholder.  The Second Lien
Trustee, for itself or on behalf of any such Second Lien Claimholders, promptly
shall execute and deliver to the First Lien Agent or such Subsidiary Guarantor
such termination statements, releases and other documents as the First Lien
Agent, Holdings or such Subsidiary Guarantor may request to effectively confirm
such release.


(c)           Until
the Discharge of First Lien Obligations occurs, the Second Lien Trustee, for
itself and on behalf of the Second Lien Claimholders, hereby irrevocably
constitutes and appoints the First Lien Agent and any officer or agent of the
First Lien



 16
 









Agent, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power
and authority in the place and stead of the Second Lien Trustee or such holder
or in the First Lien Agent’s own name, from time to time in the First Lien
Agent’s discretion, for the purpose of carrying out the terms of this Section
5.1, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary to accomplish the purposes of
this Section 5.1, including any endorsements or other instruments of transfer
or release.


(d)           Until
the Discharge of First Lien Obligations occurs, to the extent that the First
Lien Agent or the First Lien Claimholders (i) have released any Lien on
Collateral or Holdings or any Subsidiary Guarantor from its obligation under
its guarantee and any such Liens or guarantee are later reinstated or (ii)
obtain any new Liens or additional guarantees from Holdings or any Subsidiary
Guarantor, then the Second Lien Trustee, for itself and for the Second Lien
Claimholders, shall be granted a Lien on any such Collateral, subject to the
lien subordination provisions of this Agreement, and an additional guarantee,
as the case may be.


(e)           In
the event that the principal amount of funded First Lien Obligations, plus the
aggregate face amount of letters of credit, if any, issued under the First Lien
Credit Agreement and not reimbursed, plus the aggregate principal amount of
unfunded commitments under the First Lien Credit Agreement (collectively, the “First Lien Obligations Amount”), at any
date of determination no longer constitute at least 15% of the sum of (i) the
First Lien Obligations Amount and (ii) the principal amount of funded Second
Lien Obligations (collectively, the “Second
Lien Obligations Amount”), then any agreement provided for in
Section 5.1(a) above (except for releases given in connection with a
Disposition permitted under the First Lien Loan Documents and the Second Lien
Documents) shall require the consent of First Lien Claimholders and Second Lien
Claimholders representing in the aggregate more than 50% of the sum of (i) the
First Lien Obligations Amount and (ii) the Second Lien Obligations Amount.


5.2          Insurance.  Unless and until the Discharge of First Lien
Obligations has occurred and after the occurrence and during the continuance of
an Event of Default under the First Lien Loan Documents, subject to the rights
of the Grantors under the First Lien Loan Documents, the First Lien Agent and
the First Lien Claimholders shall have the sole and exclusive right to adjust
settlement for any insurance policy covering the Collateral in the event of any
loss thereunder and to approve any award granted in any condemnation or similar
proceeding (or any deed in lieu of condemnation) affecting the Collateral.  Unless and until the Discharge of First Lien
Obligations has occurred and after the occurrence and during the continuance of
an Event of Default under the First Lien Loan Documents, and subject to the
rights of the Grantors under the First Lien Loan Documents, all proceeds of any
such policy and any such award (or any payments with respect to a deed in lieu
of condemnation) if with respect to the Collateral shall be paid to the First
Lien Agent for the benefit of the First Lien Claimholders pursuant to the terms
of the First Lien Loan Documents (including for purposes of cash
collateralization of letters of credit) and thereafter, to the extent no First
Lien Obligations are outstanding and after the occurrence and during the continuance
of an Event of Default under the Second Lien Documents, and subject to the
rights of the Grantors under the Second Lien Documents, to the Second Lien



 17
 









Trustee for the benefit of the Second Lien
Claimholders to the extent required under the Second Lien Collateral Documents
and then, to the extent no Second Lien Obligations are outstanding, to the
owner of the subject property, such other Person as may be entitled thereto or
as a court of competent jurisdiction may otherwise direct.  Until the Discharge of First Lien Obligations
has occurred, if the Second Lien Trustee or any Second Lien Claimholders shall,
at any time, receive any proceeds of any such insurance policy or any such
award or payment in contravention of this Agreement, it shall segregate and
hold in trust and promptly pay such proceeds over to the First Lien Agent in
accordance with the terms of Section 4.2.


5.3          Amendments
to First Lien Loan Documents and Second Lien Documents


(a)           The
First Lien Loan Documents may be amended, supplemented or otherwise modified in
accordance with their terms and the First Lien Credit Agreement may be
Refinanced, in each case, without notice to, or the consent of, the Second Lien
Trustee or the Second Lien Claimholders, all without affecting the lien subordination
or other provisions of this Agreement; provided, however, that
(x) the holders of such Refinancing debt bind themselves in a writing addressed
to the Second Lien Trustee (for the benefit of the Second Lien Claimholders) to
the terms of this Agreement and (y) any such amendment, supplement,
modification or Refinancing shall not:


(i)            contravene
the provisions of this Agreement;


(ii)           increase
the then outstanding First Lien Obligations Amount in excess of the Cap Amount;


(iii)          increase
the “Applicable Margin” or similar component of the interest rate by more than
3.0% per annum (excluding increases (A) resulting from application of the
pricing grid set forth in the First Lien Credit Agreement as in effect on the
date hereof or (B) resulting from the accrual of interest at the default rate);
or


(iv)          extend
the scheduled maturity of the First Lien Credit Agreement or any Refinancing
thereof beyond the scheduled maturity of the Second Lien Indenture or any
Refinancing thereof.


(b)           Without
the prior written consent of the First Lien Agent, no Second Lien Document may
be amended, supplemented or otherwise modified or entered into to the extent
such amendment, supplement or modification, or the terms of any new Second Lien
Document, would:


(i)            contravene
the provisions of this Agreement;


(ii)           increase
the “Applicable Margin” or similar component of the interest rate by more than
3.0% per annum (excluding increases resulting from the accrual of interest at
the default rate);


(iii)          change
(to earlier dates) any dates upon which payments of principal or interest are
due thereon;



 18
 









(iv)          change
any default or Event of Default thereunder in a manner adverse in any material
respect to the First Lien Lenders;


(v)           change
the redemption, prepayment or defeasance provisions thereof in a manner adverse
in any material respect to the First Lien Lenders; or


(vi)          increase
the obligations of the Company or any Grantor thereunder, other than the
increase in interest permitted in subclause (ii) above and other than the
capitalization of PIK interest, or confer any additional rights on the Second
Lien Holders which would be adverse in any material respect to the First Lien
Lenders.


The Second Lien Indenture may be Refinanced to the extent the terms and
conditions of such Refinancing Indebtedness satisfy the requirements for
amendments to the Second Lien Documents set forth in Section 5.3(b) above and
do not (x) shorten the maturity or weighted average life to maturity of
the principal amount thereof outstanding immediately prior to such Refinancing
or (y) change the direct or contingent obligors with respect thereto, provided
that the terms of such Refinancing Indebtedness are not materially less
advantageous to the First Lien Lenders than those of the Second Lien Indenture
and the holders of such Refinancing Indebtedness bind themselves in a writing
addressed to the First Lien Agent (for the benefit of the First Lien
Claimholders) to the terms of this Agreement.


(c)           The
Company agrees that each Second Lien Collateral Document shall include the
following language (or language to similar effect approved by the First Lien
Agent):


“Notwithstanding
anything herein to the contrary, the lien and security interest granted to the
Second Lien Trustee pursuant to this Agreement and the exercise of any right or
remedy by the Second Lien Trustee hereunder are subject to the provisions of
the Intercreditor Agreement, dated as of April 2, 2007 (as amended, restated,
supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), among
Protection One Alarm Monitoring, Inc.,  a Delaware
corporation (the “Company”),
Protection One, Inc. (“Holdings”),
Bear Stearns Corporate Lending Inc.  (“BSCL”), as First Lien Agent and Wells Fargo Bank, N.A., as
Second Lien Trustee and certain other persons party or that may become party
thereto from time to time.  In the event
of any conflict between the terms of the Intercreditor Agreement and this
Agreement, the terms of the Intercreditor Agreement shall govern and control.”


In addition, the Company agrees that each Second Lien
Mortgage covering any Collateral shall contain such other language as the First
Lien Agent may reasonably request to reflect the subordination of such Second
Lien Mortgage to the First Lien Collateral Document covering such Collateral.



 19















(d)           In
the event any First Lien Agent or the First Lien Claimholders and the relevant
Grantor enter into any amendment, waiver or consent in respect of any of the
First Lien Collateral Documents for the purpose of adding to, or deleting from,
or waiving or consenting to any departures from any provisions of, any First
Lien Collateral Document or changing in any manner the rights of the First Lien
Agent, such First Lien Claimholders, the Company or any other Grantor
thereunder, then such amendment, waiver or consent shall apply automatically to
any comparable provision of the Comparable Second Lien Collateral Document
without the consent of the Second Lien Trustee or the Second Lien Claimholders
and without any action by the Second Lien Trustee, the Company or any other
Grantor, provided, that:


(i)            no
such amendment, waiver or consent shall have the effect of:


(A)          removing assets subject to the Lien of
the Second Lien Collateral Documents, except to the extent that a release of
such Lien is permitted or required by Section 5.1;


(B)           imposing duties on the Second Lien
Trustee without its consent;


(C)           permitting other Liens on the
Collateral not permitted under the terms of the Second Lien Documents or
Section 6; or


(D)          being prejudicial to the interests of
the Second Lien Claimholders to a greater extent than the First Lien
Claimholders; and


(ii)           notice
of such amendment, waiver or consent shall have been given to the Second Lien
Trustee within ten Business Days after the effective date of such amendment,
waiver or consent.


5.4          Bailee for
Perfection.  (a)  The First Lien Agent agrees to hold that part
of the Collateral that is in its possession or control (or in the possession or
control of its agents or bailees) to the extent that possession or control
thereof is taken to perfect a Lien thereon under the UCC (such Collateral being
the “Pledged Collateral”) as
collateral agent for the First Lien Claimholders and as bailee for the Second
Lien Trustee (such bailment being intended, among other things, to satisfy the
requirements of Sections 8-301(a)(2) and 9-313(c) of the UCC) and any assignee
of the Second Lien Trustee solely for the purpose of perfecting the security
interest granted under the First Lien Loan Documents and the Second Lien
Documents, respectively, subject to the terms and conditions of this Section
5.4.


(b)           The
First Lien Agent shall have no obligation whatsoever to any First Lien
Claimholder, the Second Lien Trustee or any Second Lien Claimholder to ensure
that the Pledged Collateral is genuine or owned by any of the Grantors or to
preserve rights or benefits of any Person except as expressly set forth in this
Section 5.4.  The duties or
responsibilities of the First Lien Agent under this Section 5.4 shall be limited
solely to holding the Pledged Collateral as bailee in accordance with this
Section 5.4 and delivering 



 20
 









the Pledged Collateral upon a Discharge of First Lien Obligations as
provided in paragraph (d) below.


(c)           The
First Lien Agent acting pursuant to this Section 5.4 shall not have by reason
of the First Lien Collateral Documents, the Second Lien Collateral Documents,
this Agreement or any other document a fiduciary relationship in respect of any
First Lien Claimholder, the Second Lien Trustee or any Second Lien Claimholder.


(d)           Upon
the Discharge of First Lien Obligations under the First Lien Loan Documents to
which the First Lien Agent is a party, the First Lien Agent shall deliver the
remaining Pledged Collateral in its possession (if any) together with any
necessary endorsements, first, to the Second Lien Trustee if any Second Lien
Obligations remain outstanding, and second, to the Company if no First Lien
Obligations or Second Lien Obligations remain outstanding (in each case, so as
to allow such Person to obtain possession or control of such Pledged
Collateral).  The First Lien Agent
further agrees to take all other action reasonably requested by the Second Lien
Trustee, at the expense of the Company, in connection with the Second Lien
Trustee obtaining a first-priority interest in the Collateral or as a court of
competent jurisdiction may otherwise direct.


5.5          When
Discharge of First Lien Obligations Deemed to Not Have Occurred.  If, at any time after the Discharge of First
Lien Obligations has occurred, the Company thereafter enters into any
Refinancing of any First Lien Loan Document evidencing a First Lien Obligation
which Refinancing is permitted by the Second Lien Documents, then such
Discharge of First Lien Obligations shall automatically be deemed not to have
occurred for all purposes of this Agreement (other than with respect to any
actions taken as a result of the occurrence of such first Discharge of First
Lien Obligations), and, from and after the date on which the New First Lien
Debt Notice (as defined below) is delivered to the Second Lien Trustee in
accordance with the next sentence, the obligations under such Refinancing of
the First Lien Loan Document shall automatically be treated as First Lien
Obligations for all purposes of this Agreement, including for purposes of the
Lien priorities and rights in respect of Collateral set forth herein, and the
First Lien Agent under such First Lien Loan Documents shall be the First Lien
Agent for all purposes of this Agreement. 
Upon receipt of a notice (the “New
First Lien Debt Notice”) stating that the Company has entered into a
new First Lien Loan Document (which notice shall include the identity of the
new first lien collateral agent, such agent, the “New Agent”), the Second Lien Trustee shall promptly (a) enter
into such documents and agreements (including amendments or supplements to this
Agreement) as the Company or such New Agent shall reasonably request in order
to provide to the New Agent the rights contemplated hereby, in each case
consistent in all material respects with the terms of this Agreement and (b)
deliver to the New Agent any Pledged Collateral held by it together with any
necessary endorsements (or otherwise allow the New Agent to obtain control of
such Pledged Collateral).  The New Agent
shall agree in a writing addressed to the Second Lien Trustee and the Second
Lien Claimholders to be bound by the terms of this Agreement.  If the new First Lien Obligations under the
new First Lien Loan Documents are secured by assets of the Grantors
constituting Collateral that do not also secure the Second Lien Obligations,
then the Second Lien Obligations shall be secured at 



 21
 









such time by a second priority Lien on such assets to
the same extent provided in the Second Lien Collateral Documents and this
Agreement.


5.6          Purchase
Right.  Without prejudice to the
enforcement of the First Lien Claimholders remedies, the First Lien
Claimholders agree (a) in the absence of Exigent Circumstances, at least five
(5) Business Days before any Option Event or (b) in the case of Exigent
Circumstances, such shorter period prior to or following any Option Event as
may be dictated by such circumstances in the sole judgment of the First Lien
Claimholders (but in any event within five (5) Business Days following such
Option Event), the First Lien Claimholders will offer the Second Lien
Claimholders the option to purchase the entire aggregate amount of outstanding
First Lien Obligations (including unfunded commitments under the First Lien
Credit Agreement) at par (without regard to any prepayment penalty or premium),
without warranty or representation or recourse, on a pro rata basis across
First Lien Claimholders.  The Second Lien
Claimholders shall irrevocably accept or reject such offer within fifteen (15)
Business Days of the receipt thereof and the parties shall endeavor to close
promptly thereafter.  If the Second Lien
Claimholders accept such offer, it shall be exercised pursuant to documentation
mutually acceptable to each of the First Lien Agent and the Second Lien
Trustee.  If the Second Lien Claimholders
reject such offer (or do not so irrevocably accept such offer within the
required timeframe), the First Lien Claimholders shall have no further
obligations pursuant to this Section 5.6 and may take any further actions in
their sole discretion in accordance with the First Lien Loan Documents and this
Agreement.


SECTION
6.  Insolvency or Liquidation
Proceedings.


6.1          Finance
and Sale Issues.  Until the Discharge
of First Lien Obligations has occurred, if the Company or any other Grantor
shall be subject to any Insolvency or Liquidation Proceeding and the First Lien
Agent shall desire to permit (a) the use of “Cash Collateral” (as such term is
defined in Section 363(a) of the Bankruptcy Code), on which the First Lien
Agent or any other creditor has a Lien or (b) the Company or any other Grantor
to obtain financing, whether from the First Lien Claimholders or any other
Person under Section 364 of the Bankruptcy Code or any similar Bankruptcy Law (“DIP Financing”), then the Second Lien Trustee, on behalf of
itself and the Second Lien Claimholders, agrees that it will raise no objection
to such Cash Collateral use or DIP Financing and to the extent the Liens
securing the First Lien Obligations are subordinated to or pari passu with such
DIP Financing, the Second Lien Trustee will consent to the subordination of its
Liens on the Collateral to the Liens securing such DIP Financing (and all
Obligations relating thereto) and will not request adequate protection or any
other relief in connection therewith (except, as expressly agreed by the First
Lien Agent or to the extent permitted by Section 6.3); provided  that,
the foregoing shall not prevent the Second Lien Claimholders from (i) objecting
to any provision in any DIP Financing setting or otherwise determining the terms
of a plan of reorganization which must be or may be included in a plan of
reorganization under Section 1123 of the Bankruptcy Code; however, this clause
(i) shall not apply with respect to such terms to the extent such terms are
contemplated under Section 364 of the Bankruptcy Code or (ii) proposing any
other DIP Financing to the Company in any Insolvency or Liquidation Proceeding;
provided, further  that, the aggregate principal amount of
the DIP Financing plus the aggregate outstanding 



 22
 









principal amount of 
First Lien Obligations plus the aggregate face amount of any
letters of credit issued and not reimbursed under the First Lien Credit
Agreement does not exceed the Cap Amount and the Second Lien Trustee and the
Second Lien Claimholders retain the right to object to any ancillary agreements
or arrangements regarding Cash Collateral use or the DIP Financing that are
materially prejudicial to their interests. 
The Second Lien Trustee on behalf of the Second Lien Claimholders,
agrees that it will not raise any objection or oppose a motion to sell or
otherwise dispose of any Collateral free and clear of its Liens or other claims
under Section 363 of the Bankruptcy Code if the requisite First Lien
Claimholders have consented to such sale or disposition of such assets, and
such motion does not impair the rights of the Second Lien Claimholders under
Section 363(k) of the Bankruptcy Code (notwithstanding the above, the Second
Lien Trustee, on behalf of the Second Lien Claimholders, may object to or
otherwise oppose such motion if such motion impairs in any way the rights of
the Second Lien Claimholders under Section 363(k)); provided  that,
the Cap Amount shall be reduced by an amount equal to the net cash proceeds of
such sale or other disposition which are used to pay the principal or face
amount of the First Lien Obligations.


6.2          Relief
from the Automatic Stay.  Until the
Discharge of First Lien Obligations has occurred, the Second Lien Trustee, on
behalf of itself and the Second Lien Claimholders, agrees that none of them
shall seek (or support any other Person seeking) relief from the automatic stay
or any other stay in any Insolvency or Liquidation Proceeding in respect of the
Collateral without the prior written consent of the First Lien Agent, unless a
motion for adequate protection permitted under Section 6.3 has been denied by
the Bankruptcy Court.


6.3          Adequate
Protection.


(a)           The
Second Lien Trustee, on behalf of itself and the Second Lien Claimholders,
agrees that none of them shall contest (or support any other Person
contesting):


(i)            any
request by the First Lien Agent or the First Lien Claimholders for adequate
protection; or


(ii)           any
objection by the First Lien Agent or the First Lien Claimholders to any motion,
relief, action or proceeding based on the First Lien Agent or the First Lien
Claimholders claiming a lack of adequate protection.


(b)           Notwithstanding
the foregoing provisions in this Section 6.3, in any Insolvency or Liquidation
Proceeding:


(i)            if
the First Lien Claimholders (or any subset thereof) are granted adequate
protection in the form of additional collateral in connection with any Cash
Collateral use or DIP Financing, then the Second Lien Trustee, on behalf of
itself or any of the Second Lien Claimholders, may seek or request adequate protection
in the form of a Lien on such additional collateral, which Lien will be
subordinated to the Liens securing the First Lien Obligations and such Cash 



 23
 









Collateral use or DIP Financing (and all Obligations relating thereto)
on the same basis as the other Liens securing the Second Lien Obligations are
so subordinated to the First Lien Obligations under this Agreement; and


(ii)           in
the event the Second Lien Trustee, on behalf of itself or any of the Second
Lien Claimholders, seeks or requests adequate protection in respect of Second
Lien Obligations and such adequate protection is granted in the form of
additional collateral, then the Second Lien Trustee, on behalf of itself or any
of the Second Lien Claimholders, agrees that it will not object to the First
Lien Agent being granted a senior Lien on such additional collateral as
security for the First Lien Obligations and for any Cash Collateral use or DIP
Financing provided by the First Lien Claimholders and that any Lien on such
additional collateral securing the Second Lien Obligations shall be
subordinated to the Lien on such collateral securing the First Lien Obligations
and any such DIP Financing provided by the First Lien Claimholders (and all
Obligations relating thereto) and to any other Liens granted to the First Lien
Claimholders as adequate protection on the same basis as the other Liens
securing the Second Lien Obligations are so subordinated to such First Lien
Obligations under this Agreement.  Except
as otherwise expressly set forth in Section 6.1 or in connection with the
exercise of remedies with respect to the Collateral, nothing herein shall limit
the rights of the Second Lien Trustee or the Second Lien Claimholders from
seeking adequate protection with respect to their rights in the Collateral in
any Insolvency or Liquidation Proceeding (including adequate protection in the
form of periodic cash payments, periodic cash payments of interest or
otherwise).


6.4          No
Waiver.  Subject to Sections 3.1(a)
and (d), nothing contained herein shall prohibit or in any way limit the First
Lien Agent or any First Lien Claimholder from objecting in any Insolvency or
Liquidation Proceeding or otherwise to any action taken by the Second Lien
Trustee or any of the Second Lien Claimholders, including the seeking by the
Second Lien Trustee or any Second Lien Claimholders of adequate protection or
the asserting by the Second Lien Trustee or any Second Lien Claimholders of any
of its rights and remedies under the Second Lien Documents or otherwise.


6.5          Avoidance
Issues.  If any First Lien
Claimholder is required in any Insolvency or Liquidation Proceeding or
otherwise to turn over or otherwise pay to the estate of the Company or any
other Grantor any amount paid in respect of First Lien Obligations  (a “Recovery”), then such First Lien Claimholders shall be entitled to a
reinstatement of First Lien Obligations with respect to all such recovered
amounts, and the Discharge of First Lien Obligations shall be deemed not to
have occurred for all purposes hereunder. 
If this Agreement shall have been terminated prior to such Recovery,
this Agreement shall be reinstated in full force and effect, and such prior
termination shall not diminish, release, discharge, impair or otherwise affect
the obligations of the parties hereto from such date of reinstatement.


6.6          Reorganization
Securities.  If, in any Insolvency or
Liquidation Proceeding, debt obligations of the reorganized debtor secured by
Liens upon any property of the reorganized debtor are distributed pursuant to a
plan of reorganization or similar 



 24
 









dispositive restructuring plan, both on account of
First Lien Obligations and on account of Second Lien Obligations, then, to the
extent the debt obligations distributed on account of the First Lien
Obligations and on account of the Second Lien Obligations are secured by Liens
upon the same property, the provisions of this Agreement will survive the
distribution of such debt obligations pursuant to such plan and will apply with
like effect to the Liens securing such debt obligations.


6.7          Post-Petition
Interest.  (a)  Neither the Second Lien Trustee nor any
Second Lien Claimholder shall oppose or seek to challenge any claim by the
First Lien Agent or any First Lien Claimholder for allowance in any Insolvency
or Liquidation Proceeding of First Lien Obligations consisting of post-petition
interest, fees, costs, charges or expenses to the extent of the value of any
First Lien Claimholder’s Lien, without regard to the existence of the Lien of
the Second Lien Trustee on behalf of the Second Lien Claimholders on the
Collateral.


(b)           Neither
the First Lien Agent nor any other First Lien Claimholder shall oppose or seek
to challenge any claim by the Second Lien Trustee or any Second Lien
Claimholder for allowance in any Insolvency or Liquidation Proceeding of Second
Lien Obligations consisting of post-petition interest, fees, costs, charges or
expenses to the extent of the value of the Lien of the Second Lien Trustee on
behalf of the Second Lien Claimholders on the Collateral (after taking into
account the First Lien Collateral).


6.8          Waiver.  The Second Lien Trustee, for itself and on
behalf of the Second Lien Claimholders, waives any claim it may hereafter have
against any First Lien Claimholder arising out of the election of any First
Lien Claimholder of the application of Section 1111(b)(2) of the Bankruptcy
Code, and/or out of any Cash Collateral or financing arrangement or out of any
grant of a security interest in connection with the Collateral in any
Insolvency or Liquidation Proceeding, in each case to the extent any such
action is not in contravention of this Agreement.


6.9          Separate
Grants of Security and Separate Classification.  The Second Lien Trustee, for itself and on
behalf of the Second Lien Claimholders, and the First Lien Agent for itself and
on behalf of the First Lien Claimholders, acknowledges and agrees that:  (a) the grants of Liens pursuant to the First
Lien Collateral Documents and the Second Lien Collateral Documents constitute
two separate and distinct grants of Liens; and (b) because of, among other
things, their differing rights in the Collateral, the Second Lien Obligations
are fundamentally different from the First Lien Obligations and must be
separately classified in any plan of reorganization proposed or adopted in an
Insolvency or Liquidation Proceeding.  To
further effectuate the intent of the parties as provided in the immediately
preceding sentence, if it is held that the claims of the First Lien
Claimholders and the Second Lien Claimholders in respect of the Collateral
constitute only one secured claim (rather than separate classes of senior and
junior secured claims), then each of the parties hereto hereby acknowledges and
agrees that, subject to Sections 2.1 and 4.1, all distributions shall be made
as if there were separate classes of senior and junior secured claims against
the Grantors in respect of the Collateral (with the effect being that, to the
extent that the aggregate value of the Collateral is sufficient (for this
purpose ignoring all claims held by the Second Lien Claimholders), the First
Lien Claimholders shall be entitled 



 25
 









to receive, in addition to amounts distributed to them
in respect of principal, pre-petition interest and other claims, all amounts
owing in respect of post-petition interest, including any additional interest
payable pursuant to the First Lien Credit Agreement, arising from or related to
a default, which is disallowed as a claim in any Insolvency or Liquidation
Proceeding) before any distribution of Collateral or the proceeds of the
Collateral is made in respect of the claims held by the Second Lien
Claimholders, with the Second Lien Trustee, for itself and on behalf of the
Second Lien Claimholders, hereby acknowledging and agreeing to turn over to the
First Lien Agent, for itself and on behalf of the First Lien Claimholders,
proceeds of Collateral or the Collateral otherwise received or receivable by
them.


SECTION
7.  Reliance; Waivers; Etc.


7.1          Reliance.  Other than any reliance on the terms of this
Agreement, the First Lien Agent, on behalf of itself and the First Lien
Claimholders, acknowledges that it and such First Lien Claimholders have,
independently and without reliance on the Second Lien Trustee or any Second
Lien Claimholders, and based on documents and information deemed by them
appropriate, made their own credit analysis and decision to enter into such
First Lien Loan Documents and be bound by the terms of this Agreement and they
will continue to make their own credit decision in taking or not taking any
action under the First Lien Loan Documents or this Agreement.  The Second Lien Trustee, on behalf of itself
and the Second Lien Claimholders, acknowledges that it and the Second Lien
Claimholders have not relied on the First Lien Agent or any First Lien
Claimholder or any documentation or information provided by them, in making any
credit analysis or decision to enter into the Second Lien Documents and be
bound by the terms of this Agreement and they will continue not to rely o the
First Lien Agent or any First Lien Claimholder in making credit decisions, if
any, and in taking or not taking any action under the Second Lien
Documents or this Agreement.


7.2          No
Warranties or Liability.  The First
Lien Agent, on behalf of itself and the First Lien Claimholders, acknowledges
and agrees that the Second Lien Trustee and the Second Lien Claimholders have
made no express or implied representation or warranty, including with respect
to the execution, validity, legality, completeness, collectibility or
enforceability of any of the Second Lien Documents, the ownership of any
Collateral or the perfection or priority of any Liens thereon.  Except as otherwise provided herein, the
Second Lien Claimholders will be entitled to manage and supervise their respective
loans and extensions of credit under the Second Lien Documents in accordance
with law and as they may otherwise, in their sole discretion, deem
appropriate.  Except as otherwise
provided herein, the Second Lien Trustee, on behalf of itself and the Second
Lien Claimholders, acknowledges and agrees that the First Lien Agent and the
First Lien Claimholders have made no express or implied representation or
warranty, including with respect to the execution, validity, legality,
completeness, collectibility or enforceability of any of the First Lien Loan
Documents, the ownership of any Collateral or the perfection or priority of any
Liens thereon.  Except as otherwise
provided herein, the First Lien Claimholders will be entitled to manage and
supervise their respective loans and extensions of credit under their
respective First Lien Loan Documents in accordance with law and as they may
otherwise, in their sole discretion, deem appropriate.  The Second Lien Trustee 



 26
 









and the Second Lien Claimholders shall have no duty to
the First Lien Agent or any of the First Lien Claimholders, and the First Lien
Agent and the First Lien Claimholders shall have no duty to the Second Lien
Trustee or any of the Second Lien Claimholders, to act or refrain from acting
in a manner which allows, or results in, the occurrence or continuance of an
event of default or default under any agreements with the Company or any other
Grantor (including the First Lien Loan Documents and the Second Lien
Documents), regardless of any knowledge thereof which they may have or be charged
with.


7.3          No Waiver
of Lien Priorities.  (a)  No right of the First Lien Claimholders, the
First Lien Agent or any of them to enforce any provision of this Agreement or
any First Lien Loan Document shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or any other
Grantor or by any act or failure to act by any First Lien Claimholder or the
First Lien Agent, or by any noncompliance by any Person with the terms,
provisions and covenants of this Agreement, any of the First Lien Loan
Documents or any of the Second Lien Documents, regardless of any knowledge
thereof which the First Lien Agent or the First Lien Claimholders, or any of
them, may have or be otherwise charged with.


(b)           Without
in any way limiting the generality of the foregoing paragraph (but subject to
the rights of the Company and the other Grantors under the First Lien Loan
Documents and subject to the provisions of Section 5.3(a)), the First Lien
Claimholders, the First Lien Agent and any of them may, at any time and from
time to time in accordance with the First Lien Loan Documents and/or applicable
law, without the consent of, or notice to, the Second Lien Trustee or any
Second Lien Claimholders, without incurring any liabilities to the Second Lien
Trustee or any Second Lien Claimholders and without impairing or releasing the
Lien priorities and other benefits provided in this Agreement (even if any
right of subrogation or other right or remedy of the Second Lien Trustee or any
Second Lien Claimholders is affected, impaired or extinguished thereby) do any
one or more of the following:


(i)            change
the manner, place or terms of payment or change or extend the time of payment
of, or amend, renew, exchange, increase or alter, the terms of any of the First
Lien Obligations or any Lien on any First Lien Collateral or guarantee thereof
or any liability of the Company or any other Grantor, or any liability incurred
directly or indirectly in respect thereof (including any increase in or
extension of the First Lien Obligations, without any restriction as to the
tenor or terms of any such increase or extension) or otherwise amend, renew,
exchange, extend, modify or supplement in any manner any Liens held by the
First Lien Agent or any of the First Lien Claimholders, the First Lien
Obligations or any of the First Lien Loan Documents; provided that any
such increase in the First Lien Obligations shall not increase the First Lien
Obligations Amount in excess of the Cap Amount;


(ii)           sell,
exchange, release, surrender, realize upon, enforce or otherwise deal with in
any manner and in any order any part of the First Lien Collateral or any
liability of the Company or any other Grantor to the First



 27
 









Lien Claimholders or the First Lien Agent, or any liability incurred
directly or indirectly in respect thereof;


(iii)          settle
or compromise any First Lien Obligation or any other liability of the Company
or any other Grantor or any security therefor or any liability incurred
directly or indirectly in respect thereof and apply any sums by whomsoever paid
and however realized to any liability (including the First Lien Obligations) in
any manner or order; and


(iv)          exercise
or delay in or refrain from exercising any right or remedy against the Company
or any security or any other Grantor or any other Person, elect any remedy and
otherwise deal freely with the Company, any other Grantor or any First Lien
Collateral and any security and any guarantor or any liability of the Company
or any other Grantor to the First Lien Claimholders or any liability incurred
directly or indirectly in respect thereof.


(c)           Except
as otherwise provided herein, the Second Lien Trustee, on behalf of itself and
the Second Lien Claimholders, also agrees that the First Lien Claimholders and
the First Lien Agent shall have no liability to the Second Lien Trustee or any
Second Lien Claimholders, and the Second Lien Trustee, on behalf of itself and
the Second Lien Claimholders, hereby waives any claim against any First Lien
Claimholder or the First Lien Agent, arising out of any and all actions which
the First Lien Claimholders or the First Lien Agent may take or permit or omit
to take with respect to:


(i)            the
First Lien Loan Documents (other than any such action which the First Lien
Agent is specifically required by the terms of this Agreement to take, permit,
or refrain from taking);


(ii)           the
collection of the First Lien Obligations; or


(iii)          the
foreclosure upon, or sale, liquidation or other disposition of, any First Lien
Collateral.


The Second Lien Trustee, on behalf of itself and the Second Lien
Claimholders, agrees that the First Lien Claimholders and the First Lien Agent
have no duty to them in respect of the maintenance or preservation of the First
Lien Collateral, the First Lien Obligations or otherwise.


(d)           Until
the Discharge of First Lien Obligations, the Second Lien Trustee, on behalf of
itself and the Second Lien Claimholders, agrees not to assert and hereby
waives, to the fullest extent permitted by law, any right to demand, request,
plead or otherwise assert or otherwise claim the benefit of, any marshalling,
appraisal, valuation or other similar right that may otherwise be available
under applicable law with respect to the Collateral or any other similar rights
a junior secured creditor may have under applicable law.


7.4          Obligations
Unconditional.  All rights,
interests, agreements and obligations of the First Lien Agent and the First
Lien Claimholders and the Second Lien 



 28
 









Trustee and the Second Lien Claimholders,
respectively, hereunder shall remain in full force and effect irrespective of:


(a)           any
lack of validity or enforceability of any First Lien Loan Document or any
Second Lien Document, or any lack of perfection of any Lien held by the First
Lien Agent or the Second Lien Trustee;


(b)           except
as otherwise expressly set forth in this Agreement, any change in the time,
manner or place of payment of, or in any other terms of, all or any of the
First Lien Obligations or Second Lien Obligations, or any amendment or waiver
or other modification, including any increase in the amount thereof, whether by
course of conduct or otherwise, of the terms of any First Lien Loan Document or
any Second Lien Document;


(c)           except
as otherwise expressly set forth in this Agreement, any exchange of any
security interest in any Collateral or any other collateral, or any amendment,
waiver or other modification, whether in writing or by course of conduct or
otherwise, of all or any of the First Lien Obligations or Second Lien
Obligations or any guarantee thereof;


(d)           the
commencement of any Insolvency or Liquidation Proceeding in respect of the
Company or any other Grantor; or


(e)           any
other circumstances which otherwise might constitute a defense available to, or
a discharge of, the Company or any other Grantor in respect of the First Lien
Agent, the First Lien Obligations, any First Lien Claimholder, the Second Lien
Trustee, the Second Lien Obligations or any Second Lien Claimholder in respect
of this Agreement.


SECTION
8.  Miscellaneous.


8.1          Conflicts.  In the event of any conflict between the
provisions of this Agreement and the provisions of the other First Lien Loan
Documents or the other Second Lien Documents, the provisions of this Agreement
shall govern and control.


8.2          Effectiveness;
Continuing Nature of this Agreement; Severability.  This Agreement shall become effective when
executed and delivered by the parties hereto. 
This is a continuing agreement of lien subordination and the First Lien
Claimholders may continue, at any time and without notice to the Second Lien
Trustee or any Second Lien Claimholder, to extend credit and other financial
accommodations and lend monies to or for the benefit of the Company or any
Grantor constituting First Lien Obligations in reliance hereon.  The Second Lien Trustee, on behalf of itself
and the Second Lien Claimholders, hereby waives any right it may have under
applicable law to revoke this Agreement or any of the provisions of this
Agreement.  The terms of this Agreement
shall survive, and shall continue in full force and effect, in any Insolvency
or Liquidation Proceeding.  Any provision
of this Agreement that is prohibited or unenforceable in any jurisdiction shall
not invalidate the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such 



 29
 









provision in any other jurisdiction.  All references to the Company or any other
Grantor shall include the Company or such Grantor as debtor and debtor-in-possession
and any receiver or trustee for the Company or any other Grantor (as the case
may be) in any Insolvency or Liquidation Proceeding.  This Agreement shall terminate and be of no
further force and effect:


(a)           with
respect to the First Lien Agent, the First Lien Claimholders and the First Lien
Obligations, on the date of Discharge of First Lien Obligations, subject to the
rights of the First Lien Claimholders under Section 6.5; and


(b)           with
respect to the Second Lien Trustee, the Second Lien Claimholders and the Second
Lien Obligations, upon the later of (1) the date upon which the obligations
under the Second Lien Indenture terminate if there are no other Second Lien
Obligations outstanding on such date and (2) if there are other Second Lien
Obligations outstanding on such date, the date upon which such Second Lien
Obligations terminate.


8.3          Amendments;
Waivers.  No amendment, modification
or waiver of any of the provisions of this Agreement by the Second Lien Trustee
or the First Lien Agent shall be deemed to be made unless the same shall be in
writing signed on behalf of each party hereto or its authorized agent and each
waiver, if any, shall be a waiver only with respect to the specific instance
involved and shall in no way impair the rights of the parties making such
waiver or the obligations of the other parties to such party in any other
respect or at any other time. 
Notwithstanding the foregoing, the Company shall not have any right to
consent to or approve any amendment, modification or waiver of any provision of
this Agreement except to the extent its rights are affected (which includes,
but is not limited to any amendment to the Grantors’ ability to cause
additional obligations to constitute First Lien Obligations or Second Lien
Obligations as the Company may designate).


8.4          Information
Concerning Financial Condition of the Company and its Subsidiaries.  The First Lien Agent and the First Lien
Claimholders, on the one hand, and the Second Lien Claimholders and the Second
Lien Trustee, on the other hand, shall not be responsible to each other for
keeping themselves informed (to the extent, if any, required to do so by
the First Lien Loan Documents or the Second Lien Documents, respectively), of
(a) the financial condition of the Company and its Subsidiaries and all
endorsers and/or guarantors of the First Lien Obligations or the Second Lien
Obligations and (b) all other circumstances bearing upon the risk of nonpayment
of the First Lien Obligations or the Second Lien Obligations.  The First Lien Agent and the First Lien
Claimholders shall have no duty to advise the Second Lien Trustee or any Second
Lien Claimholder of information known to it or them regarding such condition or
any such circumstances or otherwise.  In
the event the First Lien Agent or any of the First Lien Claimholders, in its or
their sole discretion, undertakes at any time or from time to time to provide
any such information to the Second Lien Trustee or any Second Lien Claimholder,
it or they shall be under no obligation:


(a)           to
make, and the First Lien Agent and the First Lien Claimholders shall not make,
any express or implied representation or warranty, including with respect to
the accuracy, completeness, truthfulness or validity of any such information so
provided;



 30















(b)           to provide
any additional information or to provide any such information on any subsequent
occasion;


(c)           to undertake
any investigation; or


(d)           to disclose
any information, which pursuant to accepted or reasonable commercial finance
practices, such party wishes to maintain confidential or is otherwise required
to maintain confidential.


8.5          Subrogation.  With respect to the value of any payments or
distributions in cash, property or other assets that any of the Second Lien
Claimholders or the Second Lien Trustee pays over to the First Lien Agent or
the First Lien Claimholders under the terms of this Agreement, the Second Lien
Claimholders and the Second Lien Trustee shall be subrogated to the rights of
the First Lien Agent and the First Lien Claimholders; provided that, the
Second Lien Trustee, on behalf of itself and the Second Lien Claimholders,
hereby agrees not to assert or enforce all such rights of subrogation it may
acquire as a result of any payment hereunder until the Discharge of First Lien
Obligations has occurred.  The Company
acknowledges and agrees that the value of any payments or distributions in
cash, property or other assets received by the Second Lien Trustee or the
Second Lien Claimholders that are paid over to the First Lien Agent or the
First Lien Claimholders pursuant to this Agreement shall not reduce any of the
Second Lien Obligations.


8.6          Application
of Payments.  All payments received
by the First Lien Agent or the First Lien Claimholders may be applied, reversed
and reapplied, in whole or in part, to such part of the First Lien Obligations
provided for in the First Lien Loan Documents. 
The Second Lien Trustee, on behalf of itself and the Second Lien
Claimholders, agrees to any extension or postponement of the time of payment,
subject to Section 5.3(a)(iii), of the First Lien Obligations or any part
thereof and to any other indulgence with respect thereto, to any substitution,
exchange or release of any security which may at any time secure any part of
the First Lien Obligations and to the addition or release of any other Person
primarily or secondarily liable therefor.


8.7          SUBMISSION TO JURISDICTION;
WAIVERS.  (a)  ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY ARISING OUT OF OR RELATING
HERETO MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE, COUNTY AND CITY OF NEW YORK. 
BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY, FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY:


(i)            ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;


(ii)           WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;



 31
 









(iii)          AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, TO THE APPLICABLE PARTY AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SECTION 8.8; AND


(iv)          AGREES THAT SERVICE AS PROVIDED IN CLAUSE (iii) ABOVE
IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE PARTY IN ANY
SUCH PROCEED­ING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT.


(b)           EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING HEREUNDER.  THE SCOPE OF THIS
WAIVER 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 HEREOF,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS.  EACH
PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO A BUSINESS RELATION­SHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN
ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS
WAIVER IN ITS RELATED FUTURE DEALINGS.  EACH
PARTY HERETO FURTHER WAR­RANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE; MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 8.7(b) AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO. 
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.


8.8          Notices.  All notices to the Second Lien Claimholders
and the First Lien Claimholders permitted or required under this Agreement
shall be sent to the Second Lien Trustee and the First Lien Agent,
respectively.  Unless otherwise
specifically provided herein, any notice hereunder shall be in writing and may
be personally served, telexed or sent by telefacsimile or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service and signed for against receipt thereof, upon receipt of
telefacsimile or telex, or three Business Days after depositing it in the
United States mail with postage prepaid and properly addressed.  For the purposes hereof, the addresses of the
parties hereto shall be as set forth below each party’s name on 



 32
 









the signature pages hereto, or, as to each party, at such other address
as may be designated by such party in a written notice to all of the other
parties.


8.9          Further
Assurances.  The First Lien Agent, on
behalf of itself and the First Lien Claimholders, and the Second Lien Trustee,
on behalf of itself and the Second Lien Claimholders, and the Company and the
other Grantors, agree that each of them shall take such further action and
shall execute and deliver such additional documents and instruments (in
recordable form, if requested) as the First Lien Agent or the Second Lien
Trustee may reasonably request to effectuate the terms of and the Lien
priorities contemplated by this Agreement.


8.10        APPLICABLE
LAW.  THIS AGREEMENT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.


8.11        Binding
on Successors and Assigns.  This
Agreement shall be binding upon the First Lien Agent, the First Lien
Claimholders, the Second Lien Trustee, the Second Lien Claimholders and their
respective successors and assigns.


8.12        Specific
Performance. Each of the First Lien Agent and the Second Lien Trustee may
demand specific performance of this Agreement. 
The First Lien Agent, on behalf of itself and the First Lien
Claimholders, and the Second Lien Trustee, on behalf of itself and the Second
Lien Claimholders, hereby irrevocably waive any defense based on the adequacy
of a remedy at law and any other defense which might be asserted to bar the
remedy of specific performance in any action which may be brought by the First
Lien Agent or the First Lien Claimholders or the Second Lien Trustee or the
Second Lien Claimholders, as the case may be.


8.13        Headings.  Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive
effect.


8.14        Counterparts.  This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. 
Delivery of an executed counterpart of a signature page of this
Agreement or any document or instrument delivered in connection herewith by
telecopy or electronic mail shall be effective as delivery of a manually
executed counterpart of this Agreement or such other document or instrument, as
applicable.


8.15        Authorization.  By its signature, each Person executing this
Agreement on behalf of a party hereto represents and warrants to the other
parties hereto that it is duly authorized to execute this Agreement.


8.16        No
Third Party Beneficiaries.  This
Agreement and the rights and benefits hereof shall inure to the benefit of each
of the parties hereto and its respective successors and assigns and shall inure
to the benefit of each of the First Lien Claimholders and the Second Lien
Claimholders.  Nothing in this Agreement
shall impair, as between the 



 33
 









Company and the other Grantors and the First Lien Agent and the First
Lien Claimholders, or as between the Company and the other Grantors and the
Second Lien Trustee and the Second Lien Claimholders, the obligations of the
Company and the other Grantors to pay principal, interest, fees and other
amounts as provided in the First Lien Loan Documents and the Second Lien
Documents, respectively.


8.17        Provisions
Solely to Define Relative Rights. 
The provisions of this Agreement are and are intended solely for the
purpose of defining the relative rights of the First Lien Agent and the First
Lien Claimholders on the one hand and the Second Lien Trustee and the Second
Lien Claimholders on the other hand. 
None of the Company, any other Grantor or any other creditor thereof
shall have any rights hereunder and neither the Company nor any Grantor nor any
other creditor thereof may rely on the terms hereof.  Nothing in this Agreement is intended to or
shall impair the obligations of the Company or any other Grantor, which are
absolute and unconditional, to pay the First Lien Obligations and the Second
Lien Obligations as and when the same shall become due and payable in
accordance with their terms.



 34















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


First
Lien Agent


BEAR STEARNS CORPORATE

LENDING INC.,


as First Lien Agent


	
  

  	
  By:

  	
  /s/ Victor F. Bulzacchelli

  
	
   

  	
   

  	
  Name: Victor F. Bulzacchelli

  
	
   

  	
   

  	
  Title: Vice President

  



 


Bear
Sterns Corporate Lending Inc.


383
Madison Avenue


New
York, NY  10179


Attention:
Stephen J. Kampf


Telecopy:
(212) 272-9743


Telephone:
(212) 272-9759



 S-1
 









Second
Lien Trustee


WELLS FARGO BANK, N.A.,


as Second Lien Trustee


	
  

  	
  By:

  	
  /s/ Joseph P. O’Donnell

  
	
   

  	
   

  	
  Name: Joseph P. O’Donnell

  
	
   

  	
   

  	
  Title: Vice President

  



 


Wells
Fargo Bank, N.A.


213
Court Street


Suite
703


Middletown,
CT 06557


Attention:
Joe O’Donnell


Telecopy:  (860)704-6219



 S-2
 









Acknowledged
and Agreed to by:


PROTECTION ONE ALARM MONITORING,
INC.


	
  By:

  	
  /s/ J. Eric
  Griffin

  	
   

  
	
   

  	
  Name: J. Eric
  Griffin

  	
   

  
	
   

  	
  Title: Vice
  President & Secretary

  	
   

  



 


PROTECTION
ONE, INC.


	
  By:

  	
  /s/ J. Eric
  Griffin

  	
   

  
	
   

  	
  Name: J. Eric
  Griffin

  	
   

  
	
   

  	
  Title: Vice
  President & Secretary

  	
   

  



 


Protection
One Alarm Monitoring, Inc.


1035
N. 3rd Street, Suite 101


Lawrence,
KS 66044


Attention:
Darius Nevin


Telecopy:
(877) 299-0111


Telephone:
(305) 594-0231



 S-3